When marital discord spills out of the bedroom, boards need to get ready for
From the first inklings of marital discord that surface as screaming matches in the lobby to the protracted endgame where couples divvy up their apartments, condo and co-op boards are often caught in the middle of divorces. In one recent case, a co-op board president received a note from a shareholder warning him that her husband might try to forge her signature on documents. A short time
later, the husband delivered doctored transfer documents to the board for approval. In another case, a small condo building in the Flatiron District couldn’t collect maintenance fees from a couple for more than a year while the two sparred over finances from abroad.
“Walk extremely softly. Divorce is a very, very private issue that borders on very severe legal issues,” advises Larry Weinstein, president of a cond-op in Queens. “It really is more of a situation for lawyers to handle than for a board.”
Coping With Couples
Sometimes, the building staff first learns that a couple is on the outs when the pair start brawling in the common areas. In one recent case, a doorman had to physically separate a husband and wife who came to blows in the lobby. When divorcing couples air their grievances in public, the biggest concern is not for the parties involved but for other residents who expect their lobby to be a polite public space and not an extension of a family’s living room.
“The board’s responsibility is to protect other shareholders not only from harm, but from scenes and public annoyance,” says Weinstein.
Board members should sit down with the warring couple and see if a public truce can be worked out. The couple should be reminded of the rules for behavior in common areas – and that they are expected to follow them. If they’re not followed, a co-op can turn to the proprietary lease and threaten the couple with eviction if they don’t curb their behavior.
Condo boards, however, wield far less power to enforce good behavior. Unlike a co-op, which can bring a disruptive shareholder to landlord-tenant court, a condo must seek an injunction against the residents in State Supreme Court. Later, if the board prevails, it can attempt to recoup legal fees. “In a condo, there is more exposure in a divorce situation where the parties are feuding,” says Elliot Meisel, a partner in the law firm Brill & Meisel.
Often the people on the front lines are building staff, such as the porters and doormen. Property managers often advise staff to stay out of disputes as much as possible. If an altercation gets heated, the staff is usually advised to contact the managing agent, who can then decide whether the board’s lawyers should be consulted. “We deal with it at arm’s length as much as we can,” says Don Levy, a vice president at Brown Harris Stevens.
Put It in Writing
The property shared by a couple during their marriage is invariably a bone of contention. To avoid getting caught in the middle of a dispute over who has rights to use the apartment, boards should get any requests in writing and have them reviewed by the building’s attorney. For example, if a wife tells the board that her husband is no longer allowed to enter the apartment, she should send a written request, with supporting legal documentation, to the property manager for review.
The building’s lawyer may respond with a letter saying the building will attempt to honor a request if it is supported by a legal position. But unless there is a restraining order, the building cannot bar a shareholder whose name is on the apartment title.
“That is certainly the most perilous period,” says Meisel. “The condo and co-op boards should stay out of legal aspects of ownership rights.”
Where’s the Money?
Then there’s the matter of money. Two years ago, a small luxury condo in the Flatiron District was left holding the bag when a divorcing couple left the country. The husband had lost his job and didn’t have the money to pay anymore. His wife refused to agree to sell the apartment and so, with no money on hand, they let common charges go unpaid for more than a year before finally agreeing to sell and pay what they owed the condo. According to Robert Schlosser, a Manhattan solo practitioner who represented the couple in the sale, in the end, the couple paid the condo everything they owed.
When a marriage falls apart, maintenance fees and condo charges often end up entangled in the dispute. Assets get frozen. Ousted spouses refuse to pay maintenance for apartments they have left behind. And couples disagree on a selling price. In a Gramercy co-op recently, a husband left his wife and took all the money. Until an agreement could be reached, she had no cash with which to pay her maintenance fees.
Julie Hyman, a matrimonial attorney at her eponymous firm, warns: “That property is going to get tied up in litigation, but it’s better to catch this problem before it happens.”
“These situations are dependent on the resolution of the divorce issues by the court,” says Bruce Cholst, a partner at Rosen, Livingston & Cholst. “An arrears situation can drag on for a long period of time, especially if it’s tied up in a divorce decree where the parties are fighting over assets. If it’s not a primary residence, that’s worse because neither party has an interest in resolving this issue. They can hang tough because it’s unclear whether this property will be theirs by the end of the divorce, so they don’t want to sink money into an asset that they may not own.”
