Adam Leitman Bailey, P.C. Secures Reduction in Common Charges for Commercial Condominium Units

Adam Leitman Bailey, P.C. Secures Reduction in Common Charges for Commercial Condominium Units

Adam Leitman Bailey

Adam Leitman Bailey

August 2, 2021 12:10 PM

In this matter, Adam Leitman Bailey, P.C. was presented with the multifaceted legal issue of whether the offering plan or the condominium declaration and by-laws govern with respect to the amount of common charges payable by condominium unit owners, as well as the proper method for determining such calculation.

The firm’s client, the commercial unit owner and sponsor of a trendy SoHo condominium, needed representation in a dispute with the condominium’s board of managers concerning the amount of common charges payable by the commercial unit owner. When the offering plan made clear that the commercial owner would only be responsible for paying certain categories of common charges, the declaration and by-laws did not provide for any such distinction. Instead, they required simply that all unit owners (including the commercial units) would pay common charges equal to their percentage common interest across all categories.

This was problematic and inherently unfair for the commercial owner, which did not utilize many of the residential services for which the board was claiming the commercial owner should pay common charges. For example, the commercial owner was being charged for repairs to the building’s residential electrical and intercom systems, costs for painting and plastering interior common areas of the residential portion of the building, costs to repair certain doors, locks, and windows in the residential areas, cleaning fees for the residential areas, fees for licenses and permits not affecting the commercial units, elevator service fees for elevators that do not serve the commercial units, and building staff payroll.

Adam Leitman Bailey, P.C. jumped into action and attended numerous settlement meetings with the board and its counsel. After months of hard work and negotiations, Adam Leitman Bailey, P.C. ultimately hashed out a comprehensive settlement agreement with the board, whereby the commercial owner would only pay common charges for certain categories of expenses (in line with the offering plan), and would pay a usage fee if the commercial units ever needed to utilize the building elevator (for example, if a handicapped patron needed access to the commercial unit located in the basement of the building in order to comply with the Americans with Disabilities Act of 1990). The settlement prohibited the board from establishing any new services that would impact the commercial owner without consent and from increasing, by more than 3% annually, any of the categories of common expenses that the commercial owner is responsible for paying without the commercial owner’s prior consent.

In addition, the settlement agreement required the board of managers to call a meeting of the unit owners to vote to amend the condominium’s declaration and by-laws to provide that the commercial unit owner is only responsible for payment of certain delineated categories of common expenses in line with the commercial unit owner’s usage thereof. This had the effect of “correcting” the declaration and by-laws which should have been drafted to include this distinction from the beginning. The settlement also required the board to discharge the common charge liens it had filed against each of the Adam Leitman Bailey, P.C.’s clients for allegedly unpaid common charges. The liens were threatening the client’s relationship with its lender. Thanks to Adam Leitman Bailey, P.C.’s involvement, the client is now paying only for those services that it actually utilizes, and it has restored its good standing with its lender.

Adam Leitman Bailey and Rachel Sigmund McGinley represented the commercial unit owner/sponsor in this matter.

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