HABITAT

LEGAL/FINANCIAL

For board members and property managers of co-ops and condos in New York City, there are legal and financial questions regarding new and old laws, accounting rules, auditing, and so much more. Here’s what you need to know to manage your finances and speak knowledgeably with your accountant and attorney.

 

Douglas Steiner of Brooklyn’s Steiner Studios has secured a $130 million construction loan from Bank of America Merrill Lynch to erect an 82-unit luxury condo building in the once-crusty, ever-glitzier East Village.

Steiner, who lives in the East Village, told Commercial Observer  that luxury condos in the neighborhood are “not the oxymoron people might have thought it was 15 or 20 years ago. We’ve seen a huge pent-up demand for luxury services in the East Village, and only a few have been done.”

Steiner acquired the property at 438 E. 12th St. for $41 million in 2012 from Mary Help of Christians Church. The site, which housed a church, rectory and private school, was originally intended as a 158-unit rental building with 22 of the units set aside as affordable under the Department of Housing Preservation and Development’s Inclusionary Housing Program.

Score another one for luxury over affordability.

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On Harassment

Written by Tom Soter on December 29, 2015

New York City

 

Attorney James Samson, a partner at Samson Fink & Dubow, offered some advice about how cases go off the rails. A potential client came to him with serious-sounding charges against the board. Although her charges were serious-sounding, on closer inspection, there was less here than meets the ear. The supposed “poisoning” of her dog occurred when the animal came into contact with some boric acid that had been put out to kill vermin. Other charges were equally questionable: she said the board had changed the locks on her. But, as she admitted after probing by Samson, the board had actually changed locks because it was switching over to a more sophisticated lock system. Everyone was given an expensive, electronic key fob, and additional keys cost $50 each. She wanted more fobs, and she gave them a check, but for some reason, it had been rejected. Banking problems, perhaps. But harassment? Not likely.
“She has a tendency to overstate her case,” Samson said. “I told her she had a motor mouth. ‘Listen to what you’re saying.’ I said. ‘If you can’t state your claim in three sentences or less, you’ve got a problem. Judges aren’t going to listen to you for the whole afternoon.” Her most serious charge – a lack of annual meetings – could be cleared up if she sought out the votes for a special meeting, which he explained to her how to do. “But she has to take an active role. I told her, ‘If you really think you’re being harassed, then go to the Human Rights Commission (HRC).’”
From the board’s point of view, how should they deal with a disgruntled shareholder like her? “The last thing the board wants is for it to go to the Human Rights Commission,” Samson observed, switching perspectives. “The people over there are zealots, true believers, and they can create a lot of trouble. The board should try to stay as far away from harassment claims as possible. The board should be very careful. They shouldn’t play games.”
What games had this woman’s board played? Apparently, they had allowed some shareholders to easily buy two or three additional keys, and if that is true, the HRC will probably ask, “Did you play games with her? Did you make it more difficult for her because she’s always complaining?”
 
Everyone should be treated in the same way, asserts Samson. The board doesn’t want to get itself involved in a discrimination case. Boards should be especially wary of shareholders and unit-owners, he says, who are “looking to find an offense.” Even when a board thinks a claim is bogus, it needs to treat all shareholders the same way to avoid finding itself in litigation.

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The Department of Justice announced on Dec. 23 that it has filed a lawsuit against Trump Village Section 4 co-op in Brooklyn, as well as its embattled former board president Igor Oberman, for violating the Fair Housing Act. The co-op, according to the suit, failed to accommodate four residents who require emotional support animals.

The government contends that harassment of the animal owners has continued despite a legal agreement reached in January, as reported by the Sheepshead Bites website. That case accused the co-op of trying to evict an Afghanistan veteran who, suffering from PTSD, filed a fair-housing complaint in order to keep his emotional support animal.

The 1,144-unit in Coney Island has seen a blizzard of lawsuits over the years. When shareholders launched a website to air grievances about Oberman’s “KGB tactics,” Oberman sued for defamation of character. Oberman was fined $7,500 for conflicts of interest when he ran unsuccessfully for City Council last year.

Oberman has a theory that the latest lawsuit is linked to the current presidential campaign. “The only reason why the federal government is wasting taxpayer dollars is to get headlines due to Donald Trump running for federal office,” Oberman said in an emailed statement. “I feel due to the Trump name, we are being persecuted.”

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How Can You Accommodate the Disabled During Capital Work?

