The Importance of a Paper Trail

Gray areas. Ideally, the proprietary lease should clearly lay out whether the co-op corporation or the shareholders are responsible for repairs when a building leak occurs. Things often get tricky because there’s not a uniform proprietary lease used in New York City co-ops, and the legal and insurance complications can get even messier if renovations or alterations have been made.

Collateral damage. Typically, shareholders are responsible for what occurs inside their apartment walls, and the co-op is responsible for what’s outside. The standard plain-vanilla proprietary lease from around 1980 specifies that when there is a leak resulting from a one-time casualty event — for example, a contractor working in one apartment damages a pipe in a wall, causing a leak that damages the unit below — the co-op can file a claim to its insurance carrier to repair the pipe. The co-op, however, isn’t responsible for repairing the damage inside the apartment, which is why many boards require shareholders to maintain homeowners insurance. 

Past history. Problems also arise when leaks are the result of alterations done by former shareholders and there is no assumption of alteration agreement between them and the current shareholder. Managing agents change, and document transfers from one agent to the next are often problematic. The lesson for co-op boards is to be diligent about keeping records of apartment renovations because current shareholders are responsible for anything in their apartment that they or the previous shareholders have modified.