Has the MA started a legal action? Is the MA still representing your co-op? How were the wrongdoing accusations raised? In a public forum? What is the extent of the damage?...Have you discussesd the problem with your co-op counsel?

AdC

Just an FYI re defamation of character....Libel is written. Slander is verbal. Call your attorney today.

It consists of several public open forum statements accusing the current Managing Agent of wrongdoing which appears to be heading toward his termination. No legal action has been filed, but there is concern that the coop could now be drawn into a libel suit.

if you have facts and evidence of wrongdoing you will be OK.

There's an archived article on this topic. The board member who cannot prove their claim could be sued and then drag your coop into the lawsuit. You should look into your coverage.


June 4, 2000
YOUR HOME; Liability And Boards Of Co-ops
By JAY ROMANO

ON April 11, the New York Court of Appeals, the state's highest court, addressed the issue of whether corporations, including co-op housing corporations, can be required to pay punitive damages assessed against their board members. The court's answer -- a qualified no -- has been unsettling for co-op corporations and their board members.

''I think a lot of people are nervous about this decision,'' said Richard Siegler, a Manhattan co-op lawyer. ''It's going to make people more hesitant to serve on co-op boards, and it will make those who do serve more reticent about making decisions that could be controversial.''

The case in which the court ruled, Biondi v. Beekman Hill House Apartment Corporation, was the final chapter in a legal case that began in 1995.

At that time, a shareholder in the apartment corporation, a co-op at 425 East 51st Street, sought permission to sublease her apartment to Gregory and Shannon Broome. When the board denied the request, the Broomes filed suit under the federal Fair Housing Act and other antidiscrimination laws, charging that the denial was based upon Mr. Broome's race. He is black; his wife is white.

After a jury found in favor of the Broomes, the couple was awarded a total of $640,000 in damages. Of that amount, Nicholas A. Biondi, the president of the board, was ordered to pay $230,000 in compensatory damages and $125,000 in punitive damages. After subsequent settlement conferences, the compensatory damages ended up being paid by the co-op's insurance carrier while Mr. Biondi remained personally liable for $124,000 in punitive damages.

Mr. Biondi then filed a lawsuit against Beekman Hill House seeking indemnification, a form of reimbursement, for that amount. The basis of his claim was a clause in the co-op's bylaws that required the corporation to indemnify board members for any ''judgments, fines, amounts paid in settlement and reasonable expenses'' incurred as a result of their good-faith actions on behalf of the corporation.

In 1999, after a lower court dismissed Mr. Biondi's claim, he appealed to the Court of Appeals. In April, the court affirmed the lower court's dismissal, saying that in this case, indemnification for punitive damages was prohibited by public policy.

''What the court is basically saying is that it is against public policy to reimburse an individual director for capricious, arbitrary or illegal conduct,'' Mr. Siegler said, adding that while this may seem reasonable for conduct clearly undertaken in bad faith, it becomes a bit more murky in situations in which a board member, acting in what he or she may believe to be in good faith, nevertheless crosses the line and does something for which a penalty is assessed.

And it is that uncertainty -- coupled with an increasing number of federal, state and local laws that expose board members to punitive damages, fines or other penalties -- that Mr. Siegler and other lawyers say make it harder to find volunteers to serve on co-op boards.

''I don't think people will be as willing to serve if they feel they won't be indemnified for actions taken on behalf of the corporation,'' Mr. Siegler said, adding that in addition to the potential liability board members face when dealing with federal, state and local laws against discrimination, there are also some less obvious exposures.

For example, he said, failure to comply with the city's window-guard law, the elevator-inspection law and the federal lead paint disclosure law could all subject directors to substantial fines and penalties.

Bruce A. Cholst, another Manhattan co-op lawyer, said that while current and prospective board members may understandably be concerned about the impact of the Court of Appeals decision in the Biondi case, there are subtleties contained in it that could still make it possible for co-ops to reimburse board members for punitive damages under certain circumstances.

''The Court of Appeals held that public policy prohibits boards from indemnifying directors for punitive damages imposed for acts of bad faith,'' Mr. Cholst said. ''But what is significant about this decision is the court's definition of the term 'acts of bad faith.' '' The court, Mr. Cholst said, defined ''bad faith'' as the absence of a ''reasonable belief'' by board members that their conduct served ''the best interests of the corporation.'' In other words, he said, it is still possible for a board member to be reimbursed for punitive damages if he can adequately demonstrate that he was acting in good faith for the benefit of the co-op.

Accordingly, he said, punitive-damage awards, fines or penalties arising from errors of judgment -- following another person's misguided advice, for example -- can probably be reimbursed if a board member can establish that he was acting in the best interests of the co-op.

''The first precaution that should be taken by boards concerned about this issue is to review their bylaws to make sure that all existing loopholes are adequately plugged,'' Mr. Cholst said, adding that if the bylaws do not permit reimbursement for ''judgments, fines, amounts paid in settlement and reasonable expenses,'' they can be amended to do so. In addition, he said, the bylaws can also include a provision permitting reimbursement of legal costs before a final decision in the case.

