Bill Morris in Legal/Financial on May 4, 2023
Beset by rising fixed costs everywhere they turn — from facade repairs to property taxes, insurance premiums, green retrofits and staff payroll — co-op and condo boards sometimes overlook one area where they can actually control costs: legal fees. The key, say numerous lawyers, is to pursue dispute resolutions that avoid litigation. Translation: stay away from courtrooms.
“For a lot of boards, their biggest expense is legal fees,” says Justin Waiser, a partner at the Queens-based law firm William A. Slutsky, who adds that flexibility is required of boards in situations that threaten to escalate from damage claims to legal claims.
“Coming up with a creative solution for access, repairs and abatement of maintenance can be more cost effective for buildings than dealing with lawsuits and legal fees,” Waiser says. “It also sends a message that the cooperative is a community that cares for the practical well-being of shareholders.”
Such creative solutions require imagination and sensitivity. “You look at the condo’s bylaws or the cooperative’s proprietary lease, and then the board and the unit-owner or shareholder have a conversation,” Waiser says. “You have to figure out the scope of work, but you also have to feel out if the person is litigious. Sometimes, spending a few dollars more to make repairs that are not absolutely required under governing documents — while partially abating maintenance — will be more cost effective for buildings than taking a hard stand.”
(Like what you're reading? To get Habitat newsletters sent to your inbox for free, click here.)
He cites two case studies where such a flexible approach saved boards from high legal fees.
Mold. Water infiltrated the foundation of a building and spawned mold in a ground-floor apartment. The unit-owner hired an attorney to send a letter to the condo board demanding repairs. To avoid a lawsuit, the board agreed to abate common charges for the 30% of the apartment that was affected until the work was completed. The board fixed the exterior leaks and remediated mold conditions. It also made some interior repairs in the apartment, which it was not obligated to do.
There was a hiccup along the way. To fix the infiltration, the board needed access to a city-owned garden next door, but the city would provide access only for a limited time, and there was a delay securing permits because the condo was a landmarked building.
“We negotiated the agreement with the city to allow for an extension of time to get the work done, which was not as easy as it sounds,” Waiser says. “Keeping the unit-owner advised in real time about the delays, abating common charges and completing the work avoided a lawsuit and legal fees.”
Water leak. While performing renovations, a shareholder disposed of grout down a shower drain — never a good idea — which led to a leak that caused $17,000 to $20,000 in damages to the downstairs apartment. The downstairs resident’s boyfriend was a lawyer, and they were eager to sue the board. The co-op’s insurance company awarded an $11,000 claim, which the board used to pay for repairs to the damaged apartment. By using its preferred vendor, the co-op saved on its portion of the repairs.
“We negotiated an access agreement for up to five days to do the work and abated maintenance for that time,” Waiser says. “In return, the shareholder released the co-op from any claims or damages. Again, the corporation avoided a lawsuit and legal fees through the negotiated access and repair agreement.”
Waiser notes that there are basic steps to avoiding litigation: “The most important thing is to check with your insurance company on coverage, evaluate the damages and the cost and time of repairs.”
Then there’s the personal component: “You also have to take into account the personalities involved. Are they litigious? Have they been good shareholders in the past? That way, you keep things at a good temperature.”
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.