New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Rules of the House

The owner of Apartment 6D was incensed. For months, he had argued with his neighbor in 6C about noise: about loud stereo music after 11 p.m.; guitar playing after 1 a.m.; loud parties. He was living a noise nightmare. To 6D, the situation was simple: after 11, the cacophony had to stop. But to 6C, a subtenant in the 22-unit Manhattan co-op, it was equally simple: he had a right to the loud enjoyment of his home and 6D was just nutty.

The board talked to the owner of 6C. The owner talked to the subtenant. The subtenant continued making noise. The board warned 6C of eviction. The noise continued. Then the board received a vaguely threatening letter from 6C's father, an attorney, who claimed 6D was making just as much noise as 6C and that 6D was harassing 6C because of his lifestyle. Now what did that mean? The house rules were clear, yet, short of actually evicting the tenant, what could the board do?

That is the question faced by many boards of cooperatives, condominiums, and homeowner associations as they attempt to negotiate the shoals of house rules. Few things can inflame the tenancy more than a seemingly capricious rule. Indeed, from pet prohibitions to roof restrictions, boards sometimes seem to be acting inconsistently and autocratically.

But rules are necessary. "House rules are very important," says one management executive. "You are part of a group. The whole idea is to establish criteria that maintain the value of the building and also show consideration for your neighbors. If everybody did what they wanted then the place would be a mess. It would be chaotic." Adds Anita Sapirman, president of Saparn Realty: "It is a question of getting people to understand their rights and their obligations."

Yet how does a board know which rules to uphold and which to eliminate or ignore? And once established, are there rules that should be selectively enforced? What sort of difficulties are boards likely to encounter?

Rules vs. Laws
The first thing to understand is that there is a difference between a house rule and a bylaw. Attorney Richard Siegler of Stroock & Stroock & Lavan in Manhattan offers this definition: "I call the bylaws the governing rules of associations or co-ops that provide for the internal management of its affairs and deal with operational and administrative matters. House rules are regulations governing conduct, usually intended to prohibit illegal, objectionable, or anti-social conduct: routine housekeeping, covering noise, keeping bikes in the hall, housing pets."

Bylaws can be amended in a variety of ways: in some instances by a majority vote of the board, in others by a shareholder vote. House rules can usually be amended or expanded by board resolution. All, of course, are subject to the peculiarities of a particular plan.

"House rules can be amended more easily, which gives boards more flexibility in adapting to different situations," says attorney Robert Tierman, a partner in Litwin & Tierman. "It's a way for the board to regulate the behavior of people on the premises without having to get the approval of all the unit-owners."

The Reasonable Standard
When drafting rules or redrafting sponsor-written ones, the key, above all, is to be reasonable. "A good house rule is one that's enforceable, and it has to be sensible," says Steve Greenbaum, director of management at Mark Greenberg Real Estate. "In every instance, the board has to consider the needs of their neighbors," adds a management executive. "They should make every effort not to create rules that are onerous."

Reviewing the rules when a board comes to power should be paramount. "House rules are often put in by the sponsor at the time of conversion," Tierman notes. "A lot of boards don't pay attention and don't undertake a thorough review of the rules until something becomes an issue. That's a mistake. You should analyze what you've got, where it needs to be changed and beefed up, and then it should be published. You need to be a proactive board rather than a reactive one. If you have a fair and comprehensive set of rules, it will create an atmosphere in which people will be more likely to obey."

"Today's real estate developers do not merely insert into the deeds a covenant or two, as sellers did in earlier times," writes Evan McKenzie, assistant professor of political science at the University of Illinois at Chicago, in his book Privatopia. "Instead, they have lawyers draft a fat package many pages long and full of elaborate restrictions that, taken as a whole, dictate to a large extent the lifestyle of everybody in the project."

Write rules that reflect the needs of a building's occupancy. Protecting the building is a legitimate concern when making any rules. Move-in/move-out fees, times to move (often between 9 and 5 on weekdays) parking, and prohibitions (in hi-rises) about when you can use the service elevator all revolve around quality-of-life questions.

