From the Editor 1: Rats

THINGS THAT GO BUMP IN THE NIGHT

By Tom Soter

"The building is overrun by rats," Ellen Kornfeld, vice president of the Lovett Company, said to me at a recent meeting, and as she spoke, I had a fleeting image of a scene out of Willard or Ben, the rats-are-out-to-get-you horror flicks of the 1970s. "It''s not over yet," she said, citing an 80-unit Upper West Side building she had recently begun managing. "I'm in the throes of dealing with it."

Her words reminded me of my own, much smaller cooperative in Manhattan, and its battle with rodents last year. The ground-floor residents had first reported the rats, and the five of us on the board – I am the president – asked the manager to look into it immediately. Kornfeld’s board also responded quickly but simply told her to hire an exterminator. She suggested that before they do that, they should get an analysis done of the 102-year-old building. "Very often, the attitude is: 'Rats, schmatz, what can you do? Everybody has rats.' One board member even said to me, 'I'm not going to spend the money on a building analysis; just get the exterminator.' I wish it were that simple."from HABITAT, September 2008

Her reasoning was clear: the exterminator can kill the rats, but unless you get to the heart of the problem – their entry and exit points into the property – you might win the battle but lose the war. “An exterminator can do the job from the outside, but you can’t blame the exterminator [for failing] if the building doesn’t so what it has to do to get things under control on a preventive measure.”

I remembered our building’s problem: we had simply hired an exterminator who came by multiple times a week, placing traps with poison. But like the multi-headed Hydra of myth, they never seemed to stay dead for long. As one died, two more seemed to take its place, a situation that was, in part, caused by a poor tenant education program on my board’s part. Residents would leave the garbage can lids ajar and the rats would climb in, only to leap out of the cans when you went to deposit the trash. (Once, our super actually trapped one in a can and – well, I won’t describe the gory details beyond saying that it was an epic battle.) We also had restaurants on either side of our building that were supplying attractive lures – ill-packaged waste products – to the creatures.

Kornfeld’s property had different woes, however: the rear courtyard was crumbling, a drain had collapsed, and a retaining wall was in disrepair. All three offered hiding places and/or entry spots for our modern-day Bens. “I’m also dealing with a property that owns a neighboring lot. You’ve got that vacant lot contributing to your condition, you’ve got Central Park across the street, and with all the construction going on – every time you rip up the street, or you knock down a building you contribute to the problem.”

The situation was becoming intolerable, she noted with dismay. “We’ve just planted beautiful flowers at the entrance of the building. And we’re talking a gorgeous building – it looks like the Dakota. You’re talking 12-room apartments, in some instances, quite lovely. We have a circular planter when you come into the building, and the rats, brazen as they are, went into the circular planters and dug out the plants.”

The planter assault proved too much for the board’s resistance to spending money – “Once the people are afraid of rats getting into their apartments, they will do whatever they have to do,” Kornfeld explained to me – and the manager got her way. A building-wide inspection was conducted and a number of suggested steps were undertaken: new concrete was poured in the courtyard, new sealed steel sheds were put out for garbage – “I think every building at the very least should keep garbage in a sealed container. I’m shocked they didn’t have this already” – and there are plans to rip out the sidewalk and plug all the holes. The total cost? Between $300,000 and $400,000.

My much smaller building had a much smaller bill – $5,000 – but that was still too high by our standards. Unlike Kornfeld’s property, we had just hired a man to come by and bait traps. At $75 a visit, that was an awful lot of baiting. We told our manager each month that we wanted to terminate the exterminator as too pricey, but, like the rats themselves, he wouldn’t go away. Either because our agent didn’t tell him or because of an Ahab-like obsession with our rodents, the man kept returning every few days. Unnoticed by anyone, he would silently bait the traps, and then just as silently depart, leaving little Kilroyesque notes for us that he had been there. Besides our concern over security – how did he keep getting in? – we were frustrated by our inability to fire him. Some $2,000 later, however, he finally got the message: he was history. We didn’t pay the extra money and we never saw the little man again. We also got rid of the rats eventually, thanks to our super’s diligent efforts.

As for Kornfeld? Her approach seems as methodical as it is practical and has a good chance of success. “Every board tries to get their building so buttoned up and tight that the rats go somewhere else,” she said. “That’s what’s happened at the building next door – they redid their backyard, they redid everything in their building so the rats can’t go there. If they can’t go in, they go elsewhere. We’ve got to do the same thing.” She added: “You know, we have this notion that rats only go into slums. That’s not true. They go everywhere.”

From the Editor 2: Dogs

SNOOPY, TOTO...OR CUJO?
THE BOW-WOW AFFAIR

By TOM SOTER

Growing up in New York City, my best friend was always my dog. No surprise there: dogs are traditionally seen as faithful, friendly, and obedient. After all, what other animal would be happy to go fetch a dirty stick and return it to you, over and over again? Certainly not a cat (“Fetch a stick? Moi?”)

But popular image notwithstanding, dogs can also be dumb, dangerous, and disobedient – and the source of headaches for co-op boards. In fact, if you knock on any co-op.condo attorney or manager’s door, he or she is sure to have a canine caper to share with you.

This thought came to mind when I was talking with Don Levy the other day. A vice president and account executive at Brown Harris Stevens, Don told me about one of his employees who had faced his own dog day afternoon: “One of our shareholders has two dogs that don’t look all that terrifying, but when our handyman went to make a repair in the bathroom, the two dogs attacked him and did some serious damage around his knees requiring tetanus shots and hospitalization.” Under current policy, the pets were allowed, so the board was trying to find some polite way of asking them to leave.

How does one ask a deadly dog to go? How do you determine that the canine is actually a menace and not just experiencing a one-time fit of pique caused by, perhaps, indigestion? (I recall my own dog-owning days, when Charlie, our family dog, revealed his apparently racist tendencies by growling at African-Americans who came to call. I always felt I had failed in his upbringing. Should I have banned him from the premises? Sent him to remedial racism school? Monitored his friends?)

It’s a thorny situation, from both ends of the street. I had a girlfriend once who had one of those tiny little dogs that look more like a toy than a living creature. The beast was completely innocuous but still widely noticed and admired by the staff in her Manhattan building, an East Side co-op. For some reason, the board president got bent out of shape over the animal, and like Miss Gulch in The Wizard of Oz, ordered the dog removed. Unlike Dorothy and Toto, however, my girlfriend didn’t run away but instead fought the board, claiming that the mutt had been “hiding” in plain site of the staff and that the board’s “agents” therefore knew and tacitly approved of the dog. Unfortunately, the staff – so friendly with the tiny dog in the past – now claimed it had never seen it. Facing the collapse of her case – and after she and the board had spent thousands of dollars litigating over this tiny canine – my girlfriend threw in the towel and moved out. She wouldn’t give up the dog. She sold the apartment instead.

Was the board right to shell out the co-op’s hard-earned money over a harmless little dog that could easily have been allowed in without setting a precedent? Who knows? “Boards get crazy,” attorney Jim Samson, a partner in Samson Fink and Dubow once said to me when we were talking about pet policy. “Things get out of proportion.”

