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Habitat Magazine Business of Management 2021

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Board committees - Bee Dub Sep 28, 2007


Under BCL 712, the Board can appoint committees to carry out Board business (I included the law below) without the rest of the Board's approval. Do you have these types of committees? Or do you have informal committees that don't have approval power, and instead make recommendations to the rest of the Board for their vote? What types of committees do you have? I have heard of Boards having Financial, Legal, Building committees. Or do you not have committees at all, and instead the entire Board just hashes out each and every issue (making for longer meetings)? Do you allow non-Board members to serve on the committees?


S 712. Executive committee and other committees.
(a) If the certificate of incorporation or the by-laws so provide, the board, by resolution adopted by a majority of the entire board, may designate from among its members an executive committee and other committees, each consisting of one or more directors, and each of which, to the extent provided in the resolution or in the certificate of incorporation or by-laws, shall have all the authority of the board, except that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs shareholders` approval under this chapter.
(2) The filling of vacancies in the board of directors or in any committee.
(3) The fixing of compensation of the directors for serving on the board or on any committee.
(4) The amendment or repeal of the by-laws, or the adoption of new by-laws.
(5) The amendment or repeal of any resolution of the board which by its terms shall not be so amendable or repealable.
(b) The board may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member or members at any meeting of such committee.
(c) Each such committee shall serve at the pleasure of the board. The designation of any such committee, the delegation thereto of authority, or action by any such committee pursuant to such authority shall not alone constitute performance by any member of the board who is not a member of the committee in question, of his duty to the corporation under section 717 (Duty of directors).

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Our board has no committees but I have begun to discuss this with them. Right now we all are involved in every decision.

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Our coop has a seven person board.

We have a summer pool committee that consists of one board member and three residents.

We have an interior decoration and refurbishment committee that consists of one board member and several residents. Several years ago, they engaged an interior designer who prepared the “new look”. Separately we dealt with the design of the new mailroom. Then, we engaged several contractors to bid on the work. Based on the feedback from the interior designer; the building manager, the committee and myself selected a contractor to perform the work. Our legal counsel then worked out the formal documents.

For capital improvements such as the $1,300,000 elevator upgrade and new larger generator, we had two board members and six residents.

For our window replacement program, we have one board member and one resident who is a former general contractor as our committee. The building manager and the superintendent oversee the project, but do read much further below.

Our landscape program is managed by one board member and our building manager.

Our union negotiation committee had several board members and the building manager. Being in NJ, we have a separate contract (not a group contract among a number of high rises) for our maintenance and janitorial staff.

We have a 24x7 security firm. The day-to-day security operations are managed by the building manager and our resident superintendents. (We have two.) For contract negotiations and occasional summit meetings with our security provider, our building manager and two board members are engaged.

For our inside parking deck overhaul, our building manager dealt with our outside engineering consulting firm that wrote the RFP. Then, the engineering firm and our building manager reviewed the bids and brought term to my attention. Based on the recommendations, we selected a contractor and then our legal counsel worked out the necessary legal documents.

Please note that the president is an ad hoc member of the committees, but remains on the sidelines.

Also, all should be aware that we have a zero punch list policy to the greatest extent possible. By this, I mean our outside engineering firm will be on site during the work or while the work is in progress to validate the work and the quality of work. Thus with the window replacement program, the contractor does not leave the apartment until our engineer reports zero defects.

For our elevator upgrade we hired an outside elevator consulting firm that wrote the RFP fore the elevator and for the generator, provided a list of bidders, and then evaluated the responses. The consultant then interviewed the firms with us. Finally, the consulting firm was on site several times a week to monitor the work and approved progress payments.

The committees cannot make any financial commitments or sign any documents. Legal documents are signed by the secretary with the approval of the board for expenditures over a certain amount.

Legal counsel is engaged as necessary.







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Please see my posting within:
Budget Time — Gabrielle, Wed Sep 26 5:26PM

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--

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I believe the Habitat Magazine published two to three years ago a good article on committees. In our particular case, we only have three committees and we are trying to put in place a fourth one. These are in our case:

1. Admissions Committee - Approx. 5 individuals who review applications and make recommendations. However, 3-4 individuals will meet for the interview.
2. Pool committee - Right now it consists of one person only.
3. Parking committee - 2 individuals only.
4. Elections Committee - one person, but hope it would be a 2-3 member committee.

In the past we have also formed adhoc committees for refinancing and commercial space.

As you can see the work is plentiful, but the laborers are few in our case. The main thing that you aim at with a committee is interest and development of leadership; however, communcations and coordination among the groups are critical to ensure that your co-op will serve the needs of your residents rather than stagnate under small arguments or no action with dysfunctional individuals and groups.

