Home Businesses in a Co-op

Zoning regulations in most areas require anyone running a home business to live in the space. The operation should also take up no more than 25 percent of the home, or 500 square feet, and there can be no more than one other employee working on-site.

Beyond that, boards will be concerned about security issues. "It's a question of control," observes attorney Stanley B. Dreyer, emeritus of Gallet Dreyer & Berkey. "If a home business impacts building security, it's up to the board of directors and managing agent to keep this sort of activity under control."

Occupational Hazard

"I had a case where an acupuncturist was running an office on the third floor of a co-op," explains attorney Steve Wagner, a partner at Wagner Davis. "This doctor was clearly not living in the apartment. There were several treatment rooms and a reception area where herbs were sold, and there was no kitchen. This doctor was basically buzzing in anyone who came to the door and leaving trash bags full of used pins out in the hallway. Other residents on the same floor had children. They weren't playing in the hallway, but it was dangerous."

A prudent board will draw a distinction between the types of occupations that stress resources and security, and those that are permissible. "A draftsman working out of his home, alone, isn't going to require a lot of client or customer involvement," says Dreyer. "A day-care center, or even a woman babysitting three or four neighborhood kids, is conducting a business that will impact the co-op. A day-care center would require a number of city permits."

The board can also establish rules requiring visitors to log in and out and to wait in the lobby (as opposed to hallways); limiting times that clients/patients may visit; indicating disposal methods for certain types of waste; and restricting noise. If you're obviously conducting an unacceptable home business, are unwilling to give it up, and are endangering or disturbing other shareholders, the board will consult its lawyer, who will attempt to present a court with what the law calls a "material obligation" — a matter that affects the health or safety of other residents or puts strains on the facility.

"I sought an action for declaratory judgment against the acupuncturist," Wagner says. "It's more expensive, but you wind up with a permanent injunction instead of going through a housing court proceeding. The court declares exactly what the use of the unit may be."

At the Admissions Interview

There are some reasonable requests a board can make of a prospective shareholder during an interview. According to attorney Bruce Cholst, a partner at Rosen & Livingston, a board can guard itself against prospective problems by asking to examine the following documents:

• a lease for current office space
• business tax returns (which should indicate an office address)
• business letterhead

What about if you're already a shareholder in the co-op? "When boards come to me and ask me what to do about an intrusive home business, the first thing I tell them is to regulate using house rules," says Cholst, who gives boards this advice: "Don't sit on your rights, or these people could end up getting grandfathered in, no matter what the board thinks is best for the co-op."

Adapted from Habitat February 2002. For the complete article and more, join our Archive >>