Some of the proposed regulations are as follows:

1. Projects consisting of three (3) or fewer units will no more than one (1) unit encumbered with FHA insurance.  Projects consisting of four (4) or more units will have no more than 30% of the total units encumbered with FHA insurance.
2. The new regulations require that at least 50% of the total units must be sold prior to endorsement of any mortgage in the project.
3. Transfer of control of the association shall pass to the owners of units no later than:  (i) 120 days after the due date 75% of the units are conveyed to unit purchasers; or (ii) one (1) year after completion of the project evidenced by the first conveyance to a unit purchaser.
4. A final certificate of occupancy is required as a precondition to project approval.  Temporary certificates of occupancy are not permitted.
5. No more than 25% of the property's total floor area in a project can be used for commercial purposes.
6. No more than 15% of the total units can be in arrears (more than 30 days past due) of their assessments.
7. A current reserve study must be no more than 12 months old.
8. Existing condominium project approvals will expire two (2) years from the date placed on the list of approved condominiums.

These lending guidelines were to be effective October 1, 2009.  The effective date has been twice postponed however.  The current effective date is December 7, 2009.

Mr. Lasser and the other panelists discussed legal and ethical issues property managers and boards face concerning Directors and Officers (D & O) liability and insurance coverage.  Topics covered during this round table discussion included the amounts and types of D & O insurance coverage available, typical claims such as discrimination claims and practical and legal solutions to common pitfalls faced by property managers and boards.  Mr. Lasser discussed the NY Business Judgment Rule and how it protects property managers and boards in addition to D & O insurance.  After the presentations, there were discussions with the audience the panelists and an extensive question and answer session at the end of the seminar, which was followed by more informal discussions at a coffee and cocktail reception immediately after.

For justification, the proposed law's drafters provide that in the "past, unscrupulous or untrained property managers have bilked cooperative shareholders of millions of dollars in elaborate schemes of fraud."  Other justifications are provided as well.  Stark & Stark's Condominium & Cooperative Group will continue to track this proposed law, as well as all of those that affect New York's condominiums and cooperatives.

There are caveats and/or exceptions to these policies and/or rules.  According to Fannie Mae, the 70% rule does not apply to loan applications suubmitted through an underwriting program used by major lenders.  Fannie Mae added that hundreds of projects submitted through that exception since March 1, 2009 have been approved even though their sales levels are below 70%.  Further, developers can seek exemptions with respect to loans that are manually underwritten. 

Debates in Congress are ongoing with respect to whether these policies ought to be further amended, as everyone continues to try to find the right balance between the need to facilitate the creation and purchase of housing, and the need to avoid another round of mortgages for individuals that cannot afford them.

Condominiums, cooperatives and homeowners associations should consult with counsel once it receives any owner or resident request for a "reasonable accommodation" pursuant to the United States Fair Housing Act.

In or around 2007 a condominium board of managers contracted for certain construction work on its buildings.  Owners within that condominium filed a suit against the condominium arguing that the contract called for "alterations" or "improvements", which required approval of the owners per the condominium's governing documents.  The resulting suit was captioned William F. Helmer, et al v. Marc A. Comito, et al.
 

As the matter involved an owner challenge to a board action, the court relied upon the business judgment rule.  The court wrote that under "'the business judgment rule, the court's inquiry is limited to whether the board acted within the scope of its authority under the bylaws (a necessary threshold inquiry) and whether the action was taken in good faith to further a legitimate interest of the condominium.  Absent of showing of fraud, self=dealing or unconscionability, the court's inquiry is so limited and it will not inquire as to the wisdom of soundness of the business decision.'"  In this case, the board determined that the work involved constituted "repairs" and "maintenance", which was within the board's sole authority to address.  There was an overwhelming amount of evidence that the buildings continued to suffer from leaks, and that experts hired by the condominium recommended repairs.  Further, the Village of Nyack Building Department opined that "the proposed scope of work is of a repair/maintenance nature and does not require a building permit".   As a result, the court found, the board was "within its authority in entering the construction contract without the unit owner approval required for 'alterations' or 'improvements' costing more than 25% of the estimated annual budget, such that the owners' complaint should be dismissed.
 

