New York's Cooperative and Condominium Community

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Rent-Regulated Apartments Co-op Buildings

"There were smells," Rob Crooke, co-op board treasurer of 61 Eastern Parkway, recalls about a problem with one of the six rent-regulated tenants in his Brooklyn building. Cigarette smells, to be exact, seeping from one of the sponsor's six remaining units into the owner-occupied apartment next door. The 40-unit building had no rule against smoking, but board members knew from past experience that professionally sealed cracks around the baseboards and pipes in the smoker's apartment would be needed. And while the board could have easily argued that the job was the sponsor's responsibility, it instead just hire a contractor and ate the cost, in the interest of saving time and keeping peace.

"There's always a little bit of a dance with our sponsor when it comes to making sure he's taking care of those apartments," says Crooke. After all, it's one thing to know certain things are the sponsor's responsibility as landlord, but another to enforce perfect compliance at the expense of what's best for the building.

Many New York City co-ops and condos similarly contain at least a few apartments subject to either rent-control or rent-stabilization laws. Though their number of these apartments is diminishing, the situation can cause conflicts and confusion for boards and tenants alike, involving repairs and maintenance, house rules and amenities.

Repairs R Us

The top source of confusion — and potential litigation — is that repairs and maintenance inside individual units are handled differently. The rules seem simple at first: Anything within the walls of the apartment, including appliances and fixtures, are the responsibility of whoever owns it, whether a sponsor/investor or a co-op shareholder.

But when some apartments involve a landlord-tenant relationship and others don't, things can get complicated. For instance, if a shareholder's refrigerator or sink needs to be fixed, he handles it himself, but when a tenant needs the same repairs, he must go through his landlord to get it done. "The tenant might call the super first, but it's not the co-op's responsibility," says Neil Davidowitz, president of Orsid Realty.

Adding to the confusion is that the super may ultimately be the one to make the repair. It's just that when he does, he'll be working for — and therefore should be paid by — the landlord of the apartment, usually using a predetermined set of charge-back fees. "It falls to the managing agent to keep a close eye on these things and make sure the sponsor is billed properly when the building staff does work for him," says Donald H. Levy, a vice president of Brown Harris Stevens.

"It's tricky, because the rule of thumb is that staff will usually do minor services, like changing a fuse, at no charge. You also have to remember that staff is often getting gratuities. Sometimes it can be hard to say no when a tenant wants them to do work on the clock and tip them extra," Levy adds. Keeping everyone in the building in the loop about who pays for what and under what circumstances helps to minimize billing errors while ensuring repairs and maintenance happen promptly.

That's important, because a lax response from a landlord can result in a 311 call from the tenant — or worse, a major plumbing problem that goes unchecked and damages the apartments below. "We don't want to take on things that aren't our responsibility, but when there is something that could cause us all problems later on, we have to do what's best for the building. Sometimes we'll just go in and have it fixed and then say, 'Look, this is what you owe us,'" says Crooke.

Know the Issues

Even under the best of circumstances, rent-regulated apartments need a managing agent who understands the issue. That's the case whether one company manages the entire building or the sponsor uses a separate one for rental apartments. "I've seen it work both ways — there are different pros and cons to each. With a single entity, you have the expedience factor, because there are fewer layers of people to contact," says Davidowitz.

At the same time, managers need to tally expenses separately and supervise building staff so they're allocating time fairly. Splitting the management between two companies, as most sponsors with large numbers of rental apartments do, helps keep billing separate.

"You avoid conflicts by drawing a strict line in the sand," says Davidowitz. The downside is that multiple parties require more coordination, which increases the possibility of errors. "It creates a lot of red tape," warns Dan Wurtzel, president of Cooper Square Realty.

Next page: Specific warnings and potential pitfalls >>

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