Confronting Controversy

It was not the reaction the board of Rupert Yorkville Towers had expected. Concerned about an overpopulation of sometimes unruly dogs at the 1,257-unit condominium complex in the East 90s, the board had passed a stringent new pet policy. Among other things, it required that dogs wear special tags identifying their owners' apartment numbers; that owners register their animals and submit proof that the dogs had been inoculated and spayed or neutered; and that visiting dogs be outlawed. Violators would be charged fines ranging from $100 for the first offense to $500 for the third (with further breaches resulting in the removal of the pet). Not long after the policy was announced, dozens of enraged pet owners registered protests at an open board meeting, and a group of condo owners and renters hired a lawyer who specializes in pet problems to represent them.

"I don't think the board realized it was going to be as controversial as it turned out to be," says the condo's attorney, Howard Schechter, a partner in Schechter & Brucker. "When you're dealing with over twelve hundred units in a very confined amount of space, unlimited numbers of dogs can create problems. What they were finding is that there was a certain percentage of the people who were afraid of dogs, that some people didn't necessarily have their dogs on a leash, and that waste that was picked up by people who were walking their dogs [became a problem]. You're talking about hundreds of dogs leaving waste every day, and when you pick it up it doesn't necessarily get it all up from the sidewalks. So you're dealing with odors and those kinds of things. That's why the board established a set of rules."

And so the battle of the dogs began.

If you want to increase attendance at your annual meeting, pass a new pet policy. Or redesign your lobby. Or ban smoking in apartments. Do so at your own risk, however. Guaranteed, your attendance will increase - but so will your headaches.

"Some people think they can put something in place without touching base with co-op members and that once it's approved, people will have to follow it," observes Herb Cooper-Levy, formerly executive director of the National Association of Housing Cooperatives and currently director of a major non-profit housing group. "Maybe that works in Congress, but it sure doesn't work in a co-op. Saying, 'We're the board and we've got the authority' just doesn't work. Being on a board of a co-op is too representational a form of democracy to hide like that."

"Some boards are not sensitive to the fact that when they are making these decisions they are affecting people's lives," adds attorney James Samson, a partner in Bangser, Klein, Roca & Blum. "But what may be good for governance policy does not always make for a warm and fuzzy community. The easy answer to controversial questions is [to say,] 'We're the board and we can pass these rules.' Yes, you are, but you represent a community, too."

When dealing with controversial issues, boards need to be wary - if they don't prepare properly, sensitive issues can spin out of control and the harmony, quality of life, and, sometimes, even property values can take a nose dive.

Check It Out

The first step a board should make is to research a problem thoroughly. Find out what other properties have done and see if it applies to you. "One rule of thumb is you don't want to be the only building on the block that does something," Samson says. "You've got to look around and say, 'What have other buildings done?' For instance, are you the only building in New York banning smoking?"

Recognize if a policy is going to be controversial. Chances are any lifestyle issues will provoke the ire of some owners. "If it's something that impacts on the quality of life in general it's going to create controversy," says Don Levy, a vice president and account executive at Brown Harris Stevens. "If it's going to impinge on people's use of elevators [such as restricting dogs to the service cars] - if it's going to take away the use of something that they had had before - then it's going to create resentment."

Take, for example, a Manhattan building managed by the Gerard J. Picaso management firm. For years, the storage space in the basement had been utilized in a haphazard fashion: some owners had space, others didn't, while many used more of the room than was fair. The board decided that it was time to allot the storage area more equitably. It hired a consultant to prepare a proposal to do just that, and then announced the changes to everyone. To implement the plan, however, the board had to first clear out the room, which meant that the material had to be packed up and stored elsewhere for the duration of the rehabilitation.

"The only ones who are happy are the ones who had no storage space at all," notes Picaso. "The people who complied with everything all along, and didn't have too much stuff are pissed off because they've got to move their stuff out, while the people who had too much are, of course, hysterical, because they are not going to have the space for all their stuff downstairs. Some of them invested a lot of money in storage cabinets and lockers and now they're gone."

Recognizing that such a scenario would fan flames of discontent was a no-brainer. But other situations are not as obvious. At Satellite 83, a cooperative at 320 West 83rd Street, the board thought the firing of an acting superintendent was a relatively easy call. After all, there had been few complaints when the previous super had been fired, and little notice seemed to be paid when a popular porter was promoted to the top job. After a few months, the board felt the former porter/new superintendent was in over his head and dismissed him. A firestorm of protest was ignited, and a meeting of angry residents took place in the basement.

