A Simple Case of Trespass, or, how to commit fraud under the coop or condominium veil

The New York Times (“The Gold Mine in the Halls,” Sept. 1, 2013), once reported on a seemingly new trend as if it were celebrating how to manipulate the corporate veil of condominiums and coops to effectuate fraud and theft. The article went on to describe the use of “sales” of common elements to raise cash. But what it didn’t do was warn about how easy it is for insiders to abuse such transactions to eliminate other people’s property rights and steal cash and real estate for themselves by exploiting board informational advantages. Here’s how.

A condominium pretends to “sell” unit owners their own common element. This is portrayed as a “profit venture” to the “benefit” of “all.” These benefits are not explained to board members not in on the theft racket in any detail. “Profit” sounds good to them. So they gloss over the lack of detail. No one asks about taxes. Nor does anyone ask, how can a board “sell” adversely to its own unit owners?

And wait! A condominium board doesn’t even “own” common elements to “sell”!  Only unit owners “own” such building parts. So how does this make any sense? The answer is, it doesn’t. Yet the board blunders on.

The new “plan”also sounds good because board members are told their common charges will be “reduced,” if they don’t buy. This is a promise of personal gain to those members, a bit of a bribe. Suddenly no one thinks about what the common interest is at all any more. They only think, oh good. I gain.

Pricey “experts” are hired. They issue no opinion letters. They warrant nothing. But they look like a Good Housekeeping Seal of Approval. The Board feels good, but has in fact inquired into, and understood, nothing. There have been no material disclosures. All is omission. And, of course, boards, so often, really like it like that. “All” will “benefit,” someone chants. “I” will “benefit.” That’s all they really care to know.

Unit owners are told even less. All of a sudden they get a strange “purchase offer” in the mail, followed by a sales pitch from the managing agent. Recklessly, they trust this person. They assume these entities exist to protect their interests. But do they? Or do they just cater to the resident board autocrat?

Say an old abandoned elevator shaft—equally and usably divisible by all owners—runs through the middle of a building, the size of two large walk-in closets if owners’ units are two to a floor—or one very big one, about 80 sq. ft., if you own a whole floor. The fraud kingpin, the owner in the penthouse, built into his own space for himself well over a decade ago.

This “sales offer” is nothing but an engine of fraud. It superimposes a contract regime intended to strip some individuals of their property and hand it to others—in total secrecy. Private “sales” contracts are, legally, private. This violates numerous terms of your 350 page condominium governing documents, but that is all ignored. And since when have you read your documents, in detail? The burden now is on the victims of theft to make their case—and boy, is that expensive. To quote one lawyer, “the courts hate these cases.” Simply to get to trial is tricky.

A fake entity “profit motive”now steamrollers all unit owner property rights. The entire elaborate engineering of democracy, openness and fairness of the condominium governing documents are ignored, replaced, as if by a evil changeling, with a set of licenses between third parties purporting to strip you of your property.

Board insiders set their own “bargain” real estate prices, hold a fake sale, then secretly grab all the property they want that is “left over,” for themselves. There is no common interest in this. It is nothing but theft, by thieves, of other people’s property.

It is a fraud that is deconstructible but it is also a Rubik’s Cube. The attorney’s fees would break any normal person’s bank.

First, no real estate is being “sold.” The board did nothing but “sell” board approvals pretending that bid-rigged construction was a sale of real estate. How can a fiduciary fulfill its duty by selling board approvals? Pretending to be real estate? This is obviously corrupt. To sell one’s duty is to breach it—to deprive owners of honest services due them from a board. It is a type of extortion, tantamount to the solicitation of a bribe, by a board abusing its position of power over unit owners.

The next crazy aspect is that structuring this as a profit venture, payable to “all,” makes no sense. Only some are infringed by the taking of their allocable share of property. So, why are “profits” distributed to “all”? “All” have no need of a remedy, only those being blocked out of their space by a neighbor. That means the price list for shaft space is inaccurate. The real price paid by all “buyers” is reduced by all “profits” paid to each “buyer,” rebated by their common interest share, over time.  Taxes are due on all these “profits” every year, at both entity and unit owner levels.

