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Condominium Board Permitted To Pursue Dual Strategies To Recover For Defective Design And Construction

In Baxter Street Condominium v. LPS Baxter Holding Co., LLC, 2015 N.Y. App. Div. LEXIS 1736, 2015 N.Y. Slip Op. 01745 (Mar. 3, 2015), the Appellate Division allowed a Condominium Board of Managers to proceed on two fronts in seeking recourse for the allegedly defective design and construction of the building.  The Board had commenced an action asserting various claims against the sponsor, which remains pending.  The Board then also sued a designee of the Sponsor, which owned three commercial condominium units, for unpaid common charges and late fees arising from the designee’s share of a $700,000 assessment issued against all unit owners.

The Appellate Division affirmed an award of summary judgment to the Board in the collection action.  The Board’s conclusion that the assessment was necessary to pay for “repair” work – which, under the By-Laws, did not require the Sponsor’s consent or the unit owners’ approval – was protected by the Business Judgment Rule.  In opposition, the Sponsor’s designee failed to demonstrate bad faith, fraud, self-dealing, or unconscionability.  Moreover, the fact that the Condominium had a separate action pending against the Sponsor and others did not require the Board to await the resolution of that action before imposing the assessment.