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Board’s Decision to Assess Unit Owner, as Authorized by Governing Documents, Is Protected by Business Judgment Rule

The Board of Managers of a condominium voted to assess all unit owners to fund needed repairs to the building and replenish a capital reserve.  The assessment applied to both residential and commercial units.  Defendant, which owned four commercial units, did not pay the assessment.  The condominium filed common charges liens against these units and moved to foreclose on the liens.

Defendant challenged the assessment arguing that it was inappropriate to impose the same assessment on commercial units as residential units.  The court rejected the challenge, finding that “the board had acted within the scope of its authority and was entitled to the protection of the business judgment rule.”  Significantly, “[t]he condominium’s declaration and by-laws authorized the board to make repairs and to replenish the reserve fund, and the board presented evidence that the assessment was necessary to achieve those aims.”  Moreover, “[th]e board also provided evidence that calculation and apportionment of the assessment was done in a way consistent with the declaration and by-laws, and that both these governing documents allowed the assessment to be levied against the commercial as well as the resident unit owners.”

Because the Board’s decision to impose the assessment was protected by the business judgment rule, it could only be overturned based on a showing of fraud, self-dealing, or another breach of fiduciary duty.  Here, the defendant made no such showing, so the assessment was upheld.  Baxter Street Condominium v. LPS Baxter Holding Co., LLC, 2022 N.Y. App. Div. LEXIS 3388, 2022 N.Y. Slip Op. 03470 (1st Dep’t May 31, 2022).