The case continues the longstanding applicability of the business judgment rule in matters involving challenges to board decisions.  It is imperative that boards ensure that the authority for a particular action is set forth in the governing documents or applicable laws, and that said action is motivated by good faith.  It is equally as important that a board document the evidence supporting its decisions and/or actions. 

Mr. Lasser focused his presentation on the practical and legal considerations involved with filing liens, commencing lawsuits for money judgments, sheriff and foreclosure sales and collecting rent from tenants residing in non owner occupied units.  Mr. Lasser also discussed pending laws, which will affect condominiums and homeowners associations, and how the courts in New York have applied the Business Judgment Rule to condominium and homeowner association boards. Mr. Byrne presented materials related to collections and the impact of various federal and New York on community associations (you can listen to Mr. Byrne's portion of the seminar here).

You can listen to Mr. Lasser's portion of the seminar here. 

Mr. Lasser's portion of the seminar covered the topic Minimizing Acrimony & Conflict While Collecting Carrying Charges and Assessments.  Mr. Lasser's presentation included discussions on the different types of debtors, the statutory warranty of habitability, common management back office mistakes and legal pitfalls. You can listen to Mr. Byrne's portion of the seminar here.

You can listen to Mr. Lasser's portion of the presentation online here. (17.5 MB)

Over the years, a large body of adverse possession caselaw developed in New York, which helped flesh out the sparsely worded statutory requirements of an adverse possession claim.  As the caselaw developed, the doctrine of adverse possession started to be used more frequently as a sword to help owners acquire their neighbors’ property rather than being used as a shield to protect owners from stale encroachment claims as was originally intended.  In July 2008, the New York State legislature revised the statute governing adverse possession by adding some of the elements of adverse possession created by caselaw and specifically excluding other aspects of the caselaw.  These revisions were made in order codify the caselaw and to prevent adverse  possession claims made in bad faith.

Adverse Possession Alive and Well in the Suburbs and Cities
Property law professors in New York cover the legal concept of adverse possession during the first year of law school, and adverse possession used to be a topic that appeared occasionally on the New York State Bar Exam.  The cases discussed in educational settings mostly involve boundary disputes in rural areas where landowners often own many acres and it is understandable that a landowner might not notice that a structure was built on her property and take appropriate action to have the structure removed.  Even though most lawyers are vaguely familiar with the concept of adverse possession from their law school days, many remember it as an arcane doctrine that is only relevant to lawyers who practice in rural counties.

To my surprise, the doctrine of adverse possession is invoked frequently in the real world of real estate litigation, not only in rural areas but also in suburban and urban areas settings where there is high building density and population density.  Instead of fighting over who owns woods and fields, these property boundary disputes typically involve the use of shared driveways or alleyways between two houses or buildings, or arise when one neighbor decides to erect a fence along a property line.  Although the size of these areas may be relatively small, the value of this suburban or urban real estate can be quite large, resulting in bitter disputes between neighbors.

The Elements of Adverse Possession
Regardless of whether property is located in the country, a suburb or a city, the law in New York governing adverse possession is the same, and is contained in Article 5 of the New York Real Property Actions and Proceedings Law (hereafter abbreviated as "RPAPL 5").  Although not spelled out explicitly in RPAPL prior to the July 2008 revisions, the caselaw interpretations of the statute held that in order to succeed on an adverse possession claim, the adverse possessor had to demonstrate that his possession was

1. under claim of right;
2. hostile;   
3. actual;
4. open and notorious;
5. exclusive; and
6. continuous

The actions required to be taken by an adverse possessor to satisfy any one of these elements will typically satisfy several others as well.  Basically, if you openly and exclusively occupy someone else’s property for ten years, all of these elements, except for the claim of right element, are satisfied.  Historically, an adverse possessor satisfied these elements by enclosing the land in controversy with a fence, building a structure on it, or cultivating it if it was farmland.

