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Alterations

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First published: Nov 2022
My Leaking Doors, Your Cost To Fix

This fact pattern is fairly common in cooperatives. A shareholder will undertake an alteration, and the alteration agreement with the cooperative will state that the shareholder is responsible for the repair and maintenance of the new fixtures, walls, etc., and that subsequent owners will also be responsible. But decades later, when repairs are required, there is no agreement with the new shareholder in which he assumes the obligations under the alteration agreement. To make matters worse, management may not even have a file on this matter (since management often changes over the decades). Unless the proprietary lease has precise language binding the shareholder, there is little to do. It should be noted that some cooperatives require a purchasing shareholder to sign an Assumption Agreement of the prior lease, as well as executing a brand new proprietary lease. Some Assumption Agreements include language which states that the new shareholder assumes not only the old lease, but also any other agreements between the (selling) shareholder and the cooperative. This might be enough to hold the new shareholder responsible for problems with a prior alteration, but at this time the courts have not reviewed this issue.

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First published: Sep 2022
Endless Renovations

If the duration of an alteration project is of concern to a board of a cooperative or condominium, care should be taken to ensure that all material information, including the specific deadline and consequences for failure to meet it, are clearly spelled out in the agreement. Even a seemingly minor mistake or unintentional oversight can have major consequences and a potentially significant impact on building operations.

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First published: Sep 2022
Brodie v. Board Of Managers Of The Aldyn Condominium

Takeaway If the duration of an alteration project is of concern to a board of a cooperative or condominium, care should be taken to ensure that all material information, including the specific deadline and consequences for failure to meet it, are clearly spelled out in the agreement. Even a seemingly minor mistake or unintentional oversight can have major consequences and a potentially significant impact on building operations.

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First published: Feb 2020
Wachtel v Park Ave & 84th St., Inc.

This case raises a number of interesting issues for both boards and purchasers. As a purchaser, it is important that you do your due diligence, although it is not clear typical diligence could have helped these purchasers. There are representations that should be requested in a contract, but there is no indication here that the seller even knew there was an issue with the entrance or with the share allocation. Moreover, it is unlikely that any lawyer would seek to look at minutes going back 40 years, nor is it very likely that a managing agent would provide them. Having said that, the ADA-non-compliant step was obviously in place, and the purchaser could have inquired about it and retained an architect to look into DOB records. Although it is somewhat beside the point of this case, it is important to remember that someone purchasing a even a small home outside of Manhattan will have a home inspection, yet someone buying a far more costly apartment will often do no physical or architectural diligence at all. While it may cost more in the short term, asking an architectural professional to look at an apartment and public records might save money in the long term. As to the share-allocation issue, the court was able to rely on the business judgment of the board in part because the board had records that showed that the determination concerning the share allocation was made in accordance with proper corporate governance. This is important. Boards should make determinations at board meetings; minutes of those meetings should accurately reflect what took place; and those minutes should be maintained.

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First published: Dec 2018
Perrault vs. Village Dunes Apt. Corp.

There are some co-op proprietary leases and condo bylaws that require that certain acts of the board be reasonable or that its consent not be unreasonably withheld. These are found most often in provisions concerning alterations and the establishment of house rules, or other rules and regulations. When reasonableness language is present, the burden is on the cooperative or condominium to demonstrate that its acts were “reasonable.”

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First published: Dec 2017
Matter of Steinberg-Fisher v North Shore Towers Apts., Inc.

Alteration work that drags on with no end in sight is a problem in all buildings. Neighbors are disturbed by noise, odors, and workers, and building systems (especially elevators) often endure additional strain. On the other hand, if a shareholder is physically or psychologically incapable of complying with policies, the policies must be reasonably modified. It seems this case is one where the courts would have liked to see the parties engage in an “interactive process.” It is a construct often used in employment cases, where the parties collaborate to arrive at a solution acceptable to all. It has been applied in the housing context for the last several years, and it appears that the court here was indeed bothered that the parties went, almost immediately, into “litigation mode.” It seems Steinberg-Fisher wanted unlimited time, and the board was unwilling to budge from the 90-day limit. When a reasonable accommodation is requested – especially one, as here, in which the need for some accommodation appears to be unchallenged – it is important that the parties speak with one another in an attempt to find a solution acceptable to all. That approach can often obviate the need to involve the DHR or the courts altogether, which is always preferable.

