New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Changing Course

The board president was concerned. According to the superintendent, the tenant-shareholder at the small Manhattan co-op had contractors in her apartment who were performing unauthorized construction work. The house rules made it very clear: you couldn’t use contractors unless the super or the managing agent had cleared them. The reason was simple. The board had been worried about contractors lacking proper insurance injuring themselves and suing the corporation. So, the directors had dutifully revised the house rules to require that all contractors have coverage.

What was clear to the president had been unclear to the resident, however. When confronted with her breach, she claimed to have been unaware of the house rules revision. Indeed: the board had revised the rules, but had neglected to communicate that fact to the shareholders. This board had done one thing right – it had known when it needed to revise its restrictions – and one thing wrong – it hadn’t let the shareholders know what it had done.

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. They say that you are part of a group, that you have criteria that maintain the value of the building, and that you show consideration for your neighbors. If everybody did what each one wanted, you would have anarchy.

Although having written rules is important, it is just as crucial to know when to revise them. An outdated rule can lead to confusion and discontent within your community. “If you don’t revise regularly,” says Lynn Whiting, director of management at the Argo Corporation, “you end up with house rules that still talk about incinerators, when there haven’t been incinerators in many, many years. Or they talk about balconies, when there are no balconies in the building. You end up with house rules that really don’t make any sense for the building.”

“It seems like some buildings have never revised their house rules,” adds Steve Greenbaum, director of management at Mark Greenberg Real Estate. “They’re using the ones that say, ‘No velocipedes allowed in the hallways,’ when most people don’t know what velocipedes are [an early form of the bicycle]. But you need to have new house rules to incorporate recycling and trash disposal, and maintaining carbon monoxide detectors, and a move in/move out policy. Even the ones that have been revised have to be revisited on a regular basis.”

Yet how does a board know which rules to eliminate? What sort of difficulties are boards likely to encounter?

What Is It?

Before reviewing and/or revising your rules, you should become familiar – if you’re not so already – with what house rules are. Some people get them confused with bylaws. The bylaws provide for the internal management of a co-op or condo’s affairs and deal with operational and administrative matters. House rules are regulations governing conduct, usually intended to prohibit illegal, objectionable, or antisocial behavior. They include move-in/move-out fees, the proper times to move (often between 9 and 5 on weekdays), parking, and prohibitions about the use of the service elevator.

A typical house rule reads: “No article (including, but not limited to, garbage cans, bottles or mats) shall be placed in any of the passages, public halls, vestibules, corridors, stairways or landings of the building, nor shall any fire exits be obstructed in any manner. Nothing shall be hung or shaken from any doors, windows or roofs, or placed upon the windowsills. Doormats may not be kept outside apartment entrances.”

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 simply by board resolution. All, of course, are subject to the peculiarities of a particular offering plan. House rules can be amended more easily, which gives boards greater flexibility in adapting to different situations. That way, they can regulate the behavior of people on the premises without having to get the approval of all the unit-owners.

“The bylaws are for corporate governance, or in a condominium, condo governance,” observes attorney Steve Troup, a partner in Tarter, Krinsky & Drogin. “What the bylaws describe are how you elect directors, how you elect officers, what kind of notice you need to call a meeting, and things like that. House rules are more akin to the proprietary lease. The lease deals with issues of occupancy.” (A typical issue would be windows, as addressed by this house rule, drafted by Troup: “No fan, ventilator, or air conditioning device shall be installed in any unit without prior written approval of the board.”)

Review Time

Typically, a board will decide to revise its rules when an issue comes up: for instance, an owner has questions about the subletting policy, and the board examines it, finds it confusing, and decides to review the entire policy. “It’s time to redraft when you start taking a look at your house rules and they just don’t apply to the current state of affairs of the community,” observes attorney Joseph Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert. “Most of the house rules need to be looked at on a regular basis to make sure that they’re current. But many boards don’t look at them.” Some professionals say you should review your house rules at least once every two years to see what’s out of date and what’s status quo.

Once you’ve decided on a full-scale review, set up a committee of at least two or three board members to examine the policy. Discuss the rules thoroughly, eliminating ones that don’t make sense anymore or are confusing and/or contradictory (for example, one set of rules had a one-year limit on sublets, with board permission required for an extension, which was limited to two years unless you had a valid excuse for extending further, the validity of each situation to be judged by the board).

Victor Stuhl, president of a three-building, 225-unit co-op in Queens, was one of four board members out of nine who sat on the building’s rules revision committee. Of particular concern were the confusing rules relating to the garage. “We went through every particular parking rule one by one, and it took us two sessions,” he recalls. “After the first one, I suggested new rules. The whole thing was so crazy. What had happened was that the rules were written in sections, like an engineering book, and the parking section was, I think, Section 5. So it was 5.1, 5.2, 5.3, and then it went up to 5.32, 5.33. They got to a point through the years where they put down different groups of rules and most of those additional rules should have been revised earlier to be in the first major section called ‘General Rules.’”

Although rules are generally not arranged in any particular order – they are often chronological (i.e., as an issue came up, a new rule would be added to the list), you may want to take this opportunity to rearrange them by category or subject (“Parking,” “Common Areas,” “Windows,” and so on) for easier reference. In addition, be sure that your rules reflect the needs of a building’s occupancy. When children are found playing in the halls, for example, that can be disruptive to peace and quiet and may also cause damage to the public areas. So, it may be time to draft a rule like this: “Neither unit-owners nor their guests, family members, roommates, business invitees, agents, servants, employees, or tenants shall play in the entrance, lobby, passages, public halls, elevators, vestibules, corridors, or stairways.”