"We had an underground volcano going on," recalls Gary Aigen, the president. "We went to the basement and addressed the issue, and calmed everybody down, and made everyone realize that this person did not have the skill set or the language to handle this. It took a tremendous amount of debate and negotiation there in the basement. It was a good two hours of back and forth. We did not expect this sort of reaction. Nobody had told us they liked the guy, and we didn't let anyone know in advance that we were planning this."

Trial Balloon

Aigen's board was blindsided. You don't have to be. If you're not sure how a policy is going to be received, send up a trial balloon to gauge reactions. This can be a survey, a letter, or, even, (in smaller buildings) informal talks with the residents.

"You want to get feedback," says Arthur Davis, a management consultant. "If you get a lot of feedback you may want to ratchet it up a notch and have a special meeting or get a committee to deal with it. Keep in mind, however, the one-third rule: one-third of the people will think you're absolutely right, one-third of the people will think you're incredibly wrong, and one-third will simply not want to get involved. And that pretty much goes for everything. Even if people don't like you, though, they have to respect the way you tried to reach out to people to find out what their opinion was. And on key issues that's critical. You should have heightened sensitivity awareness."

The trial balloon can be part of an overall education process, crucial in minimizing stress over a controversial policy. Communicating the whys and wherefores can take the form of a memo or letter, but the preferred method is a one-issue meeting at which the topic under consideration can be explored, questions answered, and any frustration vented.

"Shareholders will let you do what you want, provided that you are doing it in their best interests, and you communicate well with them," Samson says. "You have to give them an opportunity to express their concerns." Adds Davis: "The three words that come to mind are openness, openness, and openness. A co-op is a public company, and you should treat it like the public is involved. You want to engage people."

Samson cites a co-op at 69 West 9th Street, which had a "horrible-looking" lobby. The board hired two architects, and each presented a design proposal at a special shareholders meeting. One of them was very bold, with lots of blues and chromes - an "in-your-face" kind of statement - while the other consisted of earth tones and no sharp edges.

At the meeting to discuss the designs with the shareholders, all hell broke loose. Half of those in attendance preferred one design and half preferred the other. The discussion grew heated, with raised voices and angry fist-waving in the air. Finally, one shareholder stood up and said, "Ladies and gentlemen, look at what we have now. If you can promise me that my lobby is going to look like either one of these choices, I'm voting for it." And that seemed to calm the owners down because they realized that yes, it was a very personal choice, but that anything was better than what they had.

"You have to ask for feedback, but expect that you'll never satisfy everybody," Aigen notes, "and understand in advance that these are the kinds of arguments you're going to get back from these folks. How are you going to deal with it? Don't get surprised or start taking offense at the critiques coming back at you. It's going to come. They'll bring it up in a way that's very insulting and very public. And if you're not prepared, you'll answer in a way that's not very civil."

Some argue that it is also a good idea to get non-board members involved even further by forming committees to look into topics under consideration. Besides co-opting your potential adversaries by placing them in your tent, you also give more universality to any decision you might ultimately reach.

"A lot of shareholders still have an us-against-them mentality," observes George Karpodinis, board president of the co-op at 720-730 Fort Washington Avenue. "They don't seem to fully understand that there is no 'them.' Many were renters for a long time, and then they bought. And they still have that idea that somebody has to be 'them,' and they sort of look at the board as being 'them.' We found that by setting up these committees it can make a difference. We just hired a new super, and to do that we set up a search committee. We had three board members and three non-board members, and it really helped when we settled on one. When we introduced him to the shareholders, we could say this was not just something the board did on its own."

Where such committees are particularly helpful is in lobby redesigns. According to Lynn Whiting, director of management at Argo, decorating committees help defang some of the inevitable complaints about bad taste because "it is a very democratic process and the people who live there get a few choices and get to have their input considered before a decision is made."

Truth and Consequences

Throughout the process, it is important to be flexible. Be willing to modify the policy if you hear valid objections. At Rupert Yorkville Towers, the condo with the strict pet policy, the resulting hubbub forced the board to reconsider. "There have been conversations on behalf of the board and the dog owners concerning the dog owners' concerns, and we're hoping that we're going to work out an adjustment of the rules that everybody will find acceptable," says Schechter, the attorney. "Part of the objection was that people didn't necessarily know how [the policy] would be implemented and were concerned that [it] might be implemented in a way that would be detrimental to them."

In this condo's case, Schechter says part of the controversy arose because the board was new and the conversion to condominium status was recent - within the last year - so everyone was exploring new roles. "These buildings take on a collective personality," he explains. "At the beginning, there's a period of adjustment during which the board and the shareholders or unit-owners at large are working out the relationship between themselves and how they interact with each other. The fact that there is some sort of initial disagreement over how things should be done procedurally is really just a kink in the process and it's not a major issue for corporate governance."