''If they don't,'' he said, ''then board members who are individually sued are required to pay their own defense costs upfront and then seek reimbursement from the co-op only after the proceeding has been concluded in their favor.''

The bylaws should also contain a provision, Mr. Cholst said, that protects board members from liability to shareholders for anything they might do in good faith on the corporation's behalf.

Finally, Mr. Cholst said, if a board is particularly uncomfortable about the potential for having to pay punitive damages, it should talk to its insurance broker about finding coverage. While New York law bars insurance companies from selling such coverage in the state, he said, it can be obtained from ''offshore companies,'' as they are known, most of them in the Caribbean.

Martin Eveleigh, a manager at P. D. Insurance, in Tortola, British Virgin Islands, said his company offered coverage for punitive damages when they are imposed concurrently with compensatory damages, as was the case with Mr. Biondi.

''We draw a distinction between punitive damages and fines,'' Mr. Eveleigh said, explaining that insurance from his company specifically excludes fines and penalties.

He said that the maximum coverage now available is $500,000 and that the individual or company seeking coverage must also have a standard liability policy. The yearly premium for punitive-damage coverage starts at about $1,500, Mr. Eveleigh said, depending on the deductible and the amount of liability coverage.

There are, of course, some drawbacks to dealing with an offshore insurer. Donald Gabay, a Manhattan lawyer, said that New York's insurance guarantee fund, which protects policyholders if an insurer goes bankrupt, would not apply here. In addition, he said, offshore companies may operate with less regulatory oversight.

Arthur I. Weinstein, a Manhattan lawyer and the vice president of the Council of New York Cooperatives and Condominiums, said that if a co-op determined that punitive-damage coverage from an offshore company was ''affordable and enforceable,'' the board should consider it.

''It is always in the best interest of the co-op to get the maximum amount of insurance it can reasonably afford for its directors,'' he said. ''How else are you going to get good people to serve?''

* Copyright 2006 The New York Times Company

I asume from your posting that you have a sponsor or investor.

If you have one and it has not said a word about past assessments,in fact, it has paid for the assessments without giving you problems, then you should not worry. The sponsor has given its blessings.

re: "issued shares" - I believe that a sponsor has no say in the matter (yay or nay) . it merely seems to be a rul that , as long as he has shares, there may be no assessment over 15k.

2) can you define what is meant by "issued share"?

Last night I checked my proprietary lease and ours is more generous. It limits the sponsors position to only 28%.

In other words, if the sponsor in the builidng has equal or more than 28% of the shares, our board needs to request authorization of individual shareholders (issued shares)v. sponsor (unassinged shares). Luckily, we passed this number and the board is now free to assess without consulting first the sponsor for its blessings.

This measure protects the sponsor from high cash demands by the co-op that it did not plan for during a given fiscal year. So, a board needs to first count with the sponsor's blessings because the sponsor may block the assessment by voting against it and by speaking out at the special meeting. As you probably know well, if there is a vote on an assessment, there are individual shareholders that will oppose it and you will end up borrowing from your reserves to patch your operating budget.

As I said previously, if your sponsor has gone along with the assessment without invoking its powers, it has given its blessings. However, if you prepare to raise a large reserve through assessment, make sure you explain it to the sponsor the reasons so that it sees your point. Since you are usually communicating with a management representative of the sponsor, then give sufficient time for such a plan so that the management representative may convey it to the owner.

AdC

you will see that it says all shares. approval of ALL shares.

No need to re-read, but here I go again!

If you are technical about it, it was not illegal that you did not try to obtain a vote from your shareholders. It only meant that you should first count with the sponsor to make sure that it is in posiiton to provide your support or not. If not, then, you need to look for the support of the rest of the shareholders.

In your case, the sposnor is in control even if it owns one apartment or one share to sour your proposed assessment. If you wish to assess, you need its blessings. This is why, äs long as it owns a share, an assessement requires the vote of the shareholders." However, if you remove the shareholder, i.e., it does not say a hoot or it has sold or its assets, the assessment is valid.


You may argue that this is not what the language suggest. True... if you have not encountered oppositions, then it means all the shareholders have given their blessings as well. Otherwise, they could say, well! what about the sponsor...it owns shares; is it happy about the assessment?

Recommendations: now that you know what to assess means in your builidng, then you should look for an amemndment of your proprietary lease to give you more flexibility to impose assessments as needed or before you adopt one (for fear of being challenged) you should follow to the T what your proprietary lease says. Let the sponsor know what is going on and let them challenge your assessmen.

AdC

No need to re-read, but here I go again!

If you are technical about it, it was not illegal that you did not try to obtain a vote from your shareholders. It only meant that you should first count with the sponsor to make sure that it is in posiiton to provide YOU support on your assessment. If THE SPONSOR DOES not AGREE WITH YOUR PROPOSED ASESSMENT, then, you need to look for the support of the rest of the shareholders TO REMOVE THE OBJECTION.

