Page 17 - NY Cooperator June 2019

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Actions and Consequences When board members deliberately abuse their powers, they can face consequences that make whatever gains they’d hoped to get out of their position seem hardly worth it. “Selective enforcement of the documents may result in shareholder or unit owner un- rest, and possible action to remove a board member for cause,” warns Reilly. “These are all distractions for corporations and condo- miniums that detract from the hard work that volunteer board members put in each month to help run their communities. If a building or a community develops a repu- tation for not having consistent enforce- ment of its rules and regulations, that may negatively impact the sale and transfer of apartments and homes in that community. Additionally, board members could find themselves facing jail time if they are found to be engaging in self-dealing conduct or kickback schemes.” Occasionally, a board member will vio- late the rules in an effort to appease demand- ing residents. This rarely works out well. “A fundamental problem is that everyone eggs on board leaders to spend as little as possible and to keep assessments low,” says Gelfand, adding that part of the issue may be people’s tendency to balk at paying for intangibles. “Sometimes it’s effective for le- gal counsel to point out to an association’s directors, as well as the membership, that they really do not want to live in a commu- nity that has the smallest budget and lowest assessments. “We have had high-rises next to one an- other, governed by their individual associa- tions,” he continues. “One had residents who were willing to pay for upgrades on a regular cycle. The other had residents there for de- cades who did not see why they ever needed to do anything different from what they’d al- ways been doing, because everything looked fine from their point of view. Observing the buildings side by side, one appeared sleek and modern while the other appeared to be crumbling from disrepair. As a result, resale prices were substantially different!” Whether a board member bends the rules in an effort to seem magnanimous, or does so solely to line his or her own pockets, deviating from community governing docu- ments is always a bad idea. Those particular rules are laid out for good reason, and fol- lowing them in good faith is a solid strategy for avoiding most serious trouble. When it comes to association governance, the cool kids are the ones who dutifully follow all of the rules. n Mike Odenthal is a staff writer/reporter with The Cooperator. GOVERNING... continued from page 11 Blurred Lines Confusion can arise when a board mem- ber or manager is perceived to be engaging in behavior that is objectively not in violation of anything in the law or the documents, but just seems, well...wrong. “I can’t tell you how many times a board or manager will call to report a violation and I cannot find a rule or restriction to cite when I prepare to send a demand for compliance,” says Magill. “Obviously you cannot enforce a rule that doesn’t exist. However, there are mores in each community that may not rise to the level of rules, but are frowned upon or will draw backlash if violated. Failing to wear decent attire, using foul language or deroga- tory slurs, and other simply-put ‘bad’ behav- ior in common areas is problematic. Allow- ing your dog to urinate on the balcony so that it drips down on other units is disgusting, but not typically addressed in rules until it hap- pens. Formal rule-making may be necessary to initiate an enforcement process, such as levying fines or pursuing arbitration, unless the conduct is so outrageous – and persistent – that it is considered a nuisance.” “The association is on its most solid foot- ing when the enforcement action deals with a violation of a written regulation,” admits Katz-Leavy. “Sometimes you can hang your hat on a more general rule, such as ‘a unit- owner cannot do anything that constitutes a nuisance.’ In general, the association has fairly broad latitude for regulating conduct that oc- curs within its common elements, but they’re much more limited when it comes to regu- lating activities taking place within an indi- vidual unit.” When the governing documents do fail to indict particularly egregious behavior, a board member or resident can always try and appeal to the conscience of the trans- gressor. “The best guide for board members and the managing agents who work with them is common sense and an innate sense of right and wrong,” says Shmulewitz. “If it feels wrong, or you would be embarrassed if the matter came out in the media, just say no.” That may sound overly optimistic, but it’s BOARD... continued from page 13 always important for the individuals who vol- unteer to run their community associations to have a functional moral compass and a re- spect for their fiduciary duty. After all, we’re all in this together! n Mike Odenthal is a staff writer/reporter with The Cooperator. “A conviction record is not a protected class in housing,” says Koplovitz. “It recently became one in employment, though.” She be- lieves that this will lead to a similar status for housing. “Historically, housing has followed employment in this type of legislation. It’s only a matter of time.” Condominiums Unlike co-ops, which are corporations, condominiums are real property. Thus, condo boards have less control over who can buy in. In many markets outside of New York City, a condominium requires little or nothing from the buyer or seller to approve a sale of a unit. In New York City, however, condominium associations are requiring buyers to complete board approval packages; that may be due to the influence of the co-op market. “Condos in New York City ask for basically the same information as a co-op,” says De Leon. But the remedy afforded to a condomin- ium board looking to reject a buyer is quite different than a co-op. Unlike a co-op, which can simply say ‘no thanks’ to a prospective buyer and move on to the next one, a condo- minium board has a right of first refusal. In simple terms, if it is unhappy with a prospec- tive buyer for whatever reason and chooses not to approve the sale, the board can elect to purchase the unit itself at the same price as the prospective buyer. This is a very rare oc- currence, as few condominium associations have the available cash on hand or in their reserves to purchase units that can have high six- and seven-figure price tags. In the final analysis, co-op boards should be rigorous in their assessment and vetting of potential buyers. But they also careful not to veer into discriminatory practices when de- termining who their neighbors will be. VETTING... continued from page 15 continued on page 18