NEW YORK CITY

We represented a co-op building that had a number of leaks within a short period of time. Each was caused by shareholders and caused significant water damage to other apartments and common areas of the building. We met with the board and evaluated what steps could be taken to reduce the leaks and to create greater legal requirements to protect the building and its shareholders. Merely submitting insurance claims to the carriers of the cooperative and hoping they would cover the losses was not a viable option. 

We also met with the building's managing agent and engineer to see if there were conditions that contributed to the frequency of the leaks. As a result of the inspections, the engineer suggested annual inspections and maintenance of certain plumbing pipes and fixtures that, under the proprietary lease, were the responsibility of the shareholders. They included checking visible piping in bathrooms and kitchens as well as toilet gaskets, inspecting caulking in showers and bathtubs, and testing shower pans. We recommended that the cooperative's proprietary lease be amended to require all shareholders to carry insurance policies that covered damages and losses resulting from leaks and similar conditions. We also suggested that the proprietary lease and house rules be expanded to codify shareholder responsibilities relating to these issues. The board also implemented a more aggressive policy to act on the enforcement of the proprietary lease and house rules. 

Takeaway

A board can take action to implement fair and protective measures that the shareholders will support after being informed of the problem and presented with viable solutions.

Dennis H. Greenstein is a partner at Seyfarth Shaw.

We handled a transaction where a building installed a cogeneration system that allowed the building to realize savings on the costs to heat its hot water and, at the same time, provide backup power to allow the building to have some elevator service, emergency lighting, and hot water during a power outage. In addition to the utility savings and the advantages of having a backup power resource, the building qualified for a New York State grant to help fund the project.

Takeaway

The project was the brainchild of an energy consultant retained by the building to explore different ways it could stay ahead of the curve in terms of energy efficiency when considering upgrading its elevators. When a building is contemplating a significant capital improvement to its mechanical systems, it would be worthwhile to investigate what energy efficiencies can be achieved in connection with such an upgrade and what government subsidies might be available to defray the costs.

Robert J. Braverman is a principal at Braverman Greenspun.

A luxury condo's board exercised its right of first refusal to match the offer of a purchaser to buy an apartment, and assigned the purchase right to a neighbor of the seller. The condo also agreed to license a portion of the adjacent hallway area to the neighbor, in exchange for a significant license fee to the condo.

Can it do that?

The seller refused to proceed with the sale and, instead, sued everyone involved. But the lower court upheld the condo's right to exercise its right of first refusal and to assign the purchase rights to the neighbor, thus making new law. The appellate division affirmed. The closing should occur shortly.

Takeaway

Board powers are very broad if exercised in accordance with procedures set forth in the plain language of governing documents. Boards should not shy away from revenue opportunities that comport with governing parameters.

Aaron Shmulewitz is a partner at Belkin Burden Wenig & Goldman.

Difficult residents? In New York? Get outta here. Unfortunately, it's a fact of life for cooperatives and condominiums. Difficult residents come in all sorts: they may make noise at all hours or, even worse, not pay their maintenance, common charges or assessments. How co-ops and condos deal them varies.

Before giving your board attorney the go-ahead to try to make a deal with the bank, there are variables you need to consider. Veteran real estate attorney Marc Schneider, a partner at Schneider Mitola, says it's important to make sure the attorney handling the association's foreclosure is very familiar with the process "and not just pushing the thing through, but paying attention to the fine details so you can avail yourself of every possible opportunity to recover your funds."

Where there is opportunity, there are opportunists. The insurance industry — and the public adjuster business — is no exception. In 2014, after a string of cases where rogue public adjusters scammed homeowners by steering them to use contractors with whom they had undisclosed relationships, New York State passed legislation intended to end dubious connections and financial arrangements.

Insurance claims rarely — if ever — end up in litigation, say experts, and never for damages. In the event of a disputed claim, every insurance policy affords either party an appraisal for matters of value, which is binding arbitration. A public adjuster also ensures litigation is rarely taken. 

"You go and ask a contractor for an estimate to repair your building and the contractor says he wants $750,000 and the insurance company says, no, it is only worth $500,000," says Bob D'Amore, president of the New York Public Adjusters Association, an approximately 100-year-old organization that brings together 164 of the roughly 400 licensed public adjusters in the state. "Somewhere in there is the truth. How do you come to that truth and maximize the recovery? That is what a good public adjuster can do."

Steve Gutenplan, president of Affiliated Adjustment Group (AAG), says relationships with insurance companies blow hot and cold but the majority of claims are settled professionally, without conflict. "[Insurance companies] are not my best friends and they don't give me a blank check, but we know how to co-exist," he says. "Either we have fought in the past and want to find an amicable resolution to a claim, or I'm going to make them not want to fight with me again. Usually we are pretty successful."

When something major goes wrong at a co-op or condo building — and we're talking pretty huge, such as a construction crane falling against a condo or a storm ripping the roof off a co-op — there's going to be more than one insurance company involved. For that reason, co-ops and condos may want to consider using a public adjuster — an independent insurance specialist hired by an insured party to secure a claim that better reflects the work required to repair damages.

Last week, we took a look at how renting out a foreclosed apartment can give a condo association leverage with a bank. It's an unusual approach, but it can be tricky to get a bank to see how everyone can stand to benefit from a negative situation. As Peter Lehr, director of management at Kaled Management pointed out, it's all about alliances: "It could be successful… You've got to say to them, 'We can get this done faster, so let's partner on this. No one gets hurt in this partnership. You get a little bit, I get a little bit — we're all happy.'" But some banks are harder to convince than others.

Your co-op or condo is probably properly insured. But that may not be enough to cover the cost of repair, especially if the incident is major: a construction crane falls against a condominium building and damages the façade and several apartments; a fire creates havoc on several floors with smoke and water damage; a storm rips a roof off a co-op building and exposes shareholder units to wind and weather-related damage. "The insurance company gives a determination of what happened, what was damaged, whether it is covered, and what the cost would be to repair the damage," explains Ed Mackoul, president of Mackoul & Associates, an insurance brokerage. But, he adds: "The insured are not always happy with the result they get."