The Claim of Right Controversy
The element of adverse possession that has received the most attention from courts and the legislature in New York during recent years is the element known as a claim of right.  A claim of right is the adverse possessor’s basis for claiming an ownership interest and possessing land not actually belonging to her.  Prior to 2006, the rulings by New York courts on the issue of whether an adverse possessor’s knowledge that someone else owned the land they sought to take was relevant to establishing a claim of right were inconsistent.  This inconsistency encouraged litigation because without a firmly established caselaw precedent, plaintiffs and defendants both felt they could win challenges concerning a claim of right on any given day.

Finally, in the landmark 2006 case of Walling v. Przyblo (Walling v. Przybylo, 7 N.Y. 3d 228. 2006.),  the highest appellate court in New York, the Court of Appeals resolved the claim of right controversy and held that actual occupation, not subjective knowledge, determines whether the claim of right element of an adverse possession claim is satisfied.  In other words, if you act like you are the owner of the property, you have established a claim of right even if you knew you were not the owner of the property when you took possession of it. 

Although many legal scholars and real estate lawyers viewed the Walling decision as unjust because it seemed to reward people who took possession of and erected structures on property they knew the did not own, at least the law concerning a claim of right was finally settled in New York.  Unsurprisingly, the caselaw precedent set by the Court of Appeals in the Walling decision did not last long.

2008 Amendment of Article 5 of the New York Real Property Actions and Proceedings Law
On July 7, 2008, two years and five days after the Walling decision by the Court of Appeals, the New York State Legislature amended RPAPL 5 in order to overturn the precedent set by Walling.  In her memo in support of the amendment, Senator Elizabeth Little stated that “A person who attempts to possess land that they know all too well does not belong to them should not be encouraged.  If a person desires land, they can buy it. … Adverse possession should be used to settle good faith disputes over who owns land.  It should not be a doctrine which can be used offensively to deprive a landowner of their real property.” (New York State Senate Introducer’s Memorandum in Support S7915-C.)

The 2008 amendment to RPAPL 5 attempts to eliminate bad faith adverse possession claims by using a reasonableness standard to determine whether a claim of right has been established.  The statute now defines a claim of right as “a reasonable basis for the belief that the property belongs to the adverse possessor.”  (New York Real Property Actions and Proceedings Law Section 501.) In other words, if you know or should know you are occupying someone else’s land, you cannot establish a claim of right.  Occupation is no longer determinative to establishing a claim of right.

In addition, the amendment codifies the other elements of adverse possession previously only established by caselaw as follows: adverse, open and notorious, continuous, exclusive, and actual.” (Id.)  The amendment also makes it more difficult to demonstrate these elements by specifically stating that “non structural encroachments, including, but not limited to fences, hedges, shrubbery, plantings, sheds and non-structural walls, shall be deemed to be permissive and non-adverse.”  (New York Real Property Actions and Proceedings Law Section 543.) This is a significant departure from the standard set by prior caselaw where fences often served as the cornerstone of adverse possession claims.  

Conclusion
The doctrine of adverse possession has played a vital role in property boundary disputes in the countryside, suburbs and cities of New York for a long time.  The July 2008 amendment to RPAPL 5 codified the elements of adverse possession established by many years of caselaw, but also made a significant departure from the caselaw by establishing a reasonableness standard for the claim of right element.  The amendment also made it more difficult to establish an adverse possession claim by specifically excluding fences and other non-structural encroachments from comprising part of the basis for an adverse possession claim.  As a result of the amendment, a property owner in New York who sleeps on his rights by failing to action to remove encroachments on his property has a better chance now of defeating an adverse possession claim than at any previous time in history.  Nonetheless, it is still possible to acquire property through adverse possession, so an owner who believes that his neighbor is encroaching on his property should promptly consult with an attorney in order to take measures, which will nullify any potential adverse possession claim.  Similarly, an owner who believes that he may have acquired his neighbor’s property by adverse possession should consult with an attorney in or to determine whether his claim is viable, and if any further steps should be taken to strengthen the claim.

A variety of legal methods can be used by a condominium association's attorneys to attempt to collect common charge arrears. Which method or combination of methods will be best for a particular situation will vary.

