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Case Notes: Boards Waste Time and Money By Not Strictly Following Rules

Richard Siegler & Dale Degenshein in Legal/Financial on September 29, 2014

New York City

Sept. 29, 2014

The board began an action as the representative of the unit-owners, asserting claims for breach of contract, warranty and fiduciary duty. There was also a demand for an accounting. The defendants moved to dismiss, asserting, among other things, that the board lacked standing and the "legal capacity to sue."

Take Notice That You Must Give Notice

The sponsor conceded that the Condominium Act allows a board to sue on behalf of a condo's unit-owners. But the bylaws of this particular condo stated that notice of board meetings had to be given at least three business days before the meeting.

One sponsor-appointed board member submitted an affidavit stating that there was no meeting to authorize beginning a lawsuit and that he never received three business days' notice of any such meeting. There was no question that the board members never unanimously consented in writing to the start of the action.

The board argued that no resolution or notice of meeting was required. The court did not agree. In this case, there was not even a suggestion that the action was authorized by a vote of the board.

No Vote, Not Even a "No" Vote

The court found that no notice was given and no formal action was taken by the board to authorize the suit. Even though the statute and the bylaws did not specifically require a board vote, the court found that "some form of vote is clearly required for the board" to start a lawsuit.

The court ultimately determined that there was no question that the board had the right to bring an action — had it followed the procedures required by the condo's governing documents.

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