There are good and bad Management companies, but the bottom line is that the Management company works for and takes direction from the Board. Legally the Board will be held responsible for the decisions made, contracts signed and monies spent.
The Board/Shareholders have a financial interest/investment in the building -- which is not shared by the Management. If the costs go up, maintenance raised -- or your assets mismanaged, the Shareholders pay -- not the agents.

Again, ultimately the Board is responsible: This article in the Times (a 7million loss for the coop) is not about a bad management Co. – but (as they admit) lazy Board members – which seem to be where you are heading:

http://www.nytimes.com/2005/10/30/realestate/30cov.html

The Email Trail: Email/the Internet, is changing the accountability of both Board members and management Companies. Never forget, this is your money, your investment:
Transparency works. This will not make you popular but start the Email Trail by documenting: EVERYTHING! Do not accuse anyone of anything or make personal slights – but ask business-like questions.

Store Emails. The Email trail will protect you and Board members who care -- from being accused or sued. (Use a Gmail account, in that your Emails are easily retrieved, and will be stored) Also, collect the Email addresses of other concerned Shareholders and keep them informed.

If you are told Board discussions are secret and should not be shared with the S/H -- this is one of your biggest clues that something is wrong. (Certain personal or financial discussions are confidential)

Be Informed: Get a copy of the Building/Management contract. Although it was forbidden in the contract, we discovered that large checks were being written without board approval – (Catch 22) since no one objected – they did have board approval.

LL11/Major repairs: Although Board members are generally not engineers/architects – common sense is often more valuable: While reviewing the engineers recommendation/report for a major repair of the façade ( with a walk-though), we discovered big-cost items we did not need, and overlooked work that was visible to the naked eye. (After you begin the Job, a “Change of Order” adds up to big bucks).

Also, don’t necessarily rely on the expertise of ONE board member. This “rely on the expert”, cost the Coop in the Times article millions. Another Coop discovered that the resident expert Board member (an architect) – had included in the cost of LL11, the steel structures for a greenhouse to be built onto his terrace. This was discovered by non-professional Board members reading the reports/engineer recommendations. Common sense works!

REVIEW (vendors, engineers etc) Contracts and start going over the financials --especially payroll. For Example: After a year with a new agent we discovered a payroll increase of appox 50,000: the new Management did not keep a (legal) pool of non-union workers to fill in for vacations, sick leave etc -- and we were paying full union wages/benefits for overtime. Keeping this pool is extra work for the Agent. Cost are going up, but check out the building supplies – especially if there was a change in vendors or the way supplies are bought. If something does not sound right – plumbing cost, replacement of windows etc.etc. – dont be embarrased --- ask questions -- its YOUR money.

The Property Agent/Management Co. is as good as the Board demands: Property Agents are generally honest, but are overworked/underpaid and don’t have time for personal attention.

We are on our way to recovery, it has not been easy but we now have an involved Board and a Management Company that is working with/for us. VP

While it may sound like a good idea to those in the building that benefit from such, there is now way that I could justify installing a lock box and then have to live with the guilt afterwards should something terrible happen afterwards. Lets see you have no security camera, no doorman, and you want to leave keys for the front door in a so called "lock box". You might as well leave your doors unlocked instead of putting in a lock box as you are just begging someone to enter your premises.Also who is going to monitor such and be help accountable should something happen. Bad, Bad idea.

Ronnie Biggs

It got Al Gore in trouble in 2000, and would get your building in trouble now, I fear.... too many wildcard factors and too little oversight.

Are your residents in the habit of forgetting their keys when they drink??

I respectfully disagree. I think she does a great job of saying what a lot of us feel, and she certainly writes about a lot more than her super, so I'm not sure where that's coming from. I say Viva Opera Lady! (And, no, I'm not Opera Lady or anybody who knows her.)

