Spotlight on: When Self-Managed Co-ops / Condos Should Use a Lawyer

Boards owe it to their shareholders to find a middle ground. Don't reflexively assume that calling your lawyer is the costly, "last-step" option, especially when dealing with shareholder / unit-owner disputes. Thorny situations like noise complaints and late maintenance payments can grow into larger problems if they're not dealt with promptly. Getting a lawyer's advice early can help defuse situations before heavy legal fees have a chance to pile up in litigation.

Pros and Contracts

Make sure your attorney checks out any service contracts and vending agreements as well. Laundry room agreements are particularly troublesome. These agreements often contain language that restricts a board's options if it' unhappy with the service and wants to change vendors, including provisions for automatic renewal and a right of first refusal. 

While these provisions are routinely removed in negotiations at the request of the co-op, that's not something a board would necessary know until they try to change suppliers and get a threatening letter from the existing supplier threatening a lawsuit. When dealing with these contracts, lawyers can often spot situations that may cause a co-op headaches down the road.

Always Use an Attorney When...

At the very least, boards should consult a lawyer whenever a co-op transfers a unit, initiates a major capital improvement or refinances its underlying mortgage. Self-managed buildings should also have their attorneys review building documents, such as alteration agreements and sublet policies, to make sure they're up to snuff.

These days it seems like there are no decisions a co-op can make that aren't fraught with legal pitfalls. But as in most board issues, taking the cautious route, consulting with your professionals and not making hasty decisions based solely on the bottom line are always good practices to follow. You never know when a seemingly simple by-the-books move could blow up in your collective face — but it's a good bet that your lawyer does.

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Adapted from "Call Me" by Michael Gwertzman (Habitat, April 2004)