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For board members and property managers of co-ops and condos in New York City, there are legal and financial questions regarding new and old laws, accounting rules, auditing, and so much more. Here’s what you need to know to manage your finances and speak knowledgeably with your accountant and attorney.
Two Shareholders' Personal Animus Keeps a Board Prez's Sale Unapproved
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Oct. 18, 2010 — The board at one of our co-ops is very split. Board members argue about everything. There was even a problem in agreeing to refinance the mortgage on the property. The co-op board took additional funds from the lender to pay for capital improvements for the next few years. Two of the board members were against it, claiming that the additional money and the additional debt service were unnecessary.
Now, two years later, the president of the co-op (who was president then, too, and a proponent of the transaction) is selling her unit and moving. The two board members who were very much against the refinancing are now refusing to consent to the sale — even though the purchaser is well qualified. And wait till you hear their state reason for objecting to the sale. Read More »
Co-ops & Condos Caught as DOB Steps Up Local Law 11 Enforcement
October 19, 2010 — The New York City Department of Buildings is creating a fine mess for co-op boards and condo associations – issuing a plethora of fines for Local Law 11 building-façade violations, making surprise visits, issuing "failure to maintain" and other violations, and charging co-ops and condos fines ranging from $5,000 to $10,000. "It appears the enforcement of the site-safety plan management regulations are being strictly enforced," says Gene Ferrara, president of JMA Consultants, which advises contractors and others.
Why? And why now? And more importantly, what can you do about it? Read More »
New Crackdown on Co-ops/Condos: Are YOUR Backflow Preventers in Place?
October 15, 2010 — The New York City Department of Buildings appears to be on a crackdown regarding Local law 11 repairs, as reported in the October issue of Habitat. Now it appears that its sister agency, the NYC Department of Environmental Protection, is doing likewise over a small, science fictiony-looking piece of plumbing equipment called a backflow-prevention device. And if your co-op or condo doesn't have these installed where you should, backflow could turn into cash flow – from your bank account to the city's coffers. Also, a shutoff of your water supply. Ouch.
Not all co-ops or condos need a backflow-prevention device. But how do you know if yours does? And if so, what do you need to do? Read More »
Deftco Dupe: How a Finance Company May Have Ripped Off Four Co-ops
October 12, 2010 — It sounded too good to be true. So, of course, it was.
In summer 2009, a 50-unit co-op on Long Island was caught in a familiar bind. The co-op's building needed major capital improvements, but given the dismal state of the economy, the co-op board was reluctant to raise monthly maintenance or impose an assessment. The obvious alternative was to refinance the mortgage, but the recession had caused loan sources to dry up.
And then, conveniently, the board heard about an outfit called Deftco Corp. The company claimed it could give the co-op a newly refinanced, 15-year, $10 million mortgage at six percent interest. The new mortgage would be, supposedly, backed by the U.S. government. It got better. By sending $5,000 to cover "underwriting expenses," the co-op board could avoid paying the fee that Distinctive Management, the co-op's management company, would charge for doing the paperwork on the deal. Read More »
What's a Ground Lease … and How Did One Nearly Make a Co-op Disappear?
Oct. 5, 2010 — The "ground lease" on the 132-unit co-op at the corner of East 61st and Lexington Avenue in Manhattan (at right; click to enlarge) was set to expire on June 30. If the co-op failed to negotiate a new lease with the land owner, then it would simply cease to exist: The building would revert to a rental property, and shareholders would lose their equity.
That didn't happen, mercifully, because the co-op's board of directors woke up and realized no one was going to bail them out. With the help of its professionals, the board managed have to save the co-op. It was no mean feat. Read More »
Co-op Board Misdeeds: Should You Turn Your Board In? When Must You?
Oct. 1, 2010 — When the earthshaking court ruling in 40 West 67th Street vs. Pullman came down in 2003, it solidified that co-op boards are corporate boards, and that its decisions fall under the same Business Judgment Rule that applies to a regular, professional-business corporate board. But with great power must also come great responsibility, as a not-so-itsy-bitsy spider-writer once said — and that means board members may sometimes have to consider whether to self-report wrongdoing to outside agencies or regulators.
Must you always, to stay in the clear legally? Surprisingly, the answer is no. Here's why…. Read More »
Reveal Co-op / Condo Minutes to Apt. Buyers? A Top Attorney Gives the Facts
Sept. 28, 2010 — A co-op board member asks: "I would like to know whether my co-op board should let purchasers of our apartments see the board minutes. It seems to me this could be an invasion of our privacy especially because they're not even shareholders." Read More »
How Co-op / Condo Background Checks Can Keep Out Criminals
Sept. 24, 2010 — When a shareholder at a 300-plus unit co-op in Bayside, Queens, asked to speak to the co-op's managing agent this past July, nothings seemed unusual about the request. But the conversation, the managing agent recalls, was hair-raising: Did the managing agent know that a new sublessor in the co-op was listed on the New York State registry of sex offenders? Read More »
Fraud? No, Just a Scam: How Co-op & Condo Boards Can Avoid Little Rip-offs
Sept. 14, 2010— Sometimes being on a co-op board or condo board is like being on Racket Squad. Only baby-boomers with long memories will recall Racket Squad, a Dragnet-wannabe from 1950s television that supposedly reenacted cases ripped from the police files. Unlike today’s Law & Order, however, these were not murders but scams perpetrated against innocent “marks” (victims) who were easily taken in by the clever bunko artists. “Remember,” said Captain Braddock, the host and narrator of the documentary-like program, at the conclusion of every episode, “a man can pat you on the back with one hand — and pick your pocket with the other. And it could happen to you.” Read More »
Co-op/Condo Boards Must Be Flexible on Issues of Flying the U.S. Flag
Sept. 10, 2010 — These colors, as they say, don't run — and neither do co-op shareholders and condo unit-owners who want to fly the American flag. Yet a number of co-op boards, condo associations and homeowners associations (HOAs) object to the flag and/or flagpoles. If your co-op/condo board wants to forbid flags, you'll need to walk a fine line in terms of federal law, shareholder/unit-owner consensus, passion regarding a national symbol and plain old common sense: Legal battles cost money, and even if you win on a technicality you're going to lose the public-relations fight against Mom, apple pie and, well, the flag. Read More »
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