Regardless of which method or methods are used, the first step in the process is sending a Thirty Day Notice of Debt Collection to the unit owner. One benefit of sending a Notice of Debt Collection prepared by an attorney is that it conveys the seriousness of the common charge arrears to the unit owner. In addition, it provides the unit owner with an opportunity to examine the breakdown of the amount he or she owes. This may expedite an amicable resolution to the matter, as sometimes owners do not read their monthly common charge statements and do not realize they are in arrears. It may also motivate an owner to make an inquiry regarding a particular charge her or she wanted answered before paying it.

 

In the event payment is not made within the thirty day period provided under the Notice of Debt Collection, the next step is filing a common charge lien against the unit pursuant to NY Real Property Law Section 339-aa. Common charge liens are security interests similar to mortgages. Like a mortgage, a common charge lien is filed in the property records of the Office of the County Clerk where the unit is located. A properly filed lien provides notice to the world that the common charges are owed and in most cases will prevent the sale or refinance of a unit until the common charges owed by the unit owner are paid. In addition, a common charge lien can be foreclosed like a mortgage. That is, a condominium association can start a foreclosure action that will result in an auction sale of the unit with the auction proceeds being used to pay off the common charge arrears.

Unfortunately, common charge lien foreclosure actions can drag on for several years, and the condominium's lien will be subordinate to any mortgages filed before it. This puts condominium associations in New York at a great disadvantage compared to other states where a certain period of common charges (e.g., six month's worth) will take priority over mortgages on the unit. Therefore, attorneys representing condominium associations in NY should ascertain whether there are mortgages against the unit and the value of the unit and then consult with their clients in order to determine whether a lien foreclosure action makes sense before proceeding.

Even if the condominium association's attorneys evaluate the situation with their client and conclude that a lien foreclosure does not make sense, they should still file a common charge lien against the unit. As well as making the unit unsaleable, filing the lien will make the condominium association a "secured creditor" under Federal Bankruptcy law. Having the status of secured creditor will generally allow for the recovery of amounts due at the time. This will ultimately result in a higher percentage of the common charges being repaid to the condominium association if the unit owner files for bankruptcy protection.

For the past few years, rather than going the foreclosure route, I have generally recommended that condominium associations sue unit owners in arrears in Civil Court for money judgments. This is much faster and less expensive and can still result in an auction sale of the unit. It also provides the condominium association with access to other assets such as bank accounts and wages to satisfy the common charges arrears once a judgment is entered.

Taking this a step further, I have recently begun recommending that lawsuits for money judgments be filed with the Small Claims Part of the Civil Court. While the amount of the recovery is limited by the $5,000.00 jurisdictional limit of the Small Claims Part, it is much quicker and less expensive than regular Civil Court. Rather than litigating for months or years, your attorney can literally spend a few hours in court at a hearing where a repayment agreement with the delinquent unit owner can often be negotiated. If negotiations with the unit owner fail, your attorney can present your case to an arbitrator who renders a binding decision (and judgment if you prevail), which your attorney will receive in the mail within a few days of the hearing date--quick justice indeed!

Lastly, a little known, but attractive, method to collect common charge arrears is available where a unit owner rents his or her unit to a tenant. Real Property Law Section 339-kk authorizes condominium associations to collect rent payments directly from the tenants of unit owners in arrears. This is accomplished by sending a notice to the tenants pursuant to the statute. Since a tenant's monthly rent for a unit is usually several times the amount of the common charges for the same unit, if the tenant obeys the notice the arrears are usually paid off within two or three months. Unfortunately, the statute does not provide the condominium association with any legal remedy against the tenant if he or she disregards the notice. This flaw in the statute can be remedied by putting language in a condominium association's lease application, which authorizes the condominium association to sue a unit owner's tenant directly.

It is evident that Real Property Law Section 339-kk, which authorizes condominium associations to collect rent payments directly from the tenants of unit owners, and Real Property Law Section 339-aa, which authorizes lien foreclosures, both need to be amended by the legislature in order to give them more teeth. As written, these statutes require creative lawyering to get results, which leaves many condominium associations operating under tight budgets with chronic arrears problems. A few minor revisions to these statutes would dramatically increase their effectiveness, and I hope to petition the NY State Legislature to effectuate these changes in the not so distant future.

