The impact of COVID-19 on real estate sales and rentals has received wide attention, not so much with respect to its effect on cooperative and condominium shareholders and unit owners.
Before we start to delve into this subject, we must first call attention to “the business judgment rule” that recognizes the right of the boards of directors of co-ops and the boards of managers of condominiums to make business judgments that the boards determine are in the interest of their shareholders and unit owners. The recognition of this authority is embedded in the April 5, 1990 New York Court of Appeals decision, Levandusky v. One Fifth Avenue Apartment Corporation, and the May 23, 2002 Appellate Division First Department New York ruling in 40 West 67th Street v. Pullman.
In an article published in the New York Law Journal on October 2, 2020, authored by Ira B. Matetsky and William A. Joskal, attorneys with the law firm Ganfer Shore Leeds & Zauderer, they state: “There are many unanswered questions concerning whether and to what extent privacy rights will be enforced in New York against cooperatives, condominiums, and other property owners and management entities who hold confidential information about shareholders and unit owners.”
Matetsky and Joskal address many right to privacy issues beyond those related to the current COVID-19 illness, which is the focus of this article. With respect to COVID-19 issues, they say: “The board and building management may become aware of the resident’s COVID-19 illness or exposure from a variety of sources, but most often from the resident him or herself.” They then pose the question: “Should the board inform the other residents that one of their neighbors is sick?” They go on to say: “The consensus has evolved that residents should be told that someone in the building has tested positive, and reminded to use the appropriate precautions such as mask-wearing and social distancing, but that the specific name and apartment of the sick resident should not be disclosed.”
Matetsky and Joskal further expand the scenario. “But what if a shareholder or unit owner were to demand the names of people in the building known to have COVID-19 illness …and make a books and records demand for the information? It is likely that the courts would allow a board to withhold this information to protect the privacy of the residents’ medical information, but as yet there are no cases on the issue.”
Another interesting set of circumstances raised by the authors pertain to boards restricting access to the buildings by non-residents, such as housekeepers, child-care workers, real estate brokers, and movers, or requiring visitors to answer questions about their health, etc. They offer the following opinion: “These restrictions would ordinarily seem quite intrusive, but most people would find them more acceptable given the crisis that New York has faced and the threats to public health. Moreover, such measures may be defensible based on the executive orders and official New York State guidelines…”
They conclude their article with the following advice: “Ultimately, many unanswered questions remain concerning whether and to what extent privacy rights will be enforced in New York against cooperative, condominiums, and other property owners and management entities. When asked to disclose information that a reasonable person might expect to keep confidential, the holder of the information is well-advised to consult with legal counsel to balance what may be competing obligations to the subject of the information and to the person requesting it.”
It is also the case that some shareholders and unit owners are unable to pay their maintenance and common charges, making it difficult for coops and condos to meet their operating costs. The problem is exacerbated when their commercial tenants affected by loss of income can’t pay the rent.
None of these problems are happening in a vacuum. As Aristotle is quoted as saying: “The whole is greater than the sum of its parts.”