Board of Mgrs. of 184 Thompson St. Condominium v 184 Thompson St. Owner LLC
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Board of Mgrs. of 184 Thompson St. Condominium v 184 Thompson St. Owner LLC 2018 NY Slip Op 32169(U) September 7, 2018 Supreme Court, New York County Docket Number: 103991/2011 Judge: Eileen Bransten Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 SUPREME COURT OF THE STATE OF NE\V YORK COUNTY OF NEW YORK: co:rvnvIERCIAL DIVISION PART IAS l\/10TION 3 --------------------------------------------------------------------}{ Index No. BOARD OF MANAGERS OF 184 THOMPSON STREET CONDOMINIUM, 103991 i201 l Plaintiff, DECISION AND ORDER 184 THOMPSON STREET OvVNER LLC, Defendant --------------------------------------------------------------------)( HON. EILEEN HRANSTEN: Defendant, 184 Thornpson Street Owner LLC, moves for partial summary judgment (motion sequence 006) as to whether it properly calculated the reserve fund for the condominium located at 184 Thompson Street, and dismissing the Plaintiffs fourth cause of action, alleging th{.~ reserve fond \Vas underfonded, as a result Plaintift~ Board ofIVfanagers of 184 Thompson Street Condominimn, rnoves for summary judgement (motion sequence 007) declaring that Defendant 184 Thompson Street Ovvner, LLC has failed to adequately fond the reserve fund and declaring that the certain credits taken by the Defendant be disallowed. I, Background Defendant, 184 Thompson Street Owner LLC, is the Sponsor behind the conversion of rental apartments to condominium units at 184 Thompson Street in New York City (the "Property"), See Amen, Comp, iJ~l,4,· see also Defendant's Rule 19-a S'tatement ~2-3. Pursuant to Section 26-703 of the New York City Administrative Code, when a rental building is 2 of 12 [*FILED: 2] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOl'vlPSON STREET OWNER 10399112011 Page 2of11 converted to a condominium the Sponsor is to adequately create a minimum reserve for the condominium. Amen Comp. at ~6; see also Defendant's Rule 19-a Statement ~4. This reserve was to be funded \Vith three percent (3~·(i) of the total price offered to tenants up lo the effective date of the condominium offering plan, 1 The condominium offering plan was accepted for filing vvith the New York Secretary of State on August l 0, 2006, See Geller Ajfirm. E"C. 2. The Defendant then funded the reserve fund with $2,495,166 as adjusted by the Eighteenth Amendment to the Oftering Plan dated July 11, 2007. See Comp. ~127; see also Geller Affirrn. Ex. 7. The Sponsor may decrease the total amount in the reserve fund by taking a set number of credits for capital replacements bq,'lm afrer the plan was submitted for filing. Comp. at ~32. Ultimately, the Plaintiff alleges that the Defendant failed to adequately fund the reserve fund by, inter alia, miscalculating the total amount that should have been placed in the reserve, by taking credits for work which does not qualify as a capital replacement, and by failing to perform work yet taking money from the reserve nonetheless. Id n. Analysis A Calculation of the Reserve Ftmd Section 26-703 of the New York Administrnti ve Code requires that "Within thirty days after the closing of a conversion pursuant to an offering plan the offeror shall establish and transfer to the cooperative corporation or condominium board of managers, a reserve fond to be 1 See Discussion Part ILA, infra. 3 of 12 [*FILED: 3] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOMPSON STREET OvVNER 103991/2011 Page 3of11 used exclusively for making capital repairs, replacements and improvements necessary for the health and safety of the residents of such buildings." See ,VYC' Admin Code §26-703(a) (,4mLegal 2018); see also Amen. Comp. ~6, An offoror may fond the reserve using one ofh-vo methods; either "three per cent of the total price or, three per cent of the actual sales price of all cooperative shares or condominium units sold by the offeror at the time the plan is declared effective, provided, however, that if such amount is less than one per cent of the total price, then the fund shall be established as a minimum of one per cent of the total price." See NYC .Adrnin Code §26-703(b/ Here, the Sponsor elected to fund the reserve by depositing three per cent of the total price into the reserve fund. See NYC Admin. Code §26-703(/J)(i) (AmLegal, 2018); see also Amen. Comp. ~!7-10« Blanco Affirm. ~\1; Geller Affirm Ex. 7 "Under the plain language of the governing statutes, the 'total price' refen-ed to in§ 26-703(b)(i) is not the price in effect during the exclusive discount period, i.e., the so-called 'insider's price,' but rather the 'last