The focus of most pet policies and rules enacted by cooperative and condominium boards is dogs.  Some of the more common rules require dogs to be kept on leashes while in common areas, prohibit dogs in elevators, limit the number of dogs per apartment and limit the size of permitted dogs.  In most cases, a majority vote by a board is sufficient to amend these rules and policies, and to completely prohibit dogs. 
 

Enforcing policies and rules relating to dogs is often more difficult than passing them.  To a large extent, this is due to Section 27-2009.1 of the Administrative Code of the City of New York, which is commonly known as the "Pet Law."  The Pet Law was originally passed by the New York City Council in 1983 to prevent landlords from trying to use "no-pet" clauses in Rent Stabilized leases as a pretext for commencing eviction proceedings against tenants with below market rents who coincidentally had pets.  In basic terms, the Pet Law prohibits landlords from enforcing "no-pet" clauses in leases against tenants who have "openly and notoriously" harbored a pet for a period of three months or longer.

A significant body of case law involving various courts' interpretations of the Pet Law has evolved in the cooperative and condominium context.  Based on this case law, it is clear that the Pet Law applies to cooperative proprietary leases and house rules.  More specifically, if a cooperative's board of directors fails to commence legal action to remove a dog from a shareholder's apartment that his been kept "openly and notoriously" in violation of the cooperative's policies or rules for three months or longer, then the cooperative board will usually be prevented from removing the dog pursuant to the Pet Law.

There are many cases where courts have interpreted the meaning of "openly and notoriously."  Each case is fact specific, but in broad terms the courts have held that as long as one member of a building's staff is aware that someone is harboring a dog in his or her apartment, then such knowledge is imputed to the building's board and the "openly and notoriously" requirement of the Pet Law is satisfied.  It is important to note that a board must commence a lawsuit within three months of its actual or imputed knowledge of a dog being illegally harbored in an apartment in order to defeat a Pet Law defense.  Sending a warning letter or a notice to cure is not sufficient.

It is also important to note that even if a Board fails to commence a lawsuit within the three month window required under the Pet Law, this will not prevent a Board from removing a dog whose behavior is causing problems in a building.  The Pet Law specifically states that it will not be applicable where the harboring of a pet causes a nuisance or interferes with the health, safety or welfare of a building's other occupants. 

Interestingly, whether the Pet Rule applies to condominium boards and condominium unit owners depends where the condominium property is located.  There is a split in the decisions by the appellate courts that cover different geographic areas of New York City.  The appellate court that has jurisdiction over Manhattan and the Bronx has ruled that the Pet Law does not apply to condominiums.  On the other hand, the appellate court that has jurisdiction over Queens, Brooklyn and Staten Island has ruled that the Pet Law does apply to condominiums.  Eventually this split will probably be resolved by the State's highest court, the Court of Appeals, or by the City Council.

To complicate things a little more, there are additional Federal, New York State and New York City anti-discrimination laws relating to individuals with disabilities.  These laws may trump a board's right to remove a dog, even where a dog is kept in violation of a properly enacted policy or rule and the board seeks to timely enforce such rule within the three month window provided under the Pet Law.  The penalties for violating these anti-discrimination laws are severe and may include the assessment of fines, punitive damages and an award of counsel fees.  However, only a very narrow class of people with dogs fit into the protected categories under these statutes. 

In conclusion, a cooperative or condominium board (in the Bronx, Brooklyn or Staten Island) that fails to commence legal action to remove a dog that is being harbored in violation of its buildings' policies and rules within three months of its discovery will probably be barred from enforcing such policy or rule pursuant to the Pet Law.  Notwithstanding whether the Pet Law is applicable, a Board may be barred from removing a dog under the anti-discrimination statutes relating to people with disabilities.  It is recommended that you consult with legal counsel with regard to any pet-related issues, especially to the extent that disability-related issues are present.