Board Talk: Another Fine Mess: Is $1K OK?

Spritkey: I closed my co-op on February 15; [the] co-op sent me an e-mail today and said they will impose a fine of $1,000 because the tenant from the previous owner hasn’t moved out yet, and the co-op denied me permission to move in until the tenant moves out. I already told the tenant to move out, and she is looking for a new place and will move out soon.

What can I do? $1K seems like a lot. And I do not see anywhere in the house rules where this $1K fine comes from. I’ve enclosed the house rule where it states fine structure. Please help! There is also a sublet rule; the tenant asked me to let them stay there until they find a new place, and they would pay me for the stay. Does the sublet rule apply here?

“12.1 Failure to follow the House Rules constitutes a violation of the Proprietary Lease and is liable to penalties. NOTE: THE PROVISION OF THIS COPY OF THE HOUSE RULES CONSTITUTES A WRITTEN WARNING OF ANY/ALL VIOLATION. 12.2 The general administrative fee structure is follows: First Offense: written warning (see above). Second Offense: $100. Third Offense: $250.”

A: We also have a $1K fine for an illegal sublet in my building. As a board, we are reasonable and will waive it if circumstances warrant. As part of our application, the sublet policy is included so there is no question about it.

You don’t indicate whether the existing tenant from the prior owner had a lease that extended past February 15th. I would think that if the lease had not expired, that you could say to the board, “You approved the lease, and” – I assume – “there was no clause in the lease indicating that the lease terminated if the co-op was sold to a new owner.” If the lease already expired, send a letter to the board indicating that as a new shareholder in a co-op, you were unaware that allowing the current tenant sufficient time to find another place to live would be a violation of the rules. Explain that you would have abided by the rules if you had been aware that this was an issue, and that you have asked the tenant to move out as expeditiously as possible. Then ask that any penalty be waived as you were new to the building, unaware of the rules, and took steps to comply with the rule by insisting the tenant move out. Remind them that this was a pre-existing tenant and that no one advised you this was an issue.

Spritkey: Also, when I question about the written warning, they quote me 12.1 and said the house rule is the written warning – can they give the warning prior [to] violation?

co-op_owner: Any fines have to be in the proprietary lease. If you were informed of this after all paperwork was submitted, it seems the seller pulled a fast one on you.

A: I am not an attorney, but it is my understanding that it isn’t “any fines have to be in the proprietary lease,” but rather that the proprietary lease allows for fines.

Carl Tait: This is one of the stranger things I’ve heard about lately. First, why in the world did you close on your purchase with a tenant in possession of the unit you were buying? Vacant possession should be a prerequisite to any sale except in extraordinary circumstances – e.g., buying an apartment with a rent-controlled tenant as an investment. Second, you can give someone a general warning in writing that rules will be enforced, but that’s not a “written warning” in the usual sense of the term. The warning has to follow the specific offense. The third point is that the authority to impose financial penalties must come from the proprietary lease, not the house rules. Financial penalties are a material term of the lease and may not be imposed unilaterally by the board. The board can add financial penalties...but they will not be enforceable unless the lease clearly provides for them.

Additional questions: Why didn’t the board know about the sublease at the time of the closing? Or did they? Has the sublease expired at this point? Is there even a formal sublease, or is the presence of the sublessee a surprise to the board?

Be extremely careful about letting someone stay in an apartment after a sublease has expired, as all sorts of surprising laws kick in. Also, although the board may not have the authority to fine you, they certainly have the right to sue to cancel your lease and shares if you fail to remove the sublessee. Be open and forthright with your board about the situation and what you’re doing about it.

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