Then, again, there are times when the pet most definitely has to go. Ask Lynn Whiting, director of management at Argo. A self-proclaimed animal advocate who finds homes for feral cats, Lynn told me about a situation she had once faced in a Manhattan co-op.

“There was an elderly resident who had a dog that was emitting a very foul odor. So, the board sent a letter to the man demanding that the dog be removed from the premises by a certain date. I was surprised that the board took such extreme action, and I even called up the co-op’s lawyer and said, ‘Come on, this is an old man, you’re asking him to get rid of his 14-year-old dog. How bad can the smell be?’

“He told me that the dog had some kind of condition and that it was under medical care because its skin was decaying.’ I said, ‘That’s too bad,’ but still thought they were overreacting. So, I went to the building myself, got into the elevator, and stepped off onto the floor where the guy lives – and my gag reflex started. I thought I was going to throw up because it smelled like a dead body. Maybe worse.” The smell was so powerful that it spread throughout the hallway. Lynn Whiting, animal advocate, was convinced. “So, we got the dog to go,” she recalled. But he didn’t go alone. He took his owner with him. “There was no way that the shareholder was going to give up that dog. He moved out.” He was, in fact, this dog's best friend. Arf.

From the Editor 3: Staff

FAMILY AFFAIR

By Tom Soter

“We love our super,” the long-time board member said to me when we were talking about problems in his building. So what was he to do when the love affair went sour? One of the porters had apparently gotten angry with the superintendent – his boss – and an angry exchange soon got ugly as each side refused to back down – until the super threatened his porter with a lead pipe.

It was no lead pipe cinch what the board should do next. Sure, the board could discipline both men, but could they really retain a Captain Bligh as the one in charge of their employees? What if he had hit the porter with the pipe and the porter had sued – or, worse yet, died?

I don’t know how that co-op resolved the problem – they were probably going to have to dismiss him – but the incident got me thinking about the supers and staff of my youth, and the Upstairs Downstairs kind of world they inhabited: employees, true, yet still a kind of remote family, inhabiting a world of their own, which would occasionally intersect with ours.

Some of the moments I recalled are bizarre: there was a super named Mr. Brown, a big bear of a man, who once asked my dad to hold him by the legs as he hung from a window to help him make a repair (my father, naturally enough, refused); I also remembered the personable doorman named Fastino who was fired for having prostitutes visit him on the night shift.

Then there were two other doormen, both named Eddie. One was twinkly, the other dour. Twinkly Eddie, who worked the morning shift, looked a little like Jimmy Durante and would engage in endless chatter, repeating the same bad jokes over and over (he’d feed our family dog, Charlie, candies in the morning, while quipping, “Charlie Chan,” cackle, cackle, "Charlie Chan has a sweet tooth”). Dour Eddie was hardly as animated – which was not surprising since he worked from midnight until eight – and when I’d occasionally see him, he would be half-asleep in his chair. When twinkly Eddie died (he was buried in his doorman’s uniform, or so the story went), dour Eddie used his seniority and union clout to get the morning shift, a spot the board had wanted to give to a more talkative man. Needless to say, he never made Charlie Chan jokes.

That world of supers and doormen is quite different from the reality of most co-op or condo owners who often have very little contact with the staff, outside of hellos and goodbyes and the can-you-send-someone-up-to-fix-my-door-it-squeaks type questions. It is a world that some managers look on with amazement. “No matter how charming they may appear, smart they’re not,” a veteran agent told me. “They can’t remember things. You talk to them, you tell them stuff, they go, ‘Okay, okay, yeah, okay, I, got that.’ You go up in the elevator, and then come back down and ask them again [what you told them to do] and it’s nothing like what you told them. The co-op owners don’t get it. I say to them, ‘You’re all just lucky the elevator only goes up and down. Because if it went sideways as well, nobody would ever get home at night. They would never be able to figure it out.”

This manager wasn’t surprised by the pipe battle between the super and the staff member. “There’s the whole issue about pride and machismo. You don’t know what it’s like dealing with them at times. They can be like children. These guys fight sometimes in the employee lockers over who ripped off a newspaper. ‘He took my newspaper!’ I go crazy. And you’re thinking to yourself, ‘It costs what? Fifty cents or a quarter.’ If it were me, I’d say, ‘Let him take the Goddamn paper.’ But it’s not about that. It’s at some other level that you don’t even want to know about.”

Maybe so, but there are some great supers and staff members out there, none better than Nick Orozco, a superintendent at the Manhattan co-op where my family lived for 33 years. Diligent and hard-working, he seemed like he could do almost anything, always with a smile and a “Don’t worry about it” when you’d try to thank him for completing some seemingly impossible task. I’ve kept in touch with Nick over the years, and when my father recently had an emergency at his new home, he called me – and asked me to call Nick. I did, explained the problem, and help was there within minutes. When I tried to thank Nick, he waved me aside. It’s understood, he seemed to be saying. It’s family.

October 2008

From the Editor 4: Crime

ALL FOR NONE (AND NONE FOR ALL)

By Tom Soter

I was home early, and had settled down to watch a little Hardball with Chris Matthews when someone decided to play hardball with me. The intercom buzzed and a man said, "I have a check for you." Knowing that my 22-unit co-op’s commercial tenant (who subleases the ground-floor space) was late with his rent, I thought, “That’s probably him, wanting to make nice over the check.”

When I went downstairs, there was a slightly built bald man standing by the outside door. I opened it and said, "Yes, can I help you?

He looked at me, his eyes blazing with anger. "Is this you?" he said loudly, waving the certified envelope in which I had sent him a letter advising him that he was late. "Is this you?" he shouted.

"Yes," I said, taken aback by the intensity of his emotion.

He took a half step towards me and threw the paper in my face, brandishing a fist. "If you ever send me one of these motherf---ing notes again I will kill you!" he screamed, lunging at me. I quickly slammed the door, forcing it shut as he pushed on it. "I'll kill you!" he cried, banging on the door.

After a moment, he started walking down the steps; I opened the door and yelled after him: "If you ever come around here again, I'll call the police."

Wrong move.

He pivoted suddenly and ran towards me; I shut the door, and he banged on it again. "If you send one again, I'll kill you!"

I am the board president of my small co-op, and I’ve heard from angry shareholders, pissed-off staff members, and even an irate manager or two – but my life has never been threatened because of a late notice. I suppose stranger things have happened – but not to me.

I made a report to the police, and although they were sympathetic, they weren’t very helpful (apparently, I would have had a stronger case if he had actually hit me). The next day, a detective phoned, who was Inspector Clouseau-like in his manner: he seemed to have all the facts wrong and capped the conversation by asking if I knew where to find the commercial tenant’s offices. “You only have a P.O. box,” he complained. A simple trip to Google produced the address and also several newspaper articles about the commercial tenant, who was a slumlord apparently prone to verbally abusing tenants when they complained about their apartments. I passed this information on to the investigating sleuth, but he didn’t seem particularly grateful or interested in my dilemma.

