Board Repair Obligations, Revisited

• Published date: 02 September 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Contracts and Commercial Law, Trials & Appeals & Compensation, Real Estate
• Law Firm: Herrick, Feinstein LLP
• Author: Andrew B. Freedland and Deborah Koplovitz

The business judgment rule applies to both residential cooperative corporations and to condominiums. Levandusky v. One Fifth Avenue Apt. Corp., 553 N.E.2d 1317 (1990); Perlbinder v. Bd. of Managers of 411 E. 53rd St. Condo., 65 A.D.3d 985, 989 (1st Dep't 2009). However, the business judgment rule "will not serve to shield boards from actions that have no legitimate relationship to the welfare of the [cooperative or] condominium, or that deliberately single out individuals for harmful treatment". Perlbinder., 65 A.D.3d at 989.

For board members and their counsel seeking guidance, a recent federal court decision may provide a deeper understanding about the extent of the business judgment rule's reach in addressing repair requests. Kofinas v. Fifty-Five Corp., 2021 WL 3169155 (S.D.N.Y. July 27, 2021) (The Kofinas decision dismissed the plaintiffs' claims for breach of contract, negligence, breach of fiduciary duty and aiding and abetting a breach of fiduciary duty after a bench trial, and after previously having already dismissed the plaintiffs' tortious interference with contract, and aiding and abetting tortious interference with contract, and all claims for punitive damages. Id. at *1.)

It would appear that reasonable forms of patch work, such as caulking and sealing cracks, rather than...