Page 10 - New York Cooperator July 2020

10 THE COOPERATOR — JUNE 2020 COOPERATOR.COM from the budget. In terms of income, buildings and limited-equity co-ops from the nimble- communities have been holding their ness and flexibility that other associations comes to PPP access. This publication breath to see how the pandemic will im- pact the collection of assessments and other fees. Each month tends to tell a dif- ferent story, and seems to be case-specific communities’ fiscal assumptions, it leaves under the CARES Act. (See, for example, depending on location, demographics, them in limbo, with little to no control. www.cooperator.com/article/co-ops-con- preparations, and communications. So “Obviously, our crystal ball wasn’t work- far, Stoller says he has not seen any im- pact on collection of fees from residents, like most co-ops, we could never have with U.S. Sen. Chuck Schumer and U.S. but commercial tenants have been gravely anticipated the turmoil that would ensue Rep. Alexandria Ocasio-Cortez, appealed affected. While in his client communities from this pandemic. … We continue to directly to U.S. Treasury Secretary Steven commercial rent is not part of the associa- tions’ income stream (those portions of ket co-ops, state-supervised co-ops can’t Carranza, claiming that the SBA had is- the buildings he manages are separate en- tities from the co-op or condo portion), then have it implemented by August or gibility for co-ops. Engel, whose congres- the demise of the businesses with which September.” residential communities share space will likely have an impact, both financially closely monitoring its budget and, as County, including Yonkers and New Ro- and in residents’ quality of life. Special Cases Regardless of the larger economic despite the obvious challenges,” he re- and social landscape, any discussion of ports, “and our finance manager, Wendy just like any small business—should be el- budgeting should include a caveat: For Cosgrove, along with \\\\\\\[board treasurer\\\\\\\] igible for the same relief made available to cooperatives and associations incorpo- rated under various city, state, and fed- eral housing programs, the accounting pressures of monitoring our budget, deal- and reporting processes differ somewhat ing with various financial issues, and try- from those of a typical co-op or condo. ing to anticipate any budget problems be- In New York, these types of limited equity fore they can arise.” developments account for tens of thou- sands of units of housing for hundreds of diligent in its communications with the providers. As reopening plans proceed, thousands of people. Charles M. Zsebedics is General Man- ager for the Amalgamated Housing Cor- poration and Park Reservoir Housing whether the NYSHCR would need to plans in place to do so. The question on Corporation, in New York City, and ex- plains some of these differences. With 274 gram for their affordable housing portfo- units, Park Reservoir is the first Mitchell- Lama development in New York State; budget deficits,” offers Zsebedics. Col- with nearly 1,500 units, Amalgamated lecting this data could be an effort to “en- Housing Corporation is the first and old- est Article 4 Limited Dividend co-op in properties—don’t fall so far into financial may have to assess whether their expo- the country. As a limited dividend coop- erative, Amalgamated is required under cult to dig ourselves out of a large deficit,” reserve fund for legal defense and fees. the New York State Homes and Commu- nity Renewal (NYSHCR) budget process to provide a two-year budget. “Therefore,” says Zsebedics, “when we received our ap- proval for an increase in August of 2019, limbo: whether they, their commercial perhaps there will be a little more certain- it was for the period up until August 2021. tenants, and/or their individual residents ty around the many considerations that That is the earliest date when Amalgam- ated can ask for another increase—unless, of assistance from the federal government hand, the unrest around social inequali- for example, we decide to refinance our in the wake of the pandemic. Small busi- mortgage before then, and would have to nesses that have received loans via the for upheaval around the presidential elec- consider an earlier increase. “Most HCR supervised buildings have apply those funds to their rents, allowing es and considerations as yet unforeseen. to pursue the HCR’s Budget Rent Deter- mination process,” he continues, “which current on their payments … for the time as ‘normal’ times, a budget is ultimately under normal circumstances can take being. And residents who are employees a best guess—and change is a given, no anywhere from six to eight months to of those recipient businesses might now matter what the circumstances. complete, including an HCR carrying have a paycheck when they didn’t a month charge hearing with shareholders, which or two ago … again, as long as their em- requires testimony from shareholders on ployers can continue to afford payrolls the pros and cons of any increase and how with those loans, or from their businesses it will affect them and the various income reopening or resuming normal function groups within the