AdC






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Fines - Anonymous Sep 28, 2007


The Board is considering giving me a fine. Can a board do this? Fines are no where written in the proprietary lease, house rules, and amendments. Also, I thought fines must not only be mentioned but their amount must be stated and attached to the type of infraction (if there was any) claimed. Also, aren't fines enacted by shareholder votes and not the board?

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Most all these questions are and should be answered in your legal documents.
Typically, the Board does have the right to institute fines and a fine structure. Usually these will become amendments to the House Rules. Sometimes the amount imposed will vary depending on the severity of the infraction, so the exact amount may not always be written.

You should have received a letter stating that you are being fined in accordance with XXX Rule in the amount of XXX for XXX infraction... or something along this order.

~AR

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Also, there is such a thing as "recovery charges" for acts or omissions of the shareholder that had to be covered financially or otherwise by the Lessor or co-op, including legal charges.

So, make sure you are not given a "recovery charge."

AdC

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who pays: sponsor or coop - sdm Sep 27, 2007


leak in apt owned by sponsor and rented at market rate - not detected and repaired effectively for 4 weeks resulting in extensive property, mold damage and hotel bills for the occupant (who was travelling).

who should pay mold remidiation and detection costs? who pays for damages to the property (the renter did not have insurance) the coop or the sponsor? the sponsor is the direct landlord to the renter in this case, isnt he?

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I don't know from your message if the leak was from infrastructure and consequenlty, co-op responsibility or if it was a leak caused by the owner of another apartment going into the sponsor unit.

If the problem was co-op responsibility to fix, then the co-op takes care of the expenses for mold remediation and any other expenses associated with the leak.

Bottomline is: the sponsor is another shareholder and his tenants get the same privileges of a shareholder as far as being entitled to services.

AdC


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no? big one at thAT. the upstairs neighbor may have had questionable plumbing working on her drain but hard to prove - they had a renovation few years back.

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In a building, nothing is questionable: it leaks or it does not leak.

What is the source will lead to who is responsible.

Speculation is just for the BIRDS!!! Facts only count.

AdC

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what was the cause of the leak and what leaked?
Pg

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supposedly that was it. a neighbor who was home notified the super repeatedly of a bad smell. no action was taken util stains appeared in the apt below . the sponsor's managing agent hored a mold inspector but the cop, as far as i know, got hte 3k bill.

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The source of the leak must first be identified. At this time, the responsible party is named.
If it is a faulty drain in the tub, then it is in the wall and a coop repair and expence.
nevertheless, I reccomend emediate testing and remediation, let the billing be sortted later.
Unfortunately, the private property damage will have to picked up by insurance and not the responsible party, unless they want to make a civil case out of it and atempt to collect through other means... in which case neglegence may have to be proved.

~AR

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Budget Time - Gabrielle Sep 26, 2007


As we begin to talk about our budget we realize a maintenance increase is likely as past boards have not done so. Without crunching our numbers yet we have thrown around the likelihood of minimal increases that are in line with inflation over the next few years. Do your boards consider this at all? That is minimal routine maintenance increase just to keep pace with rising costs which seem much higher for cooperatives than for the average individual purchaser of, for example, consumer goods.

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You don't want to have too frequent increases. Increasing maintenance annually is pretty frequent. Combine larger maintenance increases every two or three years, with assessments if necessary to fill in the gaps.

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A good idea is to budget for building maintenance that is usually deferred. Example: a building just undergone a 180K renovation of the facade and other areas. This particular building as a 45 unit, 6 story building. I recommended budgeting in 30K per year for capital items such as these. Now every 5-6 years, they perform the work needed in any area and have the money put aside for it. They do not have to assess, or borrow to pay for these items.
inflation should ALWAYS be put into the budget, I usually add 6% across the board. budgeting in the added 30K per year (obviously, this amount will vary for different buildings), it will allow me to float the budget through an average of 2 years before having to reraise maintenance.
If you find yourself in a jam, you can always place a fuel cost assessment for the winter months to make up a shortfall.
- just a few ideas

~AR

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We increase maintenance every year. After all our corporation’s expenses increase every year: salaries (we are self managed), insurance, services, consumables, fuel, repairs (e.g.: the building is aging), etc.

In this way, the residents are conditioned from the admissions committee interview to expect an increase every year. Thus, there is virtually no quibbling at the shareholders’ meeting.

Further, by increasing every year, we avoid the shock of the double digit increase.

For the record, through good and bad times, over the twenty-five year life of the coop, the maintenance increases have averaged 3.9%. Guess what? That’s the US inflation rate.

By having a cash reserve, not the capital reserve, we can take care of the swing up in one year and the swing down in the next year, thus we do not panic and increase maintenance 7% one year and 2% the next year. Our swings are more like 3.5% to 4.1%.

