Ownership Under Labor Law as It Impacts on Condominiums and Cooperatives

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New York=s Labor Law Sections 240(1) and 241(6) were created to protect workers who are injured while performing their duties during construction, renovation, demolition, etc.

The first paragraph of section 240(1) of the Labor Law contains two distinct criteria, each of which comes into play when an injured worker seeks recovery under this statute. In relevant part, LL ‘240(1) reads as follows:

All contractors and owners and their agents, …[1] in the erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure [2] shall furnish or erect, or cause to be furnished or erected for the purpose of such labor, scaffolding, hoists, stays, ladders, slings, hangers, blocks, pulleys, braces, irons, ropes, and other devices which shall be so constructed, placed and operated as to give proper protection to a person so employed. (Numbers in [ ] added)

Actions predicated under Labor Law Section 241(6) pertain to violations of specific regulations set forth in the Industrial Code. Both provisions place the responsibility for safety practices at construction / building sites squarely on all contractors and owners and their agents, while owners of one and two family homes who contract for but do not direct or control the work are exempt.

The definition of Aowners is not set forth in the Labor Law. However, since Aowners of one and two family homes are not responsible for the injuries of laborers, where does that leave the laborers who are injured while performing their duties in cooperatives and condominiums? After all, can it be said that a co-op or condo is not the equivalent of a one family house? Yet, unlike the owners of private dwellings, the co-op and condo owners are bound by the by-laws and proprietary leases created by the respective boards. Can the co-op or condo boards, themselves, escape liability by arguing that the units are individually owned while at the same time requiring unit owners to comply with the by-laws, House Rules, etc., that may require approval prior to the commencement of certain repairs, renovations, alterations and the like? This, then, becomes a Catch 22″.

These were some of the issues that the Court of Appeals addressed in its decision Guryev v. Tomchinsky, NYLJ, 12/12/12.

However, before reviewing the majority opinion and the vigorous dissent by Chief Judge Lippman, it would be helpful to see how Aownership in co-ops and condos has, in fact, been defined by the courts over the years.

Twenty years ago, the Appellate Division, First Department, set forth the differences between condominiums and cooperatives in Frisch v. Bellmarc Mgt., 190 AD2d 383, that has become the benchmark that has been cited in all areas of the law when ownership of these properties come into play.

The condominium form of ownership is based on a bipartite scheme whereby participants own space purchased by them, as well as an undivided interest in the land, structures, and facilities held in common with all other owners in fee. Each individually owned space is designated as a Aunit. Usually there is an agreement among the unit owners regulating the administration and maintenance of the property (citation omitted). AA person having a cooperative interest in real estate (e.g., a tenant-shareholder in a cooperative apartment) typically owns stock in a cooperative corporation and has a proprietary leasehold granted by the corporation [citation omitted] (citation omitted). The cooperative corporation is the sole owner of the land, structures and facilities, while the individual shareholder through the proprietary lease receives the right to occupy the space in the premises to which his or her shares are allocated.

While some superficial aspects of condominium and cooperative ownership are similar (e.g., the payment of monthly charges for the maintenance of common areas), the two forms of interest in real property are fundamentally different by design and as a matter of law.

[C]ondominium units are conveyed by recorded deeds (citation omitted) whereas in the case of a cooperative, the shares in the corporation and corresponding proprietary leases are conveyed. Id. at 387 – 388.

The by-laws govern the administration of the condominiums affairs and are Ain essence, an agreement among all the individual unit owners as to the manner in which the condominium will operate, and which sets forth the respective rights and obligations of unit owners, both with respect to their own units and the condominium=s common elements (citations omitted). Board of Mgrs. of Vil. View Condominium v. Forman, 78 AD3d 627 (2nd Dept., 2010)

With respect to cooperatives, it is Awell settled that conditions within the cooperative apartment that are not caused as a result of any external factors for which the cooperative can be held accountable are the sole responsibility of the shareholder (315-321 E. Parkway Dev. Fund Corp. v. Wint-Howell, 9 Misc3d 644, 648, [2005, Heymann, J.]), requiring the lessee to directly hire the workers to cure the conditions, and where the work is in noncompliance with the co-ops alteration agreement the co-op board has the authority to direct suspension of the work. See, Bryant v. One Beekman Place, Inc., 73 AD3d 616, (1st Dept., 2010)