price offered to tenants in occupancy prior to the effective date of the plan." 5'ee Board oflvfanagers ofl84 Thornpson Street Condominiwn v. 184 Thompson Street Orvner, LLC, 106 A.D.3d 542, 542-43 (1st Dept 2013) citing Turtle Bay Toivers Corp, v, ff7elco Assocs«, 228 A.D.2d 189, 189 (1st Dep't 1996). The Plaintiff argues the reserve fund was irnprnperly calculated by providing an affidavit from tenant Jamie Kaiikow and an oftering sheet for tenant Andy Ramgooli. See Geller Affirm. Exs. J3, 20. The offering sheet for Andy Ramgooli is undated and is, therefore, inadequate to determine ,~.rhether the offer was made prior to the effoctlve date of the Offering Plan. Similarly, the affidavit of Jamie Kaiikm.v states that in August 2006 she received an Offering Plan, but then 4 of 12 [*FILED: 4] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOMPSON STREET O\VNER 103991/2011 Page 4of11 waited several months while a group of tenants attempted to negotiate a lower price; these negotiations ended approximately six months later and, only then, did Jamie Kalikmv decide to purchase the apartment. See Geller Affirm. Ex. 20 ~414-8. The law requires the Sponsor to provide three _percent of the "last _price , , offered to 0 tenants in occupancy prior to the effective date of the plan. regardless of number of sales rnade." See Turtle Bay Towers Corp. v, WelcoAssocs,, 228 AD.2d 189, 189 (1 5( Dep't, 1996) (emphasis added). The offering plan \Vas declared effective by the Eighth A1nendment to the offering plan dated February 21, 2007. 5'ee Geller Affirm. Ex. 6. Here, while at least two tenants waited to purchase units until they no longer qualified for the "insider's price," there n.~main questions as to whether the tenants were offered to purchase their units at the higher price prior to the effective date of the offering plan, Thus, summary judgment on this issue is DENIED, B. \Vork Failing to Qualify as a Capital Replacement Section 26-702(c) of the New York City Administrative Code defines Capital Replacements as: [A] building-wide replacement of a xnajor component of any of the following systems: ( 1) elevator; (2) ' . heating, ventilation and air conditioning; (3) plumbing; (4) wmng; (.•') window; ,, or, a major structural replacement to the building; provided, hmvever, that replacements made to cure code violations ofrecord shall not be included, (AmLegal, 2018). 5 of 12 [*FILED: 5] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOMPSON STREET OVt/NER 103991/2011 Page 5of11 Both parties agree that that there does not appear to be any case !a\v which interprets how Capital Replacements are to be defined, Tlms, this court is merely left to consider the text of the statute when determining whether the Sponsor's claimed capital replacements are eligible to receive credit. As the Court of A.ppeals has made clear, "the starting point in any case of interpretation must always be the language itself, giving eflect to the plain meaning thereof" Raynor v, Landmark Chlysler, 18 N.Y.3d 48, 56 (2011). The Court, therefore, first detem1ines whether each service for which a cred1t is claimed falls within the plain meaning of the statute. i. Regarding the Elevator System The Plaintiff argues that modifications to the elevator systern do not apply as capital replacements because the modifications were made to cure existing violations. See Geller .{!firm. Ex. 3 (noting that outstanding violations to the elevator system consisted of a failure to have proper signs posted on each floor, failure to have keys for thf..: inspection of a side exit, a need to replace defective door rollers, a worn car saddle, an issue pertaining to a hoist.way door roller, and fr-i.ilure to have a fire extinguisher), This comports with the statutory provision that "replacements made to cure code violations of record shall not be included". See lvTC Admin. Code §26-702(c) (AmLegal, 2018). The Defendant argues that the renovations to the elevator were a complete modemization of the system and, as a result, do not constitute a replacement made merely to cure a code violation of record. See Blanco Ailld Ex. I The provided evidence, however, fails to conclusively weigh in favor of either party and presents a triable issue of fact. Specifically, the contract for modernization of the two elevator 6 of 12 [*FILED: 6] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOIV1PSON STREET O\\'NER 103991/2011 Page 6of11 units fails to itemize what services were perfom1ed such that the court can conclude the work \Vent beyond efforts to cure the existing violations, See id Summary judgment on the issue of the elevator is DENIED. ii. Regarding the BVAC System The Plaintiff