This newsletter explores the emerging legal topics and issues affecting the condominium and cooperative services industry. Thought-leading attorneys from Moritt Hock & Hamroff’s Condominium and Cooperative Services Practice Group share their legal insight, experience and best practices on this rapidly evolving area of law.
The Corporate Transparency Act: No Injunctions, But Also No Future?
The CTA continues its long, strange journey to its final form, which increasingly looks to be as a dead letter. When we last checked in, there had been two nationwide injunctions against enforcement of the CTA, both of which were eventually lifted. For a brief moment, most Regulated Entities were facing a March 21, 2025 deadline to file BOI reports. On March 2, 2025, however, the Treasury Department announced that it would not enforce any fines or penalties under any existing regulatory deadlines, and also pursue rulemaking to limit to “narrow the scope of the rule to foreign reporting companies only.” The question whether the Treasury Department has the authority to effectively nullify a duly-enacted Federal statute is left as an exercise for the readee.
The Parc Vendome Litigation Holds Important Lessons For Condo Boards
The Parc Vendome condominium in Midtown Manhattan has been embroiled in incredibly bitter and disastrous litigation with a succession of commercial unit owners since as far back as 2007. There have been judicial findings of fraud and bad faith, million-dollar malpractice lawsuits, referrals to the attorney disciplinary authorities, and potential six-figure judgments submitted against both the board and individual board members. Most recently, on February 28, 2025, the court scheduled a brand new trial on damages after 26 months and 13 days of hearings (and undoubtedly hundreds of thousands of dollars in wasted legal fees) somehow failed to produce a result.
In such a history, cautionary tales abound. For example, one issue at the heart of the Parc Vendome litigation was the condo board’s exercise of the right of first refusal under its governing documents.
As most readers will know, when a unit owner wishes to sell or lease its unit, condo boards typically have a right of first refusal (or ROFR) to either buy or lease the unit on the same terms as the proposed buyer or tenant has offered. Condo boards will sometimes try to leverage the ROFR to try to exert a measure of control that co-op boards enjoy, but they have to be very careful not to overreach.
In the Parc Vendome case, the commercial unit owner had submitted a lease with a prospective tenant and had asked the board to either exercise or waive its right of first refusal in accordance with the association’s governing documents. However, the board strung out the commercial unit owner for several years insisting that the ROFR had not yet been triggered, essentially because it wanted to condition its waiver on receiving certain concessions from the unit owner that it would not otherwise have been entitled to.
Unfortunately for the Parc Vendome board, it badly overreached and suffered a series of scathing decisions condemning its behavior and tactics. For example, see this excerpt from the Appellate Division, First Department’s decision affirming the trial court’s highly unusual decision to strike the board’s pleadings:
The motion court also properly determined that the board violated the bylaws . . . by unreasonably withholding and delaying its waiver of the right of first refusal with respect to plaintiff’s lease with its prospective tenant. Under article XIII, section 2 (C) (ii) of the bylaws, the board had 30 business days to exercise or waive its right of first refusal, or to seek additional information. The board raised numerous cavils to the form of lease presented by plaintiff, which arguably it was permitted to do, although these objections were not based on any good-faith interpretation of the declaration, bylaws, or any other agreements. What the board was not permitted to do, however, was to refuse to waive or exercise the right of first refusal well beyond the duration set forth in the bylaws based on its own unreasonable refusal to execute the documents . . . the board had approved for plaintiff’s predecessor in 2008. Thus, the motion court correctly determined that the board’s failure to act within the bylaw’s timeframe constituted a waiver of its right of first refusal. (Emphasis added.)
The interesting bit in this excerpt is where the court notes that the board “raised numerous cavils” to the proposed lease, which “arguably it was permitted to do.” In an otherwise harsh and direct affirmance, this is a sentence full of ambivalence and equivocation. The court clearly believed that the Parc Vendome board was in the wrong in this case, but was reluctant to blanketly condemn game-playing with the ROFR generally.
This may be because the court recognized that raising “cavils” (e.g., tendentious and drawn out procedural objections about a unit owner’s form of request to waive the ROFR) that are only “arguably” consistent with the by-laws is something that some condo boards have been known to do from time to time. This is, again, because some condo boards may desire the ability of co-op boards to extract concessions based on their broad consent rights.
Be that as it may, condo board members should still heed this lesson of the Parc Vendome litigation, which is that those who try to use the ROFR to pursue a separate agenda do so at their own peril.
New (Old) Legislative Proposals Affecting Co-ops And Condos
Every year, we share a preview of newly-enacted and potential legislation affecting our co-op and condo clients. However, there is no way to predict with any certainty what actually will be introduced in Albany until the legislative session begins.
That said, some bill introductions are inevitable. For example, A1505, sponsored by Assemblymember Rosenthal, would enact a co-op and condo “bill of rights,” requiring, among other things, that “all applications and requests by unit owners or shareholders . . . be processed in a reasonable expeditious manner pursuant to uniform procedures and timetables adopted in writing.” This bill has been introduced practically every year since 2015, so far without gaining any traction.
A4567A, sponsored by Assemblymember Cunningham, would permit New York City residents aged 65 or older to be granted a “real property tax freeze.” Seniors would continue to pay the same real property tax they paid when the bill is enacted, with the difference being made up when the home is sold or when the senior resident dies. This bill was first introduced in 2017.
A1111 would establish a reverse mortgage loan program for seniors who “own and occupy a single family dwelling, a condominium or a co-op.” It is unclear from the text whether this program would supersede any co-op or condo rules regarding financing approvals. In any event, this bill is sponsored by Assemblymember Simon and was first introduced in 2014.
A3169 would require that if any auditor discovers any evidence “which would materially impact an auditor’s professional findings about the fiscal health” of the co-op or condo, the auditor would be required to disclose such findings not only to the board but also to the current owners and any prospective purchasers. This proposal, also sponsored by Assemblymember Rosenthal, was first introduced in the 2011-2012 session.
We will advise if any of these bills are ever enacted.
