Hi, JBM,

I'll take the first crack at this.

If the fees for a sublet apply to anyone who sublets, then the fees are not unequally applied. Since they apply equally, no one is being treated differently.

For example, just because the little old lady in 7-B chooses not to sublet while the soldier sent to Iraq for three years in 12-V finds a renter doesn't mean the soldier is being discriminated against. He's being charged for taking advantage that the co-op offers.

Likewise, let's say your building has a party room that's available only for a fee. You want to rent it, but don't want to pay the $50. You can't claim that your being discriminated against on the grounds that your neighbor -- who isn't having a party in the room -- doesn't have to pay it. The point is that your neighbor, or anyone else in the building, would have to pay the same rate for the same service.

I can't tell you where the equal rights for shareholders principle has its source, but it wouldn't have to be printed in your PL any more than your PL has to prohibit any other illegal activity.

I don't think the sublet fee has anything to do with equality but what the PL says about being able to sublet an unit. The PL usually says something about shareholders may be able to sublease the apartment provided that corporation is notified and "reasonable expenses" surrounding the rental are covered by the shareholder. In other words, the co-op does not seek a "sublet fee" but recovery of reasonable expenses. This is why a "fee" amendment is usually introduced in coops where subleasing is allowed.

Finally, shareholders in a co-op most likely have COMMON SHARES with same value as stated in the beginning of the black book or prospectus. Therefore, the deviation of the PL is a breach to the coventant between a shareholder and the co-op and has nothing to do with a violation of the equal rights since all shareholder who sublease their apartments are most likely charged the same fee.

AdC

AdC

Thanks for the response. I guess my main question is still - where does the equal rights for shareholders principle find its source. I've heard (as in my original example) that sublet fees that are significantly above the normal expenses of administration apparently constitute unequal treatment and require an amendment to the the PL based on this equality principle.

I don't think the problem is equality but USURY and what is defined as USURY.

Youur rights are defined by the PL. Unless the PL has language to allow sublet fees, a co-op runs the risk to be taken to court and lose the case. Many shareholders accept the sublet fee, even if not truly legal, because they undestand that subletting may be a privilege that they may be taken away. So, it's better to pay the co-op for the provilege of having a sublessee while the real shareholder is enjoying other pastures (whether greener or not so greener).

When structuring a sublet fee, boards have to be conscious that the sublet should not be so high as to constitute usury. A certain percentage is acceptable, after than percent, the fee becomes questionable.

AdC

Sublet issues aside - In general -Does anyone know the source of the principle of equal treatment for all shareholders. (i.e. granting some privilege/right to some shareholders and not others).

It's difficult from these posts to understand what you mean by the "source of the principle of equal treatment."

All Shareholders have the right to vote, sublet, renovate, participate in amenities (eg., fitness rooms, pools, roof decks, parking, etc.) whether fee-based or not. All Shareholders have the right to sell their shares. All Shareholders have the right to run for a position on the Board of Directors.

The Proprietary Lease and ByLaws of each cooperative outline all of the rights of ALL Shareholders. What privileges or rights are you referring to, where some Shareholders are receiving "unequal" treatment?

McKinney, consolidated laws of New York - book 6 Section 680-800, I believe Section 709 has paragraph that you cannot treat shareholders unequally - same thing

I don't know about the laws, Alice, but if you're right about the contract, then the managing agent didn't follow it. You certainly have grounds for terminating your contract with the managing agent, but that may be too drastic.

Consumer policies usually allow you to cancel within 30 days of signing a contract. That's probably not a good idea either because you then wouldn't have insurance unless you can get a new policy ASAP.

Here's what may be a more sensible approach. You have insurance now. But you (that is, the board) should shop around for competing policies. Once you have one you like, sign up and pay the premium. Then you just stop paying the premiums on the contract you don't like. (The policy will lapse, and that's what you want.) Find out how often the premium is being paid, and hope that it's at least twice a year.

As always, check with your corporate lawyer before doing any of this.

Thank you for taking the time to answer.. We have already started an investagation, but someone (retired) from another Mang company, suggested that there may be NYState laws that apply to the Mang company and Agent making an agreement without board approval..

Email Power is making it more and more difficult for Mang companies to get away with this sort of nonsense...

Thank you Alice

Some managing agents have a sufficient number of buildings that there is an "umbrella" policy to cover them all... and you can save substantially on your premiums.

It's appalling that your MA acted without direction from the board.