Eight years later, this is a serious tax nightmare. Obviously no one has been reporting or paying tax on any of these “profits” at all. The board has just been dumping the sums collected into general capital.

Condominiums don’t own common elements. Unit owners do. Their common interest shares pay for that ownership. So, barring a special situation, and a great deal of due process to all the owners, condominium boards can’t just “sell” common elements. Nor can they extort money from owners except by special assessment for condominium “costs.” So all of this was really only a cost project—some common costs, some individual responsibilities. The fake “sale” construct simply effected the total elimination of all line item accounting, all owner approvals, all voting rights, and all of the transparency required by the governing documents.

A case, Cohen v. Perry St. Board, has been absurdly misconstrued by some in the real estate bar, over-eager to racketeer these common element “sales” transaction sets to muster slush funds for boards, as holding that a board can “sell” a common element to unit owners at any “price” it wants.

It is important to note that real estate “price” is not determinable by a condominium board at all. A condominium board is just a manager. Not an owner. Only an owner can determine what “price” to set on their real estate. Board insiders can’t just sit around a table pricing a common element, holding a fake sale, then use their informational advantages to help themselves, secretly, to property they now deem “left over” from the fake “sale” they just held for themselves.

Legally, it is an illegal, unregistered offer of sale of derivative securities.

In Cohen v. Perry Board, an owner wanted to enclose 26 sq. ft of hall space just outside his door—well within the allocable portion of a hall he was sharing with his neighbor. He got a Board approval after making a donation to the common fund. In essence he offered his Board a bribe, here relatively harmless, for an approval. The Board took his proferred donation, distributable as income to all owners. (Condominiums for tax purposes are treated as partnerships.)

The difference between this relatively anodyne situation at Perry St., and our hypothetical, is that Perry St. never offered to “sell” all halls in the building to all unit owners. No owner on floor 1 secretly “bought” any hall space outside the door of an owner on floor 2. The Perry St. Board also didn’t illegally enfold any “sale” of construction services into its “price.” Indeed, it quoted no “price” to anyone at all. It just took a gift.

Three fraud kingpins benefitted. The dominant board member by far the most. He walked off with a piece of common roof, for free, in secrecy, evading all required approvals. The money laundry of the Offer was intentionally built so that he got to pay just his cost; everybody else had to pay quadruple their costs. Pooling one person’s very high cost with others’ very low costs, and averaging them, obviously cheats the latter. This was all illegal because it is clear from the very structure of the condominium that these were individual, not common costs. Pooled accounting masks this kind of cheating. Just as, in rhetoric, glossy generalizations “lie” about all the critical details one needs to know to make the right decision.

The false rhetoric of “sale” here had the effect of eliminating Board fiduciary duty. It erected a fake entity “profit” motive completely at odds with the common interest. The common interest was to protect unit owners’ property rights against insider theft and self-dealing.

Taxing users of a common element to benefit nonusers changed everyone’s common interest shares. This is illegal under a statute: NYS R.P.L §339-m.

This board divided up space, corrupted board member judgment with vague promises of kickbacks, then steered all the property they wanted for themselves, to themselves. One of the kingpins arranged to be last in line to “buy.” Because all surrounding floor builds were done and paid for on the price schedule, he thus got his space for free. His property rights now allowed him to just break in and use the floor above as his ceiling and the ceiling below as his floor. He also then had no duty to restore anything at his cost. Because he did not build those floors, or sign any contract agreeing to pay to remove that which he did not build, he could just use his space freely. Delightful. For him.

In fear of losing their property, many owners were tricked into complicity with the thieves. As “buyers” and now trespassers on their neighbors, their own interests were corrupted by being gradually aligned with the corrupt intent of the fraud kingpins.

None of it withstands close inspection. But it is so knotty, it can even fool courts, particularly given the stresses on them that feed their current taste for judicial abdication. How many people in America flee, in rage and tearful frustration—forced to sell by thieving neighbors—rather than stay on to fight fraud?