Somewhat shaken by this cavalier attitude towards (my) life and death, I mentioned the incident to Jim Samson, an attorney and partner at Samson Fink & Dubow. Jim was more sympathetic, but equally blasé: “I've been threatened before," he said to me, adding: "Guys who make threats like that rarely carry them out. He's too smart. He doesn't want to end up in jail." The lawyer then launched into a pair of anecdotes about how he had survived death threats, one by a managing agent whom he had ticked off.

I was almost reassured until Jim added: “You should probably get an order of protection, so he doesn’t come near you.” In other words, I needn’t worry because the threats were empty but I’d better get a protective order just in case they weren’t.

Only slightly comforted, I talked with Andrea Bunis, principal at Andrea Bunis Management. Protection orders? Sure, her board members got them all the time, she said, as though we were discussing what sort of bagels to order for breakfast. To get one, I would apparently have to go to my local precinct and then to the courthouses downtown, where a judge would sign off on it. This notice would be sent to the tenant, who would, of course, abide by it peacefully, as any reasonable person would.

Ha! I grunted bitterly to myself, feeling like the abandoned Gary Cooper in High Noon. That emotion was intensified when one member of my board, for some reason, tried to separate me, Tom the Individual, from me, Tom the Board President, seeming to indicate that Individual Tom had to take care of himself because he was the one who got the threat – not the board. (I tried to explain that I was being threatened because I was doing the board’s work but was about as successful as Kevin McCarthy had been at getting people to believe him in Invasion of the Body Snatchers).

A bit down about it all, I mentioned the incident (in the abstract) to co-op attorney Bruce Cholst, a partner at Rosen & Livingston. “A board member attacked!” he said, with sincere shock in his voice. “I’ve never heard of such a thing!”

Ah, thank goodness for innocent, conscientious Bruce Cholst! The last of the true believers. Serving on the board may be a thankless job – but you occasionally do want some sympathy. And, of course, a bulletproof vest.

October 25, 2008

From the Editor 5: Self-Management

IF YOU WANT SOMETHING DONE

By TOM SOTER

from January 2009

It was a routine question. The answer was what floored me. The managing agent of our 22-unit building was responding to a question from a board member, who had asked why a repair had not been made as directed. "Well," the manager said, with some exasperation, "I didn't get to it. If you were so concerned, you could have called the contractor yourself."

I was flabbergasted. "If you want us to do that," I asked, "then what are we paying you for?"

What indeed? This incident flashed through my mind as I stood at the Council of New York Cooperatives & Condominiums (CNYC) housing conference, listening to a frustrated board member tell me about the troubles she had seen. She lived in a 16-unit, two-building condominium association and the board was having a whale of a time getting the manager to return phone calls and complete what seemed to her the simplest of tasks.

"You're probably too small for him and get lost between the cracks," I said. "You live in a small building. Why don't you manage it yourself."

She laughed, as though I had suggested she perform brain surgery on herself. "Not with these people," she sighed, referring to her board.

I knew how she felt. Back in 1988, my board had been frustrated with its first managing agent — a holdover from the sponsor — but didn't know where to turn: other managers were too expensive, and everyone felt self-management was daunting. Who had the time to run down to the courthouse and contest the sanitation violation? Or keep track of the payroll taxes for our small staff? Or do the myriad of other mysterious things a manager does?

Finally, we got a volunteer. We had been so fed up with our agent — and she with us — that we had increasingly turned to an aggressive board member to complete tasks left unfinished by the manager. His job allowed him to work out of his home, so, eventually, we fired her and hired him. He resigned from the board, and we put him on a salary much less than what we had been paying the former agent. We were set.

He became increasingly more arrogant,

lecturing us as though we were errant

schoolchildren who needed scolding.

Things went swimmingly for a number of years. But as time went by, Our Neighbor the Manager (ONM) became increasingly more erratic: he would attend to the things that interested him and leave the rest to fall between the cracks. You've heard the expression, "Absolute power corrupting absolutely"? Well, our situation was something like that, if a tad less grandiose. (More like, "Too much power going to his head.") We tried to give him instruction, but he became increasingly more arrogant, lecturing us as though we were errant schoolchildren who needed scolding. Our treasurer, a mousy but knowledgeable man, got into frequent fights with ONM, who tended to bully and bluster when his authority was questioned. After one circuitous conversation about some innocuous matter, which took twice as long as it had to, I sighed, remarking, "That's 15 minutes of my life I'll never have again."

The problem, we found, with having our neighbor as manager was that we couldn't properly discipline him — it was awkward, since he lived next door to me — and he was a peer but also an employee. And he knew it. He was pretty much doing what he wanted, the board be damned.

We eventually got up the nerve to fire him — with a generous, guilt-induced severance package included — and, thankfully, turned to an outside manager for two years. When that didn't work out, we decided to try it ourselves. "How hard can it be?" asked our secretary, a detail-oriented fellow who was so organized he'd write memos about his memos. We were bolstered in our plans by a visit the secretary and I had taken to a CNYC seminar, entitled something like, "Self-Management? Is It for You?" We told the seminar leader that we were considering self-management.

"How large is your co-op?" he asked.

"Twenty-two units."

"A piece of cake," he said. "There's no reason why you should be paying someone. It's a question of organization. You get it organized properly, and after a few months, it'll run itself."

He was right, too. At first, it seemed overwhelming, but our anal-retentive secretary (who later became treasurer-secretary) was so wonderfully organized — and the rest of the board so committed (the members attended weekly 7 a.m. board meetings!) — that, within six months, deficits had turned to surpluses and the place was humming along.

It got to the point, where one of the directors, proud of our accomplishment, said, "Hey, why don't we offer ourselves as managers to another building?"

I think he was joking. At least, I hope so.

From the Editor 6: Security

DANGER, WILL ROBINSON!

By Tom Soter

from February 2009

It was about 1 a.m. and my girlfriend and I were just returning from a New Year's Eve Party. I slipped my key in the door and we stepped in, when out of nowhere, a well-built young man in an open-necked shirt and jeans appeared right behind us. Even though we live in a co-op and I'm on the board, there are some people I don't immediately recognize: girlfriends, guests, and odd hangers-on. This fellow could have fallen in that last category. Since he was not wearing a coat on a night when the temperature was well below freezing, I assumed he was a New Year's partygoer at my building who had stepped out for a smoke.

Nonetheless, I was wary of him, having had personal experience with security breaches. When I was much younger and living in a brownstone in Manhattan's West 80s, I was standing in my vestibule getting the mail after a long day at work. A stranger came up the steps with a piece of paper in his hand, apparently a messenger.

"Do you know if this person lives here?" he asked me.

I examined the scrap but didn't recognize the name, so I turned away from him to look at the mailboxes. "Did you check...?" I started to ask.

My words were cut off as I felt the man's hands around my throat. "Give me your money," he said.

Without thinking — if I had thought, I would probably have surrendered my wallet — I rammed him back into the wall of the narrow space; he released me and a furious fight ensued, after which my attacker fled.

