Leni Morrison Cummins, Partner at Cozen O'Connor in Legal/Financial
Obtaining board approval for apartment alterations in both co-ops and condos is essential to ensuring any work is carried out in accordance with the building's rules and regulations. However, disputes about alterations and repairs are not uncommon and it usually boils down to who is responsible for the costs associated with damage or upgrades in an apartment. These disputes highlight the importance of detailed record keeping by the board as well as the enforcement of two important agreements set in place to protect the interests of both boards and shareholders or unit owners.
An alteration agreement is a contract setting out the responsibilities and obligations of the shareholder or unit owner for the work that’s being performed. Signing an alteration agreement is typically part of the board approval process and is required by proprietary leases. In the absence of an alteration agreement, the common area repairs in a co-op and even to some extent the apartment repairs, will be the responsibility of the board. An alteration agreement is crucial in shifting this responsibility to the shareholder.
A good example is a shareholder who adds new terrace awnings to their apartment’s balcony. With an alteration agreement in place, the work is approved by the board subject to architectural and engineering reviews, and if there’s damage after the installation due to wind or other conditions, the alteration agreement puts repair and maintenance costs on the shareholder. Without it, the board would have to take responsibility.
This contract transfers liability for repairs to a new owner or shareholder at the point of sale, ensuring the obligations of the original shareholder or unit owner are passed on to subsequent owners. Assumption agreements should be signed at closing. This is typically easier in a co-op where the managing agent is often the transfer agent. Hopefully the management has good records and a representative can be there at the closing table to make sure the assumption agreement is signed. In a condo, it's a little more difficult because there is no transfer agent, but in either case, it really is the property manager's responsibility to maintain the records of the condo or co-op and to flag that at the time of closing or before. This process should continue for all subsequent sales to maintain consistency.
The common practices regarding assumption agreements can vary, but many issues arise when the agreement cannot be located during a transaction. When the assumption agreement cannot be found, the shareholder or unit owner responsible for the alterations may be exempt from liability. In these cases, the proprietary lease or bylaws often govern responsibility, typically placing a significant portion of the burden on the board.
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.