Thank you RLM... We are following through, and having other brokers check the policies -- and have already discovered very troubling issues... However, do you know if there is a NYState law governing Insurance, and how it is procured...

AliceT

group risk policies are discounted because it is a bulb discount. usually through a manging agency who tries to put all its' buildings with one insurance co. . you should talk about this with your managing agent. if they do not know about it, get a new MA that does.

Regardless our property manager engages our insurance broker periodically to obtain quotes for insurance coverage, e.g.: liability, vehicle, property damage BD&O, etc.

We determine whether to retain our current carrier or move to a new carrier.

Quite frankly, it isn’t an easy process as one might expect each carrier writes policies with different disclaimers and deductibles.

However, our broker does the analysis and provides the overview for our review

One needs to be aware there is an insurance history or experience file for each property that identifies the number of claims files and paid.

Essentially, we use our broker as our interface to the carriers and as our consultant.

Please see this NY Times (12/30/07) article.

http://www.nytimes.com/2007/12/30/realestate/30home.html?pagewanted=print

Space is one of the parameters based on the article.

Quite frankly, as we have not faced the issue I cannot offer an opinion.

What is the fee for?

When you say "adjusted for the size of the unit," are you referring to the residential unit, or the HVAC unit?

Do some units use much more electricity than others?

Need more information....

HAPPY NEW YEAR!

Thanks for your questions.

The fee would be for a yearly maintenance contract that each condo unit owner would pay for their heating/ central air system.

Also, residential units vary widely in size, and therefore also electricity use. Additionally, half the owners are not using their apts,. full-time.

Hope this helps

In our NJ coop (not condo, we have heating/cooling units (essentially fans and fins) beneath each window in each apartment supplied through a water loop (hot or cold) depending on the season via our central heating and cooling plants.

As part of the maintenance, our staff cleans the units, cleans the condensate pipe, replaces filters and performs any necessary maintenance, e.g. fan replacement. This is baked into the monthly maintenance each unit pays which in turn is based on the number of shares. Thus, our costs are based and bundled on a shares per unit basis, regardless of the number of service calls or the number of units in the apartment.

When we convert to condo as we expect we shall, we will continue the same maintenance program.

From my brief reading of the dialogue herein, your building is engaging an outside contractor rather than employ in house staff as we do to perform the tasks above. Perhaps there is no in house staff available.

Using your $352 / unit times our 500 units, I can say that our in house costs are significantly less.

I also think this should be included in the monthly charges and based upon the % shares of each condo unit.

It also seems rather expensive to me - a little like highway robbery, in fact.

http://www.habitatmag.com/ Click on the cover and then the article...

TITLE Freedom of Choice
DESCRIPTION The FCC rules on cable TV building monopolies.
TOPIC Telecommunications

AUTHOR Frank Lovece
MAGAZINE ISSUE January 2008 - Number 241
ARTICLE TYPE Hotline
PAGE # 42-44

Yes, I saw that ... am wondering what your building is doing.

Every co-op and condo should have both (cable tv and satellite) systems in their buildings to allow shareholder to have a choice. Now that Verizon is the new kid in town, people may opt for Verizon if Time Warner Cable prices can be beat. Time Warner has a monopoly on most of Manhattan. It will be interesting to see how many TWC customers will jump ship to Verizon when it is available everywhere.

Find yourself a GOOD real estate lawyer. NYC has volumes of regulations on construction, buildings and more.

PRESS RELEASE
CONGRESSMAN CHARLES RANGEL

FOR IMMEDIATE RELEASE December 19, 2007

Contact:
Emile Milne 202-225-4365
Elbert Garcia 212-663-3900

RANGEL LEGISLATION PROVIDES RELIEF TO CO-OPS

Provision would allow housing cooperatives to determine commercial rents without sacrificing tax benefits to shareholders



WASHINGTON - Thanks to the efforts of Congressman Charles B. Rangel, hundreds of housing cooperatives boards in New York City will now have greater flexibility in the rent they charge commercial tenants.

Included in a recently passed Mortgage Forgiveness Debt Relief Act of 2007 (HR 3648) is a measure that allows co-ops to determine commercial rents without the fear that the additional income would disqualify owners from deducting their proportionate share of the building's mortgage interest and taxes. Under current law, co-ops are limited to charging commercial tenants rents that do not total more than 20 percent of the building's total income from rents and cooperator maintenance payments.

Rangel was happy to see that Congress could come together to resolve such a longstanding issue.