This certainly does sound reasonable. Although I would want to know what information this company will provide you with regarding an Energy Action Plan and recommendations based on their findings. Through their benchmarking process are they going to identify aspects of your buildings mechanical systems that are not operating at an optimal level? Will they make suggestions as to how best to achieve mechanical optimization? Will they prioritize recommendations based on immediacey of impact, payback period and benefit cost ratio over the next 5, 10, 15....years? The EPA Portfolio has it's advantages, one being it's free as far as cash in concerned. What will the benchmarking company do with the information is what should be of concern. Please contact me should you have any questions.
Eric

In case this helps, I found this helpful
http://www.habitatmag.com/Publication-Content/2010-March/Web-Exclusives/New-Energy-Conservation-Code

Definitely helpful. There is so much out there about this law and the "Co-Op/Condo Ombudsman Law" & the "Energy Audit and Retrofits Bill" that I would suggest all who are impacted by these laws begin looking at compliance as early as possible for several reasons. Two big reasons: 1) There may be rebate and incentive programs available to help offset cost of compliance. One example: the installation of an energy management system can cut energy costs by 15-20% and be eligible for a rebate through Con Edisons Commercial/Industrial program. This rebate can be as high as 70% of total project cost up to $20,000. Also, address inefficient lighting now, including both common area and exterior lighting. There are rebates available for this as well. Now, while not ideal, the savings from lighting upgrades and an EMS can be dedicated to any costs associated with complying with these new laws.

Another HUGE advantage of proactively pursuing compliance with many of the new energy laws is that the cost to comply, be it abandonment of #6 oil or inefficient lighting will only increase as we get closer to mandated deadlines. The cost to convert from oil to gas, retrofil lights, conduct benchmarking will continue to get more expensive as deadlines approach. There is no reason NOT to at least look into all of this now. It will be very costly to be reactive as opposed to proactive with regard to these laws.

Are there any penalties or fines for not complying in time or at all with this law ?

Yes there are. I will get u the specifics tomorrow.

A late fee of 5% *per month* corresponds to an annualized rate of 60%. This is flagrantly usurious and illegal. Not only is this unenforceable, but it may even be criminal. Check with your attorney immediately.

I think someone on your board needs to take a little remedial math if they really confused 5% per month with 5% per year. Are you sure that they actually plan to collect $600 interest per year on a $1000 debt?!

thanks. to clarify, they argue it is under the 16% per annum to charge a total of $600 if you are 12 months late. (of course you might have evicted you by then....) stating well they are not compounding ..

S wrote:
>they argue it is under the 16% per annum to charge a total
>of $600 [on $1000] if you are 12 months late.

Sorry, but they're mathematically incompetent if they believe that. A year of 16% simple interest on $1000 is $160, not $600. 5% per month is equal to an annual rate of 60%; that's a simple fact and no amount of sophistry can get around it. (The time actually taken to repay the debt has nothing to do with the interest rate.)

One other thought. If you simply went to a reasonable flat fee as a late penalty -- regardless of balance -- then you'd be okay if you amended the lease to provide for it. You could also charge a lawful rate of interest on top of that, if allowed by the lease.

They can't make changes to the PL without a "super majority" vote of "yes" from the shareholders ... making that fee totally illegal.

We have a similar late interest clause in our Proprietary Lease. Before I came on the Board, a prior Board changed the late interest to a late fee of $75 by Board fiat. We had then decided to move to a more punitive posture as the Board felt that we were losing ground to the credit card companies who charge very punitive late fees – we wanted to be competitive: $175 if not paid by the 17th and an additional $100 if not paid by the last day of the month. This cleared up arrearage quickly, as you can imagine for those who could pay.

We then had a unit move to court and the lawyer challenged the late fee as we only had late interest in the mentioned in the lease. But the before the Judge could rule, the bank paid the full amount due including the late fees. We were lucky.

We have since moved back to a late interest of 1.24% per month. We are also asking the shareholders to approve a late interest / fee scenario that incorporate both late fees for the first six months (on a per share basis) and then switches to late interest after month seven including compounding. The measure is very likely to pass as our shareholders do not take kindly to late payers and having to fund for their arrearage.

The moral of the story for us is: charge what your Proprietary Lease states: it is safe from a legal perspective; builds integrity between the Board and the shareholders; and you would be surprised what the shareholders will approve given full opportunity to hear you out.