In your case, the SPONSOR is in control OF THE DECISION TO ASESS, even if it owns one apartment or one share OF YOUR BUILDING. IT HAS THE POWER to sour your proposed assessment. This is why, äs long as THE SPONSOR owns a share, an assessement requires the vote of the shareholders." HOWEVER, IF THE SPONSOR AGREES WITH THE ASSESSMENT, YOU HAVE INDEED REMOVED THE NEED TO GO TO YOUR SHAREHOLDERS AT LARGE.

You may argue that this is not what the language suggestS. True... if you have not encountered opposition FROM YOUR SHAREHOLDERS AT LARGE, then it means all the shareholders have given their blessings as well. DON'T THEY HAVE A COPY OF THEIR BY-LAWS AND PROPRIETARY LEASE TO RAISE THE OBJECTION? What about the sponsor...it owns shares; is it happy about the assessment? WE NEED TO VOTE.

Recommendations: (1)now that you know what to assess means in your builidng, then you should look for an amemndment of your proprietary lease to give you more flexibility to impose assessments as needed or before you adopt one (for fear of being challenged) you should follow to the T what your proprietary lease says. (2) Let the sponsor know what is going on and find out if there are any obejctions to the assessment for which a general vote may be required. (3) Ask your attorney for a deeper interpretation of your proprietary lease / bylaws in regards to this clause.

AdC

So your friend's building never raises the maintenance? Or they do raise the maintenance and then assess when there's a deficit? The bottom line is, prices go up. I think it's better to budget in a surplus (i.e., raise the maint. when necessary) rather than cross your fingers and hope you won't have to assess to make up the difference.

they only assess when absolutely nesessary but they keep their eye on the maintenence like hawks. the key thing to remember is that a mntnce increase is permanent. If there is an operaitonal budget shortage for a given year, they assess over a few months to make up the difference then they remove the assessment, carefully keeping the mantaience at as reasonable and appealing a level as possible and also honoring the tempprariness of the assessment.

The cost of living rises every year. So who are we fooling? Assessments are for capital expenditures.

In view the slight of hand tricks show a complete misunderstanding of fiduciary responsibly, AICPA accounting rules, etc.

Please search this forum for other comments regarding maintenance as there are some prescient thoughts.

are you saying that our building should not be assessing for a vague reason such as "to help keep done future mntnce"? (they are doing this now to balance the annual tax abatement) - are you saying it it illegal to assess for anyting other than cap improvements?

a very respectable building does what I described - assesses when the annual operating cost does not meet budget - it does seem like a very very good strategy to keep mantainence from being raised.

creative thinking and ideas - as threating as they might seem to some (people are scare of change) is often nothing but a better idea.

It seems that you have already made up your mind on the matter and aren't open to other peoples' opinions.

How do assessments really keep down future maintenance increases? Expenses rarely stay flat from year to year. By assessing rather than increasing maintenance, you're only fooling people. You're fooling them into thinking your building is more appealing (your words), and your fooling yourself by thinking that constant assessments don't affect a potential purchaser's decision.

that is s dismissive thing to say. obviously, if they are asking this question, obvioulsy they are open to new ideas.

there are many ways to reduce maintaience such as negotiating w/ your insurance company and taking a bit of time to shop around.

in general, it seems there istrange board censosrship atitude sometimes on this discussion group everytime someone mentions new thinking about mntnce increases, essessments, etc.

MM or anonymous or whoever... You asked for peoples' opinions and you're getting them. And you're criticizing those people who aren't too thrilled at the idea of assessing rather than doing a needed maintenance increase.

Of course there are ways to reduce costs. But in the end, you get what you pay for.

PD you are jumping allover someonw wihtout making constructive suggestions.

In general, there is no guarantee operational costs will increase a year after an assessment ot fill a deficiet a board may have though of a clever way to reduce some costs, commericial income may increase, it is too general of a statement to say that "costs go up" without giving a due consideraion to this idea.

Very OT: you've now posted under 3 different names (anonymous, mm and td). If you'd keep the same identity instead of pretending to be 3 separate people, I might take you more seriously.

Back on topic, please see AdC's response above.

you are the kind of unproductive, petty person the website does not need. seriously.

we have had costs remain constant in some year and NOT go up - also you cna work on lowering them via energy effieicent utility changges, negotiating with your insurance co, etc.

This has been discussed in the past at length and the conclusion is the same as being offered here. Your maintenance has to go because of inflation. If you postpone it too long, you may find yourself raising it in larger increments down the line or with incrasing assessments every year.

Obviously, all boards look for ways to cut expenses. This is part of your fiduciary responsibility. However, cutting expenses shall not mean compromising your services to building systems and shareholders. Delayiing important services on essential systems may end up costing more. Postponing a repair may duplicate its price when it becomes an emergency. So, your "good savings" may end costing a mighty fortune.