Private contracts may not undermine, violate, and contradict bylaw-granted rights of unit owner property

The “licensing” scheme at this condominium is a fraud that rips everyone off solely to benefit former dominant board member Defendant One.

All rights to shaft space are bylaw defined. The effect of it on the abandoned freight elevator shaft in the building, is to divide it evenly among everyone.

This fraud is an ongoing crime, rectifiable on an ongoing basis, by any or all unit owners.

Since 2007, the board encouraged shaft build ins, even repeatedly promising that these build ins would be done for all in common. The Offer did the exact opposite. The condominium attorney—and now, sadly, others in the New York City real estate bar, for whom such schemes only manufacture transactional and dispute fees—wrongly thinks that Cohen v. Perry St. Board is about a condo board “selling” common element space “to” unit owners. The case does nothing of the kind. The Perry St. unit owner who wanted to enclose a small piece of adjacent hall into his unit made a donation to grease a board approval. This was on his initiative, not the board’s. A harmless bribe given for approval. The Perry St. board “sold” nothing. It merely took cash given to it. In no way does this imply that a fiduciary board can turn around and, on its initiative, forcibly “sell” a common element to unit owners, at a declared entity “profit,” discriminatory among unit owners. That is extortion. Condominiums are based on cost. Not profit.

I believe this is an instance of rising enterprise corruption in New York, given a sad assist by judicial abdication to a class of overprivileged board malfeasors who now find it all too easy to evade accountability—and which echoes the move toward corporatized fascism which the late Obama administration famously viewed as more of a feature than a bug, basing its experimentation on recent anti-libertarian legal-academic trends. This experiment in delegation to corporate entities by the state is not going well anywhere in America—including in the sexual harassment kangaroo courts lately instituted at contemporary American campuses.

Fair market value (sale or rental) is merely a valuation. It is not a “sale.” Real estate is valued when a board, pursuant to its duty to the common interest, acts within its power. It had no such power here.

In this situation the condominium board simply has no power to “sell real estate.” Fair market valuation in pursuit of a common purpose is all the board—which is a manager, not an owner—has any authority to do.

This licensing scheme sought to sell board approvals. This is inherently corrupt. No common purpose was served by it. Defendant One merely served himself—to everyone else’s money and property, abusing board power and common funds to steal others’ property by fabricating a faux appearance of legality in a flurry of private contracts. A condominium “profit” motive adverse to unit owners, selling to them, is on its face a conflict of interest.

When you look at this closely, it is all unethical, illegal, and worst of all, economically irrational.

Everyone but he was charged four times their cost to build in while he got to pay his cost. Everyone was forced to subsidize him.

By grouping shaft with roof under a “price” list, the Offer deceitfully implied that the roof was part of the shaft. It is not. To use the common roof, Defendant One must pay fair market value rent. On the roof, everyone else is being deprived of that valuable, highly limited, common roof real estate. No one is deprived of anything if a unit owner uses their part of the shaft.

Defendant One never got proper permission for any of his roof constructions. All are illegal. To be legal, the documents must be followed and they were not. Every owner affected by a change in a common element must approve.

The Offer fraudulently recharacterized roof rentals as “common interest share monthly payments” to use “the shaft.” To do this, the Offer made everyone in the building liable to pay a monthly charge to use the shaft—all so that Defendant One could pretend that his taking of the roof was part of the shaft. The only relevant building precedent for shaft use inside the building is no charge. (Defendant One’s use of it since 1997).

Comically, Defendant One also gets his common interest share of “profit” from these monthly “common interest share shaft” payments, and the fake “sales” gouged out of everyone in the building except him.

When the Offer was first sent out, Defendants Three and One were already building in the shaft and on the roof. They had broken into our loft from there, three weeks before the Offer arrived on all doorsteps.

In charging everyone new “common interest shares” for the shaft, common interest shares have changed. This violates RPL §339-m.

Under §2.2 or its §2.2.3 limited residual powers, there was no board power to lease a common element. These clauses align with Bylaw §6.15.4 which grants the sole prerogative to initiate an enclosure of an adjacent common element to the unit owner specified in that bylaw as eligible to do so. It does not grant such prerogative to the board. Defendant Three is not eligible under the bylaw terms. Nor is Defendant One. They are not adjacent to the space and their units are not appurtenant to it. Only ours is.