Further, very early in the life of the coop, we imposed an assessment every year that started at 25 cents a share and rose 25 cents a year cents and is now nearing $12 a share. Seems large, but it stopped at $6 a share and then when we paid off the mortgage two years ago, we did not decrease maintenance costs and just flowed the former revenues destined for mortgage retirement into the capital reserves.

Again, from the admissions committee interview residents expect an assessment every year. Thus, once again, there is no quibbling at the shareholders’ meeting.

We now garner about $900,000 a year for capital improvements. Our AICPA dictated capital improvement schedule shows that over the next fifteen years, we will need to face $15,000,000 in capital improvements at current costs. Yes, it looks like a shortfall with inflation and such, but through diligent maintenance we can push out some costs.

Of equal importance, we have not shirked our capital improvements as the building infrastructure ages. This year, we expended $250,000 to replace our central AC chiller plant. Last year, we repaved our driveways and outside.

The year before, we rebuilt our lobby, refurbished our indoor parking decks and built a new mail room – $1,200,000 for all.

The year before that, we overhauled our elevator system and put in a very large generator (we had a small generator for the fire pump) -- $1,300,000.

And over the last six years, we have replaced windows and terrace doors at the rate of about 10% a year and now we are nearing 55% completion.

In all, we have expended $15,000,000 for capital improvements since the building became a coop. Not all are documented here.

Along the way we have repointed sections of our brickwork each year (ongoing) and about six years ago we refurbished all our terraces (80%) of the units have terraces. And, we have upgraded all our heating and cooling systems to automated controls.

At the same time, we retired the original mortgage without ever refinancing.

Next year we have a new roof planned and replacement of our hot water boilers.

Hope this provides some ideas.





.

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Sounds like you guys are doing a great job in self managing

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Ted;

Can you explain being self managed and all that it entails. We are very unhappy with the service our coop has gotten from, so called, professional management companies.

Perhaps a separate posting might help others who are interested in this topic.

Thanks.

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We have a building manager, an office administrator and an accountant / bookkeeper. These folks do not live on premises. Our two superintendents live on premises.

We have three senior maintenance staff and a number of porters. Maintenance personnel are on site 7 AM to 6 PM. Porters are on site 7 AM to about 9 PM. Our maintenance and porter staff personnel are all employees. We have 24x7 doormen (multiple on some shifts) on our staff and they are all employees.

Our maintenance staff performs small repairs (not requiring a license) in a resident’s apartment, e.g.: drain trap beneath a sink, sink washer replacement, shower washer replacement, door bell repairs, flushing mechanism repair, fans in the AC/heating units, window mechanism repair, etc. Of note is that the first thirty minutes of maintenance support, exclusive of parts, is free. And the staff cleans the under window AC/heating units and replaces filters each year.

The maintenance staff cleans our sidewalks and grounds, power cleans (riding machine) our garage decks, shampoos hallway carpets on each floor each month, cleans laundry rooms, picks up recyclables on each floor several times a day (no way to install a chute, among other things.

Residents will sometimes have maintenance person come to their apartment to change a light bulb.

= = = = = = = = =

On site, we have a valet cleaners, a bicycle storage room, a health club, a community room, an indoor children's playground, an outdoor pool, outdoor tennis courts (with lighting), basketball court (with lighting), an outdoor children's playground. During the summer, the pool staff fills, lights and then cleans charcoal grills, located within the pool area, for the residents.

= = = = = = = = =
All below are contracted:

Our security (contracted firm), 24x7, staff is in our upper garage (we don’t have access control), and our lower garage (again no access control) as the lower garage is also employed for visitors. Even if we had access control, we would have a security staff presence.

We have a rear lobby and the security staff watches our CCTV system and assists with food and truck deliveries and contractor access control, e.g.: no out of hours deliveries, no contractors except those pre-registered with the office (e.g.: insurance and credentials). Contractors, except cable TV and telephone are restricted to Monday to Friday, 9 AM to 5 PM; and the rule is enforced as every contractor has a badge issued by our security staff. Truck deliveries have the same restrictions except deliveries are permitted Saturday, 9 AM to 1 PM. The security staff does a late evening sweep of the floors to check for hazards, trash, etc. Security also walks the garage areas looking for autos with lights on, flats, oil leaks, fuel leaks, etc. Oh, contractors are not permitted access the day before certain religious holidays, e.g.: Christmas, Rosh Shoshanna, etc. And yes, the restrictions are enforced.

We have a house counsel (retainer) for most legal affairs, e.g.: closings, letters, town notices, notice to vendors/contractors, etc. We have an outside counsel for major items, e.g.: any litigation (rare, but necessary), and we hire “specialist” counsels as needed, e.g.: tax law, labor, etc.

We have an engineering firm that handles our every other year capital improvement / replacement AICPA redquired schedule for our annual report. The firm also assists with RFP’s and performs the quality assurance when we have major work in progress, e.g.: parking deck repairs, roof replacement, window replacement, recreation deck overhaul, etc.

