The Three T’s of Every Successful Alteration Agreement

Let’s open with a couple of horror stories. A shareholder in a 300-unit co-op in the Bronx was renovating her kitchen, but the guy doing the electrical work was not a licensed electrician. While installing an electrical outlet, he accidentally punctured a gas line, which led Con Ed to shut down the building’s gas. The co-op board had to spend more than $200,000 on repairs and pressure tests before gas service was restored. 

Then there was the 21-unit co-op in Morningside Heights, where a couple bought an apartment and began a renovation project that was supposed to last three months. Seven months later – after horrendous noise, unsanctioned work on weekends and evenings, and much ill will – the job was finally finished. 

Why do such horror stories happen? Because co-op and condo board either don’t have an alteration agreement, they don’t enforce their existing agreement, or it lacks teeth. As veteran real estate attorney C. Jaye Berger sees it, all alteration agreements need to contain three T’s:

Timetables

“Some buildings do not require or enforce a timetable on alterations,” Berger says, “so they leave themselves open to jobs that never get done.” She advises that all alteration agreements specify a completion date for the work.

After the nightmarish renovation, the Morningside Heights co-op board took such a step, stipulating that alterations must be completed within three months. If work is not complete, the shareholder must submit a new alteration agreement, with no guarantee that the board will approve it. There’s an obvious incentive to get the job done in a timely fashion. 

Teeth

Berger advises board’s to specify a daily monetary penalty for work that runs past the agreed-upon completion date. The Morningside Heights board instituted such a penalty – $100 a day – which would have added up to about $12,000 for the job that dragged on for seven months. 

Transparency

“You build into the alteration agreement that the board has the right inspect the work as it’s being done,” Berger says. “That way you can make sure that it’s being done properly and in accordance with the agreement – especially if a wall is opened.” Some boards insist that their architect or engineer perform these inspections, while others rely on the super or managing agent.

Transparency should begin even before the work begins – by making sure that workers are licensed, unlike that Bronx “electrician,” and that their insurance covers the work that is actually going to take place. Berger advises boards to require shareholders to carry homeowner’s insurance as a backup. “I see many instances where something goes wrong and the contractor’s insurance doesn’t cover it,” she says. “If the shareholder has adequate insurance of his own, that can save the day.”

Brian Scally, vice president of the management firm Garthchester Realty, hires a company to make sure that all workers have the proper licensces, and to study the limitations on all contractors’ insurance policies. Some policies, for instance, cover work up to six feet from the floor – though the job will require workers to use 10-foot ladders. The time to know this is before the work begins – not after an accident has happened. 

In the end, a solid alteration agreement is about peace of mind. “They’re designed to give boards comfort that the insurance is in place,” Berger says, “and that the work is done according to code – and that the work being done is the work that has been agreed to.”