Appeals Court Invalidates 4% Per Month Late Fee Provision
Many leases of real property provide for “late fees” in the event the tenant is late in paying the rent or other money due under the lease. Although the term “late fees” is used rather than “interest,” the amount of such fees can still be limited by law. For example, the recent case of Cleo Realty Assoc., L.P. v. Papagiannakis, 2017 N.Y. App. Div. LEXIS 4286, 2017 N.Y. Slip Op. 04368 (1st Dep’t June 1, 2017), involved late fees under a lease guaranty in the amount of 4% per month or 48% per year. The court held that “[i]n view of the public policy underlying” New York’s usury statute, “which makes an interest charge of more than 25% per year a criminal offense, these late fees are unenforceable.”

HabitatReporter here, with a response from Eric Goidel, Esq., of Borah Goldstein Altschuler Nahins, & Goidel, P.C.:

"The question is not whether the late charges being imposed by the apartment corporation is usurious, but whether those late charges can be imposed at all. Where a proprietary lease has a specific formula for a late charge, the only way that an apartment corporation can legally change the formula is by way of an amendment to the proprietary lease. Virtually all proprietary leases require the affirmative vote of some super majority of shareholders-lessees (typically seventy-five (75%) percent) and do not give boards of directors the unilateral power to amend the proprietary lease. A late charge in derogation of a clear proprietary lease provision would be uncollectible."

HabitatReporter, thanks for the response from attorney Eric Goidel. While Mr. Goidel is certainly correct that the authority for any late charges must be in the Proprietary Lease -- or an amendment to the lease approved by the required percentage of shareholders -- the original poster said from the start that his lease *did* have such a clause: "Our late fee is outlined in the prop lease as being based on a maximum legal rate of interest (16% or 1.5% a month)."

The poster then went on to explain his board's twisted *interpretation* of this clause: namely, that 5% per month was somehow equivalent to (or less than!) 16% per year, and was therefore permitted by the current lease without amending it. That's just crazy, and provably false.

Also, even if that coop managed to get a super-majority to approve a lease amendment stating that interest on overdue balances was 60% per year, I can't imagine that it would be enforceable in any state with laws against usury. As far as I know, laws invariably trump the lease in case of a conflict. For example, the portions of the standard "Use of Premises" clause (Paragraph 14 in many leases) that conflict with the Roommate Law are not enforceable. You *can* have a roommate, regardless of what the lease says.

Don't know if this particular thing will help, but if there are a lot of noise issues at your building, there's a New Product on the front page of Habitat that may help in other situations.

Sorry, but all those are the responsibility of the coop to repair. If there is an assessment, the sponsor pays based on the number of shares assigned to the apartments he still owns

It's astounding that the co-op was NOT named. Plaintiff attys usually err on the safe aside; it would be wise to assume this will happen.

Even if you're not brought in, you're not off the hook: whether this goes to court or settles, the sponsor's carrier will likely pursue yours through subrogation.

Suggest you notify your carrier ASAP.

The water penetration is probably due to a lousy pointing job from a few years ago. The sponsor tries to tell tenant it's just he needs a paint job. Should we call in an engineer to determine what is causing it?

With an engineer's report, you'll confirm responsibility, know the scope of the problem & cost of the repair, & can make better decisions. Besides--your insurance carrier [& any court] will know you did the right thing.

it goes without saying that your board has a fiduciary responsibility to the entire co-op; if you do not take steps to ascertain whether your building envelope is no longer secure from water damage, you may be in for a world of hurt down the line, either from legal actions or from the repairs you'll have to make.

A board's first responsibility is to its shareholders -- and their investment depends largely on ability for resale. If your building isn't sound, both structurally and financially, future shareholders will look elsewhere. I always urge boards to do a complete survey of their building, top to bottom, if it has not already been done by previous boards; you need to find out where you are before you can determine where or how far you need to go.

Hiring an engineer to make a report seems a logical first step; and I have also found that a good super knows where problem areas are... so if yours is good, ask for input.

