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Boards need to be on top of their alteration policies and agreements.
AUTHORJeffrey M.Schwartz, Partner, Schwartz Sladkus Reich Greenberg Atlas
PAGE #p. 47
As buildings age, more residents want to do alterations – the board needs to know what these are and what their policies regarding alterations allow.
Very often co-op and condo boards are asked to approve alterations by unit-owners or shareholders in their buildings. As buildings age, more and more residents are performing alterations.
Boards have to decide whether to allow the alteration at all. What tools, what restrictions, and what agreements should they require? First, boards should be talking to their attorneys. Many boards are surprised when they go to their operating documents, and find they don’t have the authority to require an alteration agreement. That’s one preliminary step that all boards should take.
What should be in the alteration agreement? The entire scope of the project has to be laid out in architectural design drawings, and presented to the board with all the documentation needed for approval. You’ve also got to get a list of which permits are necessary from the Department of Buildings. Insist on a security deposit. Finally, and probably most importantly: all insurance requirements have to be set forth in the alteration agreement. Insurance certificates have to be given by each contractor or a general contractor.
One other very important factor is assigning responsibility if something goes wrong. A key provision in these alteration agreements is requiring that the apartment owner secure – not only from their general contractor but from any subcontractors who are coming in – both insurance and indemnification agreements from each company that’s working in the apartment. That agreement is appended to the alteration agreement, which specifically provides that before that subcontractor can come into the building, they have to present an executed indemnity agreement.
The most common problem that exists in buildings today is the apartment owner who starts an alteration and never finishes it. It goes on and on and on, and it continues to interfere with the people who are next door and continues to burden the building’s systems by taking up elevator time. To prevent that, require that no work can start until all permits are obtained. The danger in allowing an owner to start an alteration without having everything in place is that he or she could get one permit, start the job, and then find out that another permit is needed. Also, fix a date by which the apartment owner has to be done. There has to be a penalty if he or she doesn’t get done on time, or there has to be the ability of the co-op or condo to shut the job down if that date is not met.
There are some things that a building can do to control and manage alteration projects. Enact policies that will only allow a specified number of alterations to be going on in a building at a particular time. These policies might limit the number of alterations on various floor groupings, and prohibit alterations during holidays. You may also want to encourage work during specified time periods, like the summer, when a lot of people are on vacation and not in the building. This can minimize disturbances during the school year and times when the building is at full occupancy.