The Obligation To Pay Condominium Common Charges
THE OBLIGATION TO PAY CONDOMINIUM COMMON CHARGES
AND THE WARRANTY OF HABITABILITY
By: Michael P. Graff, Esq.
Warren Frisch purchased a unit at Cooper Square Condominium, in Manhattan. Frisch informed the Board of Managers of water leaks in his unit. Other unit owners also complained of leakages. The condominium hired an engineer to locate the source of the leaks and then had substantial work done to remedy the problems. They were traced to defective work done by the sponsor. Some leaks were traced to terraces and balconies which were common elements exclusive to the owners of units having sole access to them, and which were to be maintained and repaired by those owners at their sole expense.
Frisch began withholding common charges and assessments, and sued the condominium alleging negligence and a breach of duty to make the repairs necessary to stop the leaks and water damage. The condominium counterclaimed for payment of past due common charges which amounted to $20,000, costs and attorney's fees.
A justice of the Supreme Court, New York County, published a decision applying the warranty of habitability to condominiums.[1] Previously, this warranty had been applied only in landlord-tenant relationships. On appeal to the Appellate Division, First Department, covering Manhattan and the Bronx, the trial court was reversed.[2] The appellate court held that a condominium board of managers is not to be viewed as a landlord. Unit owners cannot withhold payment of common charges and assessments based on defective conditions in their unit or in the common areas, or based on a disagreement with actions lawfully taken by the board of managers, absent claims of fraud, self-dealing, unconsciousability or other misconduct. The board was awarded judgment for common charges, assessments, and its reasonable attorneys fees.
The following is to provide some guidance to attorneys, managing agents, boards and condominium residents about this development in the law.
I. The General Rule.
The New York Condominium Act requires that condominium unit owners comply with the condominium bylaws and related documents.[3] Bylaws include the obligation to determine and collect common charges and assessments.[4] Unit owners cannot avoid this obligation. Under the "business judgment rule" this obligation is almost absolute.[5]
The business judgment rule is the appropriate standard for reviewing actions of condominium and co‑op boards.[6] Before the courts can question the decision of the board, it must ascertain (1) whether the board has acted for the purposes of the condominium; (2) within the scope of its authority, and (s) in good faith. The burden is on the unit owner to demonstrate that judicial review is mandated.[7] Absent a showing of fraud, self-dealing or unconscionability, the courts will not interfere with the business judgment of the boards. This rule covers issues of collection, use and expenditure of assessments, and the management, maintenance and repair of the building. The courts should limit their inquiry to whether the action was authorized and whether it was in good faith and in furtherance of the interests of the Condominium.[8]
In one case in which the unit owners refused to pay common charges, they interposed various allegations of board misconduct. These included representations in the offering plan regarding the use of the premises by professionals; misuse of the "residential lobby" of the building; poor maintenance of the lobby and common areas; and failure of the Board to notify the defendants of the unit owners' meeting. The court dismissed these defenses as legally insufficient. It stated "When the defendants bought their unit they agreed to the condominium declaration and bylaws. Consequently, they agreed to pay their share of the condominium's costs through monthly common charges and assessments as determined by the Board.[9]
The mere assertion of a counterclaim by the unit owner for breach of contract is not a bar to judgment for common charges, and attorney's fees as well, if authorized by the bylaws.[10]
II. The Warranty of Habitability.
The Warranty of Habitability is codified in a statute that begins with the words "In every written or oral lease or rental agreement for residential premises the landlord or lessor shall be deemed to covenant and warranty that the premises so leased ...are fit for human habitation ...."[11] This warranty carved out an exception to the common law rule that required constructive or actual eviction if a tenant were to be excused from the obligation to pay rent. Generally, statutes that carve out exceptions to common law rules are strictly construed by the courts. If the legislature wanted the statute to be more expansive, such as to apply to the payment of condominium common charges, it could have drawn it so. The appellate court in Frisch refused to apply this statute to a condominium that was not a party to a lease. It rejected the lower court's holding that the "Condominium Agreement" was no different from a lease in that it creates a landlord-tenant relationship between the condominium board and the unit owner. (The lower court never explained what it meant by the "Condominium Agreement." It pointed to no precedent for this finding.[12])
III. Conclusion.
At least in Manhattan and the Bronx, Condominium Boards are not subject to a warranty of habitability. However, unit owners that rent their units to tenants are still subject to that warranty.
There is some basis to question whether the decision in Frisch will be applied in the Second Department, which covers Brooklyn, Queens, Staten Island and Long Island. There, the Appellate Division seems more willing to impose upon boards of managers more of the trappings of landlord,[13]
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[1] Frisch v. Bellmarc Management, Inc., NYLJ, August 20, 1992, p. 22, col. 3 (Sup. Ct. N.Y. Co).
[2] 190 A.D.2d 383, 597 N.Y.S.2d 963 (1st Dept. 1993).
[3] Real Property Law, Section 339-j.
[4] Real Property Law, Section 339-v (1)(f).
[5] Residential Board v. Hixon., NYLJ, October 27, 1988, p. 22, col. 3 (Sup. Ct., N.Y. Co.).
[6] Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530 (1990).
[7] Id., at p. 536.
[8] See Schoniger v. Yardarm Beach Homeowner?s Ass?n., 134 A.D.2d 1, 9, 523 (2d Dept. 1987).
[9] Board of Managers of First Avenue Condominium v. Shandel, 143 Misc.2d 1084, 1087, 542 N.Y.S.2d 466 (Civ. Ct. N.Y. Co. 1989).
[10] Board of Managers of Cooper Square Condominium v. Cooper Third Associates, , NYLJ, July 24, 1991, p. 21, col. 4 (Sup. Ct., N.Y. Co.) (Commercial unit).
[11] Real Property Law, Section 235-b.
[12] The lower court referred to Brodsky v. Gaulke, NYLJ, January 12, 1989, p. 34, col. 2, where the Housing Court applied the warranty of habitability against a unit owner to excuse its tenant from paying rent where there was excessive noise from another tenant in the condominium. The unit owner's liability to the board for common charges was not involved in that case.
[13] Board of Managers v. Lamontanero, 152 Misc.2d 874, 579 N.Y.S.2d 557 affirmed 206 A.D.2d 340, 616 N.Y.S.2d 744 (2d Dep?t 1994); but see, Board of Managers v. Quiles, 234 A.D.2d 130, 651 N.Y.S.2d 46 (1st Dep?t 1996).