"I am extremely pleased that the tax code will treat people who live in co-operative housing the same way as homeowners and condo owners are treated when it comes to their renting out part of their property," said Rangel, Chairman of the House Ways and Means Committee. "I hope that this will provide relief from for some from the high housing costs in New York."

Co-ops would be allowed to pass through applicable tax benefits if they meet one of three requirements:

1) If 80 percent or more of the co-op's gross income is from the tenant stockholders

2) If 80 percent of the total square footage of the building is used or for residential purposes.

3) If 90% of the costs of operating the building are for the benefit of the tenant stockholders.


Rangel thanked a number of groups, including the Council of New York Cooperatives and Condominiums, for their support and assistance in helping to tackle this issue.

"By working with advocates and industry groups, we were able to craft legislation that made sense to both sides of the political aisle," said Rangel. "Thanks to the hard work of many, the federal government will be able to provide some relief to families as they struggle with the rising living costs."

The co-op provision included in HR 3648 is part of a larger piece of legislation that was crafted as part of a response to the current subprime mortgage crisis. The legislation would provide relief by permanently excluding debt forgiven under these circumstances from tax liability. It would also help would-be homeowners secure their investments through an extension of the tax deduction for private mortgage insurance, and would ease restrictions for qualifying as housing cooperative corporations.

Amended by the Senate last week, The Forgiveness Debt Relief Act of 2007 is expected to be signed by President Bush later this week.

What does this mean for the buildings with 80 20 problems

This would defeat the development of the "farse" term cond-op. This unfairly keeps the commercial establishments in the hands of the developers (shareholders of the commercial spaces). I live in a cond-op and wondering how can we sustain ourselves in these economic times,but by increasing maintenance all the time. Where's the commercial establishment's contribution to the welfare of the building and shareholders? Money drained.

Presumably, fortuitously or hopefully, the apartment renter has homeowners insurance.

The renters file a claim with their insurance carrier.

The insurance carrier obtains reimbursement from whichever is deemed to be the culpable or culpable parties.

= = = = = = =

For instance, a renter in a sponsor’s unit, doing some “upgrades” had a workman installing hanging lights. The ceiling/floor between apartments is poured concrete.

The workman drilled into the ceiling, perhaps a bit too far, and drilled into an imbedded conduit severing the local electrical service within part of the apartment above.

In this case, the aggrieved homeowners were advised to file a claim with their insurance company. The aggrieved shareholder’s insurance company can then file against the sponsor, the sponsor’s renter and (or) the renter's workman.

Yes, the coop office ensured that before work began the workman had adequate insurance coverage in case the workman damaged the coop’s property.

you hit the core of the problem on the nail. bingo. now, the important thing is also that the coop neglected to fix the leak at first notice (from a neighbor) of sings of it. given that, who pays for what?

See if this works to view the article:
http://www.northjersey.com/

Then on right side under "real estate" there's an article:
A growing problem in our houses: mold
Dated: Sunday, December 16, 2007

Or this direct URL may work:
http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjcxN2Y3dnFlZUVFeXkyMSZmZ2JlbDdmN3ZxZWVFRXl5NzIzMzQ0NQ==



As it is copyrighted, I cannot reproduce here.

Read the repairs to a unit accourding to the PL and what remedies a co-op has in cases of negligence on the part of a shareholder including sponsors.

However, there is a need to put the shareholder on notice:

After 10 business days if not fixed, the co-op may do the required repairs and charge the shareholder regardless if sponsor or not. If the leak constitutes an emergency, the co-op resolves the issue and charges back the shareholder of the unit for the problem caused by a negligent act.

This scenario may change if the leak was not considered negligence on the part of the resident. It may still be co-op responsbility if the incident was not caused by a negligent resident (shareholder or not).

The best thing a co-op does is to be proactive; try to resolve the issue before escalates by giving adequate notice and deadline and intervene if necessary.

Always copy your co-op counsel so that he/she is in the loop in the event of other problems.

AdC

it was the neglegence of the coop. the tenant was traveling.. the super was notified by tow neighbors in a 15-20 day period. . repairs were not properly or effecively undertaken. result = almost three weeks of mold and subsequent damagees. the coop is neglegent. - the question is: is the sponsor also reponsible since he is the landlord.

you said the tenant was traveling. And the leak was reported to the super by two other residents. You need to find out if the super/building had keys (access) to the apartment that was leaking. If there was no access... Then this may not constitute negligence by the building as there was NO access. You can only "break in" into an apartment with a licensed locksmith if there is an emergency. Emergency is something that is Life threatening, or Server Property damage.
Access to the apartment is Key here, as I see it anyway.

there was access. the first neighbore reported the stench of wet plaster and the second got leaked on. how does the sponsor fit into all of this?

