New York's Cooperative and Condominium Community

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NEW YORK STATE

State Senator Tony Avella (D-Bayside) officially announced last week the inclusion of a tax-relief program for small homeowners, renters and co-op and condo owners in this year's New York State budget. After the original proposal entailed tax relief solely for renters, Avella introduced legislation to include condominiums and cooperative owners and other homeowners.

Unit-owners were vocal about the loan. "Some didn't want the debt, period," recalls Patrick Niland, president of First Funding of New York, the mortgage broker for the transaction. "There were a series of very intense meetings. At one, there was an exchange that almost came to blows."

When the board of a 39-unit Yonkers co-op 293 North Broadway had to pull a job from a shoddy contractor and bring in new blood, the original contractor promptly put a mechanic's lien on the property. The board could have responded with a lawsuit. Instead, it tried arbitration. Did that procedure work? Yes and no.

When the board of a 39-unit Yonkers co-op 293 North Broadway had to pull a job from a shoddy contractor and bring in new blood, the original contractor promptly put a mechanic's lien on the property. The board could have responded with a lawsuit. Instead, it tried arbitration. Did that procedure work? Yes and no.

Your first question has a simple answer: yes. Ever since August 1997, when New York Governor George Pataki signed an amendment to the 1964 Condominium Act, condominiums and homeowners' associations have been able to borrow money for repairs and capital improvements. Terms range from 5 to 10 years, with either floating or fixed interest rates. Amortization rarely exceeds 10 years (although I recently arranged a 15-year fixed-rate loan), making every loan self-liquidating over its term. As "collateral," lenders take an assignment of the association's right to collect common charges from the unit-owners.

The board of a 39-unit co-op in Yonkers recently locked horns with its engineer and contractor over a disputed $1.2 million exterior repair job. Loath to spend time and money on a lawsuit, the seven directors opted to pursue mediation and then arbitration. This board's story has some agonizing moments — and some valuable lessons along the way.

One man, they say, can change history. And in 2003, David Pullman did just that, lending his name to the precedent-setting court decision in 40 W. 67th Street v. Pullman. 

Financial professional Pullman — who'd already made headlines working with David Bowie to package the singer’s copyrights and catalog into what he trademarked as “Bowie Bonds” — had a documented history of ranting, raving and circulating defamatory fliers about various perceived transgressions at his Rosario Candela prewar classic. He pushed the co-op board and the shareholders to their limit, and then some. Finally, in a landmark turn, 100 percent of the shareholders voting in a special election, representing 75 percent of the shares, agreed to kick him out. The subsequent court case upholding that action solidified New York State co-op boards' nuclear option: eviction for "objectionable" behavior.

The landmark court decision in 40 W. 67th Street v. Pullman (2003) set the precedent that fully established that New York State co-op boards could, within certain criteria, evict shareholders found to be "objectionable." Many jocularly call this "the nuclear option," and it should only be used as a last resort. There are options boards can take before circumstances reach that extreme point. 

But if you do need to pull a Pullman, how do you go about it?

The insurance company and the board were soon wrangling over their widely divergent cost estimates, the scope of the work, what was covered under the policy and when the settlement would be delivered. Eager to get the job moving forward, the co-op board announced it was going to begin repairs in July 2009, seven months after the fire, with the money offered by the insurer — but would continue to fight for a larger settlement. Here, a bit of luck worked in the co-op's favor.

It all began on a cold December afternoon in 2008 at The Broadlawn, an elegant Jazz Era compound that houses 121 co-op apartments in White Plains, N.Y. Workers were repairing the slate roof and repointing the brick façade, and, though the contract stipulated that no acetylene torches were to be used on the job, one worker with the subcontractor was using a torch to speed the drying of mortar before the crew knocked off for the weekend. The flame ignited the roof. Soon the blaze was spreading out of control and a dark black cloud was boiling into the cold winter sky.

This is the story of that devastating fire, which wound up testing the residents, educating them and, finally, making their co-op stronger than ever.

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