The Human Factor in Capital-Improvement Budgets

It’s not just the admissions process that can turn into a legal minefield for co-op boards. When budgeting for major capital improvements, boards must take into account not only the cost of doing the work and how to pay for it – but also the cost of accommodating residents with special needs. Failure to do so can lead to costly lawsuits.

Deborah Koplovitz, a real estate attorney with Anderson Kill, cites recent cases where elevator shutdowns sparked legal action from disabled residents. In one case, a disabled resident asked to be relocated to temporary accommodations while the building’s lone elevator was out of service. The request was declined, and the resident took out a temporary restraining order. The court ruled that the project could not proceed until the resident was relocated.

“They had to relocate him and pay a portion of his legal fees,” Koplovitz says. “Requests to relocate a disabled individual are something that the board should take very seriously.”

Another case involved a disabled resident’s request to be carried up and down stairs on a stretcher during an elevator outage. The building’s alternative offer – to relocate the resident to a hotel during the work – was rejected by the resident, who filed a lawsuit. This time, the judge sided with the building.

“Such a request presents liability concerns to the board, including the fact the person getting carried down the stairs could get hurt and then sue the building,” explains Koplovitz.

While boards have to be sensitive to shareholders with special needs, there are limits. “You don’t have to say yes to everything because the request may not be reasonable,” Koplovitz says. “It may not be physically possible to implement, or it may be an undue hardship on the building.”

Relocating residents isn’t cheap. Elevator projects can take between six and eight weeks to complete. With Manhattan hotel rooms costing up to $300 per night at market rate, a board can expect to budget up to an extra $17,000 per relocated resident.

“The building should also make sure to build in strict liquidated damages provisions in their elevator contracts,” suggests Koplovitz. “If the project runs over, the contractor, not the building, is essentially paying for the extended stay of the resident [in alternative accommodations].”

There might be alternatives to relocating residents, according to Koplovitz, such as hiring additional staff to carry packages, or installing temporary stair-climbing chairlifts. One of Koplovitz’s clients built a temporary walkway on the roof of a two-elevator building to connect the upper floors while one of the elevators was being overhauled. The arrangement worked because several elderly residents were unable to climb stairs, but could walk down. The working elevator carried them to the roof, they crossed the walkway to their own stairwell, and descended on foot.

The big takeaway? Residents with special needs require special accommodations whenever there is a shutdown of services. Boards should know that major capital improvements include construction costs as well as human costs – and they should budget accordingly.