Q&A: Paid Parking Problems

Q I am a shareholder in a cooperative of 121 units and 152 parking spaces. My  question concerns the rightful use and maintenance of community property. Every  shareholder is entitled one parking space at a fee of $20 per month. The  additional 31 parking spaces are assigned to shareholders with two cars, also  at a fee of $20 per month. Although the majority of shareholders are forbidden to use the additional  parking spaces, under threat of fines and towing, all shareholders continue to  pay for these spaces without a reduction in the maintenance. In addition, the  Board of Directors allows non-shareholding residents and non-residents to  exclusively occupy a number of the second parking spaces Yet, items seven and  ten of the proprietary lease state that “the lessee may enjoy in common with all other lessees the use of all community  property and facilities of the building.” I have written a letter to the board citing that this is a matter of equity.  Shareholders who have two spaces should reimburse shareholders who do not  exclusively use this community property. I suggested a CPA breakdown the  various costs of our property to determine the actual cost of individual  parking spaces, remove the cost of 31 parking spaces from the maintenance  charges, and apply the cost to the shareholders according to space occupancy.  In addition, the board should cease to allow non-shareholders to use these  spaces. The board failed to respond to my letter. Instead, Blue Woods  Management provided a response stating “the board does not wish to incur the needless expense of having the corporation’s attorney address your allegations.” What can I do?  

 —No Parking in Parsippany  

A “The question concerning the allocation of parking spaces highlights an issue  that often arises in the context of community associations: The difference between what is "equitable" or fair, and the what a board is  legally entitled to do. Of course fairness is like beauty, it is very much in the eye of the beholder,” says attorney J. David Ramsey of the law firm of Becker & Poliakoff in Morristown.  

 “While it is understood that lessees who occupy their cooperative units may feel  that they have a priority right to use the extra parking spaces because of the  proprietary lease language that you cite—lessees "may enjoy in common with all other lessees the use of the common  property"—the misconception from a legal point of view is that a sub-tenant's use of the  common property is different from the use of the common property by the lessee  under the proprietary lease. When a lessee under a proprietary lease rents his  or her unit, the rights to use the common property flow to the tenant. The tenant, for this purpose, stands in the shoes of the proprietary lessee.  

 “The language you cite from the proprietary lease is very similar to language in  the New Jersey Condominium Act, which provides that "the right of a unit owner  to use the common elements shall be a right in common with all other unit  owners ... to use all common elements in accordance with the reasonable  purposes for which they are intended ..." Despite that language in the Condominium Act, tenants of unit owners would enjoy  the same right to use the common elements as the unit owner, absent a provision  in the governing documents to the contrary.  

 “We turn next to the issue concerning the expense of maintaining the second  spaces that certain proprietary lessees enjoy. You indicate that there is an  additional charge of $20 per month for use of the additional spaces, which is  the same charge as for the primary space to which each proprietary lessee is  entitled. You indicate that you would prefer that the cooperative determine the actual  cost of maintaining these parking spaces through an analysis by the  cooperative's accountant and use that calculation to charge the lessees who  have second spaces. While there is nothing improper about that approach, there  is also nothing in the law that requires it.  

 “The business judgment rule, a judicial rule used by courts to gauge the actions  of corporate boards, provides that any judgment of the board will not be upset  by a court if two standards are met. First, that the board is authorized by law  or the corporation's governing documents to make the decision at issue and,  second, that the board's decision is not the result of fraud, self-dealing or  unconscionable conduct. Some courts have added a third standard, which is that the board's decision is  "reasonable," though courts grant boards significant deference before finding  that an action was "unreasonable." It is highly likely that the cooperative's  bylaws give the board the right to determine the fees for parking spaces. It is  assumed that there is no proof of fraud or self-dealing. The fee you describe  would not be considered "unconscionable."  

 “Thus, the last line of inquiry by a court might be whether the decision to  charge $20 per month is unreasonable. Initially the burden would be on you to  show that it’s unreasonable. If that burden was met, the board could then have the  opportunity to rebut your showing. Thus, if you wished to proceed further, you  would have to show that the cost being charged is so out of scale with what the  costs actually are, that the board is conveying an unreasonable benefit on the  owners who have the second spaces to the detriment of the remaining  shareholders. The board is not required to make this analysis with to-the-penny  accuracy. This isn't a matter of showing that the actual costs, as compared to  the parking charge, is off by 10, 20 or 50 percent, but that it's so far off  that there is a material financial burden being placed on the remaining  shareholders in the cooperative. This would be a very substantial burden to  overcome.  

 “While you are certainly entitled to recommend to the board that it consider  alternate methods of allocating the costs of maintaining the parking spaces, it  would not appear as a matter of law that you would be successful in compelling  the board to use a different methodology.”  


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