We have a contracted elevator consulting firm that checks the safety and maintenance quality of our elevator system. This firm monitors our elevator repair service firm’s work. The consulting firm wrote the RFP for our major overhaul several years ago and assisted in the entire process.

= = = = = = = = =
We have renewable contracts with:
• a quality (and large) public accounting firm,
• an HVAC / boiler / mechanical engineering firm,
• an outside landscaping firm and an inside landscaping firm, e.g.; lobby, and holiday decorations, Halloween, Thanksgiving, Easter, Christmas,
• a snow removal firm, if we need assistance, e.g.: heavy snow,
• a fire and safety system firm,
• a pool service and staffing firm,
• a boiler water treatment firm,
• a generator service firm and a generator fuel delivery firm,
• a laundry room firm (21 floors, with a laundry room on each: two washers, three dryers),
• an AC firm for the standalone AC units that we have,
• an elevator maintenance firm,
• a LAN and PC support firm.

We hire and contract, as needed, with a plumbing firm, a painting firm, a carpentry firm, an outside electrical firm, a paving firm for spot repairs and striping, a tennis court maintenance and striping firm, an environmental firm (filing with the state), a marble maintenance firm, a brass maintenance firm, a pest control firm (free to any resident, but no real problems), a compactor maintenance firm, a secure paper and files shredding and disposal firm, etc.

= = = = = = = =

Without fear of contradiction, we are the lowest cost coop in the area and perhaps NJ region, considering all costs (maintenance with taxes, parking, assessment), and we are considered an upscale “luxury” residence. Our annual cost for a large two bedroom with terrace is about $13,700 or about $1,142 a month. As all residents have gas stoves/ovens, the cooking gas is “baked” into the monthly maintenance because we do not have gas sub-metering.

Oh, did I mention that the HVAC and the heating system are a central plant and the costs are included (electrical or gas, as appropriate by season) in the monthly maintenance displayed above (no PTAC units). Thus the resident only need pay to operate the electric fans in the under window units. As with other coops, share count is employed to allocate all costs, taxes, assessment, etc. So on top of the monthly maintenance, a typical resident personally pays another $50 a month for in-unit electrical service for lighting and for AC/heating fan operation– depending on season.

= = = = = = = =

But why self managed? The board, a number of years ago, deduced that coop or condos seek to acquire the least expensive management contracts. With the low cost contracts there is typically a novice building manager. Please accept my apology if this offends anyone, but many management firms provide what the coop/condo wishes to pay. In addition, with the high turnover in board members in many coops, the life of a management firm is typically short lived as each new board appears to have a penchant to replace the management firm as the first agenda item in identifying any ills.

By being self managed, we control our destiny; we set standards; we have continuity; we reward for performance.

And, our staff, management office (three), superintendents (two), doormen, maintenance, porters, etc, have been with us for a considerable period of time.

Our management office is open from 9 AM to Noon and 2 PM to 5 PM. The exceptions are certain half days before major holidays. Residents may only conduct business during the posted hours.

Likewise, our contracted firms have been with us for a long time.

And, we have many safety checks. For instance, the president is not authorized to sign checks and the president does not sign contracts – the secretary signs contracts. Two board members must sign every check. The management staff is not permitted to sign any checks.

We avoid all credit cards use for bills, with only minor exceptions, e.g.: stationery supply firm. Our staff is not permitted to partake of restaurant meals, sporting events, etc. sponsored by any vendor or firm with which we do business or may do business. Some firms will sometimes provide pastries, coffee rolls, etc. for the office staff. As a matter of fact, one vendor bakes his own pies and brings to the staff once or twice a year.

We pay all bills twice a month. The “big” run is at the beginning of the month for all bills received by the 25th of the preceding month. Then, we do a late month run (minor) for some stragglers or must pay transactions.

We have a seven figure line of credit which we may employ in advance of assessment revenue collections, but always repay by year end. Most often we have $500,000 to $1,000,000 in capital reserves.

= = = = = = = =

Of the 500 units (studio, one, two and three bedroom), only about a dozen are still owned by the sponsor (protected seniors) as we negotiated with the sponsor to divest all non-protected units.

= = = = = = = =






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Every Friday our building manager sends all board members and our counsel a recap of the week’s activities and events. Included are all letters from residents and all letters to residents. The monthly trial balance and income and expense statements are included as available; likewise the list of arrears is provided. Results of inspections are noted. Board members may also provide items for fellow board members.

Of note is that the board members do not charge dinners to the coop corporation. Yes, we meet, four board meetings a year and about four to eight workshops for board members. But, if we go out to the dinner, it is either share the bill or one board member picks up the tab, not the coop.

Yes, there are occasional working lunches and well have sandwiches brought to the board room. Similarly, for a workshop, we may have sandwiches provided.