argues that work conducted on an HVAC Unit should be reduced as the total cost of the work performed exceeded the estimate contemplated in the Offering Plan. The Defendant argues that the work itself was contemplated in the offering phm and, regardless of the actual price, entitles the Defendant to a Credit The New York City Adrninistrative Code provides that [A]n offeror rnay claim and receive credit against the mandatory initial contribution to the reserve fund for the actual cost of capital replacements which he or she has begun after the plan is submitted for filing to the state department of law and before the plan is declared eflective; provided, hmvever, that any such replacements must be set forth in the plan together with their adual or estimated costs and farther provided, that such credit shall not exceed the lesser of the actual cost of the capital replacements or one per cent of the total priceo" See 1VYC Admin. Code §26-703(c) (ArnLegal, 2018) (emphasis added). Neither the Plaintiff nor the Defendant dispute the work was performed. Undt~r the plain meaning of the statute, the Defendant is eligible to recover the actual cost of the replacement. See id (emphasis added); see also Raynor v. Landrnark Ch1J'S!er, 18 N.Y.3d 48, 56 (2011), Plaintiff also argues that, because the Defendant is tmable to show the HVAC \Vork was actually paid for, it is ineligible to receive the credit. See Geller A.Firm. i~28-33. This is a misreading of the statuteo The statute permits recovery for the actual costs of replacements. See NYC Admin. Code §26-703(c) (AmLegal, 2018) (ernphasis added/ The actual cost of replacements to the HVAC system are conceded by the Plaintiff and are documented through 7 of 12 [*FILED: 7] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF JV!ANAGERS OF 184 vs. 184 THOJVlPSON STREET OWNER 103991/2011 Page 7of11 invoices between third-patties and the Defendant which evidence the cost associated \.vith the third-paiiies perfonnance of the work. See Geller Affirm. Exs. 24-25; see also PlaintitT's Afemorandum in Support at 22. This Court, therefore, denies Plaintiff's motion as it pe1iains to the HVAC units and awards summary judgment on this issue to the Defendant See e.g. Aferritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 111 (1984) (noting the comi has the power to to search the record and award summary judgment to a nonmoving party); see also CPLR 3212(b) (pennitting the court to award summary judgment against any party). iii, The Addition of Roofing Membrane and Terrace \Vork The Plaintiff argues the addition of a single layer of roofing membrane does not qualify for a capital replacement credit given that the roof was (1) already watertight and (2) was merely tested by Roslyn Engineering not replace;:L As discussed in the Offering Plan, "the building \Vas re-roofed on or about 1999 ... The roof is in fair condition and can be expected to last another 2 --- 4 years. There are no active roof leaks," See Geller Affirm, Ex, 2. The Defendai1t argues it expended significant capital to test the roof and to place a new layer of roofing membrane over it There was no need to replace tbe existing roof, merely repair the test cuts made when conducting inspections, See id. Absent more, and applying the plain language of the statute, this fails to qualify for a capital replacement credit given that the roof \Vas never replaced. The Plaintiffs also argue that the Defendant improperly included terrace •vork as a major structural replacernent to the building. The terrace work undertaken by the Sponsor consists 8 of 12 [*FILED: 8] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOMPSON STREET OWNER 103991/2011 Pagt: 8of11 primarily of removal of spalled cement, securing any loose materials, and patching and recoating the tenaces. (Geller Aff., Ex. 2 at D-55 ~ D-57). The Defendant fails to address this issue of terraces in its brief, thus, the court is persuaded that the work performed on the terraces fails to qualify as a capital replacement under the statute. Summary judgment on the issues of roofing and terraces is GRANTED. iv. Windows and Doorways Plaintiff argues the Sponsor is unable to take credits for the replacement of 156 doors and 30 windows. See Geller Affirm. Ex. 22. The Plaintiff interprets the pure text of the statute to come to the logical conclusion that windows, not doors, are eligible for reimbursements given that windows are expressly enumerated in tfa.: statute. NYC Admin. Code §26~702(c) (AmLegal, 2018). Doors are not enumerated in the statute. See id The Defendant argues, however, that the sliding glass doors should be treated as windows given that the statute