Generally, a condominium is restricted from selling any portion of the common elements to a unit owner without the consent of all unit owners. However, when is it permissible for a unit owner to have exclusive use of a portion of the common elements? When and how can a condominium board grant exclusive use of a common element to a unit owner? When can a unit owner alter common elements? This column provides insight and potential answers to these questions by examining the controlling sections of the Condominium Act and relevant case law. This column also updates our earlier one dealing with transfers of co-op common areas to shareholders. Unlike condominiums, co-ops may sell common area space to shareholders with only board approval.

Common Elements

The New York Condominium Act, RPL §339-i, defines common elements and establishes a statutory mechanism for calculating ownership interests in and protecting the permanent character and indivisibility of such spaces and their permitted use.1 Board actions that alter ownership interests in or physical characteristics of the common elements are likely to violate RPL §339-i. In Ronaldson v. Countryside Manor Condominium Board of Managers,2 the trial court granted plaintiff unit owners a permanent injunction preventing another unit owner from enclosing/fencing in space designated as a common element by the condominium’s declaration. The Appellate Division, Second Department, affirmed, holding that the fences would impermissibly divide the common elements and hinder or encroach upon the rights of other unit owners, in violation of RPL §339-i(3) and (4).

The outcome in Ronaldson would have been different if the space at issue were a limited common element. RPL §339-i(4) allows certain owners to enjoy “substantially exclusive advantages” in portions of the common elements if the condominium declaration or bylaws so provide.3 In Board of Managers, Washington’s Headquarters Townhouses Condominium v. Gottlieb,4 the court denied the board an injunction to prevent the first floor unit owner from having exclusive use of the second floor of the building. The court found that the declaration expressly excluded the second floor from being common element and the offering plan deemed the second floor a limited common element for the exclusive use of the first floor unit owner. Further, because the second floor was not a condominium unit, the court inferred that it was intended to be a limited common element under RPL §339-i(4).

In Di Fabio v. Omnipoint Communications,5 the condominium board leased portions of the building’s roof and basement to Omnipoint to construct a cell phone tower. Plaintiff unit owner sought to preliminarily enjoin the tower construction. The court determined that RPL §339-i(2) does not prohibit a board from entering into an agreement relating to the use of common elements. Additionally, the bylaws and condominium rules provided broad board powers regarding use of common elements. The Second Department affirmed.

However, in Kaung v. Board of Managers of the Biltmore Towers Condo. Assn.,6 the bylaws stated that common elements could be used only for services and facilities incident to the use and occupancy of the residential units. The board leased the right to install eight cell towers on the building’s roof, asserting that they were “incidental” to the units’ residential use, relying on the DiFabio decision. Unit owners challenged the lease, and the court invalidated it, holding that the towers were not incidental to residential use because they would provide service to a large area of White Plains with no evidence that they were needed to provide service to the building’s apartment owners.

Revocable Licenses

In many newer condominiums, the bylaws provide that the owner of two or more units serviced by an adjacent common element such as a hallway may, with board consent, have the exclusive right to use and enclose such common element. However, even absent such a bylaw provision, a board may grant a unit owner a revocable license for exclusive use of a common element. In Cohen v. Board of Managers of 22 Perry Street Condominium,7 the board entered into a written revocable license agreement with unit owners permitting them to enclose adjacent hallway space to create a new entrance to their combined units in exchange for monthly payments equal to the common charges allocated to such space.

After an initial one-year term, the agreement continued on a month-to-month basis but could be terminated by either party without cause upon 120 days’ notice and by the board for cause upon 10 days’ notice. Plaintiff, another unit owner, claimed that RPL §339-i prohibited the board from allowing defendants to enclose a portion of the hallway. The court determined that the revocable license did not violate RPL §339-i(1)-(4). Specifically, the license: (1) did not affect the common interest appurtenant to each unit or contravene the method for calculating common interest; (2) did not change the permanent character of the common interest; (3) did not affect plaintiff’s title to the common elements; and (4) did not hinder the use of the hallway by other owners. The Appellate Division, First Department, affirmed.