= = = = = = = = = =

Across the years we have made many large scale capital improvements, but we have also made improvements not too evident to the residents. We do not wish to store our compacted trash outside and invite vermin. So we have chilled our compactor room and our trash storage room to reduce the heat of the trash and thereby reduce the generation of odors.

We replaced our aircraft warning lights (we are a high rise) with LED devices so that we need not send someone to the roof every few weeks to check on the bulbs and then have someone replace the bulbs. The LEDs last ten years – yes more expensive but there’s a cost benefit.

Our larger generator now supports emergency lighting in our emergency stairwells ands in our parking garage, as well as some lights in every hallway.

We replaced our original fresh water pumps that raise water to our roof top storage tanks with high quality vertical pumps from Norway or Sweden. We went with the best ands slightly oversized them to avoid future maintenance and replacement woes.

We added lighting to some dimly lit areas outside the perimeter of the building.

When we rebuilt our mailroom, we added parcel lockers for the convenience of the residents. I tried to have the postal service do home delivery, and I was even going to buy the postman an electric cart to deliver to each door, but I was turned down by the postal service.

We have had our roof infra red scanned, which is why we know we need to replace the roof next year.

For many years, we already used fluorescent bulbs (as replacements for incandescent bulbs) throughout the building. Now we have equipped many areas, save hallways, with motion detectors.

= = = = = =

As I think of more, I’ll add to the narrative.

Also see:

500 unit coop in NJ and committees +














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At Halloween, the office provides orange 8-1/2” x 11” sheets of paper imprinted with a pumpkin. As only children of residents may go door-to-door, a resident who wishes to participate pastes the pumpkin on the door.

Following a funeral for a Jewish family, the doormen provide table with water and towels for purification.

We only permit the volunteer fire department to go door to door for their annual appeal. A letter is posted in all elevator lobbies notifying residents. No other in house solicitation is permitted, not even by a resident.

Annually, we do permit the voter registration folks to sit at a table we provide in our lobby to remind residents to register.

The postal service is permitted to collect food in its annual drive in our mailroom.

The local police do an annual Christmas toy drive and the residents leave gifts beneath our lobby trees for collection by the police department.


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We have 500 units and about 600 indoor parking spaces, and another 100 outside parking spaces.

But, in this day and age of multiple vehicles per family, there is never enough spaces. So we have waiting lists for upper garage, lower garage and outside parking. Folks, can stay on the lists, even though they have other spots. Thus, someone with an outside spot can stay on the list for the upper or lower garage. Someone, with a lower garage spot can still stay on the upper garage list.

Of importance is that the board members never (correct, never) permitted access to the lists and thus cannot influence the order of the list. As a matter of fact, board members are reminded they are not to attempt to influence the lists. The rules have been established and the building manager has total responsibility.

We have 225 storage cages (e.g.: dog kennel size) and the waiting list is similarly anonymous to board members and managed by the building manager.

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Re: Construction hours - BW Sep 26, 2007


Thanks for all of your input. Our board changed our hours from Mon-Sat 8am-5pm to Mon-Fri 9am-5pm and Sat 10am-5pm. We also revised the holidays that we disallow construction.

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windowless bathroom - sally Sep 23, 2007


prewar building. windowless bathroom with air vent shaft that runs up a few floors until it ends where the apt layouts change. used to be a big metal duct running to a window on the upper-most apt but they removed it (secretly) when renovation work was done a few years ago. we now have no actual air ventiation to the roof. the question is: how can we get the resident sof the apt that did the renovation to replace the vent that is supposed to be there. the coop board will turn a blind eye. should we get a bldgs inspector?

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A review of the building code is required to find out if the building is today in violation of the code. For bathrooms and kitchens without windows, an exhaust system with mechanical ventilation is usually in order.

The existence of a prior air exhaust system, i.e., metal duct ending up in a window opening, is probably a sign that a code existed then when the buidling went up in the 20s.

Therefore, prior alterations of the apartments show that there was no regard for the code and that the building is in violation.

Obviously, it's up to the board to address the issue with an engineering company and those residents who bought or live in apartments with reconfigured facilities without exhaust.

AdC

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i believe the apt above removed the ducts inside the apt. how can e get them to replace them even if it was the owner before them? will draign be at teh buidings dept?

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This is where board should know when to put its foot down in a major renovation, when to demand the review of an engineer, when to demand a building permit, etc. to ensure that there are no violations of any nature and all units comply with the "warranty of habitability".

In your specific case, the board as the representative of the corporation who owns the property and is considered by government as "the ultimate landlord" may have to deal with the best way to cure the problem caused by the lack of fiduciary duty of another board or owner.

Thus, as bitter and difficult the situation is, the current board needs to address the issue.