The term-shuffling alone in this “licensing” scheme—swapping out “selling,” “leasing,” or “licensing” at will—was a large clue of a fraud afoot.

Board resolutions range here from nonexistent to inadequate. Nearly everything done here is ultra vires. The records show slovenliness, confusion, and autocracy gone haywire. Highly conflicted board members did not recuse, only madly self-dealt in bad faith.

Worse, the “Offer” was pitched to owners as a condominium profit venture. There is no common interest in profiting off unit owners. The term confused the personal interest in generating profit of Defendant Two, the former King of the Building—who, as an employee of the condominium’s management company had a conflict of interest in performing his King of the Building role—with the condominium’s interest in good management. Profits are worse than irrelevant here. Condominiums are based on cost. “Profit” is only a tax liability. If, as advertised, this is profit, then the last 7 years of tax returns, not only the condominium’s, but everyone’s, must be amended to report profit distributions. To put “profits” into a capital account, as Defendant Two announced that the condominium would do, without reporting those profits as such, is accounting fraud, at both entity and owner levels. For which owners are all now liable to the tax authorities. Fees (which are profits) only serve a common purpose if a board determines, pursuant to orderly investigation, report, and clear board resolution, that a common need exists to, for example, allocate demand to regulate garage parking space rentals that are highly sought after.

The only one ever “profiting” here was Defendant One. Everyone else was charged quadruple their cost, to subsidize the very high cost of valuable benefits that flowed only to Defendant One.  

The Offer pretended to be some kind of notice. But receipt of a deceitful sales pitch does not constitute notice or approval of, much less a vote for, anything.

All of Defendant One’s roof units are illegal. Private contracts do not supplant the documents. Private contracts do not substitute for a required process of due consideration, resolution, or vote. The extreme non-transparency of a process of private contracts accessible only to board members, in itself presents serious questions as to any legal legitimacy.

Perniciously, people felt forced to comply and to “buy” their own shaft spaces, out of fear of losing it, or of being tied up in expensive legal knots. This invested them in the scam. But they should never have been so compelled.

The condominium must now be put on the correct capital cost footing, the shaft and roof separated, and all so-called “licenses” revoked.

Historically, Defendant One cheated the building repeatedly via Defendant Two, who worked at Andrews. For example, Andrews once announced the condominium would pay half of Defendant One’s leak damages from a toilet of his that overflowed. Why would the condominium’s insurer share this cost? Citing no evidence, Andrews said original sponsor Zuberry was to blame because other toilets in the building were believed to be defective, too. This was false, certainly with respect to Defendant One. Defendant One took his loft totally raw. He never had any toilets from Zuberry, so Zuberry was not to blame. (We have four Zuberry toilets, none with any leak issues.) This is not the only example. At the first fractious special board meeting regarding the shaft, Defendant Two told me that the condominium’s insurance had paid half for another Defendant One leak, caused by his having opened the roof to build another roof unit. He explained that this was because the rain had come into the building through a part of the roof that was common. What? The location where rain enters is irrelevant. Who caused it is what matters.

What may have happened here was, Defendant Two was contracting for Defendant One, Defendant One blamed him, so Andrews covered for Defendant Two by allowing him lie to the condominium’s insurer so that they would not be blamed, and so notified all unit owners. Defendant Two also appears to have charged expensive cladding to Defendant One’s secretly installed third roof unit to the condominium. This needs to be investigated.

Defendant Two has made everyone pay Defendant One’s personal costs here for years. Now he engages in maliciously racking up expensive and utterly unnecessary fees from a large architecture firm, his crony, which he bills to us, with no rule or contract authority to do so. We are being harassed as retaliation for our whistle-blowing. We have been put to great personal expense and trouble to expose the frauds ongoing here.

In any contract, each party pays their own respective costs to negotiate it.

Past board members often behaved as if profiting the condominium entity at owner expense was their duty—as if a condominium board were inherently adverse to owners. At least one board member was deceived into supporting the scheme by being tricked into thinking she’d receive a personal financial benefit out of it.

