Concern over window case fallout

Real Estate Weekly, Oct 22, 1997 by Lois Weiss

That should come as no surprise, of course, to the sponsors of the cooperatives, nor to the other more than 25,000 owners of multi-family apartment buildings who deal with city inspectors on a regular basis.

But for the tenants who turned shareholders, and now often struggle to share tasks or must coerce other resident volunteers to hold positions on the board, the specter of possibly facing criminal records, fines and even jail sentences if something goes wrong is not quite what they had in mind for their resumes.

Neil Davidowitz, a former district attorney who is now vice president of Orsid Management, says he is pouring through New York City code books to see what violations could produce criminal punishment for the boards.

Cooperative attorney Stuart M. Saft, a partner with Wolf Haldenstein Adler Freeman & Herz, is alerting his clients to the issues. He is also drafting state legislation designed to protect volunteer housing boards and modeled on recent Federal legislation that lets not-for-profit board members off the hook, so king as they don't commit fraudulent acts themselves.

And other industry groups are resurrecting the fight to have managing agents licensed by the state.

The concerns were prompted by a legal case based on the city's window guard law that the experts believe could have a chilling effect on the membership of the city's cooperative and condominium housing boards.

Members of a Brooklyn co-op board were left facing such criminal penalties when the judge agreed with the city's corporation counsel that they could be held personally liable.

The stance was taken after a child died in a window fall, triggering a later Health Department inspection of apartments and a finding that there were missing and improperly installed window guards.

Brooklyn Supreme Court Judge Kathryn Smith declined to dismiss the criminal penalties against three members of the board, which the prosecuting attorney insisted must be part of any plea bargain.

Thus, after the judge's refusal to dismiss the complaint, along with the cooperative corporation paying a fine and pleading to a misdemeanor, the city's Assistant Corporation Counsel Louise Moed wanted at least one member of the board of directors to plead guilty to a violation in order to settle the case.

She said a violation "is less than a crime. We were not looking for a human being to have a criminal record." Violations are typical pleas for non-compliance with many city housing code issues. But there are plenty of laws that, as Davidowitz is finding, include criminal penalties.

That doesn't sit well with the cooperative community, because a criminal record could be exactly what is offered in another case.

In the window fall case against Premier House, the statute of limitations had run out on charging the managing agent in place at the time of the accident. But he has now come forward and pied guilty to the violation, and a fine of $2,050 has been imposed. That individual, Efrain Lopez, could not be reached for comment, but a board member confirmed he is no longer employed by the building.

The cooperative corporation itself has also pled guilty to a misdemeanor. A fine of $18,000 was imposed, $2,000 for each of the nine counts.

Volunteer and License Issues

The case is causing numerous discussions within the real estate industry, as Moed wanted the imposition of criminal penalties under the theory of strict liability.

According to the court decision, "this permits the finding of liability as to any individual who is responsible for the premises where such code violations are alleged to have occurred, without regard to any culpable mental state."

The court rejected the board's defense that they could not legally be held personally liable for the criminal violations of a cooperative corporation or its agent or employee, and therefore, this case has implications for volunteer boards and managers of property.

Moed told the court, "The management of a 185-unit multiple dwelling is not for amateurs, and it's offensive for the defendants to put forth the proposition that their positions on the Board of Directors were merely honorary and entailed no responsibility for the health and safety of the building's occupants."

The president of the New York Association of Realty Managers (NYARM), Leonard Jones, agreed. "A cooperative should have a well-trained individual handling their day-to-day business," he insisted. "I know of no board member that will follow-up on a window guard installation or the inspection of an elevator, or anything else. Even the self-managed buildings hire a managing agent."

Still, of the three members of the board that were facing criminal penalties and were listed on the multiple dwelling registration, one was a member of the family that sponsored the conversion of the building, and the other an employee, which is one reason Moed dismissed the idea here of the "volunteer" board.

The actual Health Department inspection was conducted after a boy fell to his death from a window in a master bedroom where the guard was later found to be improperly installed. According to court records, Health Department inspectors came into the building three weeks after the June 1994 accident and were only able to gain entry to nine of the 185 apartments.