In Board of Managers of 500 West End Condominium v. Ainetchi,8 Maloney, an intervener in the case, entered into a purchase agreement for a penthouse unit which prohibited enclosing the terrace or other space appurtenant to the unit without consent from the adjacent penthouse unit owner. Maloney began constructing a pool, deck and shed on the terrace adjoining his unit and the adjoining unit owners sued, claiming that Maloney violated the agreement by failing to obtain their consent. The trial court found that the terrace was not “appurtenant” to Maloney’s unit. Rather, it was a general common element of the condominium, which was not a party to nor bound by the purchase agreement. Indeed, Maloney had paid the condominium $315,960 for a revocable license to use this common element to build the pool and shed.

A concern for unit owners with revocable license agreements may be their lack of permanence. However, revocability is necessary so that ownership interests and title to the common elements are not changed. Further, board action to revoke leases and accommodations to use a common element will be enforced. In Board of Managers of Surf East Condominium v. Cohn,9 the board canceled a unit owner’s lease on his second garage space after determining that owners should only be allowed one space because of limited availability.

The court upheld the board’s action because the lease was subject to further rules that the board may adopt from time to time. In the same vein, in Mirandi v. 210 West 19th Street Condominium,10 the First Department upheld board action to require a unit owner to remove a fence and outdoor furniture from a courtyard, a common element. The court found that the previous owner’s use of the courtyard was merely an accommodation.

Alterations

RPL §339-k prohibits an owner from performing work that might jeopardize the building’s structural integrity or add a material structure without first obtaining consent from all affected unit owners. In Board of Managers of the Europa Condominium v. Orenstein,11 the First Department held that the commercial unit owner was not required to obtain consent of all unit owners for alterations adding 585 square feet of floor space to the commercial unit by extending the slab forming the mezzanine floor.

Although the alteration required excavation of the ground under the cellar, a common element, the court found the alteration violated neither the law, bylaws or declaration because the impacted common element was located entirely within the boundaries of the commercial unit and excavation would not adversely affect building operations, structural integrity or the residential units. Further, the commercial unit owner did not violate RPL §339-k by failing to obtain consent from all unit owners because “affected” unit owners should be interpreted narrowly to refer only to owners of units “appurtenant” to the cellar excavation and there were none.

In Odell v. 704 Broadway Condominium,12 plaintiff purchased a unit intending to add a balcony. Prior to closing, plaintiff obtained a letter of agreement to the alteration “in concept” from the board president. After closing, plaintiff submitted architectural plans to the president for approval, who signed the approval letter as president. Plaintiff commenced construction but, following a later meeting with the board to discuss the plans, the managing agent advised him that the board had rejected the balcony plans. Plaintiff sued the board, seeking a declaration of his right to complete the alteration.

Both parties moved for summary judgment. The board claimed that its president lacked authority to grant board approval and that plaintiff violated RPL §339-k by failing to obtain consent from affected unit owners. Plaintiff argued that the president approved the alteration on the board’s behalf and, through broad powers of attorney required to be given to the board by all unit owners as a condition of purchasing the unit, consented to the alterations on behalf of all affected unit owners.

The trial court denied both motions, and the First Department affirmed, holding that while plaintiff reasonably relied on the president’s authority to bind the board, the powers of attorney from unit owners granted authority to the board as a whole and one member, albeit the president, was not authorized to exercise them. However, the court declined to dismiss the complaint because a disputed fact remained to be determined—whether the balcony was a “material structure” within the meaning of §339-k of the Condominium Act. If not, no unit owner consent was required and plaintiff would be entitled to complete the balcony.

Easements

A unit owner’s use of a common element may also be permitted by reason of an easement. In Felner v. Adler,13 defendant unit owner was entitled to maintain a fence, although it extended five feet beyond the demising wall between terraces behind the parties’ adjoining apartments. The First Department held that the offering plan created an easement by stating that units were offered in as is condition and by referring to the fence in an inspection report and showing it on floor plans.14 Where an easement has been created, a board is prohibited from taking actions that interfere with its enjoyment.15

Co-op Law

Unlike a condominium, a co-op board may allocate shares to a common area and sell the shares and issue a proprietary lease covering such space to an existing shareholder.16 Our 2005 column dealing with this subject advises boards to obtain “no-action” letters from the New York State Department of Law so that shares can be issued without filing an offering plan.17 However, in March 2012, the Department of Law determined that no-action letters were no longer required, provided that the board is not sponsor controlled and purchasers are shareholders, so that there is no “public” offering.18