AdC

The idea that property value decreases when the maintenance fee increases has no basis in economics.

Here's an oversimplification. Your co-op is a corporation. It sells a safe, pleasant place to live. When the corporation charges more to live in one of its apartments, residents may choose to pay it (by continuing to live there) or they may choose not to pay it (by selling and moving away).

Here's where the economics come in. When the apartment goes on the market, will the owners sell it for more or less then they would have they day before the maint increase was made public? How much will it sell for? My guess is the increased maintenance will have little to do with the selling price (I'm assuming the fee isn't, say, doubling.)

Frankly, in New York's co-op market, if your building does not have enough money to a) perform necessary maintenance, b) pay for capitol improvements, and c) cushion a comfortable reserves account, your property value will still increase -- but NOT as much as in those buildings that DO increase their maint regularly (or institute assessments) to cover inflation and to compete with all the other buildings out there that people can choose to buy into.

Skimping on maintenance is like telling your boss, "Hey, I don't need that raise, I'm just going to cut my expenses for the next few years." If you did that you would soon find yourself living a less pleasant lifestyle.

Remember, the co-op is a corporation, and YOU own part of it. If it's not financially healthy, YOU are not financially healthy. And if, like most of us, your home is your biggest financial investment, you want the co-op to be financially healthy!

Usually, a co-op applicant submits financials for the board to review. The candidates ability to afford to reside in the building is carefully evaluated.

The board also with foresight factors in reasonable increase over time and at an affordable rate to most shareholders.

My point is that, most applicants/boards approve a move to an site that is affordable.

There is nothing so terrible about living on a budget and curtailing certain luxuries if it cannot be afforded. That is sound economics and common sense. A co-op board should not expect to charge 62 & York Avenue maintenance prices if actually operating within the location and budget of a coop in the heart of the Bronx (no matter how luxurourously you promote it. I'm not berating the Bronx. I love it here. I bought my place because I could afford it. And -- I'd hate to lose my cute and cozy abode because of a luxureous fantasy housed in our board president's head. Location is important, which is why the city provides an annual property (& tax) value appraisal (which is viewable online). Sometimes less is more... if you can manage keep what you have during the hard time and celebrate during the good.

If such an apartment was placed on the market (overpriced maintenance)... it would sit for years UNSOLD! However, using this rational - let's suppose that if the coop maintenance increases to the cost at which numerous shareholders are spiraled into default-- then the increase is counterproductive to the health of the corporation. Maintenance increases must be reasonable and affordable for the majority of coop shareholders.

Agreed! Otherwise the wealthier shareholders could squeeze out the less wealthy ones. Massive selling of apartments is never a good sign in a co-op.

I hope you become the president of your co-op so that you can pass your secret formula to maintain the maintenance that may attract potential shareholders.

Admissions Committees or boards doing screening should know what takes financially to carry a unit in building. Therefore, they should screen with this consideration in mind.

Reality is a board president does not necessarily has to be "the wealthiest" of all the shareholders. The board president does not have to be on an ego trip to make the co-op the most luxurious of all the builidng on the block.

Interesting enough, when a board raises maintenance, they also need to pay maintenance; thus, board members are affected by their own decisions. There are tons of board presidents who know their shareholder population and understand the needs of the building and the financial responsibility they accepted. Consequently, the board decisions they lead are taken with the best business judgement in mind, not to evict other shareholders of their apartment for lack of payment.

Finally, when you share the secret on how to keep maintenance low, do not include ano or all of the following ideas:

1. Convice your fellow shareholders that the boiler must be kept in summer until December 15 or temperatures go down to 30 F; if temperatures rises beyond 42 F, heat will not be provided

3. Convince shareholders that they should fire the superintendent and any helpers and instead, shareholders should do rotational work to clean up, pick up the garbage, etc with their own cleaning products.

4. Convince shareholder to cancel all insurances on your builidng.

5. Convince shareholders that water should not be heated as it is deleterious to your health.

6. Convince shareholders to restrict their showers to 2 minutes a day, never flush the toilet unless extremely soiled, and unplug their gas stoves and only do takeout food with paper plates and plastic utensils.

7. Convince shareholders that they must pay for plumbing insfrastructure that breaks behind their walls and to repair the walls on their own.

8. Obtain the cheapest elevator maintenance contract or do without one. Use the stairways unless you are handicapped.

Good luck!

AdC

These postings are not worthy of you. They are bitter and sarcastic and unhelpful. I agree that maintaience should not be raised unless things are dire as such raises are permanent. Yes, costs rise BUT there are many things a buiding can do to trim costs.

1) Negotiate your insurance policy. Do comparative and full research first.
2) Reduce ulility costs. Get a free audit form NYSERDA.
3) Do not increase fees to management despite their requests for a riae. Just don't do it. Examine all charges such and messenger costs, long distance phone etc. What are monthly costs that are questionable? Even small ones can add up.
etc.

