Court Denies Attempt to Apply Third-Party Beneficiary Law in Reverse

March 1, 2023New York Law Journal

Andrew B. Freedland and Deborah Koplovitz wrote an article for the New York Law Journal's Condominium and Cooperative column discussing who is responsible for repairs and damage stemming from alterations to the interior of a cooperative apartment, which were previously made by the predecessor shareholder.

In131 Perry Street Apartment, the plaintiff, a residential cooperative corporation, brought an action to compel a tenant-shareholder to repair the custom-made French atrium doors that were alleged to be leaking and causing damage to the apartment below. While neither party disputed that the atrium doors had been replaced by Clausner’s predecessor in interest, most proprietary leases, including the one between Clausner and the apartment corporation, place the obligation for repair of entrance and terrace doors on the apartment corporation, absent replacement of such doors by a shareholder.

However, the French doors at issue in131 Perry Street Aparment were installed by the defendant’s predecessor in interest nearly 25 years ago. 131 Perry Street Aparment took the position that when Clausner acquired the stock and proprietary lease in 2003, he became "bound" to the terms of the alteration agreement, even though he did not accept an assignment of the alteration agreement.

The issue arose after a large rainstorm occurred. The French doors allegedly failed, and the apartment below Clausner’s suffered damage. The plaintiff investigated and demanded that Clausner perform maintenance and repairs. When he refused, the plaintiff claimed that he was in violation of the alteration agreement. An apparent stalemate ensued, and the paintiff then filed suit containing four causes of action; a declaratory judgment that the defendant is bound by the terms of the alteration agreement; an injunction requiring the defendant to maintain the custom French doors; monetary damages for breach by the defendant of the alteration agreement with his predecessor in interest; and recovery of the coop’s legal fees under the terms of the proprietary lease.

Neither party disputed that the defendant never signed the alteration agreement or otherwise accepted responsibility for the atrium doors under the terms of the alteration agreement. But the plaintiff asserted that "a party who did not sign an agreement containing express maintenance obligations is bound by such an agreement." This argument was unsurprisingly found to be lacking in merit by the court.

In reaching its determination, the court opined that the defendant was not bound to perform obligations of an agreement which he never signed or otherwise acknowledged. The court indicated that per the plain terms of the alteration agreement, the plaintiff had the right to condition the transfer of the apartment unless Clausner accepted responsibility for the repair of the atrium doors. However, because the plaintiff did not do so at, or prior to, the closing of title to the stock and lease to Clausner, he could not be bound to uphold the obligations of that agreement.

Though not explicitly plead in the complaint, it appears that the coop implied that the contract it signed with the predecessor owner made Clausner obligated to the coop under an unknown theory of him having been made a third-party obligor by his predecessor-in-interest. That implication was rejected by Justice Arlene Bluth, apparently in recognition our law simply does not permit parties to be bound to perform duties unless they specifically agree to undertake such duties.

Here, in requesting that the court attach liability to Clausner, the coop essentially asked the court to contort the mechanics of third-party beneficiary law to attach an obligation to Clausner which he never agreed to undertake, as opposed to granting a right to a third-party which, in the absence of the contract, would not otherwise exist.

In addition to being unpersuaded by the plaintiff’s attempt to attach liability to Clausner, a nonparty to the alteration agreement, the court also noted an apparent omission in the pleadings since there was no allegation that Clausner breached paragraph 4(a) of the proprietary lease, which states that "lessor shall not be required to repair or replace, or cause to be repaired or replaced, equipment, fixtures, furnishings or decorations installed by the lessee or any of his predecessors in title …" The court did not preclude the plaintiff/lessor, however, from commencing a new action against Clausner to repair the custom French doors in his apartment pursuant to the proprietary lease.

This is discussed in the full analysis that originally appeared in the March 1, 2023 publication of the New York Law Journal. Access may require a subscription.

For more information on condominium and cooperative law matters, please contact:

Andrew B. Freedland at +1 212 592 1623 or [email protected]