When drafting, be forceful and definitive in your language. Attorney Bruce Cholst, a partner in Rosen & Livingston, points out that many boards make the mistake of being too polite – too tentative – in their house rules, which could leave their policies open to legal challenge. “I’ve seen a lot of house rules that are peppered with language like ‘Shareholders may do this or should do this, should do that, should refrain from doing this,’” he observes. “They’re trying to be very polite about imposing regulations. It shouldn’t be ambiguous, however, it should be definite and mandatory.”

Once you’ve drafted your revisions, check with your lawyer. “It’s always good to have the attorney take a peek at them. If it’s something that deals with laws, like the lead law, you want to make sure that the language is right,” notes Greenbaum. “If you have rules that have fines and penalties, you want to make sure that you’re allowed to do that and then doing it correctly.”

Some attorneys will not charge much for doing the review and revision themselves, unless your house rules are highly unusual. Notes Troup: “If a client called me now and said, ‘We’d like to revise our house rules, what do you think?’ I would e-mail that board member or managing agent a standard set that I have worked on. I would charge them just a couple hours of my time for modifications [particular to their building]. I did the heavy lifting 15 years ago when I looked at probably a dozen different sets and took what I liked from some and discarded others. And then I create new language to deal with new situations.”

To Ban or Not to Ban

When crafting or re-crafting rules, enforceability should be a key issue. Most experts say that you should always try to enforce. If you let one infraction go by, then the next time someone else does it, a rule-breaking owner might 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.

But beware of rules that are impossible to enforce, such as prohibitions against odors or noise. “The reason those are the toughest is that they’re so transitory and subjective,” says attorney Steve Wagner, a partner in Wagner, Davis. “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 is that if you are living in a hi-rise in a big city, noise is a fact of life, he adds. No one is going to have a completely noise-free apartment and there is little chance that such a house rule can be enforced.

Then there’s the question of possibly being afoul of the law – not to mention against common sense – as was the case with the Upper West Side co-op that tried to ban smoking in owners’ apartments. The board was forced to back down partly because of the uproar among the residents and partly because of practical issues.

“It was a very foolish rule to try to pass because, even if it were legally enforceable – and I really have my doubts that house rules can legally reach into the four corners of the apartment like that, that’s the kind of rule that really breeds resentment,” says Cholst. “One of my rules on house rules is try not to be arbitrary, try not to pass a rule that may not be enforceable or may be difficult to police. I think that that smoking ban certainly may be difficult to police and may be needlessly controversial.”

If a board doesn’t bend on such unenforceable rules, it may be broken. For example, you may not want 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 will simply disobey 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 need to amend the rules.

“Enforceability is always an issue,” observes Colbert. “You have to ask yourself whether you have the authority to enact a particular rule and whether you run afoul of general law principles, not necessarily whether you have the authority under the governing documents to establish that particular house rule.”

Communication

Experts agree that you should keep the owners informed of pending changes – or else you could be making trouble for yourself. Says Troup: “I’m a big believer in transparency. Any time the board is making decisions that affect shareholders, there should be some discussion at an annual meeting, or through memos – saying that ‘such and such is occurring in the building, the board is very seriously considering doing X, Y, and Z about that. If you have any comments or questions about this, please contact the managing agent or a board member.’ And give it a period of time. Give them an opportunity to respond. Chances are they won’t, unless it’s a very contentious building. But when the directors do it without first consulting the shareholders or owners, they often get into trouble.”

You should offer prompt notification and explanation of any new or revised house rules. “As a legal matter, you always have to communicate your house rules before you can hold somebody accountable for a violation,” Cholst notes. “They have to know that the rule has been enacted, and when it takes effect. I would take the opportunity to give them a little newsletter, telling them what the problem is that you’re looking to address and why you think the new rule will successfully address it and resolve the problem. That way, you’re demonstrating to people that there’s a rationale behind your rule and you’re not regulating for the sake of just flexing your muscle. Because of the perception that you’re not acting arbitrarily they’re more likely to comply with it.”

But, warns Colbert, don’t feel you have to get the approval from the residents for rewriting every rule. “Boards have the authority to adopt the house rules or to change the house rules, and this goes for condominiums as well, when the condominium boards are given the authority and the bylaws to enact the rules and regulations of condominiums,” he observes. “If everyone [in the building] votes on them, it gets very complicated.”

You may also want to present the rules to the owners in an easy-to-reference booklet. Argo, for instance, assembles a building package, which includes the house rules, the building policies on subletting, on alterations, on the contact information, how to register a complaint or how to contact a managing agent, and what to expect from the building staff.

“It’s good public relations,” explains Whiting. “The boards that do this want people to be mindful of the rules; it’s a higher level of service. People move into a building, and what do they know? If there’s a handbook that tells them what the policies are if they want to refinance, or if they want to alter their apartment, or what recycling procedures are, that’s very helpful. People really don’t know what those policies are, and there’s no one place in which all that information is contained. It also makes the whole building seem more professional. I just think it gives people a better feeling.”

Whatever approach you take, remember: having up-to-date house rules that are relevant to your property and are communicated to the residents in a timely way is the best way to keep your operation running smoothly and harmoniously. And isn’t that what communal living is all about?

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