The sponsor fits in because he/she is the shareholder (owner) of the apartment in question.

The landlord (in this case the sponsor) is responsible for the negligence of its tenant.

In other words, the chain of command is:

co-op - shareholder - subtenant.

Co-op deals with shareholder
Shareholder deals with subtenant.

Done and gone!!!

AdC

1. The co-op ALWAYS contacts the owner or landlord, in this case the Sponsor. Forget about the resident, he/she will turn your letter to his/her landlord. Therefore, the co-op through management deals with the SPONSOR.

2. If there is a minor plumbing issue, the SPONSOR is told to get a licensed plumber to deal with the deficiency, if in your policy you demand the use of a license plumber.

3. A deadline for the repairs is always set if minor and not causing major problems to others, e.g., a leaky faucet, a non-operational shut off valve, a toilet tank that runs non-stop, but you can turn the shut off valve off.

4. If you are dealing with an emergency, the co-op intervenes immediately by invoking the PL and charging back to the SPONSOR.

5. What is not negligence by way of example: an unexpected rupture of a hose under the sink that was installed appropriately, but was an obvious material failure. In this case, the co-op is responsible no matter if the shareholder is the owner of the hose.

In your case if the co-op provided notice to the sponsor when the neighbors complained, then the sponsor is responsible for not following through. However, the co-op should have earmarked the problem and instituted the PL by doing the repairs for failure on the part of the sponsor to cure the problem.

AdC

1. The AICPA has a wealth of documents for homeowners associations that will provide excellent definitions and recommendations. To some extent, I am surprised the AICPA is not quoted more often herein. Quite frankly, many cooperatives seem to ignore the good advice and recommendations of the AICPA. In my view, this is how many buildings enter treacherous waters and founder.

2. Oftentimes the proprietary lease and the bylaws have stipulations regarding the need for various reserve funs and yes there are several types of reserve funds.

3. This forum is also a treasure trove regarding reserve funds and one ought to search herein.

4. Your ousted accountant (CPA) firm should also have valuable information.

5. The CAI (Community Associations Institute) website http://www.caionline.org/ is also a treasure trove.

Ted has good advice.

Just wanted to leave you with some impressions as your statements strike different chords:

1. Flip taxes are also ways of subsidizing future shareholders.
2. If you pay for an elevator now, it has more than 15 years after it is renovated, i.e., you may sell in 3 years and you contribured to 12 more years of useful life for a future shareholder.

In other words, building reserves are not just for your term of occupancy; in fact, having reserves contributes to the overall investment and value of the property and its sellability. A potential buyer will see a building with $1 million reserve fund or reserves in better light than if the same building were to have a mere $70 K in the bank as reserves.

A reserve plan should be ideally supported by a replacement plan. At least, this will help shareholders see the value of builidng reserves.

To think in the here and now is just a condition called Myopia.

AdC

Sad but true. From my very own personal experience haveing managed many properties the board member(s)appear to be the first one to break their own rules more often than not.

Example: "All dog walkers/owners must take their pets on the service car and out the service entrance except for board members who can use the front elevators and go out through the lobby." Could you also ask the staff to enforce the rules.

FN

Oh FN dont get me started on Board members braking rules.
I can go on for ever listing what goes on. Not all board members though. Just a few that feel privileged.
Its a shame that we just cant tell them the truth and what really is on our minds without knowing that to do so would mean looking for a new job.
Pg

First there must be a tone of fiduciary responsibility and ethical values which must be inculcated in the board’s activities day after day, decision after decision, meeting after meeting, etc.

Basically personal gain or good are checked at the door and the it is the good of corporation and the shareholders which is paramount.

In our case, when we found a board member had broken a rule and wanted to be grandfathered, we then found a replacement board member and asked that offending board member not stand for reelection. This was kept quiet, other board members were aware, but not made public. This action was taken even after the offending board member took corrective action.

In my view the board needs to behave in a proper manner at all times.

This is one reason in our coop the board of directors does not have access to any waiting lists for any cages, parking, etc. This simple expedient eliminates any chance of personal persuasion and also allows the board to face the shareholders and honestly respond: ”I don’t know who is on the list or in what position, nor can I influence the list, nor would I want to influence the list.”