Co-ops may also allow exclusive shareholder use of a common area pursuant to a license, whereby the co-op retains ownership of the common area. Co-op boards may wish to include in the proprietary lease a provision stating that any shareholder use of a common area is pursuant to a revocable license, in order to prevent shareholders from claiming ownership of such common area.19

Conclusion

Currently, absent a bylaw provision that addresses exclusive use, the most effective way for a condominium board to allow a unit owner exclusive use of a portion of the common elements is to grant a revocable license for the subject space. Case law holds that revocable license agreements do not violate RPL §339-i and such licenses benefit both the owner and the board.

For the owner, the license establishes the exclusive right to use the common element, free of challenge from other unit owners. For the board, the license allows it to receive a fee without amending the declaration or obtaining the consent of other owners. Where a unit owner seeks to alter a common element, RPL §339-k requires consent from all affected unit owners. While case law suggests a narrow reading of “affected” unit owners, this should be determined on a case-by-case basis, depending on the nature, scope and location of the common element at issue.

Richard Siegler is of counsel to Stroock & Stroock & Lavan and is an adjunct professor at New York Law School. Eva Talel is a partner at Stroock and an adjunct professor at Cardozo Law School. Michael Brancheau, a law student, and Margaret Jones, a research librarian at Stroock, assisted in the preparation of this article. Stroock is counsel to the Real Estate Board of New York.

Endnotes:

1. N.Y. Real Prop. Article 9-B, secs. 339-d to 339 kk.

2. 189 A.D.2d 808 (2d Dept. 1993), lv. dismissed, 82 N.Y. 2d 706 (1993).

3. N.Y. Real Prop. sec. 339-i(4).

4. 186 A.D.2d 525 (2d Dept. 1992).

5. 2008 WL 7908050 (Jan. 25, 2008 Sup. Ct. Westchester County), aff’d, 66 A.D.3d 635 (2d Dept. 2009).

6. 22 Misc.3d 854 (Sup. Ct. Westchester Co.), aff’d, 70 A.D. 3d 1004 (2d Dept. 2010).

7. 2000 N.Y. MISC. LEXIS 675 (Sup. Ct. New York County), modified as to award of attorney fees only, 278 A.D.2d 147 (1st Dept. 2000).

8. 84 A.D.3d 603 (1st Dept. 2011).

9. 90 Misc.2d 1054 (City Ct. Long Beach County 1977).

10. 248 A.D.2d 198 (1st Dept. 1998).

11. 281 A.D. 2d 354 (1st Dept. 2001).

12. 284 A.D.2d 52 (1st Dept. 2001).

13. 195 A.D.2d 335 (1st Dept. 1993).

14. But see Board of Managers v. West 79th Street Corp., 2 A.D.3d 246 (1st Dept. 2003) (holding that while the condominium declaration granted the commercial unit use of the common elements “as may be reasonably necessary incident to the operation of the commercial unit,” such provision did not grant the commercial owner an express easement “for exclusive uses of the common elements as it sees fit”).

15. See Gisondi v. Nyack Mews Condominium, 251 A.D.2d 371 (2d Dept. 1998) (holding that the plaintiffs’ controlling easement agreements prevented the condominium board from constructing a gate that required key cards to access the common parking area because it would unreasonably interfere with the plaintiffs’ right to use and enjoy their easement).

16. See Siegler and Talel, “Procedures for Issuance and Sale of New Shares,” NYLJ, Nov. 2, 2005, at 3, col. 1.

17. See Note 16, supra.

18. See N.Y. Dept. of Law, Real Estate Finance Bureau Memorandum, Sale of Hallway or Other Additional Space by Coops or Condos, March 26, 2012, available at: http://www.ag.ny.gov/bureau/real-estate-finance-bureau/memos/effective-refb-policy-memoranda (last visited Nov. 1, 2012), for the Department of Law’s position on when a no-action letter is required.

19. See 1050 Fifth Avenue v. May, 247 A.D.2d 243 (1st Dept. 1998), holding that the offering plan, building plans and proprietary lease established by clear documentary evidence that the co-op was the proper owner of the roof area, notwithstanding tenant’s argument that the space belonged to her due to her 30 years of open and notorious use.