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Condo Board Not Liable for Informing Potential Buyer That Intended Use of Premises Was Prohibited Under Governing Documents

A Condominium Board of Managers is not liable for informing a potential buyer that her intended use of the condominium was prohibited under the Condominium’s governing documents and the building’s certificate of occupancy. Liberty on Warren LLC v. Dragon Estates Condo., 2016 N.Y. Misc. LEXIS 2319, 2016 N.Y. Slip Op. 31171(U) (Sup. Ct. N.Y. Co. June 15, 2016).

Plaintiffs sought to sell their two condominium units and located a potential purchaser. Plaintiffs notified the Board of Managers so the Board could consider whether to exercise its right of first refusal.  The Board invited the potential purchaser to meet with it to discuss her contemplated use of the units.  The purchaser advised that she intended to use the units as a dance studio and would be seeking a public-assembly permit.  The Board responded that the certificate of occupancy forbade more than 10 people at a time to occupy any unit, that the stairs and elevators did not meet public-assembly requirements, and that the By-Laws prohibited using the units as a studio.  Following this communication, the proposed sale did not take place, and plaintiffs sued the Condominium.

The court dismissed all of plaintiffs’ claims.  A tortious interference claim was dismissed because the Board of Managers “had the right and fiduciary duty to enforce the condominium’s declaration” prohibiting use of the space as a rehearsal studio.  A claim for fraud and negligent misrepresentation was dismissed because there was no evidence of any misrepresentation.  The Declaration and By-Laws prohibit use of the space as a dance studio and the Condominium had the right to apprise the purchaser of such fact.  A breach of contract claim, in which plaintiff sought to compel the Condominium to seek an amendment of the certificate of occupancy, was dismissed because whether to seek such an amendment was a decision for the Board of Managers to make.  The Board’s not seeking such an amendment did not breach any duty owed to plaintiff and was entitled to the protection of the Business Judgment Rule.