Have you been charged bills unfairly? We’d like to hear about it and correct any abuse.

Under condominium rules, any bad rule can be stricken by majority unit owner vote. No rules have been promulgated since 2005.

To force overreaching contract boilerplate on people is inappropriate.

Condominium rules need to be reviewed. They appear to be mostly reactive. Forbidding anything bad that has ever occurred in the building from ever happening again, in rule form, which is simply silly. Just state basic principles so they are correct, and flexible.

The condominium should not be commandeering individual responsibilities. The basic condominium rule is to distinguish common from individual costs.

“Licensing” in fact, here, is a lawyer fee racket. Reversion to and compliance with the documents is the best and simplest course and far cheaper and better in the long run for everyone.

Democracy and transparency should be enforced all year. An annual unit owner meeting is a good thing, if only to connect once a year with one’s neighbors. But in this day and age of electronic communication it is inadequate. Most or all board meetings should be open and announced with final board minutes regularly circulated. This has been asked for since 1997. But never done.

Better fiscal responsibility is needed here. Common bills may not be charged willy nilly to individual owners not responsible for them. Cost responsibilities are only as agreed, or as rules reasonably provide. Those responsible for bills must monitor them. Do not engineer third party payer problems.

Illegal profit venture wrapped in a fake common cost.

Defendants maliciously and willfully misbehaved to form an illegal profit venture masked by a common cost project solely for the personal gain of board insiders.

This violated condominium rules and NYS condominium laws that require boards to distinguish between individual and group cost responsibilities. A “purchase offer” was misused to defraud owners into believing that the board of the condominium was the property owner of an elevator shaft, as if the common element had been severed from the building, and as such was now the Sponsor of new real estate. It had not been. The board had undertaken none of the formalities and disclosures required by the condominium governing documents or condominium law to accomplish that. This misrepresentation fraudulently induced owners to purchase overpriced personal improvements, for which the condominium governing documents clearly made them solely responsible, in a board-created profit venture that was structured to the sole benefit of the individual defendants. This created a small, utterly economically irrational—and hence arbitrary and capricious—economic subsidy of shaft nonusers by shaft users—and a large and unjust transfer to Defendant One of roof real estate in common use, as well as of shaft real estate that was in multiple exclusive uses within the common element of the interior shaft. The roof and the shaft had nothing to do with one another and should not have been grouped. The grouping was apparently an effort to deceive naive board members into believing that this grouping made the matter a “common” one. The evidence will show that Defendant One engineered this fraud in collusion with his co-defendants and with hired gun “experts” that common funds were misused to retain, at common expense, to create the deceptive paperwork that purported to justify his significant thefts of real property, and to convert the condominium entity into a money laundry to alter owner cost responsibilities in violation of NY RPP §339-m and of the explicit terms of the condominium documents. All acts of this board were ultra vires in a number of respects including basic matters of non-election and violations of rules of order, number and quorum.

Property rights deconstructed in NYS. Another shoe drops in the road to serfdom.

New York State eliminates condominium property rights. Dismisses trespass and breach of duty to greenlight board self-dealing and theft in violation of express rules of governing documents and allocations of individual property rights.

Defendants contrived to steal old elevator shaft space (and common roof space) from their neighbors. Under an express bylaw their neighbors had the exclusive right of use of it and the right to enclose it into their units. The defendants knew this bylaw well.

This was trespass of what was in effect the plaintiffs’ property. The board had the fiduciary duty to seek their permission but used a fraudulent sales scheme to sneak around them. Individuals were simply using board power to self-deal.

A surprise “offer” was emailed to owners purporting to “sell” them shaft space. Plaintiffs were never told anything was first come first served—or, act now or forever hold your peace. The offer itself suggested that one might build in later at one’s own cost. So to the managing agent’s follow up sales call, plaintiffs demurred. After all, the condominium’s governing documents specifically provided that the space was exclusively theirs, should they want it. Board insiders then helped themselves to space set forth in the offer, that was “unsold,” within a stated 30 days. The sole purpose of the offer was to deceive plaintiffs out of their property. There was no common purpose.