I as a shareholder had the same problems, I had to sue the building for the repairs. In your proprietary lease/bylaws states that anything in the walls such as pipes and all exterior facade damage such as pointing is the buildings responsibility. As for the sponsor, he is responsible for his tenants repairs as stated above, but the building must repair the sponsors tenants repairs and damages or the sponser can sue the co-op because the co-op owns over 50% of the building, therefore they are the landlord.

is the sponsor , still the sposor/. usuallu after the AG accapts the co-op plan, the sponsor after 5 years is no longer the sponsor, they may be the managing agemnt now. The original real estat company may still own 30 apartemnets, but they are considered unsold shares.They own the units and rent them to the prior renters in a non eviction plan, but i beleive ibn 5 years, they are no longer referred to as the sponsor.
the4 tenant with the problem in unsold shares wold contact their landlord, which may be the original owner of the building, the original sponsor. or it may be another owner of unsold shares. That owner would , or should inspect the damage and if it is the responsibly of the co-op. They are to notify the co-op. renters do not have proprietary leases. . If it was something the owner of the apartment is liable for, then they as landlord have to fix it.
it gets confusing , but it really helps to call the participants the correct title.
our building has been co-op over 25 years and there are people that have been here since before the conversion, bought, are shareholders, and have no idea what unsold shares are. They never read their proprietary lease and still wont, they take the oral lies from the managing company as gospel. They cant understand why the unsold shares do not need board approval to rent or to sell

sorry about the misspellings, but i cant fix them ,there is no editing after post

Thanks everyone for their input and insights on this problem. Great group here on Board Talk. One more question: can the judge hearing the HP case order an engineer's report to be submitted by the Co-op for the water penetration problems? The owner of the unsold shares won't want to pay for it:)

Not sure I understand why the sponsor would be responsible solely for such a report; the co-op owns the building, not the sponsor... and it is the owner's responsibility to secure the building against water damage.

Only exception might be if there's been negligence on the tenant's part... might be hard to prove.

not legal advice (not a lawyer) but from experience, I'd say this is true. The sponsor WILL have to pay for its share of the report, at least -- as all shareholders will.

As a managing agent, we have a few departments of people who keep their own separate files (payables, receivables, sales/leasing, etc.). In addition, I have every file that I've ever worked on in my career in some digital form (PDF, Word, Excel, etc.) This also makes from an extremely easy transfer should we ever lose or give up a property.

What if you got a shared computer for the corporation that all Board members could access so that the files can reside in the meeting room or some other locked space in the building? The existing Board members could get comfortable with using a computer if they're not yet familiar with it and there would be no need to change over documents when your reign is over as President. It will be a clear handoff of documents as they'll always stay in one common room with Board access.

If you do use Mark's suggestion, I recommend - no, I URGE - that anyone who is not familiar with using a computer on a daily basis be supervised by someone who is until they 'get' it.

Believe me, you don't want to turn on the computer to do some work.... and find that your records were erased accidentally by someone who didn't understand what they were clicking "yes" to.

BTW, a lot of co-ops still keep paper records, with archives off-premises.

You raise a great question.
As the board president with same issue, 2 of our 5 board members don’t have a computer, and our sponsor/managing agent are the same, I have become an expert record keeper where few were kept before.
I request all proposals, documents, reports, filings, and shareholder communications be sent to me/fellow board members in PDF and a hard copy provided for those that don’t have computer/email access.
Resolutions and Meeting minutes are scanned after being signed off. Parking and Storage Agreements are also scanned and distributed to board members per our request. Hardcopies of all documents should remain with the managing agent. Prior to setting up this process, things were lost in the shuffle. It’s not easy to keep up with all the folders and traffic but I do my best and we know ink/toner is not cheap.
The next step is to find an online tool which can be utilized by all future board members going forward to maximize our data and information and reduce the change things will be lost, misplaced, deleted or the dependency of a few hard driving board members who are meticulous and detailed to ensure accurate records.
I wish you luck with the paperwork, and suggest you move to online documentation if possible.

I can recommend to you Dropbox (www.dropbox.com) as a way to backup those files and it's free, which is the best part. You can install the program and have access to all files, on any computer. You can also access files via their website if you're away.

They also have free iPhone and iPad apps so that you can access on the go.

Sounds great. Thank you. I will check this out. Someone also recommended google docs.

on-line storage is the way to go