In a case like this, I will involve the attorney of the corporation from day #1 to ensure taht all parties understand the issues. I would also involve an engineer study other alternatives that you may not be able to know,i.e., building an outside shaft, etc.

Your duty is now to attend to the violation if there is any according to the engineer base on the existing building code as the interior of the building has been modified.

AdC

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very tricky with boRD. I am almost sure the work was done illegaly wihtout board approval. there was a staff member who may have been involved. anyhow i put up a tissue ot the vent and it is getting positive air flow which should nto be happening. am thinking of simply calling 311 and letteing the buildings dept take it from there.

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If you are a board member or even a shareholder, then you should not turn your own building into the building department. You should discuss the issue with the board and take it as an opportunity to demonstrate your problem solving capabilities.

If you are only a shareholder, your position is to write a letter to the board state the facts and make them understand that it is for the good of the building and shareholders.

AdC

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they are genreally either in denial or illinformed by such parties as the MA. and, judging from previous experience, will not act on this effectively. especailly if it is not backed up from a more offical and knowing source like a city engineer. i believe it is a code violation. also it is problematic as the shareholders with the area of prior venitng will have to construct something in their apt to restore the previos ventiation. who pays for that?

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We had this problem in our building. Board members allowing illegal renovations:

Calling 311 will get thier attention, and unfortunately is often the only way to deal with boards who dont follow the rules. When you call you dont have to give your name, and you can track the action being taken on the Internet.

Make sure that you put everything in writing and save ALL Emails. Email EVERYONE, (other SH, MM, and board) everytime. The Email trail is a bad M.Agents and untrustworthy boards worst nightmare.

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Commercial Tenant - Allan White Sep 23, 2007


We are a new board of a 90 unit building with not much experience and are facing a situation where a commercial tenants lease will expire in two years.

Some of the board would like to find a new tenant as the current one is not ideal while some of the board might be inclined to renew the lease.

How does this process work? And who are the participants? Would our management company be involved?

Any advice here is helpful.

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First off, the cooperative owns the building; you have the right to choose whatever commercial tenant is best for the cooperative, regardless of the length of time your current tenant has been there.

It might be helpful to review with your managing agent or with a local realtor the rates for commercial leases in your neighborhood to ensure you are receiving market rates.

A realtor might also be helpful in discovering whether other commercial tenants might be available for your space, or others are looking for space in your area.

Your board needs to decide the optimal commercial tenant -- food-based tenants, for example, entail increased pest abatement, whereas a retail space might entail increased pedestrian activity. You state that your current tenant "is not ideal," but don't specify why; what IS your ideal?

Don't forget the 80/20 rule for "bad" income....

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2 questions...
may sound like a silly question, but have to ask....if it is a cooperative, i am going to assume the sponsor still owns the commercial? a separate investor? or does the cooperative corporation actually own the space according the the offering plan? (your collecting rent or maitenance?)

and; would raising rent effect your 80/20?

~AR

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sponsor rep ethics? - Derek Woods Sep 22, 2007


I hope i can make a messy situation clear. I'm on the board of a building has 5 former sponsor units (rent controlled with tenants) that the owners defaulted on back in the early 90's. The sponsor representitive had 3 buyers lined up over the past year to purchase them. When the board took them off the table, because 1 of the owners passed away, It was revealed that management never did a proper foreclosure of the units, and ALL of the previous owners suddenly resurfaced, and laid claims (through lawyers) on all of the apartments. they all want to pay arrears and get them back after 15+ years. Our lawyers says that we have no real options. Any thoughts appreciated?

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you say "all of the previous owners" i thought they are sponsor units? one owner?
was it a single action that was botched? or several? this was done 15 years ago? what about the other transfers? wasn't there title insurance? a lot of avenues and variables to be considered.

I am not an atty, and this requires the advice and council of your hired atty; however, I would assume there to be a statute of limitations. if not, there are H.T.O. laws that permit ownership to certain parties after so many years (I think NY is 15 years), providing certain conditions are met.

nevertheless, the management may not be responsible, but the atty and other professionals who performed the foreclosure.

~AR

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Find a really good real estate lawyer! It will be worth the cost. As the other poster here points out, there's probably a statute of limitations or if not some other way to keep control.

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Board Approval Required? - Anonymous Sep 20, 2007


I had my kitchen countertop and sink replaced at existing location. Did these things required board approval? Some of the board members are "up in arms" that I did not seek board approval. I live in a coop. I thought anything done behind the walls require board approval and anything visible do not (for example: changing a rusted out drain pipe (no approval req'd) vs rerouting pipe elsewhere in my unit (approval req'd). They want to fine me, but fines are nowhere stated in the proprietary lease nor amendments. Plus, wouldn't implementation required shareholder votes? Thanks.

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Search for Fines and Fees in other postings for answers to this part of the question.