The condominium’s governing documents specified plaintiffs’ exclusivity in that space. Plaintiffs therefore did not see that the “sales offer” was calculated to oust them, secretively and permanently.

Board members had hired a lawyer and various “experts” at common expense to rig themselves “bargain” prices to possess others’ real estate “in perpetuity.” In other words, to aid and abet theft.

Condominiums are not supposed to operate in this manner. Collective action is supposed to be open and transparent. Owners have equal rights of notice, informed consent, and vote. Ethical behavior is supposed to be strictly enforced. To sneak around the plaintiffs, failing to ask their permission for an adverse use, under these facts, was a breach of fiduciary duty.

The terms of the proposed contract were kept secret. Plaintiff asked to see a copy, but was told that it would not be shown to anyone who did not pre-agree to the price. Plaintiffs believed it to be a sale of overpriced construction. They were also led to believe that the board agreed that they could build in later at their own cost. So they let it pass. Later, plaintiffs noticed a subtle devaluation of “price” on their floor relative to others. This reflected an existing intrusion.

Before the offer was sent, Defendants One and Two had already been doing construction there.

This case is of significance as a rising form of securities fraud, openly marketed by attorneys as a board insider theft and self-dealing technique. Cf. “Gold Mines in the Halls” citing lawyer Aaron Shmulewitz urging boards to monetize common elements, NY Times.

Lawyer billings on the transaction show only 20 minutes spent on lengthy condominium documents. Instead attorney time is spent on generating complicated, duplicative, self-contradictory paperwork purporting to supersede condominium governing documents—the only owner protection owners will ever have. Board power is excessive. They divert common funds to hire “experts” to help them self-deal.

The structure and economics of the condominium was violated. This changed common interest shares.

Defendant One is a prominent litigation partner in a powerful NYC and global law firm. Defendant Two is a lawyer and real estate agent. Defendant Three was a building manager with the condominium’s building management firm. This was a sophisticated aggregation fraud.

Offering shaft construction to owners was never a common cost. Spaces were only “sold” and paid individually. Favored owners were allowed to bargain their prices down. Disfavored ones were not. It was a profit venture to sell construction to all condominium owners except Defendant One, at irrationally high prices which bore no relation to cost.

Under bylaw § 6.1 only common costs could be divided by common interest share. Instead the condominium board divided the venture’s profits by common interest share.

‘There were no proper board resolutions in place: (1) to insert all floor/ceilings into the shaft at common cost, without which the construction was grossly discriminatory; (2) to rent the roof to Defendant One “in perpetuity” for a grossly undermarket price; (3) to resell unit owners’ real estate to them charging some but not all “common interest shares” for that real estate; (4) that the condominium pay Defendant One’s roof construction costs (bulkhead demolition); (5) that others’ “prices” to use the shaft be charged based on that bulkhead demolition cost; (6) that Defendant One be entitled to pay only his cost while all other owners be charged around four times their cost; and (7) to share these profits, by common interest share.

To agree to any profit venture, including those at arm’s length, participants must contract. Not only with respect to profit sharing but with respect to the parties’ contributions—whether of cash or real estate. With full disclosure, no one would have agreed. People bought because they were ordered to by a faithless fiduciary and out of fear and intimidation. This was an abuse of what is now in New York State, grossly excessive board power.

Under § 2.2’s enumerated powers, the board had no power to lease a common element including under its residual powers; the matter was not “determinable” by it due to bylaw § 6.15.4.

Defendants One and Three were cronies. Defendant One was Defendant Three’s contracting client. At one point in the past, Defendant Three had had the condominium pay half of Defendant One’s costs (leak damage from opening the roof, broken toilet leak damage). Their relationship gave Defendant One undue influence over condominium funds Defendant Three controlled. Defendant Three had another conflict of interest, too. He was an employee of the condominium’s management company and wanted to do large construction.