A few more ways to keep maintenance down and cut costs:

I accidentally hit the "send" key too soon, sorry. More ways to keep maintenance down...

FIRST - Find ways to save money:

1) Read monthly reports and question costs for messengers, paper/stationery, postage, supplies and "miscellaneous". A lot of excess gets buried under "miscellaneous".

2) Turn off lights in places that don't need them 24 hrs a day - laundry room, storage rooms. If the lobby's bright enough, you don't need a lot of lamps on during the day.

3) Save on paper/printing by not distributing every memo to every unit. Maybe some can just be posted in the mailroom or lobby, or by the elevator on each floor. Save on postage by putting letters under doors instead of mailing them.

4) Eliminate unneeded phone/fax lines. Most documents can be e-mailed now instead of faxed. Pay only basic charges + a maximum amount on calls for super and maint staff phones. If they frequently call relatives/friends out-of-state or out-of-country, why should the coop pay for all that?

SECOND - Find other ways to raise money:

1) If you have fines/penalties for not adhering to coop rules or policies, bill owners for them! Don't go overboard but a lot of money is lost this way. And be sure to check monthly reports to make sure they've been billed.

2) Consider putting in a candy or laundry product machine as sources for income. A soda machine, especially where moving/delivery men and Fed Ex/UPS men pass through, can bring in a good chunk of change, especially in summertime and in large buildings.

3) If you allow subletting, what's your sublet fee? A lot of buildings let this go for years without increasing it. Standard today in many coops is a fee equal to 2 months maint for a new sublet and 1 month maint for a renewal.

4) Enact what buildings call a "coop administration fee" or "administrative transfer fee" on unit sales. A flip tax requires shareholder vote/approval, but this only requires a board resolution (double check this with your attorney!). Typical fee is equal to 4 months maint (2 paid by seller, 2 paid by buyer) at closing, and the board can decide where it goes - for operating costs or reserves.

5) Re-evaluate if coop money markets or other investments are in the best places earning the most money.

Maint inevitably has to go up, but there are ways to save and/or raise money if you keep alert to them.

I agree... a temporary assesment is the key. It is much more appealing to a prospective purchaser/seller. An assessment begins and ends at a set period of time - and is usually targeted toward a specific need. On the other hand, it is very rarely that a increase in maintenance is retracted or decreased - even after the circumstances that justified the increase has been satisfied or no longer requires additional financing.

Right. Seems as if many of coop board members just lie passively back and let costs go up. NO. STOP. Get active, inspired and determined!
Here are some good ideas (esp selling a super's apt if you have space in the basement for a new one):


Slashing Operating Costs

One way to diminish building costs is by eliminating unnecessary staffing. “If your elevators are manually operated, modernize them by removing the elevator men,” recommends Marcia Taranto, president of Taranto & Associates Inc., a property management company in Manhattan. “And, if a staffer is talented in some area, hire him to do some jobs on his own time if he desires. Use employees instead of outside contractors to do minor plumbing, painting or repairs. However, unless there is an emergency, the only person that should ever work overtime is the doorman (if the scheduled doorman doesn’t show), and there shouldn’t be overtime without prior management approval.”

Taranto doesn’t believe in ordering supplies in bulk. “The price is not that much better, and it’s wasteful. If you have lots of supplies lying around, it’s too easy to abuse them or use more than you would otherwise, and it’s harder to inventory,” she explains. “With smaller amounts, management has a better idea of how much is actually needed by properties.” Taranto adds that staff shouldn’t buy anything without a purchase order. She suggests reviewing bills if they seem high, and to keep in mind that some suppliers offer a one percent discount if you pay within 30 days.

John Janangelo, president of Bellmarc Property Management Services, Inc. in Manhattan, suggests monitoring utilities by both cost and consumption. “Look for major fluctuations in bills to identify problems,” he says. “Sometimes an electric company charges the wrong rate—large users are billed differently than small users—or gives you the wrong building’s reading.”

Bellmarc will occasionally consult an electrical engineer for an itemized breakdown of consumption for a building’s major mechanicals to assure billing accuracy and locate unusual drains on the building. According to Taranto, it also helps to keep the boiler and burner in good operating condition. “Have heating pipes insulated, change the steam trap, and install thermal (double) window panes to save heat,” she advises. “And, if your building has a cooling tower,” she says, “make sure it’s separately metered from the building’s main house meter for water consumption.”

Sewage charges are based on your building’s water consumption, explains Warren Liebold, director of metering and conservation for the New York City Department of Environmental Protection (DEP). “Even though cooling towers release little waste water (mostly through evaporation), properties are billed for that water unless the cooling tower makeup water line is metered according to DEP specifications and the building has applied for a Cooling Tower Waste Water Allowance. Applications are available from the New York City DEP.”

Also make sure commercial tenants aren’t on unit owners’ water meters. “When buildings have astronomical phone bills that aren’t related to business calls,” says Janangelo, “check the lobby phone and the super’s phone to see who was on duty when the excessive calls were made. Note where the calls were going if out of state or abroad.”