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First published: Sep 2017
Moltisanti v. East Riv. Hous. Corp.

An important issue in this case was whether either party was likely to succeed on the merits – a necessary element for the granting of a preliminary injunction. The lower court determined that Moltisanti would probably prevail because of the actions taken by the board. The appellate court, however, demurred, finding instead that the board’s actions created issues of fact, meaning that the case had to go to trial for resolution. Although Moltisanti v. East River Housing Corporation will not be the final word on this subject, we remind boards that they may not be able to rely on a proprietary lease clause if the cooperative, through its board or agent, violates that provision. We cannot stress often enough the need to comply with governing documents and procedures.

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First published: Jul 2017
Coliseum Tenants Corp. v. Benmark

This case is an important reminder to purchasers: always do your due diligence. Purchasers may want to review DOB records and have their lawyer get as much information as possible from the managing agent – not just what can be gleaned from board minutes. If a purchaser suspects an alteration may have been performed without appropriate permits and sign-offs, it would be prudent to obtain from the cooperative written confirmation that the alteration work was done with consent, or an indemnity from the seller, should an issue involving a previous alteration arise. Further, this case highlights the importance of properly maintaining records. We believe this problem will be minimized given the data programs available and the current practice of scanning most documents electronically. Finally, although it is not discussed in depth in the decision, Benmark was using the apartment for short-term rentals, in violation of the law and therefore the lease and building rules. There is no discussion as to whether Benmark has ceased that practice.

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First published: Dec 2012
Cogut v. 1220 Park Avenue Corporation and Brown Harris Stevens, LLC

This case reminds us that agreements entered into between shareholders and their co-op boards are contracts and the courts will treat them as legally binding. It has long been the law that one is presumed to have read what one signs. Plaintiffs’ argument that they had not read the final version of the alteration agreement before signing it was of no moment. Nor could they successfully argue that they reasonably relied on the managing agent’s alleged representations that the agreement was substantially the same as the prior version the plaintiffs had signed. As to electricity, boards do have the discretion to take the needs of all shareholders into consideration when deciding how to allocate services such as electricity. Plaintiffs’ claim that increased amperage had been approved in their alteration application was belied by documentary evidence. Importantly, boards also have the right – found in statute and case law – to rely on the advice of their experts. Finally, although we have seen other decisions where the court did not permit liquidated damages, the court here upheld the liquidated damages provisions of the alteration agreement, rejecting arguments that they should be invalidated as an impermissible penalty. The court specifically noted that the amounts charged – $250/day for the first five days; $500/day for the next five days; and $1,000/day thereafter – were not unconscionable or in violation of public policy, particularly given the scope of the project.

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First published: Sep 2009
Batsidis v. Wallack Management Co. Inc., et al.

The shareholder and co-op entered into an alteration agreement that required the shareholder to pay all of the corporation’s costs associated with the shareholder’s proposed alteration. The appellate court recognized that the provision was intended to insure that other shareholders of the co-op were not required to pay charges directly attributable to a single shareholder’s renovations. Importantly, the court drew a distinction between the provisions of the alteration agreement and proprietary lease where the lease typically requires a shareholder to pay the co-op’s legal fees in the event of litigation between the co-op and a shareholder. In the case of the lease, the court explained, public policy considerations must be taken into account so that people are not dissuaded from seeking “judicial redress of wrongs.” This is not a concern when a shareholder and a co-op contract through an alteration agreement to require a shareholder to pay costs associated with issues directly related to a particular apartment. Query whether a proprietary lease should be amended to specifically permit a co-op to charge back shareholders for professional fees incurred in connection with a specific apartment in the absence of litigation.

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