Sometimes, a board completely misreads the mood of the building, and in that case, it is often better to scrap a policy entirely than to fight a losing battle. "If you've made a mistake, admit to it - put it right out front: 'we goofed,'" observes Samson. "Shareholders are pretty forgiving of boards who admit they made a mistake. It's the ones who cover up and dodge the issue that get into trouble. You've got to get out in front of it. Don't wait for them to bring it up at the next shareholders meeting."

That was the case at 180 West End Avenue when the co-op board passed a policy forbidding new buyers from smoking in their apartments. The rule at the 29-story building required potential buyers to declare whether they were smokers, and it would have prohibited smoking in apartment units of residents who moved in after a certain date. The ban would not have affected people already living in the building. A new owner who smoked - or allowed others to smoke - in violation of the policy could have been forced to sell.

Shareholders in the 452-unit building became vocal, both pro and con. The board, caught by surprise, decided to shelve the ban and survey the building. Questionnaires went out, asking if shareholders favored or opposed the ban, and also soliciting suggestions on how to implement and enforce it.

"They got back several hundred responses, close to 300," Stuart Saft, the board's attorney and a partner at Wolf Haldenstein Adler Freeman & Herz, recalled at the time. "Many of the respondents sent back detailed suggestions. The board set up a subcommittee to review the questionnaires." Ultimately, the ban was not imposed.

"Boards can get crazy," says Samson. "Each building sets its own tone and to make any major change in that is to invite controversy because people are being told that their expectations have to change. [That policy] doesn't eliminate smokers in the building - all it does is eliminate smokers from moving into the building. It removes potential purchasers from the market. You can, in effect, bankrupt someone because they can't sell to a smoker."

Indeed, boards should be concerned about how controversy affects the marketability of their buildings. "If brokers see a lot of controversy year-in, year-out, a prospective shareholder who's going to spend three-quarters-of-a-million dollars and sees that - trust me, they'll go to someplace where there is no controversy," Davis notes. "You want brokers to be able to describe your building as very strong and very well-managed. You don't want to have the reputation of one conflict after another. It can affect the market value."

Keeping in Shape

A case in point is the two-building, 234-unit co-op on Fort Washington Avenue, which is exemplary in its efforts to diffuse controversial situations. According to George Karpodinis, the president, the board wanted to convert raw basement space into a gym - but was wary of plunging ahead. "At the time, it was very contentious," he recalls. "People said, 'Why is the co-op putting so much money into the creation of a gym?'"

Karpodinis, who served on the gym committee before being elected to the board, recalls the directors' careful approach to this and all potentially hot button topics: "Whenever we are thinking about doing anything, we carefully research it. We arm ourselves with information and then we go through an educational process [with the shareholders]."

Typically, the board stages quarterly meetings in the lobby, followed by a quarterly newsletter. At the hour-long lobby gatherings, owners are updated on current and future projects. "I have found it's a great way to introduce a subject," says Karpodinis. "Then we follow that up with a newsletter where we mention that again. The meeting and the newsletter [allow us to] ease our way into it.

"As a second step in the process, we'll send out a letter, explaining this is what we're doing and why we're doing it. We give people a couple of weeks to read it, think about it, talk to their neighbors about it, and then we bring them into another lobby meeting just for that issue. And find out how much more work we have to do. There might be questions that came up that we had not anticipated or suggestions that came up. It's really a good way to find out how close we are to getting the amendment passed. Then we go into the third step, the actual formal presentation."

With the gym, the board followed the same procedures, laying the groundwork for what it saw as an income-producer. It put forward a shareholder survey, asking owners which they would prefer: a gym, a community room, or a children's playroom, among other possibilities. The survey showed that most people were leaning towards a gym. The board then sent out another survey asking what type of exercise equipment people wanted - cardiovascular, weight-lifting, etc. - what kind of hours were preferred, and what kind of annual fee?

"We were drawing on the shareholders' input for two reasons," explains Karpodinis. "We were looking for information that could help us in the decision-making process, but we were also selling it at the same time. Once we got all that information together, we mentioned it in a couple of lobby meetings and in a couple of newsletters. We were getting some really positive responses." The gym was built with virtually no controversy and is now turning a profit - a tribute to the board's inclusiveness. "We feel it's important that the shareholders be informed," explains the president.

In fact, information is power, and the best way to reduce tensions in your building is to share some of the "power." For, as Karpodinis puts it, "People love the information. They love being kept abreast of what's going on. I find it makes for a better board, too. Obviously, there are things that require confidentiality, but if you do keep shareholders informed they feel involved. They should. It's a big investment for everybody."