Bill Morris in Legal/Financial on September 7, 2017
This lawsuit sounds like a cross between an episode of The Twilight Zone and a Victorian novel.
“It’s actually worse than Bleak House,” says attorney James Samson, referring to the Charles Dickens novel that features a legal battle over an inheritance that drags on for so many generations that the legal fees and court costs finally devour the contested inheritance.
The lawsuit Samson is referring to has dragged on for a relatively modest 18 years – since his client, the board at the 930-unit Georgetown Mews co-op in Kew Gardens Hills, Queens, was sued by a shareholder after his upstairs neighbor caused a flood in his ground-floor apartment. The case is still in court today.
“We believe the flood came from the upstairs apartment, probably from a dishwasher hose,” says Samson, a partner at the firm Samson Fink & Dubow, who has represented the co-op since 1989. “It was a simple water-damage case.”
Well, not so simple. After the insurance companies of both the upstairs and downstairs shareholders paid for repairs to their respective apartments, the downstairs shareholder sued the co-op, claiming “latent defects” had caused the flood, though the complex was built in 1952. The shareholder stopped paying his monthly maintenance, which led the board to move to evict him, which led the shareholder to agree to resume payments, which he did, sporadically. Courts have blocked the co-op from foreclosing until the case is resolved. The arrears now amount to about $30,000, and the board’s insurer has so far failed to get the injunction lifted.
“This is what you get when you allow your insurance company to hire your lawyer,” Samson says. “Insurance company logic is that they do not attack, they passively defend. From their point of view, they’re winning because they haven’t had to pay out anything or go to court. The upstairs neighbor has moved out. The downstairs neighbor hasn’t paid $30,000 in maintenance. Everyone’s a winner except Georgetown Mews. I’ve tried to get the board to sue its insurance company, but they don’t want to waste the time, energy, and money. Co-op boards sometimes don’t realize that you get what you pay for. If your lawyer is passive, bad things happen. And that’s what happened here.”
Mary Fischer, president of the Georgetown Mews co-op board, says, “Here’s the bottom line: shouldn’t there be a law that insurance companies have to settle a case in a timely fashion?” That said, she adds that this case is a relatively minor concern for a board that is installing one of the largest residential solar projects in the state. “Where am I going to use my money?” Fischer says. “On boilers and solar energy, or on settling this insurance problem? My priority is on capital improvements that better the whole corporation.”
The existence of pending litigation in a co-op creates problems. Every time a shareholder tries to sell an apartment or the board tries to refinance its underlying mortgage, the nature of the pending litigation has to be explained to placate potential buyers and lenders. “And that runs up legal fees,” Samson says. “It’s a permanent irritation.”
But Samson predicts that this case will be resolved – eventually. The board has placed a lien on the plaintiff’s apartment, which means he can’t sell the unit or refinance his mortgage until he has paid the arrears. Even if he holds onto the apartment, it’s safe bet that one day he will die. When he does, the shares can be transferred only after the arrears are paid.
“The board will get its $30,000,” Samson says. “Maybe not in my lifetime, but they’ll get it.”
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