describes the broader concept of a window "systern" and that sliding glass doors provide the same access to light and air as a windmv and, for many in the apartment com.plex, are the only access point to light and air. Indeed, it is noteworthy that the Defendant replaced over five times as many doors as they replaced \:Vindo'\NS in the buildings. A window, as defined by the dictionary in this context, is "an opening especially in the wall of a building for admission of light and air that is usually closed by casements or sashes containing transparent material (such as glass) and capable of being opened and shut." See lderriam-FVebster Dictionary. Conversely, a doorway, as defined by the dictionary in this context, is "a usually swinging or sliding barrier by which an entry is closed and opened." See 9 of 12 [*FILED: 9] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM INDEX NO. 103991/2011 NYSCEF DOC. NO. 306 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THO.rvIPSON STREET U\\INER 103991/2011 Page 9of11 A1erriarn Webster Dictionary. With two different purposes, and two different definitions, a door do'es not gualif)' as a window. a.ssoe1a.tet1, '\Vi th it />t~t~kl.n v. i)f:·{:, '.°<'~ AJ~:lt, L-'~S. (.~{}. f~~.f]-../t:'.1·V r·e:Jr.k~ 10 of 12 48 /\,.I).2d 46~: 4.g ' l :H ' ..· i [){.~I-)$ t 1975}, [*FILED: 10] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOARD OF MANAGERS OF 184 vs. 184 THOMPSON STREET O\VNER 103991/2011 Page 10 ofH as "rnajor structural replacement" to the builing. See NYC Admin Code §26-703 (c) (,·1rnLegal, 2018). Here, under the canons of ejusdem generis and noscitur a sociis, the Court determines whether the inclusion of replacing 156 terrace doors constitutes a major structural replacemem of the building as it is contemplated by the statute. Popkin v. Sec. 1Wut. Ins. Co. ofNew York, 48 A.D,2d at 48 (noting that the dictionary definition of the term "flood" did not accurately encapsulate an evt:nt and the use of general language in the contract assisted in detem1i11ing the event was covered under the flood provision of an insurance poUcy). The statute clearly lists major components to any building, such as HVAC, electrical, and plumbing. See NYC Admin. Code §26~702(c) (AmLegal, 2018), There is a presumed expectation that there wiU, generally, be rnore windows than doonvays which need replacement. In addition, the court takes notice of the Defondant's argument that the windows and terrace doorways serve the similar purpose of providing access to light and fresh air which, while expressly not mentioned in the statute, are enjoyed by the tenants. See e.g. Barash v. Pennsylvania Terminal Real Er;tate Corp., 26 N.Y.2d 77, 85-86 (1970) (noting that a "substantial interference" with easements of light and air insofar as they diminish the tenant's beneficial enjoyment of the premises would constitute grmmds for a constructive eviction). Here there axe more doorways in the building than windows. The legislature, in draJling the statute, determined that there could be other major replacement costs associated with the transformation of rental units to a coop or condominimn and thus provided for credits to be granted to the sponsor for "major structurnJ replacements", Here, the court finds that the 11 of 12 [*FILED: 11] NEW YORK COUNTY CLERK 09/07/2018 09:32 AM NYSCEF DOC. NO. 306 INDEX NO. 103991/2011 RECEIVED NYSCEF: 09/07/2018 BOA.RD OF MANAGERS OF 184 vs. 184 THOMPSON STRJ~ET OWNER 103991/2011 Page U ofH replacement of 156 sliding glass doors falls within the type of replacement contemplated by the statute. See e.g, Popkin, 48 A. D. 2d at 48. A grant of summary judgment in favor of the Defendant on the issue of the windows and doorways is therefore warranted. See e.g. ,\i!erritt Hill Vineyardr; Inc. v. Windy Heights Vineyard. Inc., 61 N. Y.2d 106, 111 (1984) (noting the court has the power to search the record and award summary judgment to a nonrnoving party); see also CPLR 32 j 2(b) (pennitting the court to award summary judgment against any party). UL Decision and Order Upon the foregoing it is hereby ORDERED the Defendant's motion for partial summary judgment is DENIED (motion sequence 006); and it is further ORDERED the Plaintiff's motion for summary judgment is GRANTED IN PART and DENlED IN PART (motion sequence 007). Summary Judgment is granted to the Plaintiff on the issue of the roof replacement Summary Judgment is granted Defendant on the issue of windows and doorways and the issue concerning the HVAC unit. Triable issues of fact remain regarding the elevator and whether the reserve fund was adequately funded, 12 of 12
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