BY JOHN KIRITSIS, ESQ., CPA, MBA, MS, JD, LL.M
Condominium board members in New York City (NYC) have various responsibilities and duties, and with those responsibilities come potential liability exposures. It’s important for condo board members to understand these exposures and take measures to minimize them. Here are some key areas of liability exposure for NYC condo board members:
- Fiduciary Duty:
Condo board members have a fiduciary duty to act in the best interests of the condominium association and its unit owners. Breach of this duty, such as mismanagement of funds or self-dealing, can result in legal claims against board members.
- Financial Mismanagement:
Board members are responsible for managing the association’s finances, including budgeting, collecting assessments, and allocating funds. Mismanagement of funds or failure to properly oversee financial matters can lead to lawsuits by unit owners.
- Contractual Obligations:
Condo boards enter into contracts with vendors, contractors, and service providers for various purposes. If the board fails to fulfill its contractual obligations or engages in negligent selection of vendors, it can lead to disputes and legal claims.
- Rule Enforcement and Discrimination:
If the condo board enforces rules inconsistently or discriminates against certain unit owners, it can result in claims of discrimination, harassment, or violations of fair housing laws.
- Maintenance and Safety Issues:
Failure to properly maintain common areas and address safety concerns can result in accidents, injuries, and subsequent lawsuits from injured parties.
- Privacy Violations:
Improper handling of personal information or violations of privacy rights can lead to legal claims.
- Construction Defects:
If the condo board is involved in overseeing new construction or renovation projects and defects arise, board members could face legal action from unit owners or contractors.
- Environmental and Health Hazards:
Failure to address environmental hazards or health concerns, such as mold, lead, or asbestos, can result in health-related claims.
- Shareholder Disputes:
Conflicts with unit owners over issues like assessments, maintenance, or use of common areas can escalate into legal disputes.
- Failure to Disclose:
Failure to provide accurate and complete information to potential buyers about the condo’s financial health, rules, or other matters can lead to claims of misrepresentation.
To minimize liability exposure, NYC condo board members should:
Act in good faith and in the best interests of the association.
Be well-informed about the condo’s governing documents, bylaws, and applicable laws.
Maintain accurate records of meetings, decisions, and actions taken.
Obtain professional advice when needed, including legal counsel and financial experts.
Communicate openly and transparently with unit owners.
Follow proper procedures for decision-making, rule enforcement, and financial management.
It’s advisable for condo boards to carry directors and officers (D&O) liability insurance to help protect board members from certain legal claims. Consulting with legal professionals who specialize in NYC condominium law is essential to understanding and addressing specific liability risks.
Citations, References and Potentially Useful Resources for Further Information:
New York State Constitution
Federal Securities Regulation
New York State Martin Act
New York Condominium Act
New York State Security Regulations
New York Business Corporation Law
New York Limited Liability Company Law
New York Uniform Partnership Act
Federal Internal Revenue Code
New York State Tax Laws, Rules & Regulations
New York City Tax Laws, Rules & Regulations
Winston Churchill Owners, Inc. v. Regents Real Estate Associates
Board of Managers of the Park Regis Condominium v. Park Regis Owners Corp.
Park Sutton Condominium v. 447 E. 57th St. LLC
28 E. 10th Street Corp. v. Veras
Riverside Syndicate, Inc. v. Munroe
Essex House Condominium v. Marks
The Parc Vendome Condominium v. Atkinson
54-56 Meserole Street Owners Corp. v. Rossi
The Beekman Regent Condominium v. Bottiglieri
Chelsea 19th LLC v. West 19th Street Realty LLC
New York Department of Finance
New York City Department of Buildings
New York City Bar Association
New York State Bar Association
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