N.Y. Ct. Says Plaintiffs in Derivative Action Against HOA Must Represent At Least 5% of the Members

New York Appellate Court decision (October 30, 2014).

Homeowners that initially represented 5% or more of the members of a homeowners association, commenced a derivative action against the association. Subsequent to filing the action, certain of the plaintiff homeowners ceased membership in the association thereby reducing the plaintiff’s membership percentage to less than 5%. On motion of the association, the trial court dismissed the case, and the remaining plaintiffs appealed, contending that the 5% ownership requirement applied only as of the date of the commencement of the action.

The appellate court affirmed the trial court’s judgment finding that the ownership requirement specified in the applicable statute “must continue throughout the action in order to maintain standing.” Because the plaintiffs in the action no longer represented 5% or more of the membership in the association, the remaining plaintiffs lacked standing and the case was properly dismissed.

See case decision: Pall_v._Mckenzie_Homeowners’