I thought of this as the strange young man followed my girlfriend up the steps of our six-story walk-up in Manhattan's Morningside Heights neighborhood; I came up behind him with the intention of seeing if he actually was a partygoer. But when we reached our landing, the man stopped, indicating our apartment. "I have to get behind that door, for ten minutes," he said mysteriously.

"You don't live here, do you?" I asked him. He was unsteady on his feet, apparently drunk or high. He shook his head. "You'll have to leave then," I said as matter-of-factly as I could. I escorted him down the stairs. He went quietly — until we got downstairs, when he ran into the street and was nearly hit by a cab.

I don't know what happened to our young visitor — I called the police to report him as a danger to himself — but I do know that security is a big issue in most non-doorman co-ops. When I first moved to my Upper West Side apartment 20 odd years ago, the word on the street was that the street was something to worry about. The man in the hardware store next door to us did a booming business in accordion gates — the kind that slide open and shut, keeping the would-be burglar (and most of the available light) out. One of my neighbors, who lived on the top floor and had been burglarized in his last home in Boston, bought sets for his six windows. One week after he had purchased them, however, he had been robbed. A burglar had climbed the fire escape and kicked in the gates.

Although there's little a board could have done in a situation like that, recounting such stories puts everyone on his or her guard. At every admissions interview, we stress to potential owners the need to know who you're admitting, whether in person or via a buzzer. Still, people are careless, leaving the front door propped open or a basement door without its double-lock secured (the latter has led to thefts from our bike room). You can remind people till you're out of breath, but sometimes they never learn. I sometimes wish we could supply everyone with a variation of the robot from the 1960s TV series Lost in Space, who could sense a threat before it happened and would invariably cry out to his young friend, "Danger, Will Robinson!"

Some years ago, in an effort to remind people about their role in security, our building had the then-manager prepare a sign that was to be posted in the vestibule. Unfortunately, we left its wording up to him, and the warning came off as strangely one-sided: "Please do not allow strangers to enter the building as you are leaving." While the intention seemed to be clear, my ever-particular grammarian father was quick to point out a flaw, a loophole that might confuse any overly literate owner: "Do not let them enter as you are leaving. What about as you are entering? Is it okay to let them in then?"

As wordsmith E.B. White might have put it, security be damned. When crafting security warnings, you can't be too careful. Or precise.

Reprinted from Habitat February 2009.

From the Editor 7: Communication

An Impactful Essay Is About to Commence

By TOM SOTER

It was Saturday morning at about 8 and there was a lot of commotion in the halls. I opened my apartment door to find the board treasurer looking ticked off as two burly men carried Sheetrock up the stairs.

"He's putting in a pressurized wall," he said, referring to the shareholder in the apartment above me in our six-story walk-up. I could see why he was angry: Although the shareholder had mentioned to the board that he had wanted to add a new wall to his apartment, he had received no official permission; we had not received insurance forms from the contractor, nor had he signed a "hold harmless" agreement in case of injury; and the work was being done early morning on a weekend, which was forbidden by the house rules.

Apparently, we had not done a good job in communicating with this shareholder. When confronted, the errant resident was apologetic but also thought he had been given the board's blessing. Our treasurer recalled later that he had made some vague remarks in a hallway conversation with the shareholder about thinking the proposed work would be okay and the eager-to-proceed resident had obviously taken that as approval. (And this was apparently a pattern: only the week before, we had dealt with a former board member who had thought we had endorsed some construction in his unit because of a casual conversation with one of the directors.)

Hadn't we told him at the admissions interview that he should read the house rules? Or had we been unclear in our e-mails about when we would get back to him? Or that we would have to get back to him? Or that talking with a board member informally was not the same as getting a green light? Was our communication faulty – or was his?

Was our communication faulty — or was his? I looked back through our e-mails; they seemed straightforward enough. Curious, I also looked at other letters sent and received by professionals we had employed over the years. Some of them were appalling in their lack of clarity (which may indicate why we had problems with some of those professionals). In fact, although managing agents and attorneys often emphasize clarity in communication when talking with board members about smooth operations of buildings, plain speaking is often a lost art. I recalled William Strunk and E.B. White's admonitions in The Elements of Style: Don't be "tempted by a twenty-dollar word when there is a ten-center handy, ready, and able." Strunk and White's view on such words as "finalize," "impactful," and "accessorized" is equally blunt: "portentous nouns and verbs invest ordinary events with high adventure... [However,] a good many of the special words of business... [do not] express [a] precise meaning."

I often think of those comments when I listen to lawyers talk or write. With most attorneys, you never "begin" something, it is always (passive voice) "commenced." It is never "according to" it is always "pursuant." Attorneys say that their legal language has to be precise: to me it is often dry and imprecise, created that way, years ago, perhaps by someone who had never heard the phrase, "Less is more." I've had letters from many well-meaning lawyers who often use ten words when six would do (for instance: "One point of clarification, as per our conversation, ... I had been, and remain, glad to liaise with him directly." Is "liaise" even a word? Is that the same as talking with him).

I also remember a mini-controversy my father had some years ago at his Upper West Side co-op with his neighbor, who had written to the board complaining about a gas fireplace in our family's apartment that he claimed was a fire hazard. My father skewered his fellow shareholder and the managing agent (who had also written us about the supposed dangers of the fireplace). My dad, a great stylist, letter-writer and grammarian, was direct in his letter of reply, using his language to define his logic and position for the historical record. "If you are saying that a burning gas flame requires some sort of a chimney or vent then this must be a new insight into the dynamics and properties of burning gas," he wrote at one point. "Certainly our kitchen stove, when a large meal is being prepared ... creates more 'undissipated gases' — whatever they may be — than our ... living room log. If you conclude our log is unsafe because of the absence of an air vent, our kitchen range is downright cinematic in its potential for destruction."

Clearly, a board needs to be clear — for the record, for the well-being of the building, and for the sake of harmony among the tenancy. For, as George Orwell once observed, clarity of word leads to clarity of thought. The more imprecise you are in your writing and talking the more often misunderstandings will arise. And you've got enough headaches operating a co-op or condo without adding communication to the list of challenges.

Now, is that clear? Or do I need to finalize my theoretical fulminations further?

From the Editor 8: Boards

SHIP OF FOOLS

By Tom Soter

from April 2009

Serving on a co-op board can be fun. People stopping you in the hall to tell you why they feel you’re not doing your job correctly. People explaining to you at annual shareholders’ meetings why they have a better plan for handling that flip tax proposal that you spent hours creating. (But do you want to serve on the flip tax committee? “No I’m sorry, who has the time?”) Other people writing you a letter addressed to “That bunch of Nazis who run the building.”

Yeah, serving on the board is a barrel of laughs.

Nonetheless, someone’s got to do it, and with my experience at Habitat, I was not only a natural but, as my boss told me, I was born to run (but how fast and in which direction would eventually be the questions of the day).

