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HOUSE RULES, P.2

House Rules, p.2

 

 

Q. Are there areas where boards aren't allowed to pass house rules?

A. Attorney Joseph G. Colbert: "As long as boards stick to quality-of-life issues in the rules, they usually stay out of legal trouble. Every now and then, however, a cooperative board tries to sneak in a requirement that doesn't belong there.

"The most notorious is one concerning fines for each violation. If the proprietary lease contains a provision authorizing such a fine, the board is authorized to adopt a house rule doing that. The trouble is that boards sometimes adopt one when they are not authorized to do so. The usual reason that boards do this is that they cannot, or do not want to try to, obtain a supermajority of shareholders to vote for an amendment to the proprietary lease.

"The rule of thumb is that boards cannot impose financial obligations on shareholders in house rules. If they want to do so, the financial obligation must be in the lease. That principle is not clear all the time. For example, a rule requiring shareholders to carry insurance would not be appropriate because it imposes a financial obligation on shareholders (they have to pay for the coverage), and it thus should be a proprietary-lease amendment."

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