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Another Decision Giving Expansive Interpretation to Owners’ Rights to Inspect Books and Records

Tenant-shareholders in cooperatives, and unit owners in condominiums, have long enjoyed the right to inspect certain books and records of the cooperative or condominium. Over the past several years, New York courts have issued a series of decisions giving an expansive interpretation to the scope of documents or materials that are subject to such inspection.  In the most recent such case, condominium unit owners sought documents for the purpose of evaluating the reasonableness of a settlement that the Condominium had entered into with the Sponsor of the Condominium.

The court held that the unit owners were entitled to inspect several years of correspondence between the Condominium’s representatives and the Sponsor, because such correspondence “was relevant and necessary to [the unit owners’] investigation into [the Sponsor’s] dealings with [the Condominium], and therefore subject of the common-law right of inspection.” The court also allowed inspection of all documents relating to the settlement agreement itself, because “understanding how the Condominium reached the settlement agreement is a valid purpose” for inspection and documents related to the settlement were “also reasonably relevant and necessary” for that purpose.

The unit owners also disputed the Condominium’s authority to pay certain legal expenses incurred on behalf of members of the board of managers and the managing agent, who had been served with document subpoenas in a litigation.  On this issue, the court sided with the Condominium and held that payment of the legal expenses was proper.  As to the board members, “[t]he Condominium’s bylaws empowered the Board to pay subpoena-related legal expenses on behalf of certain past and present Board members.”  The board’s decision to make such payment was protected by the Business Judgment Rule.  As to the managing agent, the Condominium was contractually obligated to pay these expenses.  Matter of Healy v. Carriage House Condominium, 2018 N.Y. App. Div. LEXIS 7908, 2018 N.Y. Slip Op. 07970 (1st Dep’t Nov. 20, 2018).