Planning with Foresight

Board president Michael Baughen can boast that his 44-unit co-op near Manhattan’s financial district hasn’t had a maintenance increase since 1994 (when they raised maintenance eight percent), and he’s doubtful there will be an increase next year. He claims no great strategy, just conservative management and planning by the board. When scaffolding was up on Baughen’s co-op for parapet repairs, they had the building surveyed by an engineer. This way, any other problems could be detected before the scaffolding, which is significantly expensive to erect, came down. “In addition, the board knew two years ago that the building’s elevators would need repairs, so we planned for the expense,” adds Baughen. In fact, the board could have actually reduced the maintenance but decided not to in case a major expenditure arose.

A Lower Interest Rate

Another way to keep maintenance costs level is to refinance by paying off the building’s existing underlying mortgage with a new one that has a lower interest rate. To choose the mortgage terms best suited for the property, you need to balance the amount unit owners are willing to spend on maintenance against how soon they want the mortgage paid off. “When you’ve narrowed it down to two or three options, call an accountant who specializes in co-op or condo work to help you choose which mortgage is best for your building,” advises Robert Altamura, CPA, a partner with the Park Slope accounting firm of Smolin & Yavel. A mortgage broker can also be very helpful in determining what mortgage is best for your building, and in securing the loan.

“With a good interest rate, you can refinance for a bit more than the last mortgage to build up your reserve fund for use on capital projects,” explains Altamura. “You can cover the five to seven percent costs of refinancing—including bank fees, lawyer fees, sometimes finders fees or commitment fees and a mortgage recording tax—and still reduce maintenance. But that usually means a longer amortization, which is the length of time before the mortgage is completely paid. “Sometimes [real estate] brokers call to ask how much maintenance is tax deductible,” Altamura continues. “If I say 35 percent, they ask, ‘Why so little?’ They should realize that a low deductible means the co-op is paying low interest or low real estate taxes. Higher mortgage payments are better in the long run if it means the mortgage will be gone sooner. You’d be surprised how quickly 15 years can go, and a co-op with no mortgage—or a low mortgage—is a strong selling point.”

Stephen Beer, CPA and partner with the accounting firm of Czarnowski & Beer in Manhattan, adds, “A high deductible looks good to a less sophisticated buyer; but in the ’90s, prospective buyers look at financials. They want to know the amount of debt per unit because they realize that if a property’s deductible is low, the unit may ultimately have a higher market value.” Beer notes that refinancing will be beneficial only as long as interest rates stay low. But once you’ve locked in your rate, you’ll keep it for the life of the mortgage.

Making a “Profit”

If you treat your co-op as a “for profit” corporation, rather than just a residence, it may yield a higher return. View the basement as a source of potential revenue. “Build and rent out storage containers,” advises Beer, “or refurbish the basement into an apartment for the super. It will cost $100,000 or less, while the super’s old apartment can be sold for hundreds of thousands of dollars.” Janangelo proposes evaluating the super’s apartment for refinancing, especially in a condo. “Many banks won’t refinance it, but some will. We have a co-op that gained $24,000 a year towards mortgage payments this way.”

Many co-ops and condos now charge tenants an up front “move in/move out” fee. “Extra staff time is needed during moves,” explains Janangelo. “Elevators have to be padded, floors covered, and there’s hallway wear and tear.” These expenses aren’t necessarily deducted from tenants’ security or damage deposits, so the move in/move out fee goes into the reserve fund to offset those costs. “Maximize your building’s laundry contract with the vendor,” he continues. “Buildings get a commission from that contract. Reevaluate it to be sure you’re still getting good service at competitive prices.”

James Gerb has been board president of a 225-unit Park Avenue co-op in Murray Hill since 1995. Maintenance has not increased for two years, and none is projected for next year. Gerb believes in aggressive cost-cutting except when it comes to property managers. “We’ve had two mortgages consolidated and refinanced. We apply for all available J-51 tax rebates for things like the boiler replacement, roof repairs and elevator automation. We also challenge tax assessments through our certiorari attorney and we don’t let commercial space stay vacant,” he says.

Gerb’s building also levies late fees on residents who are more than 60 days in arrears on maintenance. He also believes in settling lawsuits instead of letting them drag out because “legal fees are murder.” Years ago, when a unionized staff member sued the co-op, says Gerb, their former management agency used a private lawyer, not knowing that the co-op’s insurance carrier offered free legal counsel. A lot of money was unnecessarily wasted. In fact, James Berg, executive vice president of The Realty Advisory Board (RAB), a private association in Manhattan for property employers, states that in many situations, if management has a dispute with a union employee, the RAB will represent management at no cost using funds from membership dues, and will pay the employer’s share of the arbitration fees.

These are just some of the creative ways successful co-ops and condos have lowered costs and raised revenue. You can follow their suggestions or find ways of your own. One thing that all buildings have in common is that co-op and condo residents feel lucky when they elude maintenance increases. So go ahead: Make their day!

