Err on the Side of Fairness

Peter von Simson
CEO, New Bedford Management

Err on the Side of Fairness

Setting the Scene

New Bedford Management was hired as the managing agent for a Riverdale co-op about two and a half years ago. At that time, a new co-op board had just taken over from a board that had been in place for a decade. New owners were raising questions about two issues: arrears and sublet policy. We reviewed the co-op’s arrears situation. It was terrible. The recently deposed president owed most of the money, a large figure. As to the sublets: over the years, the sublet policy fees had been applied unevenly. Some were charged and some were not. We recommended that the board set up rules in both areas that would apply to everyone equally.

Following the Action

The new rules stated that whenever a shareholder is in arrears for at least 60 days, New Bedford Management will alert the co-op’s attorney, and he will take the necessary legal steps to collect the “past due” amounts. The board had to give up some control – formerly, it determined when to go after a deadbeat (which is why the former board president could rack up such a large bill) – but in the next two or three months, we were able to bring the arrears almost down to zero.

On the subletting front, we made a list of everyone who was subleasing. We discovered that out of all the shareholders in the co-op no one except for the current president was paying the sublet fees. That wasn’t fair, and the president initially asked for a credit for the last year of sublet fees that he had paid – if no one else paid, why should he? – but he later reconsidered, saying, “I don’t want any credit. I want all the rules to be applied evenly. I really want people to see that I did the right thing for the building.”

The word got around that the board president had acted to the benefit of the co-op and at his own expense. The shareholders were impressed. All the back sublet fees were paid.

Doing It Right

The problem here was that the board was setting aside the co-op’s rules to either benefit or essentially punish certain individuals on the board. That was wrong. In the final analysis, if the board errs anywhere, it should err on the side of transparency and fairness.