A co-op can move to evict shareholders who don’t pay their maintenance because the co-op has first lien on the apartment. So if the shareholders are in arrears, the bank holding the mortgage will ultimately be required to pay the co-op maintenance and then go after the owners to recoup the money. But condos don’t share that same protection. The condo gets paid after the banks and sometimes may never recoup its losses, especially if the apartment goes into foreclosure. At the Flatiron condo, the couple agreed to sell the apartment, so the building was able to acquire its back maintenance at the closing.
In the case of frozen assets, a board’s lawyers can talk to a matrimonial attorney to see if there is a way to unfreeze assets, but the courts rarely intervene if the property isn’t the couple’s primary residence.
“I think divorce courts are unlikely to intervene because they only have direct jurisdiction over the matrimonial dispute and the co-op is a third party,” Cholst says. “Their attitude would be to tell the co-op, ‘Go sue if you want to. Get in line.’”
In the end, apartments usually get sold or transferred to one spouse as part of the divorce agreement. This is the point where boards have a role to play, particularly co-op boards, which must approve the transfer and vet the new buyer. As was the case with the husband who forged his wife’s name, co-ops need to pay particularly close attention to transfers and make sure all parties are who they say they are.
“Lawyers all have stories about husbands and wives who have shown up at closings with fake spouses,” says Arthur Weinstein, an attorney. “Great care has to be taken to make sure that the two people who hate each other are not doing some sort of conspiracy to transfer the apartment without the full consent of one of the divorced parties.”
In the case of the forged documents, the board put a flag on the sale and the process was delayed. Ultimately the apartment was sold and “the wife got a nice settlement out of it,” recalls Weinstein.
Co-op boards need to understand the risk they face if shares are transferred erroneously: the wronged spouse could sue the board for half the value of the apartment. In a case two years ago, the ex-husband of a shareholder in a luxury Upper East Side co-op threatened to sue the board because his wife showed the apartment to potential buyers without his approval. He eventually withdrew his threat, according to Meisel.
To protect itself from legal risks, a co-op board should have its lawyers, rather than a property manager, review the transfer documents. All parties involved should have legal counsel and be present at the closing – even if the various matrimonial attorneys need to be called in to keep the spouses apart.
Condos, however, are spared this complication, as a condo sale is more like the sale of a private home, where a title insurance company, not the board, vets the transfer of title.
Last One Standing
In many cases, one spouse will keep the apartment. Co-ops often want to review the remaining spouse as they would a new shareholder, making sure he or she has the financial ability to afford the apartment. However, if the transfer happens before the divorce is final, then the board often can’t vet the spouse; most proprietary leases waive the consent requirement for a transfer of property between spouses. However, if the couple has already finalized their divorce, the board could argue that the couple is no longer married and ask to review the remaining spouse. That was the case in an Upper West Side co-op where the husband agreed the give the apartment to his wife in the divorce. The board wanted the wife to submit a new application.
“I might want to vet somebody whose financial ability has changed since the matrimonial dispute began,” says Cholst. “I think it’s a valid position to take. It’s making a very legitimate point: as a joint unit, husband and wife were financially responsible. Now, if there’s a separation and a party is going to have to stand on his own in terms of supporting the apartment, it may be that they’re less financially responsible, so I would urge a board to stand firm and review the remaining shareholder’s financial ability.”
“The co-op’s ability to [do] this would depend on the language of the proprietary lease,” says Schlosser.
Rearing Its Ugly Head
Divorces are messy and sometimes the ends don’t get neatly tied together. If a separating couple doesn’t make final all the terms of their divorce, perhaps in an attempt to save money or because they never reach any sort of agreement, the apartment they once shared might still be considered a shared asset. And, depending on the type of ownership agreement they have, particularly with co-ops, an absent spouse might have rights to the apartment years later. Or, if the spouse dies, her estate might still have a right to it.
In the end, boards should always have an attorney review a case involving divorce, even if it happened years earlier. Concludes attorney Art Weinstein: “That ex-spouse rears his ugly head and shows that the board missed something, and then you’re really left out in the cold.”