By: Mark Levine
In New York City, residential apartment buildings that are greater than 6 stories are required to do an exterior inspection every five years, pursuant to Local Law 11. Right now we are in the midst of Cycle 7 and beginning in 2015, Cycle 8 will be upon us.
On May 5, 2014 the City of New York released a memo to all building owners that included with the Cycle 7 reports, all buildings that need to comply with the LL11 now have to go one step further and inspect all balconies, terraces, handrails, fire escapes, etc. The buildings need to be inspected by a qualified architect or engineer and then must submit a letter to the city by February of 2015 outlining their current status; whether that is SAFE, UNSAFE or SWARMP.
We are recommending to all building owners that they get in touch with their architect of record to go over this new law and begin the process of inspecting for the required report.
This is a quick tip to lock down your House Rules to make them more enforceable.
Many buildings have House Rules that are outdated, or even original to the conversion. If the House Rules are outdated and are not providing for infractions and penalties for those breaches, are they really enforceable?
The Board has the authority to amend the House Rules and we recommend that when the House Rules are redrafted, place the specific infractions, penalties and fines that will come with each infraction. By laying this out, each resident will have notice of what the graduated steps will be for any breach of the Rules.
Once they are redrafted, we recommend mailing them out or handing out to each resident. When they do receive these new rules, each resident should sign an acknowledgment form that they both received the rules and after they had time to digest the new changes they should acknowledge that they have read and understand the House Rules as they are now drafted.
In addition to current residents, we also include both the House Rules and the Acknowledgement in all resale, sublet, refinance and transfer packages for each building so that all future residents will have read and understood the House Rules (and we have it in writing).
By following this simple advice, all buildings should be able to clamp down on breaches of the House Rules and can collect on the penalties that will no longer be seen as arbitrary.
**DISCLAIMER** I am not an attorney and this is my opinion based on experience in the field of Property Management. For legal opinion on this and other related matters, it is in any person or Board’s interest to seek independent legal counsel.
In this video, Mark Levine of Excel Bradshaw Management Group tackles the issue of a Cooperative Board’s ability to not approve a sale due to the purchase price that they are presented with. This is a tricky situation, but one that requires diligence on the Board’s part to ensure that the decision they are making is based on market value and not on perceived value.
Before we get into the answer and noting how a Board can avoid running into an issue of wrongly turning down a sale for the purchase price, it is worth going over the protected classes in NYC and noting which factors are not to be considered when making a decision to allow a prospective purchaser pass through the board application process.
Presently in NYC, the protected classes (and these are groups of people who cannot be discriminated against or prevented from obtaining housing based on these factors) are: Age, Alien Status, Children (or childless state), Country of National Origin, Creed, Disability, Gender (including gender identity), Lawful Occupation, Marital Status, Military Status, Partnership Status, Race, Religion or Sexual Orientation.
Now that we have the factors that can’t be considered out of the way, we can talk about what can go into a decision to deny an applicant by a Cooperative Board. Financial instability is, of course, one of the main factors for not permitting a sale to go through. If the prospective purchaser is not able to carry the apartment’s mortgage + maintenance + other expenses, the Cooperative could be placing itself at risk for a default on maintenance and potentially creating a future of legal issues.
There is one other area that should be considered as well; purchase price. Some buildings will try and set an absolute floor, whereby they will alert all Shareholders that they will not accept any sales below a certain amount. This amount could be a per share amount, per square foot amount or if most apartments in the building are similar, they could create an absolute price. This will work only if the Board’s requirements are in line with the present market value of these apartments.
We have run into these situations before where a Board will deny based on a purchase price and the ruling is challenged by the outgoing Shareholder. To counteract this and to also avoid possible legal between the shareholder and the Board, we have taken the step to be proactive. We have advised our Boards that it is in their best interests to hire an independent appraiser to come into the apartment and work up a full appraisal on behalf of the Board so that they can get a sense of the real world market value of the apartment.
An example of how this will work out in the Board’s benefit is an apartment that is under contract for $200k and they feel that the apartment is worth $250k. An appraisal is ordered for the Board and it is actually shown to be $250k. We can then bring that back to the Shareholder to show that we have these findings and we can work it out with the Shareholder and prospective purchaser to raise their contracted price or they can back out of the sale as is if they both cannot meet the new parameters.
Although this approach sounds like the ideal solution, it can have the opposite effect as well, so Boards should be careful and use judgement when they are ordering these appraisals. The flip-side of the equation is that an apartment has the possibility of appraising for lower than the stated contractual price and in that case, the argument that the apartment was selling for below the market value would be thrown out in the courts should a sale be denied based on those factors and then challenged.
Cooperative Board of Directors have to be realistic when dealing with the sales within the building and this is a great tool that could be used on a case by case basis to ensure that the units in the building are being sold at market value and are helping to preserve the comps in the building. Of course, like any other issue in a Cooperative, a little leeway will have the be given from time to time and each board, while trying to preserve their value, should also be using common sense to not hamper the transactions in their building.
A member of the forum of Habitat Magazine (www.habitatmag.com) posted that her current agent neglected to pay their water bill and now penalties and late fees were being applied. The poster wanted to know if the money that the building is out would be collectable from the current agent.
Mark Levine of Excel Bradshaw Management Group, a NYC property management firm explains a solution to how to avoid this from happening in the future in any building and also gives an insight into a real world scenario that he has encountered with the same issue.
Should the Board try and recoup the losses? Yes, but in order to collect they may have to go to legal with the property management firm and weighing the cost of legal vs. the outstanding fines and penalties will shape their decision. The real question is; will they keep their current firm or search for a new one?
June 3, 2014
NYC BBQ with Propane – Quick Tips
With Memorial Day just passing, now is the right time to talk about BBQ safety in NYC. Everyone should be aware of the propane restrictions in NYC and by doing so, we can keep the risk of fire and explosions to a minimum in the city’s 5 boroughs.
In New York City residential buildings, Local Law 75 of 2011 dealt with the replacement of Carbon Monoxide Detectors in multi-family buildings. On April 1, 2014 the law was amended to also include the oversight of replacement of Smoke Detectors at the end of their useful life, ensuring that all apartments were protected.
Mark Levine, our Vice President is introducing himself in the first of many New York City centric property management videos. Since 1996, our firm has been a 3rd party property management firm specializing in the management of Cooperatives, Condominiums and rental buildings in the 5 boroughs of NYC and also on Long Island. These videos will be a great way for our clients, potential clients and the general public to get a better handle on property management of multi-family buildings, no matter if they are in the NYC area or elsewhere.