Case Notes in


First published: Apr 2024
Know When to Fold

TAKEAWAY The most interesting part of this case involves the “seller’s concession” often used in New York to artificially boost the purchase price of co-op apartments. This practice is quite common, and is used so as to create higher comparables for the building. But this court sees through this practice, and seems to indicate that one cannot compare recent sales prices (which include concessions) to a third-party appraisal that reviews actual sales prices. Of course, it may be difficult for a court to ascertain which comparables in the appraisal included prices with concessions and which did not, but as noted by the court, this should be determined by a trial court. Further, this court indicates that it is not reasonable for a board to ever insist on a certain price, if the higher price it demands is established simply by creating the fiction of a “seller’s concession.”

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First published: Jun 2022
Trump Village Section 4, Inc. v Vilensky

Although the issues of whether a co-op can sue when a prospective buyer makes misrepresentations on a purchase application have not been finally resolved — and courts will continue to hear motions in such cases — it is interesting that the trial court and then an appellate court allowed a cooperative to bring a fraud action in this case. It is not uncommon for an applicant to claim he will move in and instead install an adult child in the apartment or use it as an investment by subleasing the apartment. In the past, boards have had little recourse. Certainly the cooperative might bring an action that the shareholder has violated the lease, but after curing, the violations could continue. Still, the possibility of winning damages in a fraud claim makes it imperative to follow such disputes to their legal conclusion.

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First published: Jul 2019
Segev v 262 N 9 LLC

The theory behind a condo board’s right of first refusal is that the seller, a unit-owner to whom the board owes a fiduciary duty, is in no different a position if the apartment is sold to the buyer or to the building. It is thus the buyer – with whom the building has no contractual relation-ship – who takes the risk that the building will purchase the apartment. However, the theory Segev advanced here – tortious interference with the contract by the board – has previously been rejected by the courts in the context of a co-op board’s rejection of a purchaser. The conclusion is that any contract to purchase a co-op or condo apartment is subject to the board’s rights under its respective governing documents. Accordingly, the prospective purchaser signs on to the rules of the building and is required to abide by them.

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First published: May 2014
The South Tower Residential Board of Managers of Time Warner Center Condominium v. The Ann Holdings LLC

This case is unusual. Boards rarely exercise a right of first refusal; and they rarely designate the right to purchase to another. Even when boards do it, however, sellers rarely sue. The seller is, presumably, receiving what it bargained for – the right of first refusal is set forth in the bylaws, the seller will receive the same purchase price, and the board is to purchase on the same terms and conditions as were set forth in the contract. In other words, the seller is not harmed. Any claim that Wohlstadter did anything to depress the price so that he could purchase at less than he (maybe) previously offered was rejected by the court. All in all, the court found that the board acted consistently with its rights under the bylaws and Wohlstadter was permitted to purchase the apartment.

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First published: Jul 2010
Ismael-Aguirre v. Wharton and Hiralion Real Estate Inc v. 225 5th LLC

These cases address when and if a prospective purchaser is entitled to a refund of the down payment. In Ismael-Aguirre, it determined that the terms of the contract were unambiguous and that, based on the board’s failure to act, the contract was terminated. As to Hiralion, the court was faced with a different issue: whether the sponsor of the conversion misrepresented that the 12th-floor terrace would have views, as opposed to an eight-foot wall which enclosed the space. Based on the ambiguity between the written words of the offering plan and the floor plans, the court was willing to consider oral representations made by the sponsor, even though they would not normally be used when interpreting a contract.

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First published: May 2010
Beudert-Richard v. Richard

This case presents an excellent example of what may happen when there is a change in the law not addressed by property owners. The majority decided to allow the case to proceed, taking into consideration the apparent intent of Adam and Pamela, even though neither ever formally altered the way in which they held title to the co-op shares. The dissenting judge would have adhered strictly to the long-standing rules concerning ownership of shares and would have dismissed the complaint, as the lower court did. While we question whether there are many apartments that were purchased by couples as joint tenants prior to 1996 who have since divorced, we offer this case as a cautionary tale and a reminder that it is important that you communicate with your attorney about any changes in the law or your marital status which may affect ownership of property.

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First published: Feb 2009
Silverstein vs Westminister House Owners Inc.

Although the plaintiff tried to claim that there was self-dealing by the board members, he had no evidence of that. The board members’ wives had lost their exclusive on the apartment months before the first prospective purchaser was brought to the board and the wives had no involvement in finding either prospective purchaser. This is another case which demonstrates that, in order to prove breach of fiduciary duty, the shareholder must be able to plead acts which show that the board acted in bad faith, outside the scope of their authority or for something other than a legitimate corporate purpose. Merely framing an alternate cause of action based on the same facts as one for breach of contract will not successfully avoid application of the Business Judgment Rule. Speculation as to the intent or motives of board members is insufficient. Moreover, an unsupported claim that discovery will reveal an improper motive will not defeat a motion to dismiss.

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First published: Mar 2008
Raimondi v. Board of Managers of Olympic Tower Condominium

The condominium here was willing to use its waiver of a right of first refusal to require a purchaser who had a history of buying, renovating, and flipping apartments in the building to pay an enhanced transfer fee on the resale of the unit. Query whether this type of fee may be demanded by another condominium to institute a de facto transfer fee without relying upon a bylaw provision approved by the unit-owners. The case also reveals yet another condominium that has adopted a flip tax despite the lack of any definitive appellate decision in New York that a flip tax does not create an unreasonable restraint on alienation.

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First published: Nov 2007
Avery vs. Caldwell

This case involved an obviously annoyed judge who did little to conceal her view that the recusal motion was frivolous and without merit. It is hard to see what led to the plaintiff’s decision to seek recusal unless there was some unarticulated belief that the judge was prejudiced against the plaintiff.

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First published: Apr 2007
Lisenenkov v. Kaszirer

This is another example of a board seeking to exceed its authority. Here, a condominium board was trying to impose requirements on a prospective apartment purchaser because it was uncertain about the ability of such purchaser to pay his shares of the common charges for the building. The only problem was that the board’s solution – an advance payout of two years of common charges – was beyond the board’s powers. So, when challenged, the court determined that the requirement was invalid and this condo board was forced to realize that it was not a co-op board, which usually has the power to require a purchaser to provide a security deposit.

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