co-op.” Depending as state and local restrictions ease. on this provisory relationship precludes might enjoy in their budgetary processes. Thus, when unanticipated global cesses some associations have had when events such as a pandemic upend these it comes to loans and grants approved ing in early 2019,” quips Zsebedics, “and U.S. Rep. Eliot Engel of New York, along watch closely, because unlike free mar- decide they need an increase in July and sued “conflicting guidance” over PPP eli- For its part, Amalgamated has been of the Bronx and parts of Westchester Zsebedics says, “holding \\\\\\\[its\\\\\\\] own.” “Our chelle, said in a previous letter on the sub- income stream remains relatively stable ject, “\\\\\\\[C\\\\\\\]o-operatives themselves—which Ed Yaker and president Howard Kamiel, other small businesses. That includes the have been extraordinary in handling the Paycheck Protection Program and other Notably, he adds, NYSHCR has been may face as both employers and housing co-op, requesting frequent updates to boards are also reopening amenities that the state of both its revenues and arrears. were closed or restricted to prevent the “I suspect that they may be monitoring spread of coronavirus—or are putting implement some additional financial pro- lio should some or many fall into major will subject them to lawsuits either alleg- sure we—and I am sure other supervised little legal precedent to rely on, boards difficulties that makes it much more diffi- he says. Waiting for Government Response There’s another question keeping will be approving their budgets in the boards and their budgets in a state of approach to the end of their fiscal years, will be eligible for—and receive—any type the pandemic has raised. On the other Payment Protection Program (PPP) can tion in November, might usher in chang- at least some commercial tenants to stay But even in what we used to understand Co-ops and condos themselves have been in a type of Twilight Zone when it has reported on the struggles and suc- dos-hoas-ppp-loans.) In a May 26 letter, Mnuchin and SBA Administrator Jovita sional district includes the northern part have employees and operating expenses loans administered by the Small Business Administration.” Also up in the air is the exposure to legal liability that co-ops and condos everyone’s mind is whether opening—or not opening—these spaces and services ing negligence or alleging denial of rights. With so many nuances to such claims and sure rises to the level of needing a specific In Conclusion In the fall, when most associations ties and policing, along with the potential n Darcey Gerstein is Associate Editor and a Staff Writer for The Cooperator. BUDGETING... continued from page 9 running the cooperative. A board can rely on the advice from professionals to this end. If you feel that your board has over- stepped its obligation to act in good faith and in the best interests of the corporation, you could have a reason to challenge the board’s decisions. However, this would be a very tough course of action. “Aside from that, the only possible con- cern you may be able to raise with your board is if there has been a miscalculation of your share of the maintenance increase and assessment. A shareholder is only re- quired to pay the proportionate amount of the annual budget or assessment based on the number of shares allocated to that apartment. If your building is not properly calculating your maintenance and assess- ments based on the number of shares you have in the corporation, then you could reach out to your board to make any neces- sary adjustments.” Tenant Obligations During a Foreclosure Q One of our condo units that the owner was renting out to a tenant is now in foreclosure. But before the unit went into foreclosure, the owner (who has been missing in action) was be- hind on the common charges and the con- do board was taking the tenant’s rent to pay for those common charges. Now the tenant refuses to pay, claiming he doesn’t have to because of the foreclosure, and he still re- mains in the unit. Can the condo sue the tenant for the common charges? —Concerned Unit Owner A According to Slava Hazin, a partner at the New York City law firm Warshaw Burstein LLP: “The tenant’s obligation to pay rent to the landlord and, in turn, the condo, has nothing to do with the foreclosure action. The condo could sue the tenant to collect the rent if there is a provision in the tenant’s lease that the condo has the right to collect the rent in the event of the owner’s failure to pay common charges. Condos usually require a lease rider with such a provision to protect the condo. Keep in mind that the condo has a claim for all unpaid com- mon charges, attorneys’ fees, and costs in the foreclosure action. The sale proceeds are distributed first to pay the mortgage (if any) and then to the condo.” n Q&A continued from page 5 Disclaimer: The answers provided in this Q&A column are of a general nature and cannot substitute for professional advice regarding your specific circumstances. Always seek the advice of competent legal counsel or other qualified profes- sionals with any questions you may have regard- ing technical or legal issues.