Our lawyer has told us that the authority to impose a fine for violating the House Rules must come from the Proprietary Lease. A monetary fine is a material term of the Lease, and such terms can only be changed by a supermajority vote of the shareholders, not by the Board acting unilaterally. So you can put a monetary fine in the House Rules, but unless the Board has expressly been given the authority to impose such a fine in the Proprietary Lease, it won't hold up in court.

Also see this Habitat article:
http://www.habitatmag.com/publication_content/habitat_s_purchasing_primer_news_for_new_buyers/house_rules

"The rule of thumb is that boards cannot impose financial obligations on shareholders in house rules. If they want to do so, the financial obligation must be in the lease."

I know that I've taken over a few properties that were either initially self managed or had been playing with that for a while. I think that your ability to self manage will take into account a few different variables. If this is a larger property, the amount of work and detail needed for all of the items that come up (Shareholder/Resident issues as well as financial items) are staggering. You'll need to ensure that the people who are on the Board and willing to do this (assuming you're not hiring a "manager") and will have the time to devote to it.

If this is a smaller building that is less than 30 units, the issues will not come as often but you'll find more detail will be needed in the financial end of managing the property.

Depending on the size of the building that you have, a small or mid-size management firm will be able to give you professional management services form soup to nuts for less than $400 per unit. This small fee is certainly worth the expense to ensure that you are properly managed and are abiding by all of the laws and requirements of the city and state. Although the bigger firms could cost $600 per year per unit, there's no need to go that large for a smaller property.

I am an accountant by trade working with a very large non-union pension fund. My biggest suggestion for you is to make sure you have dual controls over the cash / accounting functions. I would strongly suggest hiring an accountant to handle the cash record keeping (both maintenance collection and bill paying). I use a program called MAS 90 however Quick Books could also work. Then have the Board Treasurer & President (or Treasurer / Accountant) dual sign the checks. You don't want to get into a situation where the co-op shareholders are getting into disagreements over who has control of the cash or worse, missing cash.

Thanks to each of you for taking the time to respond to my inquiry.

We are also looking into self-mang...anyone have any experience with AKAM?
Thanks...

I don't recommend self management, because you always have to make sure the jobs get done. since no one is getting paid they don't feel a strong responsibility to get the job done. The key is to have a very strong and conscientious manging agent that doesn't break the bank...
we are extremely satisfied with our agent.

Who is your Mang agent... We too are changing. Any recomendations welcome. We have about 90 units... Uper-middle income building...
HG

We use The company David Eisenstein Real Estate. They are terrific, down to every detail. All of our requests are quickly responded to, the building is immaculate. We have peace of mind knowing that our building is in good hands. Give Harry a call at: 212-582-9080

Our building is over 400 units and we have been "self-managed" since inception. However we are self-managed in the sense that we hire our own professional staff rather than using a property management firm. To do so we have a dedicated office staffed with two full time employees and a part time bookkeeper.

Our reasons for doing so are several but primarily this type of self-management gives us close control and high quality on-site customer service. We also save some money; however the savings are not significant enough to be the primary reason for our ongoing decision. Our employees are highly experienced in the management and real estate field so we are not sacrificing any quality.

I don't know how large your building is; however if you contemplating self-management by your board of directors rather than directly hiring your own employees I cannot recommend it. For any of you who have read my posts before, you know that I am a strong advocate of using professionals to do a professional's job. I believe that relying on a volunteer board that may change from year to year is a mistake. Successful management of a building requires attention to a myriad of details and no matter how well-intentioned, a volunteer board is more likely to make mistakes and may make decisions for political, rather than logical reasons.

So far our story has been a success but I am open minded. As president for a number of years, I am deeply involved on a daily basis - our manager and I work closely together as a team with me providing the direction and our manager providing the execution and valued advice. Both roles are key and they have to fit together well. Of course I am not irreplaceable, but my successor will need a similar commitment to be successful. If our manager were to leave, I would seriously consider all options, including a professional management firm.

Self-direction provides a level of service and control that you might not otherwise achieve, but it's not for everyone.

You will need to contact a lawyer for a solid answer however I have heard that 5 years is the limit for the sponsor to turn over to shareholders control of the board.

OUr building has a substandard exterminator who makes monthly visits. I am also interested in finding a better regular company.

I've had positive experiences with both Metro Pest and Magic Exterminating for bed bugs within the past month.

This is what we recently advised our shareholders (and rental tenants):

General Liability $100,000
Property Damage $50,000
Apartment Contents $50,000 (suggested, depending on value of personal property)

We are a 100-unit co-op in Forest Hills, Queens.

WE suggest a minimum of $300,000 Personal Liability. The additional premiium is nominal.

I think that a 100k is a bit to little because is there is gonna be a huge law suit against the tenant, the tenants insurance company will just pay out the 100k and the rest will go against the associations insurance vs. if the tenant carries at least 300k liability, the tenants insurance company will fight it in court or make a settlement.

We also mandate 'loss assessment' coverage of between $10k to $25k (studio to 2 bedroom) and issue a fine of $250 for non-compliance.

300k is the minimum, average should be 500k

Although I'm not an attorney, shares in a co-op are considered personal property, not real estate so I expect they should be listed as such.

Keep in mind that while the shares may be left to an heir, the right to occupy the apartment does not necessarily automatically transfer. Read your proprietary lease and check with your attorney to avoid any legal roadblocks or disappointment. Depending on who the heir is, the corporation may still have the right to review, interview, and potentially reject a named heir.

House rules don't spell out procedures for a board to follow if anyone violates a house rule. They are only the rules everyone must follow, but they can state that penalties or fines may be applied.

This year we notified all our SHs by letter that, by board resolution, a $250 fine was established for violation of any house rule. It got to a point where too many people were ignoring too many rules. We revised page 1 of the house rules to include a statement that "a fine/penalty as may exist by notice from the apartment corporation applies for violation or breach of any house rule."

In our letter to SHs we first reminded them that non-compliance with the house rules is a breach of the Proprietary Lease. But we also said that a resident will only receive notice for non-compliance with a house rule for a first incident but the fine will be incurred if the incident occurs more than once. We added that we do not want residents to be burdened with unnecessary charges and we asked for their cooperation in adhering to the house rules for their benefit and that of all their neighbors.

Since we established the fine and since it's $250 which is no small change, we've had many fewer violations of house rules.

We would love to be able to charge some sort of fine for non-compliance of House Rules. However, we are under the impression that our Prop. Lease does not give us the power to levy fines and that doing so would require shareholder approval. Does anyone know where in the PL the wording for fines can be found? Or if the Board can pass a resolution like BP has done? Thank you.

Our attorney told us our PL did not give us the power to levy fines, and to do so would require a Shareholder vote.

However, the Board does have the ability to levy administrative costs associated with infractions of House Rules.

Thanks, RLM. Can you give a ballpark figure of what your administrative costs are for a House Rule infraction?