Re Improvements:

Your improvements is a rather simple one. However, if someone else is doing it for you, you should at least protect yourself and others by demanding certificates of commercial liability insurance in your name and the co-op's name. Similarly, you should ask for proof of worker's compensation insurance. If one is not available, then you should have some sort of release in case of injury.

A simple form for this type of improvement should be in order. Remember, a sink and counter requires disconnecting faucets and water. If the person breaks your shut off valve, water may end up in the unit below. This is where mysterious waters and leaks appear and the co-op may be wasting tons of time trying to find out what the problem on hand was.

This is why COMMUNICATIONS (which is something shareholders demand from board) become essential on both sides of the fence.

AdC

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We do not typically require prior approval by the board for most alterations.

In all cases, without fail, only licensed contractors or vendors are permitted as evidenced by the presentation of suitable license and insurance documents.

However, if the alteration structurally affects the unit, e.g.: removal or relocation of walls, then we will require board approval after an engineer reviews and indicates there are no structural issues.

Rebuilding a kitchen, e.g.: new cabinets, counter tops, appliances, flooring, lighting, does not fall within this “alteration” category.

Likewise rebuilding a bathroom, e.g.: new shower, commode, sink, bathtub, tiling, single faucet shower control, lighting, etc. does not fall within this category.

If a unit owner wishes to add additional power receptacles in the apartment within the power supply limits, e.g.: total amperage available, of the apartment, board approval is not a requirement.

If a unit owner wishes to replace or modify the co-op owned parquet floor, then the building will require the owner to sign an agreement wherein the owner (and any subsequent owners) take responsibility for the floors should there be any damage. This means, if there is a water leak necessitating replacement of the parquet floor, the usual scenario is the co-op calls in a repair service to replace the warped parquet floors. In the case where the owner has modified the floor (e.g.; pickled finish), the owner takes the responsibility to obtain repairs to then be reimbursed by the building’s insurance carrier.

Any alterations or modifications require a building permit from the local government.

Owners are not permitted to replace the entry door to the unit.

Owners are not permitted to replace the unit’s glass sliding terrace door with a “French” door system.


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Ted,

Do you have a mechanism (i.e., form or otherwise) in which the shareholder informs the board or management about the presence of a contractor and provides the policies and licenses expected? Does the contractor need to register with your superintendent to know that they are in the building, pad elevators when bringing supplies, etc.?

Although I do not necessarily call "approval" as such, I think you have some type of procedure in place to ensure that the building is protected from damages to hallways, etc.

Would you please comment a bit further?

AdC



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We have a situation whereby as a small building, we have never had a formal procedure in place even for kitchen/bath improvements but your co-ops' requirements of asking for proof of licenses, insurance etc. is something we have had an informal "honor" system for. Many have passed through our building without showing proof of insurance docs to our Board and management. Now we have a new managing agent and a new board and we are trying to enact what you outline in your posting. One of the long time shareholders is balking at having to be the first "test rat" for this good practice. In fact he has refused to submit proof of insurance etc. If no one will be the first to obey these procedures, what can we do? Our management suggest sending a lawyer's letter but this shareholder can easily outspend us. Any suggestions?

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I presume your board has incorporated these rules formally into your House Rules? If so, they become an extension of the proprietary lease.

It's a fairly straightforward case that a shareholder ignoring House Rules is violating the PL, and PL violations are grounds for eviction.

A strong letter from your managing agent or coop attorney could be a good second step....

but a frank discussion with the longtime shareholder should be your first. He might respond to an anecdote from our co-op: a renovation done before rules were set in place came back to haunt us, six years later, when we discovered structural changes had been made that the board hadn't authorized... and which had impacted an entire line negatively. The costs for curing the defect could have run into thousands, had we not gotten very, very lucky with building design.

Alteration rules are emplaced for a very good reason. And I'll bet that your shareholder, if approached calmly and logically, will understand that rules like these are in the co-op's best interests, and therefore in its investors' best interests.

Perhaps your managing agent could even offer to expedite this first "test case" - help with any paperwork, filings, etc., as a sign of good faith and appreciation for being the first?

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Tell a SH - or not? - BP Sep 19, 2007


One of our SHs bought his apt from the sponsor a year ago, so we never saw his sale pkg or financial info. He wants to re-fi his mortgage + get a LOC. All we got is a letter verifying his annual income. We got a credit report and he owes A LOT (I mean, A LOT) on another mortgage, loans etc. It looks like he keeps getting loans to pay down loans and is overextending himself. He's self-employed for 2 yrs. '06 Income was good, almost double of '05, but self-employed people know income can vary widely from yr to yr. The board decided to not approve his re-fi/LOC request.