"If the walls are scuffed, you need to repair them," notes Greenbaum. "You don't want people moving in or out after 5 or on weekends, because that's when the tenants are home. It's just common sense. And, when you explain that to people, if they really understand why the rules are implemented, then it makes it easier all the way through. They do not contest them because they understand the function of the rule."

In fact, consultation is crucial in passing rules and being certain they're obeyed. Most tenants want to keep up the value of the co-op and can be persuaded that a reasonable rule is in their best interests. "I think most boards have the good intention of the property at heart," a manager notes. "If a house rule seems unreasonable to a shareholder, then that shareholder should state that. The principle of the house rule is to establish the do's and the don'ts. It establishes the way of life at the property."

A board that refuses to communicate with or listen to its tenants is certain to face opposition. "As long as the rule is well thought out and people are given notice, you'll be okay," says Greenbaum, who notes that Mark Greenberg Real Estate puts together a frequently updated building manual that keeps all tenants informed of the house rules. "It's a great tool. It explains to people what the requirements are when they move in, the responsibilities of the staff, the tenants, where to throw out the garbage, how to sublease, to sell. That's helpful."

So is prompt notification and explanation of any new or revised house rule. "Everyone should be aware of the rules," says a manager. "Buyers need to know what they're getting into. We know for a fact that most buyers do not read the rules. Most of the time, they do not get rules till they show up to get the deed. If they do read them, they find they're prohibited from hanging anything from the window. They do not know that means they can't fly a flag on the Fourth of July or that they can't have an air conditioner on the window."

"The most important thing is that rules be written clearly and briefly," says another management executive. "If you give people a 100-page book of rules, be sure you have a summary, highlighting any rules — like a 'no pet' policy — that may pertain to them."

Remember: ignorance can lead to fights, so it is in everyone's best interest to keep all sides informed. "Rules need to be explained periodically to gain compliance," says a manager. "People like to know the reasons why, that they are not arbitrarily enacting rules. We can't make assumptions that people understand this. From the management point of view, our job is to put together a system of repetitive enlightenment, so to speak."

"The board adopts rules and forgets the people," observes McKenzie. "The residents say, 'They're my neighbors, I don't have to do what they say. Both people need to meet in the middle. It requires a lot more education on the part of owners and the boards. If people who live in a development understand the common purpose — to live and govern — the rules can be made to work."

To Enforce Or Not To Enforce
Enforceability is a key issue. Most say you should always try to enforce. "If you don't, it creates a precedent," Rosenfeld notes. "If you let one infraction go by, then the next time someone else does it, they'll say, 'You let Mr. Jones have his air conditioner sticking out three feet from the wall, why not me?' If the rules say all air conditioners must be flush with the exterior wall, then that's what they must be."

Tenants do fight. "There has been litigation," says Tierman. "The problem is that under the business judgement rule, boards have wide latitude, unless you can show that they were acting in bad faith or a discriminatory way."

Nonetheless, be flexible. Consider revising rules that may be outdated and in need of a change. "If there are consistent problems with house rules, you should bring them up for discussion at the annual meeting or at open board meetings," says an agent. "See if the board is being too harsh on this or that subject. If the majority of tenants want to change it, then take a vote."

Some rules are almost impossible to enforce: prohibitions against odors or noise, for example. "The reason those are the toughest is that they're so transitory and subjective," says attorney Steve Wagner, a partner in Wagner, Davis & Gold in Manhattan. "An odor can be gone in a minute. Noise can be stopped immediately. Then you have to prove in court that (a) there was an odor and (b) that it was so offensive that it violated the rule. That's not like having an illegal air conditioner in place that you can take a photo of."

"The attitude of most judges," adds Tierman, "is that if you are living in a hi-rise in a big city, noise is a fact of life. Nobody is going to have a completely noise-free apartment and no way in the world will that house rule be enforced."

Tierman recalls a case in which a complaining board hired a noise expert to do scientific tests of the noise, measuring decibels and comparing them to "normal" noise levels. After thousands of dollars of fees, the evidence was presented in housing court, but the judge ruled against the board anyway. "The judge said that his own neighbor complained about his son's piano playing and that noise was a fact of life," recalls Tierman.