Written by Stewart E. Wurtzel on December 28, 2015

New York City

A collection of issues – a disability discrimination claim with facts that were sharply in dispute, an elevator project that shut down one of the building’s two elevators for an extended period, a proprietary lease provision that was less than clear, and an insurance company’s reservation of rights with demands for the insured’s substantial participation in the settlement – all make clear the need to communicate effectively with building residents. They also underline the necessity of taking into account the needs of disabled residents when undertaking major projects.

The disabled resident in this case was a renter in a sponsor’s apartment. Even though access in and out of the building for the wheelchair-bound tenant would have been impossible while the elevator was out of service, undisputed was the tenant’s initial request to remain in the apartment when the work started. Factual disputes existed as to if and when the tenant had made demands for a reasonable accommodation and to be relocated after the work began.

After the tenant started federal court litigation, the question as to who was responsible for providing the accommodation – the sponsor or the co-op – as well as who would ultimately be financially responsible, became key issues in the case. While under state and federal statutes, all parties could be held responsible in litigation – the question was who would be financially responsible for paying the accommodation and who was liable for damages incurred.

The key section of the proprietary lease was paragraph 18(d), which holds that the shareholders are responsible for compliance with all laws with respect to occupancy or use of the apartment. The sponsor alleged that the accommodation was necessary because of work done on the elevator and not in the apartment, and it should be the cooperative that bears all financial responsibility. The complaint filed by the plaintiff, while clearly alleging discrimination, was less than clear as to whether there were claims of personal injuries involved. The liability carrier therefore disclaimed coverage; the D&O carrier reserved rights and claimed that it would not be responsible for any damages relating to personal injuries. The court ordered mediation at which time the case was settled.

 

Takeaway

There are many lessons to be learned from this case. Most important, when undertaking a major project that could have a disparate impact on a disabled resident, make sure the resident and the owner (if different) have a clear understanding about the scope of the project, how it will affect them, how long it may last, and how they plan on dealing with the impact of the project. While the building cannot force a disabled individual to relocate and it is up to the resident to request an accommodation, the importance of documenting all communications with the resident and shareholder cannot be understated. It would have ameliorated many of the issues in this case if there had been a written description of the scope of work, timing, and impact, along with written confirmation of all discussions and a clear written understanding between the cooperative and its non-resident owner as to the obligations of each.


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It's that time of year -- year-end review time! And The New York Times' Ask Real Estate column is no exception. In the column's latest edition, Ronda Kaysen looks back on a year of wild stories and reaches out to letter writers to see what's happened since they sought her help. Our favorite? Finding out what happened to the letter-writer whose icy relationship with his fourth=floor neighbor was putting a damper on backyard parties.

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You’re a pianist and a piano teacher. The co-op you’ve been living in for the past four years has a house rule that allows you to play – and teach – the piano until 10 p.m. Suddenly the board changes the cutoff time to 9 p.m. – and, for good measure, forbids shareholders from conducting business, including piano lessons, in their apartments after 5 p.m. Do you have to obey this new house rule?

Unfortunately, you do. When you buy into a co-op, you agree to abide by the proprietary lease and the house rules, and most boards have the power to amend house rules. All shareholders are bound by new rules, even if they’re more restrictive, real estate lawyer David L. Berkey tells The New York TimesAsk Real Estate column. So even though it affects your livelihood, you have to obey the new rules.

It gets worse. Commercial noise – including the sweet music of a novice piano student – is regulated by the noise code 24 hours a day. A neighbor could call 311 at any time and file a noise complaint. If an inspector issues a violation, the fine for  first offense from a commercial establishment is usually a staggering $3,200. 
Berkey suggests that you try to work out an agreement with the co-op board and the neighbor. You might consider soundproofing your apartment. It’s cheaper than breaking the house rules.

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A Little Power Goes a Long Way

Written by Dale J. Degenshein on December 23, 2015

New York City

 

There are many ways board members can “go rogue.” There are those who refuse to keep matters confidential, making sure they satisfy their constituency by handing out information as it becomes available. There are those who hire their personal attorneys, architects, or other professionals to give a second opinion, regardless of whether the other board members want it. Some believe they get special privileges by virtue of their being elected (as our best board members know, it is the opposite; they want to make sure they are treated the same as – or maybe even worse than – everyone else). And there are board members who sometimes decide that because they have been elected to the board, they have the right to admonish building staff, even if that employee has not violated any rule or policy. Some even think they can, without board knowledge or approval, meet and negotiate with building vendors, sometimes even firing them without anyone knowing about it. The staff complains, vendors complain, apartment owners complain. Trying to reason with a board member like this sometimes gets you nowhere. What does a board do? And more to the point, how does the board effectively notify its employees and vendors and figure out what action, if any, to take against the “rogue” board member without that board member sitting in on every meeting?
 