Rather than hire a consultant to find ways of doing things differently and improving board-shareholder relations, I'd brainstorm with your board and mgmt, talk to other boards, and research articles for Habitat, The Cooperator and the CNYC first. This might save you money that could be better spent elsewhere. Also, I'd wonder if shareholders would question a need to spend money for a consultant and if the board/mmgt aren't knowledgeable or creative enough to come up with approaches/idea on their own. Just my opinion.

Seen this advertisement in Habitat for Eric Kornfeld, Consultant...917-991-8127; www.erickornfeld.com.

Mr Rutherford,

I think your building is fortunate to have someone like you
take over. You have come into your new position with the
proper attitude. "How do we do it better"
I have been on my Board for 15 years, 10 as President, I am now retired and would be happy to share my experiences with you! In any case I wish you the best of luck! Best RBG

Board Newbie - Funny you mention this. We just went through this after MANY months of dealing with mice. Exterminators will find areas that need to be sealed but they won't move d/w's, fridges, ranges. Shareholders have to do it or get someone to do it (the super?) and pay for it themselves.

The coop is responsible for sealing common areas but you can't require shareholders to move appliances, patch holes, etc. and pay for it unless conditions in their apt cause problems for others and the building. Also can't require them to sign up for monthly service (far as I know).

I'd suggest a few other things:
-- A notice reminding people to discard garbage promptly, tie it tightly in bags, not leave food exposed, put food from open boxes (esp cereals, grains, fatty foods) in air tight containers, and seal holes esp around baseboards, in cabinets and around pipes/gas lines. (Holes around kitchen pipes/gas lines are the most common way mice get in).

-- Check all common areas and building rooms for holes.

-- Check the building exterior, the backyard, the garage, etc. and put bait stations/traps in those areas.

-- Have your super bag loose garbage in your trash areas promptly and get it out of the building asap.

-- Check indoor/outdoor drain holes for blockages. (Mice, bugs and rats look for sources of water as well as food).

Thanks BP, for all your good info. But I am still not clear on Co-op responsibility for mice in apartment and getting rid of them. As a shareholder in this co-op for 14 years, we never paid for exterminators, Corp. did. Certain apts have more problems than others for no known reason. I am on the Board and one of the owners with a bad mouse problem. We changed managing agents recently and the new one informs us that shareholders are responsible for exterminators and this is news to me. Additionally, it turns out there hae been no monthly exterminator visits to treat the common areas or untis since we changed management over a year ago. So I am on both sides of this and would like to be fair. It seems this would be under the warranty of habitability where one is entitled to a vermin-free apt. Any thoughts?

Thanks,
BN

Newbie, sorry if this is long but I don't know how to reply to your questions in 25 words or less.

If your bldg's had no monthly extermination in over a year, I think that's the first thing you should focus on. Find a good exterm company, decide the level of bldg service you need and include service to apts that request it on a sign-up sheet. If a company wants your business, they may give you extras and negotiate on price. Sealing holes/cracks is critical to keep mice out and you likely have more than you did a year ago. Mice are nibblers. They can chew thru wood, plaster, vinyl, and slip through a hole as small as a dime. You should also get sweeps (barrier strips) for bottom of doors for all bldg rooms (boiler compactor, pump, storage) and doors to the outside. Get metal sweeps. Mice can chew through even the hardest rubber.

Most proprietary leases say shareholders are responsible for keeping the apt interior clean and in good repair. Our attorneys say that includes sealing holes/cracks around pipe/gas lines coming into an apt, in baseboards, etc. Have your attorney check your lease. Exterms find areas that need sealing but shareholders have to empty cabinets and move major appliances. Exterms I've dealt with wouldn't do that. They also don't seal holes/cracks, just locate them.
As I understand it, if any work beyond the scope of service covered in a contract with an exterm company is requested, the coop pays for it in bldg areas and shareholders pay for it in apts. Ask the exterms and your coop attorney. Also, look through Habitat's article archives. You can also type keyword "mice" on the Net and find a lot of info on their habits, food-search patterns, how to get rid of them, etc.

Re: mice, you said "certain apts have more problems than others for no known reason." There HAS to be a reason and it's most likely holes/cracks. It could even be a split in a hardwood floor or a "mistake" hole you made in a wall to hang something and never plastered up.

Mice forage fairly close to their nest, usually not more than 10-25 feet, and they're always looking for food or water. If they find even a tiny hole they explore, and if there's food left out, open boxes of food, food scraps in trash cans, etc. in an apt, you're going to have uninvited (and unwelcome) guests for dinner.

