Condominium Board Lacked Authority To Limit Unit Leases To One Year Or Impose “Confiscatory” Fines On Unit Owners
An appellate court has held that a condominium board lacked authority to impose a one-year limit on leases of units or to impose a fine of $500 per day for noncompliance with house rules governing leasing of apartments. Gabriel v. Board of Managers of Gallery House Condominium, 2015 N.Y. App. Div. LEXIS 5875, 2015 N.Y. Slip Op. 6019 (1st Dep’t July 9, 2015).
In 2005, the Board of Managers adopted a set of house rules, which prohibited the tenants of unit owners from subletting their apartments. In 2007, the Board adopted a “rental and guest policy” placing additional restrictions on apartment leases. In 2014, the Board amended the policy to limit all leases of apartments to one year. The owners of a condominium unit rented their apartment under a lease that did not comply with the new policy, and the Board responded by imposing a fine on the unit owners of $500 per day of noncompliance. The unit owners then filed this action in 2014, seeking a court determination that the house rules, the rental and guest policy, and the fines imposed upon them were invalid and enjoining the Board from enforcing them.
The appellate court dismissed the unit owners’ challenges to the house rules and the rental and guest policy as time-barred under the Statute of Limitations. The unit owners were seeking a declaratory judgment, and the six-year Statute of Limitations for such a claim had expired. The court disagreed with the unit owners’ contention that the time period should begin anew each time the guest policy was amended based on the “continuing wrong” doctrine.
However, the unit owners’ challenge to the 2014 amendment requiring that leases be limited to no more than one year was successful, because this new restriction was not authorized by the by-laws of the Condominium. The court rejected the Board’s characterization of the amendment as a “mere clarification” of the by-laws, finding that it significantly “amend[ed] the permitted use of plaintiffs’ units.” The by-laws restricted owners’ uses of their apartments only to the extent of prohibiting “transient tenancy,” and “[t]he Board failed to offer any explanation as to how requiring leases not to exceed one year is in keeping with the prohibition on transient tenancies.”
The court also rejected the Board of Managers’ imposition of a fine against the unit owners for violation of the guest policy in the amount of $500 per day of noncompliance. In general, “the Board’s authority to impose fines is within its power to implement rules and regulations as provided in the by-laws.” However, the court found that “the imposition of fines in the amount of $500 per day for violations of the guest policy is confiscatory in nature.” The court further observed that “[t]he Board cite[d] no persuasive authority to support the imposition of such a hefty fine,” as opposed to “the imposition of administrative fees and nominal fines for a resident’s non-compliance with certain rules,” as courts have upheld in the past. The court did not indicate where it would draw the line between a permissible “administrative fee” or “nominal fine” and an impermissible “hefty fine.”