Thus, we come to the matter of Guryev v. Tomchinsky, supra. Defendants Tomchinsky purchased a condominium which necessitated renovations prior to moving in. As required by the condos by-laws and the terms and conditions of an alteration agreement, the Tomchinskys hired YZ Remodeling, Inc. to perform the work. Guryev was an employee of YZ. While working in the premises plaintiff was injured while using a nail gun when one of the nails ricocheted off the base molding he was installing and struck him in the eye causing injury. In addition to suing the owners of the premises, plaintiff also sued the condominium and its Board of Managers, among others. Plaintiff sued to recover for common law negligence and violations of Labor Law sections 200, and 241(6) alleging that pursuant to the Industrial Code his employer failed to supply him with proper eye protection. The defendants crossed moved against each other for indemnification and YZ moved for dismissal as plaintiff had a remedy under Workers= Compensation Law. The Supreme Court denied the motions but the Appellate Division, Second Department, reversed as to the condominium defendants holding that they Awere not entities which ha[d] an interest in the property and who fulfilled the role of owner by contracting to have work performed for [their] benefit. The Court of Appeals affirmed the appellate court=s reasoning that these defendants Adid not determine which contractors to hire, and were not in a position to control the renovation work or to insist that proper safety practices were followed.

The Court determined that the threshold issue was whether the condominium defendants were Aowners or Aagents of owners of the Tomchinskys apartment. In holding that the condominium or its Board were owners the Court noted that the Tomchinskys owned their unit Ain fee simple absolute separate and apart from the land beneath the condominium building and the accident occurred while the plaintiff was working in their apartment. The Court dismissed the argument that the condominium should be held accountable based on the alteration agreement because while insuring that the work did not interfere with other units or common areas and met permit requirements, it Adid not vest the Board with the authority to >determine which contractors to hire… control the renovation work or … insist that proper safety practices [be] followed. Citing Frisch v. Bellmarc .Mgt., supra, the Court did not agree that co-ops and condos should be treated equally with respect to Aownership as the former owns the building in its entirety leasing particular share to the cooperator whereas in the latter each unit is individually owned.

In his dissent, Chief Judge Lippman points out how the majority opinion would Aeviscerate the strict liability protection afforded to workers under the Labor Law as affirmed by the Court in Rocovitch, supra at footnote 2. Arguing, as did the plaintiff, that the Alteration Agreement in question gave the Board sole and absolute discretion to oversee the renovations to make sure that they conform with permits and regulations and could stop the work if necessary. Moreover, while the Tomchinkys did hire their own contractor for their renovations, the Board reserved the right to hire the contractor[s]. As the Chief Judge stated:

It is obvious that a condominium does in fact retain interest in its owners units every bit as palpable in the unit alteration context as that of a residential cooperative corporation and there exists no rationale for treating the two kinds of entities differently when it comes to allocating responsibility under the Labor Law. It is to blink at reality to treat condominiums simply as agglomerations of one-family dwellings, as this Court does now. The consequence of such a studied elevation of form over substance is dramatically to reduce the Labor Laws protective ambit: a construction laborer injured while working in a condominium unit now has no Labor Law cause of action against the unit owner by reason of the single dwelling exemption, no claim against his contractor employer by reason of the workers compensation defense, and no statutory claim against the condominium because it is not the title owner of the unit.

In this writers opinion, this anomaly will, over time, cause much havoc among the workforce who are hired to work in condominiums. No longer protected by the strict liability provisions of the Labor Law that were created for the sole purpose of guaranteeing such protection in the event of on site work related injuries, the ability of condominium unit owners to find workers to do repairs, renovations, etc., my become far more difficult and/or expensive.

As Chief Judge Lippman aptly pointed out, the majority opinion Arips a gaping hole in the Labor Laws protective mantle – one that the Legislature will have to mend if the statutory scheme is not to be rendered utterly arbitrary in its application and largely inefficacious in meeting its vaunted objectives.

How long it will take the Legislature to rectify this inconsistency remains to be seen.