David Berkey, Gallet Dreyer & Berkey
The pandemic has created the need for safe spaces, and that is extremely important in apartment buildings. What types of rules should co-ops and condos concern themselves with at this stage?
The first issue is that boards must know that New York City and New York State have mandated that co-ops and condos should follow certain rules during the restart after all of the COVID-19 restrictions have been lifted. One requirement is that they have to read and be aware of the guidance on real estate services put out by the NY State Department of Health. It explains what residential building managers or boards are required to do with respect to opening up their building to visitors, contractors and brokers and how to deal with their employees and their residents. The New York City Department of Health references the New York State rules. So the State rules are the basic starting point.
I assume these rules are being updated or changing, so somebody has to be checking them.
The rules are constantly being modified. A recent example is the new rules pertaining to gyms, fitness centers and pools, which New York City allowed to reopen, including private ones that are in co-op and condo buildings, provided the operators follow the rules that have been set forth by the New York City Department of Health and by New York State. Operators of gym facilities, including boards or managing agents, have to file a Gym and Fitness Facility Inspection Request and Attestation Form, asking that their facility be inspected. That inspection through the NY City Department of Health can be virtual, or it can be in person. They have to also have read the special guidelines dealing with gyms and how you're supposed to reopen them, including certain rules that must be adopted governing how people may use the gyms. So, you have to be aware of what the city and state guidelines are.
A co-op or condo is an organization that has lots of rules – there's governing documents and house rules, and there's many places to create a rule and to house a rule. And now there are also governmental rules. So, should a board be enacting its own rules? I mean, they could say our rule is we're going to follow governmental rules.
Every building has to adopt its own safety plan. That's also a New York State requirement. And the safety plan that buildings adopt has to show what rules they have adopted to deal with the restrictions the government is seeking to have imposed so they can comply with the COVID-19 requirements.
And are those safety plans the building adopts just sort of hanging outside of a proprietary lease, a house rule, a by-law? It's just a safety plan?
The safety plan is going to report the rules and regulations adopted by a condo board or the house rules adopted by a co-op board. We can deal with that in a little while, but you can't just say to your unit-owners or your tenant stockholders, "I want you to comply with all of the rules that the city and state Departments of Health have put out, for a building such as ours." Because they won't know what that means. You won't be able to get compliance. In order to enforce them, the rules have to be specific enough so that people can understand them. That way, if there are violations, they can be fairly addressed.
So where does a board start? I mean, they can read the governmental rules. How do they now incorporate that into their own structure?
The board should deal with its managing agent and with its attorney. And they should ask that specific rules and regulations for condos or house rules for cooperatives be designed so that their particular building and its needs will be in compliance with what the state and what the city requires. We need rules that deal with common areas and with those amenities that we talked about just a moment ago, gyms and pools. Also, rules that deal with brokers who are coming into your building and how you're going to allow them to show apartments. And rules for alterations within apartments and rules for contractors to follow so they comply with all of the COVID-19 rules that the building adopts for alterations or repairs within a building.
All of these different subjects need to be addressed by the adoption of either rules and regulations in condos or house rules in coops. Hopefully, when the city and state pull back on their requirements and we're out of this pandemic problem, you can remove those rules because they will no longer be applicable. Until then, we all have to be vigilant and adopt all of these safety rules and procedures so that people who live and work in the building are safe and protected.
So once you've adopted these rules, the next question is enforcement. Who's the "mom" in the building, who's going to be enforcing these rules?
Who's going to report someone walking down the corridor without a mask, when the rules say you need to wear one? Unfortunately, the burden often is going to fall upon building staff. It's not going to fall upon neighbor to report neighbor. And the staff has to be taught and encouraged to report violations to management and to the board so that the rules can be enforced. Because if you adopt rules and you don't enforce them, they're ineffective. And you might be found to have shirked your responsibility as a board member.
So let's say somebody has broken the rule or maybe broken it a couple of times. At some point, there's a fine or fee or a financial punishment of some sort, I assume. Do you set that up?
In condominiums, the law allows boards to impose a fine for violation of rules. In cooperatives, it’s not that clear. Cooperatives can adopt what they call administrative fees to deal with the extra costs and expenses incurred if someone is violating the rules and the rules have to be enforced. We generally recommend, especially in condos, that there be a step-by-step increase in fines, depending upon whether it's a first violation, a second or multiple. And the last tier, let's say you start with $100 for the first violation and $500 for the second. The next step would be a fine in an amount that in the board's judgment is substantial enough to deter the conduct.
Co-ops are a little bit more difficult with respect to enforcement of fines. But the co-op has the largest club, because almost every proprietary lease provides that someone who repeatedly violates the house rules is subject to having their lease terminated under the objectionable-conduct provisions of the proprietary lease. A default of the lease occurs when there is a violation of a rule; that's basic and automatic. You use the ultimate threat, which is to evict someone for objectionable conduct, if they're constantly flouting the rules. And I'll be honest, in this particular case, because someone who is just incorrigible and will not obey the rules is putting your neighbors in jeopardy, I would seriously look into enforcing the rules using that ultimate club.
And I presume that once you've adopted or created a safety plan with a bunch of rules that are in wherever they're supposed to be, you also need to let everybody know, A, what they are and, B, what the fines or fees will be for flouting them.
That's correct. Generally, rules are not enforceable unless you've notified everybody what they are, when they are going to be effective and what they are being expected to obey. There are risks to a board if these rules are not enforced. A board is supposed to act the way a reasonable board in similar circumstances would be expected to act. That's the general test that boards have to follow. And if it is unreasonable for a board to adopt rules and then ignore them, the board is subject to liability for acting negligently and could be subject to serious claims if someone could prove that they became sick because the board ignored rules they adopted to prevent that from happening.
Certainly in New York City you see masks everywhere, I'm just going to assume that most shareholders and unit-owners will most of the time follow the rules. But probably in every building or certainly in every other building, there is a person who is challenged, perhaps with dementia or some kind of illness, and whose behavior already has been challenging for a co-op or a condo. How does the board handle that? Because it's that resident who's likely to ignore all these safety rules.
That particular resident is one that requires TLC, tender loving care. Hopefully they have family or friends in the building who can talk with them, as well as board members talking with them, so they understand the seriousness and the reasoning behind the rules that they're expected to obey. And if they are so far impaired that they just have no understanding, then unfortunately because of that disability, the board may be expected to make what are called reasonable accommodations for that particular person and maybe forgive some lapses. But I would enlist all of the help I could — family, friends, neighbors, board and management — to speak kindly with those people and to encourage them to behave for the health and welfare of themselves and everyone else.
So, on a practical level, I'm a board and in concert with my managing agent and my attorney, I now have a sort of a handle on the city and the state rules, I've adopted a safety plan. I've set up a schedule of financial repercussions if you don't follow the rules, whether they're fines or fees. I take that document now. It's my obligation to distribute it to everybody, is that correct? And I can do that via email or BuildingLink or whatever communication source I have in my building?
That's right. Most buildings have a specific way that they disseminate newsletters, information and statements of general nature to their tenants. And I would use that method here in addition to the formal method required by a lease or by-laws for the sending of notice. If you were going to adopt an amendment to your proprietary lease or to your by-laws and you were going to distribute it to everybody, you should use that same method of distribution and use it for the new rules that you adopted.
Recognizing how to deal with the safety problems and implementing rules and enforcing them are ways that boards can step up. They can show the occupants of their building that they are concerned for their welfare and the welfare of those who come into the building. And communication is key. You want to make sure everyone understands the rules, and that the board and shareholders or unit owners are all in this together.