It’s become a cliché of the co-op and condo world that serving on the board is a thankless task. It’s also become standard to poke fun at service (see, I’ve done it here to open this tale of woe – there! I did it again). You can’t help it. Sure, they say comedy helps you keep your sanity – that life is a big joke and it only hurts if you don’t laugh – but come on, the very idea of a co-op/condo board is fertile ground for satire. Where else would you find the patients running the asylum? Or, to be kinder and more truthful: who in his right mind would entrust million-dollar-plus corporations to a bunch of amateurs – and volunteers to boot – who are learning about flip taxes, boilers, and arcane real estate law as they go along? Wasn’t the lesson of George W. Bush enough?

Of course, I’m not alone in my ruminations. Countless managing agents have complained to me – albeit off the record – about the idiocy of boards. “These people are morons,” said one agent with exasperation, as he went off on a diatribe detailing the ridiculous antics of one property he handled. Another said almost the same thing and added: “I don’t know why I don’t resign the account.”

Or why I don’t leave the board. I tried. Really I did. After 12 years of service, I thought I had done my time and stepped down. I was free! Free at last! Things went smoothly for a while, until I heard rumblings from the treasurer, who had worked with me to build up our reserves into a mighty fund, about his continuing adventures on the board. The new president – who was an investor and didn’t live there – apparently said at one meeting, “We’re sitting on a lot of money in the reserve account. We should spend some of it.” And spend they did. The exterior entrance to the basement had a perfectly acceptable steel fence surrounding it. That was replaced with two majestic brick walls on either side (unfortunately, they were installed crookedly). The front door steps to the building itself were getting a little worn. So they were replaced with beautiful green tiles that were easier for the super to clean because of their glossy sheen (but which also made them easier to slip on when wet).

The last straw, however, was the storage space. Years before, we had a carpenter construct 22 storage bins in three empty rooms in the basement. They were fairly standard: an inexpensive wood frame with a wire-mesh door so you could see inside. Well, the manager and non-resident president convinced a majority of the board that these bins were sub-par. What replaced them was, if anything, over-par. Beautifully built, laminated, completely enclosed wooden bins that were pretty enough to live in (if you didn’t mind the cramped quarters). Naturally, as our next super later pointed out when he saw them, the lamination (and extensive amount of wood) made them a fire hazard; and it was dangerous not being able to see inside (we later found people were storing paint in them). That’s not even mentioning the one bin that was built over a drain, which caused extensive flooding when it rained. (Oh, and did I mention the price tag: with unforeseen extras, it came to a cool grand for each bin. Ouch!)

That got me back on the board. Pronto. I’d like to say that I rode to the rescue and saved the building tons of money. But I didn’t. I made my share of well-meaning blunders, too, and for all my Habitat-gained knowledge, I could be as naïve and inept in my decision-making as the next fellow.

But what has kept me on the board for all these years – and I guess what really made me want to return – is the sense of responsibility, dedication, and concern for their neighbors’ well being that seems to motivate each of those unsung heroes who serve. It may be that board service is a big joke but the cliché is true; it is a thankless job. So, let me say a big “thank you” to all the amateurs and know-nothings, who endure the jokes and the insults and the time lost as they spend countless hours trying to (and usually succeeding in) making their brick-and-mortar enclaves into something very special: a bona fide community. Thanks, all – and don’t forget to dodge that brickbat!

From the Editor 9: Procedure

SMILING JACK

By Tom Soter

from May 2009

Although the apartment was supposed to be empty, the treasurer of our small, Upper West Side co-op – who lived across the hallway – was sure he had heard noises coming from inside. Not believing in ghosts – at least, not the supernatural kind – but still feeling that there is safety in numbers, he asked me to join him in his investigation.

We knocked on the door. It was answered not by a poltergeist but by a balding, slightly nervous, middle-aged man.

“Yes?” he said, opening the door slightly and peering out, like a character from a Dickens novel.

“We thought we heard a dog barking in your apartment,” I said.

“Dog – there’s no dog here. I’m, ah, watching TV. Perhaps you heard that."

Before we got too far, I decided to level with him. “Look,” I said, “we’re from the board. Where are the owners of this apartment?”

The man laughed and then smiled weakly. “He’s away. I’m staying here.” He paused. “Can’t I?”

I felt like the landlord heavy in a Lillian Gish silent weepie, evicting the penniless tenant who had pleaded with me for clemency. “It’s not a question of can you,” explained the treasurer, “it’s just about proper procedure. We have to know who’s living in the building for the protection of the building.”

We finally worked it all out with the owner and allowed the sublet, but why is the concept of procedure so hard to grasp? Many residents seem to think the board is made up of nosy busybodies who have nothing better to do than pry into the affairs of the residents (believe me, I could care less what goes on in most apartments). Yet the belief persists that the directors are National Inquirer wannabes, searching out scandal and dirt.

For instance, there’s the young man who lives upstairs (we’ll call him Jack, though of course that’s not his real name). Now Jack is not the original owner of the apartment. His parents bought it some years ago when Jack was just a tyke. Jack Senior, his dad, was always a friendly guy, but – as my mother used to say about questionable characters – he smiled too much. You always got the feeling that he was hiding something from you. And he usually was – like the time we found he had constructed an illegal wall in his unit (he had to take it down), or the other time when he did some rewiring that our super said was improperly done. When confronted with these sorts of things, he always gave a Peter Lorre kind of smile – and it usually took repeated calls and letters to get him to fix them.

One day, I met Jack Senior and his wife (also a smiler) with all their furniture in the lobby. Although we had procedures for moving in and out – a fee had to be deposited with us to cover damages to the wall, for instance, and the super had to be given notice to inspect those walls both before and after – Jack S. had not notified anyone.

“Moving out, Jack?” I asked.

“No, no. We’re just moving our furniture to another place,” he said, which I guess he figured was not, technically, moving out.

I didn’t push it, but we didn’t see much more of Jack S. after that. (In an odd coincidence, he and his wife were later sighted as happy residents at a large hi-rise about ten blocks from us by a former board member who had moved into that building, too – although she gave us fair warning.) We saw a lot more of Jack Jr., however, who also smiled often but who also freely told us that he had taken over the family homestead. Although we were a bit ruffled by this end-run around our carefully constructed rules, he wasn’t actually a sublessee or even a new owner, so we didn’t need to be told. He was just a family member who had grown up there and moved back in after college. So much for procedure.

I still think he smiles too much.

From the Editor 10: Meetings

THE PERMANENT PROXY

By Tom Soter

Years ago, Habitat conducted a survey of the “most pressing issues” faced by co-ops and condos. One of the answers went like this: “The most pressing issue in our co-op? Security: (1) Resident thief whose apartment is tenanted by a relative. (2) Deranged elderly tenant whose apartment is controlled by uncaring spouse. (3) Apathetic shareholders who don’t participate. The topic we would most like to read about? Board succession in light of the above.”

My flip reply at the time: “Our suggestion: put (1) and (2) in charge of the building and, before you know it, (3) will be no problem.”

I thought of this exchange when I presided over the annual shareholders’ meeting at my small Manhattan co-op. We were waiting to start the session, but the only ones who had arrived were a woman who didn’t live there but had bought a unit for her son (who had accompanied her); three of the five board members; and a man who was subletting an apartment and was there as proxy for the out-of-town owner.