As the “offer” made plain, there was no common project to insert floors. All the board ever did was sell construction, at enormous profit margins, to everyone individually with the exception of Defendant One, who was privileged to pay only his cost to confiscate common roof from everyone and then massively underpay for it on a fair market rental basis.

The condominium default assumption is that individual costs are the individual’s responsibility.

To convey the roof required unit owner vote. This, of course, was never obtained. The thieves twisted themselves in knots to avoid the scrutiny of a unit owner vote.

Defendant One now rents the roof without paying fair market value for it other than a fake “common interest charge”—obviously a deceptive mischaracterization of his “rents.” As he never paid a cent to rent for his continuous adverse (and exclusive) occupancy of the shaft since 1997, it is horrendously unjust to charge anyone else for it now, and to change all common interest shares. The contraption is a pure, selfish scam enabled by an abuse of fiduciary power.

Demand allocation issues in common elements can be solved with fees, e.g., limited parking spaces or basement storage slots, that can of course be booked as profits. But any legitimate fee charge would take the form of month to month—not lease “in-perpetuity.” These words, here, are clear evidence of malice. There was no common purpose to these acts, nor any economic rationality, whatsoever. There was only an intent to steal to privilege select individuals, discriminating unjustly against select others. The shaft is evenly divisible, so there was no need for any fee collections or profit venture.

This “offer” poses the same risks of aggregated fraud that caused FDR to regulate the securities industry heavily in the early 1930s. The keystones to preventing fraud and breach of trust in business transactions, are (1) legal duties of full disclosure of all material facts, and (2) strict enforcement, making fiduciaries who self-deal liable.

The condominium has not paid tax on its venture profits. This is tax fraud. The condominium deposited its profits to the capital, not to an income, account. This is accounting fraud—a grossly malstructured profit venture, masked by the fact that it was imposed by a board under the veil of a “common cost.”

Following the bylaw strictly meant that only owners adjacent to whose units a space was appurtenant were even eligible to ask for board approval of an exclusive enclosure.

To put board approvals up for sale poses an inherent conflict of interest, particularly coupled with rule violations that are intended to force full disclosure, and that affect the common cost sharing structure of the entity. Board approval is a fiduciary duty, not a salable “right.”

The board did not own the shaft, could not pose as its owner, and could not assign arbitrary “prices,” or “common interest share” charges for its use, particularly not as an act of intentional deceit.

Trespass and breach of fiduciary duty, at a high level, covered the case. Trespass invokes both statutory and condominium governance terms, all of which were ascertainable at trial. It was thus error to dismiss on summary judgment. “Each unit, together with its common interest, shall for all purposes constitute real property.” NY RPP. §339-g. There was a ripeness issue to trespass that could have been dealt with by a finding on the unreasonableness of repeated denials and delay to plaintiffs’ requests to enclose the space, that should have been determined at trial.

Exclusive means different things depending on context. A right of exclusive use of a space as if it were a part of one’s unit is in effect one’s “property.” An exclusive type of common use—like residential or commercial—refers to a priorized use of a common element that is in common use. Residential owners are still entitled to use an “exclusively” commercial common element that is in common use. Not all common elements are commonly used. Some are in exclusive use, meaning by only one. The bylaw reserved the space for one owner’s exclusive use, not for common use. In this usage commercial owners do not “own” real estate collectively.

This heavily factual case required a trial and could not be dismissed on summary judgment.

This was a vindictive, malicious theft. It was a conspiracy to benefit Defendant One enlisting the collusion of Defendants Two and Three. It was willful misbehavior.

These were sophisticated thieves—lawyers, a real estate agent, and a building manager, brazenly cheating people by lying to them in a severely ultra vires situation in which cronyism ruled, secrecy was paramount, elections were never held (so boards were rarely if ever elected), rules were never followed, budgets never issued, audits never done, quorums never observed, resolutions not properly recorded, owner email, board meetings and minutes were all closely held, and requests for basic information went unanswered.

Plaintiffs’ reward for respecting others, for following rules, and for whistleblowing, was only to be ripped off. Plaintiffs overthrew much of the board and eventually forced it to comply with a few rules. This case is a gross abdication of judicial responsibility to hold some truly bad actors accountable.