Avoid the Danger of Making House Rules the Governing Documents Don't Allow

House rules are intended to amplify the proprietary lease (in a condominium that would be the bylaws) and deal with quality-of-life issues. They may not, however, circumvent the amendment provisions of the lease or the bylaws. If the board enacts a house rule that exceeds the permissible scope, a determination that is not always clear-cut, the board may find the rule challenged as an illegal act.

Fee? Fie!

For example, if the house rule deals with a financial matter — such as a late fee, a sublet fee or a fine for a breach of the rules — the board may, in many if not most cases, have exceeded its authority and be confronted with a challenge. This may not only have political repercussions, but could lead to a lawsuit at some future point seeking to declare the house rule invalid and, perhaps more significantly, to require a refund of all sums paid under the challenged house rule at any time within six years prior to the date of the lawsuit.

Had the co-op or condo board consulted with counsel before embarking on this course of action, it would have been advised that for a sublet fee to be enforceable, the power to impose it must be contained in the proprietary lease; and that for a late fee or fines for breaches of the rules to be enforceable, the power to impose the same must be in the lease, or, in the case of a condominium, in the bylaws.

While condo and co-op boards are always eager to control costs, they should understand that when dealing with matters relating to corporate governance and house rule changes, counsel should be utilized as an adviser whose job is to prevent trouble before it happens. And in so doing, the board may actually find it saves money in the long run.

Phyllis H. Weisberg is a partner at Montgomery McCracken Walker & Rhoads.

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