Takeaway

Unless governing documents do not allow it, board members can call a meeting for the purpose of appointing a committee to address issues with a rogue board member and allow that committee to act (or act up to a point) without the authority of the full board. That way, the committee (perhaps made up of all board members other than the one who is creating havoc) can, for example, meet with counsel, draft and approve letters, or, if it comes to it, authorize beginning a lawsuit. The committee can also discuss the pros and cons of sending a letter to employees or third parties, advising that the rogue member has no authority to act on behalf of the board and to report any contact made by the board member. The committee-board members – working with the building’s counsel and managing agent (both of whom have likely seen this issue before) – must balance potential claims of defamation by the board member against claims of employees and, to the extent it arises, claims made by the union on behalf of staff. There is no perfect solution and no easy answer. The board’s options may be limited and any acts may take time. However, a board that has recognized the issue and attempts to find a solution is taking a step in the right direction.

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In October of 2015, New York City followed the lead of the federal and many state governments when it hired Diana Leyden as the city’s first Taxpayer Advocate. Hers is a daunting mission: to help New Yorkers resolve disputes over how much they owe – or don’t owe – in property taxes, fines and penalties. Before taking the New York job, Leyden spent 16 years teaching at the University of Connecticut Law School and running its tax clinic, which provides free legal service to help low-income earners resolve their tax controversies.
“The main part of what we’ll be doing [here in New York] is property taxes,” Leyden told Habitat. “Much of what we’re finding is flaws in how processes run – or don’t run. It was very sobering to see how we’re frozen in time, as far as the way the city’s property taxes are set up. We’re back to 1981” – a reference to the year the city’s four property tax classes were established, a source of undying controversy, especially for residents of co-op and condo buildings. Then Leyden offered a radical notion: “Maybe the whole thing needs to be scrapped.”

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Thousand-foot condo towers for billionaire owners may be the big New York real estate story right now, but there are, happily, little stories that continue to go against the grain.

Here’s one: a century-old synagogue has been spared the wrecking ball by an ingenious new condo development. The Adas Yisroel Anshe Mezritch congregation, which has been worshipping at 415 E. 6th St. in the East Village since 1910 but recently fell on financial difficulties, has agreed to let East River Partners create three condo units on the upper floors of the building. In exchange, the developer will pay the congregation a $600,000 up-front payment, an annual contribution of $20,000 a year for the next 198 years, and a $180,000 “fit-out allowance” to rebuild the ground-floor sanctuary and basement space, as reported by The New York Times.

Two of the three upper-floor condo units will have the synagogue’s original stained-glass windows, some of which include Stars of David. The units will sell for $2.95 million to $4.39 million.

Charles Knapp, the pro bono lawyer for the synagogue, said East River Partners “were the saviors of this shul.”

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A Leak Raises Questions

Written by Tom Soter on December 22, 2015

New York City

 

A leak that occurred in a Queens co-op raises questions. Not the leak itself, but its aftermath. The story involves what must be a relatively small building because the president also happens to be the managing agent. One day this president/manager – let’s call him “the P.M.” for short – gets a call from one of the shareholders – let’s call him Steve – who tells him he needs the super to fix a leak in his bathroom ceiling. The leak is apparently coming from the pipes between Steve’s unit and the unit upstairs. Time goes by and the P.M. and the super ignore repeated requests from Steve to make repairs.
 
“The leak had gotten so bad that the bathroom ceiling was about to collapse,” Steve wrote in Habitat’s online “Board Talk.” So, the frustrated shareholder finally called 311 and filed a complaint with the New York City Office of Housing, Preservation & Development (HPD), which eventually issued a violation. In response to HPD, says Steve, “the super did fix the water leak (although I don't think it's fully fixed)” and the P.M. “‘then turned around and gave me a one-week notice to fix the water damage, and he also instructed the building attorney to initiate the default provision of my lease. This is obvious retaliation because I filed the complaint with HPD.”

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Ask the Experts

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Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

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