Limit Your Liability for Shareholder Repairs

When it comes to determining who is responsible for damages and repairs in a co-op apartment, the general rule of thumb is that boards are responsible for anything outside the apartments and shareholders for anything inside. But shareholders sometimes sue boards for damages caused by their neighbors, and boards should be prepared.

Check your proprietary lease for what the corporation is liable for. Consider adding an amendment spelling out where the corporation’s liability begins and ends, including an exception for damages caused by shareholders, or at least retaining the right of recovery against them for repair costs. You don’t want to suffer financial consequences because of the negligent actions of someone else.

Mandate that all shareholders have property and liability insurance for their apartments. You don’t want people submitting claims against the building’s insurance because even if your policy pays out, you’re going to see increased premiums as a result.

Include a specific coverage amount for shareholders’ insurance, but also state that the board has the authority to increase that amount in the future. Obviously, an adequate liability threshold today is very likely to change 30 years down the road. This way you won’t have to amend your proprietary lease every five or 10 years.