On one level, the poor attendance was a sign that we were doing something right. Controversy – as my response to the survey participant indicated – is what creates crowds (“Want to get more bodies at the annual meeting?” goes the old management joke, “announce you’re redoing the lobby”). Years ago, when we first became a co-op, our managing agent rented a room for the annual meeting at a nearby school. Our lawyer and accountant came. We waited. And waited. And maybe three people came. We had to pay for the room and reschedule the meeting, but we learned our lesson. Like a good courtroom attorney who never asks a question unless he knows the answer, we realized we should never attend a meeting unless we had enough proxies to make a quorum.

From then on, proxy-collecting became a mania for us. When we announced the annual, we made it clear that everyone should get us a proxy, even if he or she intended on being there (many a slip between proxy and trip).

Sometimes, the proxy question was unclear. For instance, before this year’s meeting, the board received an e-mail from a shareholder saying, “I just want to make sure that the permanent proxy (for our unit) we submitted last year covers this year’s meeting. My wife is planning on coming to the meeting, but I can’t make it. Is it always the last Thursday of April? I would really like to go, but I work late on Thursdays. If I know far in advance I can schedule it in.”

I received this and didn’t know quite what to make of it. I had never heard of a “permanent proxy” for an annual meeting – it was my understanding that a proxy had to be for a specific event – nor had we ever had a fixed date every year for the gathering; it was usually sometime in the spring, but the last Thursday of April? What were we? The Supreme Court?

The treasurer called me about this, we exchanged a few remarks and had a quiet chuckle or two over the idea of a permanent proxy and a regular Thursday, and he then responded. End of story.

Well, not quite. The day before the meeting, I received an angry call from the wife of the Permanent Proxy Man. “I don’t understand why we can’t have a permanent proxy? asked Mrs. PPM.

“It’s just not very common,” I replied.

“Why didn’t someone tell us before now? It’s a great hardship for us to get you a proxy.”

“Are you not going to be home before the meeting?”

“I’ll be home tonight.”

“Well, I can hand-deliver a proxy to you.”

“I have a proxy.”

“What’s the problem then?” I asked, wondering how hard it could be to sign a piece of paper and feeling like I was in an Abbott and Costello routine that wasn’t quite working.

“I sometimes feel the board is going out of its way to make life difficult for us,” Mrs. PPM said, near tears. I apologized but was even more puzzled. She went on: “My father-in-law is not well, and it’s a great burden to get this to him out on Long Island.”

I saw a glimmer of light. “Does your father-in-law own the shares in the apartment?” He did ­– and thus the mystery of the permanent proxy was solved. It turned out that Mr. and Mrs. PPM incorrectly believed that only the shareholder could attend the meeting (every year until this one, the son or daughter-in-law had attended, always dutifully bringing a proxy signed by the father with them); it never occurred to them that they could attend as immediate family members.

She came to the meeting this year and was all smiles. So were we. We had a quorum – we had the requisite number of shares via proxy – and the meeting ran like Mussolini’s trains. I spoke, as did the treasurer, the mortgage refinancing committee chairman, and our accountant. There were two questions. The meeting was over in 30 minutes. “I’m very impressed,” said our new CPA. So was I.

The moral of the story? Controversy may create crowds, but competence and proxies make for smooth meetings.

Or something like that.

From the Editor 11: Neighbors

PAGING JACK BAUER

By Tom Soter

from July/August 2009

“What are you doing?” I called out in the night.

My girlfriend was standing by the window of our darkened bedroom, peering out into the alleyway.

“There are two guys on the roof of that building,” she said, indicating the small, two-story structure that abutted our six-story co-op and the building next door. “They’re doing some kind of work.”

I got out of bed, looked out the window, and saw two shadowy figures, one bending over an air duct, the other holding some kind of torch.

“Hey!” I called out to them. “What are you doing out there?”

They both looked startled, as they wheeled around and stared into space, their heads turning every which way as they attempted to locate from where my voice was coming.

“We’re working,” said one of them, with the trace of an accent.

“At 2:30 in the morning?” I yelled back at them.

“Two minutes, boss, two minutes, and we’ll be finished,” pleaded one.

I wasn’t feeling particularly merciful. If this were the TV show 24, these would be terrorists, planning to destroy my liberal Upper West Side neighborhood. As I put on my clothes to go downstairs and investigate, I dialed 911. I was no fool. I wasn’t going to be the guy who goes to investigate a noise and becomes the why-didn’t-he-summon-backup-guy-who-disappears? “It seems fishy to me,” I said, feeling very much like 24's take-no-prisoners hero Jack Bauer, as I went down to the lobby to meet the police. “Who does work at 2:30 in the morning?”

It turns out some people do: the officers found a man sitting in a truck out by the street corner, who claimed he and two colleagues were doing regular duct work required by law. Who knew whether he was telling the truth? When I repeated my new found mantra to him, “You do work at 2:30 in the morning?” one of the two police officers said, “Thank you, sir, we’ll handle it from here.”

Coincidentally, the whole incident came on top of a curious afternoon: the board treasurer and I, along with the superintendent and his assistant, had entered a shareholder’s apartment without his permission. We had gotten complaints about noise, odors, and vermin and felt we had to take some kind of action.

We had been back and forth with our lawyer about this guy – did we have a legal right to enter or not – but our proprietary lease and house rules seemed to give us clear permission to enter. We had given the shareholder fair warning, too: calls and letters, most of which had gone unanswered.

When we entered, we found an apartment that looked like my bedroom when I was a kid, just before my father came home and threatened to disown me unless I cleaned it up. Bags, boxes, and papers in nooks and crannies, clothes, books, and other items strewn around, like a dorm room in disarray. There’s nothing wrong with a colossal mess, of course – you can’t evict someone for being an average slob – but there were serious health and safety issues here: the cabinet under the kitchen sink was covered with mouse droppings. (The neighbors had also reported roaches.) Then there was a built-in heat lamp in the bathroom, too,which our super said had been improperly installed and was a serious fire hazard. Finally, we discovered a loft bed in the kitchen/living room, which our super said did not comply with code and should be disassembled.

The board decided that a letter should be sent telling the owner to clear up the first two items immediately, giving very clear deadlines (the vermin within a week, the electrical problem within 48 hours) and warning that, if he didn't comply, we'd take action and bill it back to him. “If he blows us off,” I said, back in my Jack Bauer mode, “we should probably get our lawyer to send him a letter, which he might take more seriously.”

Then again, maybe he wouldn’t. After all, in some circles, it’s apparently fine to live like Oscar Madison on a bender or do shadowy “duct work” with a flaming torch at 2:30 in the morning. Still, from where I sit it’s all a little twisted. I mean, I’m a life-long New Yorker, but….2:30 in the morning? Even Jack Bauer has to sleep.