If a board doesn't bend on such unenforceable rules, it may break. For example, you cannot have a rash of illegal subtenants, but an outright prohibition often works against boards. In a bad market, subletting may be necessary in some buildings. If you simply prohibit it, regardless of what your tenants want, then the shareholders may simply break the rules — creating enforcement nightmares for the board as it tries to police its tenancy — or the directors may be turned out in an election and the rules revised under a new board. Many co-ops have addressed the issue by allowing tightly supervised and/or limited subletting.

"If a lot of people need to sublet, then you should amend rules," says a management executive. "You should review and revise the rules regularly." Adds another manager: "If someone can present a case of financial hardship, those are special circumstances. There are many instances where the board will allow a subletting exception for a certain period of time."

A Fine Romance
What happens when tenants openly break the house rules? If talk and letters fail, fines are a step, though they can be harder to collect, depending on the type of housing. In a co-op, the fine can be applied towards the maintenance. If it is a $100 fine, that can be deducted from the $500 monthly maintenance. The fine is now paid, but the shareholder is $100 in arrears. That will keep accumulating and if the owner doesn't clear it up, the board can begin a nonpayment action. In condos, the situation is trickier. You can place a lien on the unit, which puts a milder form of pressure on the owner. He cannot sell the unit until the lien is lifted, but outside of that, it will not affect his lifestyle much.

Fines, say lawyers, should be imposed only after all else has failed and should be based on damages done (a dog soiling a carpet, a child marking up an elevator) and on shares the cooperator holds. And the fined tenant should be told he has the right to appear at the board meeting and dispute the fine, if he desires. According to Tierman, making such a procedure available will address any questions of due process.

A simple enforcement tool available to co-op boards only is the bank that holds the offending shareholder's mortgage. Let the bank put pressure. If you inform the bank that you're going to terminate the shareholder's lease, they'll threaten to foreclose. "Sometimes, I've had the bank call in the loan for a lease violation. That clears it up fast," says a manager.

Going to Court
Beyond fines, there is court, a time-consuming and expensive alternative that can have mixed results. "Technically, by breaking the house rule, they are in violation of their lease," Wagner says. "With that come provisions for enforcement."

In housing court, however, Wagner claims that judges tend to favor tenants over landlords. "Landlord-tenant court is very tenant-oriented. Judges are reluctant to terminate someone's interest in an apartment, and throw them out on the street, over the violation of a house rule," he notes. "Usually, the co-op has to show it endangers the life, health, or safety of the residents of the building or the building itself."

And even if you win, the tenant has 10 days to cure the problem before an eviction goes into effect. All he or she has to do is show that he stopped the infraction — be it noise or smells or a pet — for 10 days, and they have complied. If they start breaking the rule again after the 10 days, you have to begin the entire court proceeding anew.

A more effective, but more costly route is seeking a state supreme court declaratory judgement and injunction. The board is not asking for possession, as it is in housing court. The argument is that the property has house rules and that someone is violating them. The board wants the court to say that the broken rule is valid and issue an injunction against the violator so they won't violate again. It is an expensive process that can take several years.

If the co-op wins and the house rule is upheld, an injunction is issued against the violator. If the tenant violates the court order, the judge will take that very seriously. He can charge him with contempt and jail him. And once a board gets that judgment, it can use it against the other tenants.

"It can be much more expensive to have a supreme court action," notes Wagner. "But it could also be more expensive to defend, so that could force the other party to negotiation. And it is a very intimidating notice to get: it warns of fine or imprisonment or both. Usually, that works."

The Best Solution
The most effective way, however, is to design rules you can enforce and to communicate clearly why you are establishing them. "I suggest people avoid lawsuits," Wagner says. "I recommend that for the amount spent on legal fees in a noise dispute you can spend the money and buy the people upstairs a thick carpet."

And above all, try to let the tenants work it out between themselves. Notes one agent: "My standard answer to noise complaints is, 'I'm not there, I sympathize with you, but why not try to be reasonable and talk with your neighbor?' It all may just be a big misunderstanding that can be cleared up simply."

"When you're on the board, you have to understand that what you're doing is not just property management," says McKenzie. "You're also not just a good neighbor. You're more than a neighbor and not just a property manager. You're doing a combination of both. It's called government."

 

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