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Perspectives

Court Upholds Purchaser’s Title and Addresses Procedural Issues in Suit Against Condominium

The By-Laws of a condominium provided that units could not be transferred unless any common charges liens were satisfied. The owner of several commercial units sold the units while liens on them were outstanding. The Board of Managers’ right of first refusal did not apply to commercial units, and the Board was unaware of the sale at the time. Subsequently, the purchaser sued the Board of Managers alleging that defective conditions in the common elements were causing damage to the purchaser’s units and demanding that the Board make repairs. The Board moved to dismiss the lawsuit, arguing that the sale of the units in violation of the By-Laws was void, so the purchaser lacked standing to sue. The court held that “a requirement in the By-Laws of the Condominium that liens for common charges be satisfied at closing does not render the deed void.” The court held that the common charges remained a lien on the units, and that the condominium “can either sue on the lien or foreclose on the lien.” However, “[t]his does not affect the purchaser’s title.”

The Board also argued that in general, a unit owner cannot sue the condominium for property damage claims. The court disagreed, but noted that in many cases, the Board may be protected by the Business Judgment Rule. Finally, the court found that it was procedurally improper to designate the Board of Managers as the defendant. Citing the New York General Associations Law, the court required the purchaser to amend its complaint to name the condominium’s president or treasurer, in his or her representative capacity, as the defendant. This is not how actions involving condominiums are typically captioned and this holding may not be followed by other courts. In any event, the court held that this was not a jurisdictional issue and that the caption could be amended to cure the alleged defect. Sagacious Minds, Inc. v. Board of Managers of the Brighton Tower II Condominium, 2020 N.Y. Slip Op. 32706(U) (Sup. Ct. Kings Co. Aug. 18, 2020).