From the Editor 12: Politics

THE MIRACLE WORKER AND THE VULCAN 

from HABITAT SEPTEMBER 2009

I knew how Captain Kirk must have felt. Kirk, as most people who haven’t lived in a cave for the past 40 years know, was the dynamic leading man in TV’s ground-breaking mid-sixties science-fiction series, Star Trek (and also, for those who came out of the cave last summer, the hero of the big-budget 2009 film, Star Trek). He was the captain of the starship Enterprise, but much of his time was spent acting as nursemaid, sorting out disagreements between his two buddies, the coolly logical Vulcan-born Mr. Spock and the impulsively emotional Dr. McCoy. (There were also occasional outbursts from the brilliant but cantankerous Mr. Scott, the chief engineer, who was dubbed a “miracle worker” by most because of the nearly impossible feats of mechanical wizardry that he’d perform on the ship, usually saving it from destruction.) Kirk and company came to mind the other day when, as president of our co-op, I had to deal with our brilliant-but-cantankerous-impulsively-emotional superintendent and our coolly logical secretary/treasurer. The treasurer called me one night with a complaint: “The super agreed to make the following repairs as soon as possible,” he said, ticking off 11 tasks in a coolly angry way. “After almost two months, the only repair completed to date is the sealing of the sidewalk cracks, basically applying a caulking compound between cement slabs. It just won’t do.” I sympathized with him, and in my most understanding Kirk-like manner, told him I’d communicate those concerns to the super and get him to agree to getting the work done as quickly as possible – or else letting us farm it out.  

When I approached the super and, diplomatically, told him that I wanted to check on the progress of the work, he responded in his impulsively emotional way. “I’ve had it,” he said, saying that the secretary/treasurer was really the one I was speaking for, and if the secretary/treasurer wanted to get someone else in, that would be fine with him. He didn’t mean it, of course (that’s just how those brilliant-but-cantankerous-impulsively-emotional types talk when they get going) because he then went on to explain how it had been raining almost every other day for the past two months, and that interfered with most of the exterior work being done properly (much as Mr. Scott would complain about having to change the laws of physics to accomplish an impossible task Kirk had requested). I knew all this, of course, since the super had given us regular reports, but – as the secretary/treasurer had pointed out – there had been occasional breaks in the weather when some of the tasks might have been achieved. Yet that was too coolly logical an argument for this situation.

So, here I was, caught between two strong-willed men, each certain his position was right. What should I do? Order them to act like grown-ups and work out their problems? Or side with one against the other? Or simply order them to perform a Vulcan mind-meld so the two would become one and understand each other’s position? (Now if only that were really an option, wouldn’t life be grand?) No. I flattered. Not untruthfully, mind you. A board president must be a politician and that means, like the CIA, he never lies. He may exaggerate (as Mr. Spock did in The Wrath of Khan), but he doesn’t fib. Therefore, I reminded the super of a recent job he had completed within a three-week time frame, a job that many had claimed was impossible to finish in such a short period, but which he had managed to pull off despite the odds. I reminded him of his reputation as a “miracle-worker,” and then told him, playing my psychological trump card, “But if you think it’s too much for you, just tell me, and we’ll get an outside contractor in to finish whatever you can’t do.”

That was the final straw, as though I had Mr. Scott that we’d bring in an outside engineer to help him repair the warp drive engines on the Enterprise. “I can do it,” the super responded, rattling off a list of items that he said would be done in the next few days. “And I’ll have it all done within a week.” Within a week, the work had been done. The super was happy. The secretary/treasurer was happy. I was happy. And our building continued its adventure, boldly going where countless other co-ops had gone before. The moral of the story? Emotion beats out logic every time – but you need a Mr. Spock on your side to keep things moving.

And it’s also cool to think of yourself as Captain Kirk.

From the Editor 13: Being Neighborly

WHEN CHAPLIN WAS MY NEIGHBOR

FROM HABITAT OCTOBER 2009

 

Neighborliness is next to godliness. At least, that’s what my father might have said if he had been big on the Godliness thing.

I learned about neighborliness at a young age, when my family and I ended up as neighbors to Charlie Chaplin, the silent movie star. It was the summer of ’66 and I was just nine. We were staying in a little bungalow on the beach in Jamaica and our neighbor happened to be Charlie Chaplin. Yes, the Little Tramp himself was next door, working on the screenplay for what would be his last film. My father felt very respectful of Chaplin’s privacy and so, whenever the great man came out on the beach, my dad would quickly hustle us off to our bungalow, so that Charlie could be alone. After two or three days of taking these speedy exits, Chaplin sent a man over to our bungalow with a message: “Mr. Chaplin would like to know if he has done anything to offend you. You don’t seem to want to share the beach with him.” My father sent a message back explaining, and the next thing we knew, Chaplin had invited us over to have some tea.

My father, who died earlier this year, instinctively knew how to be neighborly: that being a good

neighbor meant respecting his neighbor’s privacy but also sticking up for himself when needed. He believed that diffusing a thorny situation with humor and charm was always preferable to raised voices and/or raised fists.

That was the case when my dad was contacted one day by the managing agent of his Riverside Drive cooperative about a complaint from his neighbor, Mr. Valency. Apparently, Mr. Valency called the fire department to investigate an obsession of his: our gas fireplace. He had also written a letter to the board about our “fire hazard.”
The visit by the FDNY and the letter to the board irritated my father greatly, and he was especially miffed by the sanctimonious tone used by Mr. Valency.

But rather than show that he was mad, my father responded with a letter to the manager that began: “My, what a storm seems to have been raging all about us.” After recapping Mr. Valency’s complaints, he used a gently mocking tone to puncture them, first pointing out the irrationality of a claim that Mr. Valency’s walls became “hot enough to light a match” (“the volume of heat or flame created by the log, I would say it is about equal to the heat provided by the broiler of a gas stove”), showing his own reasonableness on first hearing of the complaint (“I suggested that I would request the fire department provide us with an inspection and an opinion. I also offered to consult with a specialist and to install some sort of asbestos backing to the fireplace, if that were recommended”), and then returning to his neighbor’s irrationality (“On the next evening – before I had the opportunity to do any of these things – three firemen... presented themselves to examine our fireplace. They said they had been summoned by the Valencys, who had not informed us of this step… They then informed us that the fire-log was in no violation of any fire department regulation or city ordinance.”).

My father later took a jokey and, finally, a firm tone, as he noted that, since the firemen’s visit, “our poor little concrete log, cold and flameless, has…been apparently blazing away with great intimations of catastrophe, not only in the minds of the Valencys but also at the conferences of the board of directors... Mr. Valency starts off his letter by writing ‘the fact is that the gas fireplace... constitutes a fire hazard.’ I would like to know how this ‘fact’ was determined. The only authority consulted so far on what constitutes a fire hazard has been the fire department, and they expressly declared it was not a hazard. (If it were, would they have left it functioning?) …The only ‘fact’ so far clearly established is that the Valencys are fearful of our fireplace. Although they have the freedom to be fearful of whatever they choose to fear, this does not give them license to transpose the ‘fact of fear’ into a ‘fact of hazard.’ I do believe in the ‘fact’ of their fear; I respect their privilege to voice it; and I will – at whatever inconvenience to my household – cater to their fear for the sake of respectful civility. None of this makes the hazard a ‘fact.’ (If it did, I’m sure my sense of community is at least equal to the Valencys’, and I would not need to be pushed into communally protective behavior.)’”