Three BMs want to tell him why we didn't approve him bec he's "already a SH and entitled to know." The others don't want to give him reasons, as you don't for rejecting a sale or sublet. They say BM's statements will conflict, the SH will misinterpret things, we'll get pulled into disclosing details and too much discussion, etc.

Anyone denied a re-fi for a SH? Should we tell him the reasons for denial or not?

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How is the process of admissions dealt with in your co-op? Attorney or manager as transfer agent?

(1) What is the reason for the re-fi... more debt, lower interest, fixed interest v. variable or other exotic type of re-fi, new auto, a wedding, vacations, etc.

The problem is knowing WHY prior to denying.

Your SH may be lowering his interest rate or obtaining a fixed interest mortgage on the shares, which will have a good benefit for his finances. In any case verify his documentation.

(2) If max'ed out, you may say NO to acquiring more debt, using it to get married or vacations.

AdC



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To answer your questions -

First, admissions/sale packages go thru the managing agent.

Second, the SH says the re-fi is "to lower monthly costs." But it's the same interest rate and monthly payment would be only $50 less. He also wants a LOC "for emergencies" with a monthly payment of $600-700.

He has a lot of other debt (per the credit report) and the only financial info he gave us is his gross income amount. The board already decided to deny his re-fi and LOC. The dispute is: a) should the managing agent's letter just say his request is denied or give the reasons? and b) should BMs be allowed to discuss the reasons with him if the letter doesn't give them and he wants a verbal explanation?

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I agree with AR and the fact that BM's should never discuss anything with shareholders.

My statement is always the same when we turn down a potential buyer and if the shareholder calls me directly: Discuss this issue with the co-op counsel who is our transfer agent. The counsel knows how to discuss the issues without putting the BM's in a bind.

Unfortunately, humans have feelings and memories; in some cases, if the person does not get his/her way, may become vindictive. This is WHY you want to avoid involving BM's into discussing all kinds of "bad news" or "corrective action."

I personally think that shareholders forget that BM's are residents of the building and neighbors in the same communicty. As such, BM's are entitled to ENJOY their apartments. The function they do for the co-op as BMs do not make them targets of questions from individual shareholders or ATTITUDES.

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Have the managing agent, never a BM, inform the SH in writing. I would write something on the following order...

Dear XXX:

After careful review and consideration of your refinance application, and the particulars relating to your specific refinance request, the following final determination has been made:

A refinance is permitted providing that no additional debt is incurred, or reserved in the process. The loan to debt ratio shall not increase by principle, or in interest. The total debt service payment amount must be equal to, or lower than the present payment.

Kindly understand that all determinations are final.
Thank you for submitting your application.

Sincerely
XXXX
Managing Agent

the BM should never place themselves in the line of fire, at any time. that is one of the resons you pay a monthly fee to the management co.


~AR

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Let professionals be the people who handle all sorts of notifications with shareholders. The board should only be able to review the application and make the determination.

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A similar situation once came up in our co-op. We asked our attorney for advice. He told us that the co-op has no risk in the HELOC, only the bank(s). So there's no reason to deny it.

If the shareholder is going to go broke, he'll do it with or without your help. Perhaps that wouldn't be so bad for your co-op because a bank will foreclose, getting rid of a shareholder who probably won't be able to pay his maintenance in a few years. Which will lead to foreclosure at that time.

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Except that...it seems to me that if the bank forecloses, there's a good chance that the apartment will be sold off quickly and for a below-market price, which would not be a good situation for the co-op. The only winner in a foreclosure scenario imho is a lucky buyer who gets a good deal.

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It's true that the apt could be sold off quickly, such as at an auction, at a below-market price. I see your point there. It's also possible that the bank will choose to sell the apt through a broker, with open houses and all the trimmings, in hopes of making more profit. Of course, it's hard to say which direction they'll go.

The bottom line, however, is granting or denying the shareholder's HELOC. I'm no financial expert by any means, but I would expect that even if the board says no, the shareholder will find another way to borrow the money. And incur the shareholder's wrath toward the board.

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You have read the problems in which many banks find themselves today for easy credit. The corporation needs to ensure that your shareholders have the means to cover, not only their maintenance but any other charges passed to shareholders as additional rent (asssessments) and eventually maintenance increases.

I think it is rather sad to see shareholders fail in a co-op. Also, is rather wearing for a board to deal with chronic late payers, letters by attorneys and half-recovered late fees and attorney fees. Our co-op had two of these chronic late payers that only paid at the doors of foreclosure. It was a "no win" situation for the co-op.

A co-op basically depends on the maintenances and additional rents (assessments) of its shareholders. If you were to spend half of your time trying to collect from 10 - 20% of your shareholder, I'm sure you will be going out of your mind and you will be rather late yourself in paying your vendors.

So... as difficult as it may be to tell people they don't have the minimum dough, DO IT for the sake of the co-op if you are sufficiently convinced that the person is not able to make it.

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