I can't tell you too much on the warrant of habitability. It mostly referred to rentals and gets complex with coops. The standard meaning referred to a tenant being deprived of essential functions to which he/she is reasonaby entitled, such as heat, plumbing, electricity, absence of mold or lead paint. A breach of the warrant depends on the extent of the problem, if it affects health and what, if any, corrective measure have been taken. Not sure where, but I read somewhere that a coop proprietary lease has been deemed to be no different than other (rental) leases and "Courts found that a landlord-tenant relationship is created by the proprietary lease thereby rendering the coop corporation liable for breach of the warranty." (I found that in my notes from our dealings with mice last year.)

Again, it would be wise to consult your coop attorney. I'm not an attorney so don't hold me to anything legal-ish I may have written here. :-) I hope some of this helps you.

help. need the info. It may be that the slate presented on the printed proxy is only the current board that is running for reelection. need help!

We send out a preliminary letter telling shareholders: 1) they'll receive an annual meeting notice as required and 2) to contact our mgmt office by "X date" if they want to run for the board so their name can be put on the proxy which will be mailed with the meeting notice.

Sometimes the letter says anyone who wants to run should send in a resume by "X date" but adds that a resume isn't required to run, and all resumes received will be mailed with the meeting notice. This is a good idea if it's been a very contentious year, if there are many new shareholders or if you have a big building.

The proxy includes names of everyone who indicates by "X date" they want to run. At the meeting, anyone can announce he's changed his mind and isn't running if he wants to. If any proxies are mailed in voting for him, those votes are not counted in the tally. Also note that anyone is allowed to run for the board at the meeting even if they didn't tell the mgmt office in advance or send in a resume.

Not easy , why not try what most do, tell tall untrue tales about your opponents. That should get you on, and when you do get elected prove how good you are by working real hard
and they will all love you for it. Next year then you will be a shoe in. Good luck.

My recommendation.... Have lunch or phone conversation with a fellow Director from another co-op or condo board. It has inspired me in the past in a number of ways:
1- Generate new ideas to invigorate the Board
2- Generate new ideas to handle shareholder issues
3- Provided fantastic feedback for dealing with a weak mgmt. company.
4- Provided a nice "sounding board" for reviewing current and potential challenges.

Soon ending my third term... I hear you : )

Maybe it's time to step back and reassess your reasons for running for the Board in the first place; did you have a plan in place when you started your tenure? Have you been able to accomplish what you wanted, or are you meeting obstacles which are frustrating you (ie., "weak management, apathetic shareholders" etc.)? Is there anything you can do to change those obstacles -- energizing your Board, engaging your Shareholders, challenging your management? Can you mitigate your own frustration in any way?

Being President is draining and time-consuming, especially if your management company or Board has come to depend on your efforts to get things done. Have you delegated enough responsibility for others to feel involved? Have you discussed your vision for the building with them and gained agreement with those goals?

Are you questioning your need for a "reality check" (and your last statement, which you made into a question, may be an indicator of this) because you're concerned that no one else is ready/willing to step up to the plate... ?

Board president burnout is common, especially if no one is helping and things are dragging you down. You're climbing a hill but you've got a rope that's wrapped around a big rock tied to your ankle. You have to cut the rope.

Board members aren't pulling their weight? - Give them more to do, or ask for help and hope they give it. Find out what coop area most interests them (building repairs, finances, legal issues, sublets), make them the point person for that area, and have them report regularly to the board on how things are going. Also, get to knwo your shareholders. Look for potential board candidates, urge them to run at the next annual meeting and get some new faces on the board.

Weak management? - Decide where it's weakest, talk to your property manager and his supervisors, and figure out how it can be improved. Or maybe it's time to start looking for a new management company.

Shareholder apathy? - Apathy often sets in when people feel there's no point to complaints/requests because they don't think it will do any good. If they see positive changes it can make a difference. So can better communication. Have a board member start a newsletter. Make up a simple form and put a suggestion box in the mail room. Distribute a notice that announces it, tells people you want their ideas/input and say every submission will receive a reply. Put a board member in charge of it. Have the board discuss submissions and make sure replies are sent. There are always people who won't get involved but apathy can be turned around if people see changes and know that their voice matters.

As everyone on this message board probably sees by now, I write a lot. I hope my input helps in some cases and thanks to all of you for participating in this forum. I've found a lot of good advice here. It resolves a lot of problems - and it also helps to stave off burnout!

We didn't replace aluminum windows with vinyl, but some of our shareholders used vendors that provided windows from Crystal and all said they are happy with them. I've heard that Crystal is an award-winning company. Board directors in other co-ops have also told me good things about them. We've had no direct dealings with Crystal - just passing this along for what it's worth.

http://www.habitatmag.com/sg2007/glass/jbf.htm. Small company is honest and fairly priced. Redid our 16 unit co-ops 100 windows efficiently and professionally. All our dealings went relatively smoothly from start to finish. At the end of the day we were pleased with the work and the results. That was our expereince. Good luck with your window project.

a really nice thing to do (worth the cost) is to get wooden inside frames and aluminum outside frames . you can give the resident the poption of paying the difference in cost but wooden interior frames are so so so much nicer - plus you can =easily paint them to any color.