New York's Cooperative and Condominium Community

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Every once in a while, an apartment owner reports that he or she has heard that, because his or her apartment is in a building that is located within a registered historic district, the owners of apartments there have an opportunity to obtain a really big income-tax deduction without any appreciable cost. The thing to do, they say they were told, is to "donate" a "façade easement." What they want to know, of course, is whether it works. And, oh, yes, they also want to know just what is involved in making such a "donation."

A board member wished to borrow a portion of the reserve fund for a personal business transaction. He agreed to (a) pay seven percent interest on the money, (b) repay the money within 30 days of a demand by the board, (c) execute an assignment of rental income from a rental property he owned, (d) execute a confession of judgment for the full amount of the loan, and (e) repay the loan in full and any accrued interest within 90 days. The board member’s transaction closed and the money was repaid to the association. Everything went off without a hitch — and then the firestorm ensued.

Nov. 2, 2012 —  It was the "the perfect storm," "the storm of the century," or just Hurricane Sandy. And after the powerful storm struck New York City on Monday, more than 3.75 million people were hit by power failures from the hurricane, which even before it made landfall buffeted the region with savage winds, storm surges and torrential rain.

Numerous condominium associations that our law firm represents have experienced difficulty in collecting past-due common charges from a significant number of condo unit-owners. Even after a condo board has sued the defaulting owner and secured a personal judgment, obtained discovery regarding the location and extent of the owner’s assets through subpoenas and depositions, and conducted searches for bank accounts / jobs / motor vehicles, many owners do not appear to possess any personal assets that the board can ask the county sheriff to attach in an effort to satisfy its judgment.

With no apparent personal assets that the board can ask the county sheriff to attach, the delinquent unit-owner continues to reside in the unit, the arrears keep growing, the lender's foreclosure action is years away from conclusion and the other hard-working unit-owners in the association are saddled with making up the deficit. What can a co-op board do to collect on its judgment when the unit-owner has no personal assets?

Ever since New York City largely dodged the bullet of Hurricane Irene last summer, people have been wondering whether the realities of global warming and climate change are going to turn these rare and extreme weather events into "the new normal" for our area. Well, with the devastation wrought by Hurricane Sandy this week, those questions are only intensifying.

It's clear that the high winds from the storm and the resulting surge of water that breached seawalls all over the Northeast overwhelmed us — from individual buildings to large government agencies, everyone was powerless to stop the devastation. In the coming days, the communities affected by the storm will have their hands full just getting things back to normal. But when that arduous job is done, it's time for co-op and condo boards to take the long view and do everything they can to be prepared for the next emergency.

After the annual meeting and the introduction of new members to the co-op board of directors, there was a change in the majority group on the board — and, as is often the case, disputes arose about policies and decisions. A faction of the board chose not to attend meetings so that the two-thirds requirement for quorum would not be met and the board would be unable to make decisions or pass any resolutions.

A condominium client of ours had a building with abandoned units, some in the midst of bank foreclosure. The unit-owners were scattered among various locations. There were questions as to whether, even if these owners were located, any of them maintained any assets that could be executed. The unpaid common charges connected with these units mounted, generating a growing deficit and jeopardizing the scope and quality of the client's services and maintenance.

Our client was a new condominium board in a recently constructed building that suffered from serious Local Law 11 problems arising from defective construction. We counseled the board to retain an engineer to determine the cause of the cracking in the building’s exterior façade bricks. The cause was determined to be improper construction, contrary to filed building plans, which put extra stresses on bricks. Now, once you find that out, what do you do?

In 1978, Harry and Wanda purchased the stock and proprietary lease allocated to their apartment. In 1979, they had a daughter, Darlene. In 2005, Harry died, and in 2010 so did Wanda. In 2012, Darlene asked the co-op board to transfer ownership to her. The managing agent checked the building's proprietary lease and found that a child of a deceased shareholder had broad rights to have the apartment transferred to herself. The agent confirmed that the stock and lease had been owned by Harry and Wanda and prepared a new stock certificate and lease.

In the process, the agent almost caused an expensive lawsuit that the co-op probably would have lost.

There are many buildings in which apartments are owned by sponsors / investors so that they have a sufficient number of votes to elect people to the co-op board. Thus, we often see situations where the residential board members hold minority positions. Since sponsors can — and regularly do — control boards for a period of years regardless of whether they own many (or sometimes any) units, there is often the question of whether the residential owners are adequately represented.

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