Teachable Moments: Resolving Differences, Effective Problem-Solving

Neil B. Davidowitz
President, Orsid Realty

The board at an Upper West Side prewar building decided to refinance its 20-year self-liquidating mortgage with a new 10-year loan. The purpose of the loan was to generate funds for a capital plan. The board, on the advice of Orsid, held a building-wide meeting to discuss the refinancing proposal. Many shareholders at that meeting were looking forward to a debt-free building and wanted to finance capital projects via assessments. The building had a history of "pay as you go" and those shareholders disapproved of the refinancing. Other shareholders on fixed incomes were concerned about future assessments and wanted to proceed with the mortgage.

Orsid recommended a compromise whereby the annual mortgage payment savings would be used to create a capital improvement reserve fund. No assessments and no additional debt. In addition, we secured a $1 million line of credit as an additional source of funds. In this case, Orsid and the board recognized that a co-op is made up of diverse shareholders with varying philosophies, needs, and economic positions. The board heard the voice of its constituencies and acted accordingly.

Alex K. Kuffel
President, Pride Property Management

A client came to us with many problems, including a 15-year-old lawsuit that was eroding the corporation's financial solvency. The board was inclined to approach the resolution by continuing the countless legal filings and contributing to the exorbitant legal expenses that were already spiraling out of control. Our firm recommended the board approach this matter by stripping back the layers of attorneys and getting all parties together — in person — to negotiate a settlement with which all parties would be satisfied. The board rejected this idea. However, they eventually grew tired of seeing the legal fees as the primary expenditure in their budget and reluctantly agreed to try our approach. It worked. The resolution wasn't easy, but it came without e-mails or court filings and demonstrates how a good, old-fashioned, common-sense approach may pave the way to a resolution.

Beth Markowitz
President, Merlot Management 

When you sit on the board, you've got to define the line. In dealing with your staff, you've got to define who's responsible for what. This isn't as simple as it sounds. We manage a high-end condo, and at the annual meeting, a number of unit-owners raised the issue of small repairs being done in their apartments by the staff. They felt their common charges should cover those. You want to provide service, but the issue is liability. When staff members enter an apartment, are they still legally employees of the building? Or have they now become contractors for the unit-owner? And if something happens and they either get injured or cause damage, who's responsible?

After consulting with our attorney and insurance broker, we crafted a policy and defined the line of responsibility, and then in conjunction with this, we put insurance requirements in place. Essentially, the policy says that anything requiring a licensed professional — a plumber or an electrician, for example — would be the responsibility of the unit-owner. Simple things — such as changing a light bulb or snaking a drain — would be covered by the condo association. Additionally, nobody from the building is allowed to enter an apartment and do any sort of work unless the unit-owner signs on to the "super policy," which says that he/she understands those terms, and that he/she will furnish management with an insurance policy (including personal liability).

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