Terraces are prized amenities in New York, but there’s a strange concept at work. William McCracken, partner at Ganfer Shore Leeds & Zauderer, explains to Habitat what a limited common element is.
A terrace is a prized amenity in New York. But there's a strange concept at work here – it’s a private amenity, but it's also a shared amenity.
A “limited common element” is what most terraces and balconies are. It’s a concept that predominates with co-ops and condos.
Meaning that it's for the private use of an individual shareholder or unit-owner, but it's also shared by the corporation or the condo association?
That's exactly right. So there's a bit of a paradox in the concept of “limited common element.” It’s owned by the co-op or condo as a whole, but the board can grant exclusive use or access to the shareholder or unit-owner who has that terrace or balcony pertinent to their apartment.
And this can create problems?
It creates a lot of problems. A garden-variety issue is when you have leaks, because you never know if they originate from the terrace or the structure beneath it. But more significantly is when a building has to do facade work, and the building needs to use the terrace to stage the construction work. And that will deny shareholders and unit-owners use of their terraces for, sometimes, a long period of time.
And that doesn't make them happy.
No, no. Especially when owners come into the building thinking, “This is my terrace. I bought it, I paid a lot for it, I walk out on it every day. This is the main reason why I bought in this building,” And they ask, “Now, all of a sudden, you're telling me that I can't use it, and I don’t get any remuneration?”
People want some money for their inconvenience and loss of this amenity?
Correct. We had a case this year, a big condo that had to do some extensive facade work. It was sold as something that was going to take six months, and, you know, inevitably it takes two years. These unit-owners can't use their terraces that whole time, and their plants are dying, and they're very upset. And we had another building where some board members had terraces, and they were very fervent in their belief that they were entitled to some sort of compensation from the condominium for the loss of use of their terraces.
Did you, as a lawyer, have to educate them that they were wrong?
Well, it's tricky because they are wrong, legally. If you read the declaration and the bylaws, you’ll see that a limited common element is something that, yes, you have exclusive access to, but it belongs to the condo, and if the condo needs it to do repairs, they need it. It’s not like they’re taking it for no reason. They have to put things out there, they have to stage the work. You might not get the use of your terrace all the time.
What is the lesson here for shareholders, unit-owners, and boards?
Part of being in a co-op or a condominium is that you're a co-owner. There's no landlord taking your rent. You’re part of the building. The thing that boards need to realize in these situations is that it’s not enough to be legally right. You really need to educate your board members as to what this concept of a limited common element means. It’s no good to spend weeks and months arguing about these sorts of fundamental concepts when you need to be getting stuff done.
Don’t the residents of the building have to be educated as well?
For sure. And whenever we have a big capital project, we always tell our boards to educate the shareholders and unit-owners ahead of time. Make sure they understand what's in store for them. People who don't have terraces may not be as directly affected by facade work, but you're going to have the scaffolding up for 8 months, 16 months, blocking the light, blocking the views, and people get very upset about it. Most people sort of roll with the punches and understand it, but there are always some people who are less agreeable. Part of what you do on the board, and part of what you do as a lawyer is to make sure people have the information – so that if they're willing to understand, they can.