The result? Mr. Valency’s complaints were made to seem silly – which they were – and a potentially explosive situation (figuratively speaking, of course) was defused. The lesson I learned: a big stick may be more satisfying but, in the end, speaking softly – with wit, charm, and facts – can often accomplish more.

From the Editor 14: Lawyers

 

WHITHER PERRY MASON?

FROM HABITAT DECEMBER 2009

In my youth, I always admired TV’s premier attorney, Perry Mason. In every episode of the series, steely but sensitive Perry (Raymond Burr) would take on a client who was apparently guilty, persevere in a seemingly hopeless case even when his client lied to him, and undertake countless hours of detective work (never mind researching the law – he seemed to know instinctively its every twist and turn). In the end, he would not only prove his client innocent but uncover the guilty party in a dramatic courtroom confrontation as well. And to top it off, the only time a fee was mentioned was when Perry would waive it or turn it over to some needy person.

Everyone says Perry Mason is a fantasy, and even as a teenager watching reruns of the series in the sixties, I knew that the existence of such an attorney was unlikely. Nonetheless, the image persisted in my subconscious, so I was not surprised by the generous nature of some of the lawyers I dealt with in everyday life. Take the “parrot man.” He was a young attorney who lived in and practiced out of a three-story, 1800s building on Canal Street. What I remember about him was that he usually had a pet parrot on his shoulder (a little too pirate-like, I thought), and that he said that he would only charge me half his fee if he lost my case. (He lost, but his heart was in the right place.) Then, there was the lawyer who informally advised my 22-unit co-op. I had known him for years, and he gave us free advice on a lawsuit we were considering. He was a loquacious fellow, always reeling off stories about cases that he had won through outrageous legal stratagems, and I always thought he often took on a case not for the fee but for the anecdote he could get out of it. (We never tried out his advice, so I’ll never know how good it was.)

Finally, as a writer for Habitat, I have spoken with many lawyers on everything from sublet policy and proxy voting to construction contracts and noise complaints, and their expertise usually left a good impression.

That brings me to the tale of the small building. I know of a smallish co-op that has had attorney ups and downs. With its first one, things went swimmingly for a long time – fees were reasonable, advice was good. In fact, he seemed to be a real-life Perry Mason – until he moved to a pricier firm. The bills gradually increased, and many on the board became unhappy. So, they changed attorneys, explaining to the new one their problems with prices. Mason-like, he said he understood, and again, things went swimmingly. He negotiated a deal with the co-op’s commercial tenant brilliantly. He handled a refinancing with aplomb. He was always reachable. But then, as will happen in romantic encounters and attorney-client relationships, he seemed less attentive and more careless. Calls were not returned as quickly, and the board would get invoices citing lengthy conversations that few could remember, along with research draft opinions that were cited but not shown to the directors. When the board members inquired about these problems, they were given long e-mailed explanations – for which they were subsequently billed. After the board complained, the attorney would always adjust his fees, citing bureaucratic errors.

But it all left a bad taste in their collective mouths. With both lawyers, I would guess that the building was too small to be a top priority.
The co-op switched attorneys. This time, however, the board opted for a tiny firm whose principal frankly admitted he wouldn’t make any money in the short run but expected to get income from handling apartment transfers; he also hoped to cement his already-existing relationship with the cooperative’s accountant, who was connected with larger (and more lucrative) buildings. His frankness was invigorating. So was his backup staff, which was refreshingly “mom and pop”: his wife was his chief staff member, and his mother-in-law his office administrator. Slightly rumpled and deferential, this new lawyer was reportedly more Columbo than Perry Mason, but what the heck, you have to adjust your sights to the new economy. At least he didn’t have a parrot on his shoulder.

From the Editor 15: Prisoners

NOW WE ARE SIX

from HABITAT, JANUARY 2010

I woke up in what seemed to be my bedroom.

But it was strangely different.

“Where am I?” I asked the shadowy figures standing before me.

“In a co-op.”

“What do you want?”

“A 50 percent maintenance increase.”

“You won’t get it.”

“By hook or by crook we will.”

“Whose side are you on?”

“That would be telling.”

“Who are you?”

“The new board of directors.”

“What happened to the old board?”

“You are Apartment Six.”

“I am not an apartment! I am a shareholder in a corporation!”

As the board members laughed maniacally, I woke up again – this time for real – in my own bed. I looked around; I looked under the bed – no shadowy figures, just the remnants of some cake and juice that I had the night before when I had been watching the new TV version of The Prisoner, which is based on the old TV version of The Prisoner created by and starring Patrick McGoohan, who went through a variation of the above exchange in almost every episode.

Both series are paranoid dramas, dealing with identity, community, and sense of self in an increasingly dehumanized age. In the original, McGoohan plays Number Six, the man-of-principle protagonist, a secret agent who resigns his job and finds himself trapped in a remote, seaside hamlet known only as The Village. There, everyone has a number, not a name, and the happy faces and carnival-like atmosphere mask a dark truth: the people in The Village are all prisoners, kept there because they know too much or

won’t reveal enough.

McGoohan’s parable resonated in the rebellious, individualistic 1960s, and it has new meaning in the world of 21st century co-ops, where boards make decisions about a building’s finances, infrastructure, and quality of living, usually without consulting the shareholders or even communicating the reasons behind those decisions.

I thought about this after watching The Prisoner again (I had, of course, seen the original series many times in my youth). Shareholders, especially in bad economic times, must feel not unlike Number Six – prisoners in their ever-depreciating apartments with their fluctuating adjustable mortgages, wondering why the shadowy board of directors won’t allow sublets, forbids dogs, and seems to make most decisions arbitrarily. Do boards ever look at it from Number Six’s point of view?
With this in mind, I thought of the time, years ago, when my small building was faced with a large problem: a lax sublet policy had allowed the cooperative to fill up with renters; over 60 percent of the property was subleased. Our manager warned us that individuals would have trouble selling because banks would be reluctant to lend to a co-op stocked with a majority of non-owners (it makes the investment more unstable, we were informed, because those pesky renters don’t own, so they care less and damage more).

We then spent days (or was it just long hours?) researching other sublet policies, talking with different boards, and consulting various professionals, all to concoct what we saw as a fair and balanced policy, in which we put an ever-tightening cap on renters, with the aim of reducing their presence to zero over a period of years.

After we announced it, however, you’d think we had told everyone that we were going to set the building on fire. Even though we wrote a letter explaining our rationale, that didn’t stop one owner – who had subleased his unit more years than he had lived in it – from phoning me with the message, “The board is acting like a bunch of Nazis.” My own cousin, who was also subleasing a unit to renters, insisted that the board was “power mad.”

Did we seem like The Village authorities in The Prisoner? From our point of view, we were just doing what was right, but perhaps we should have done more than simply send out a letter announcing the new policy – maybe staging a town hall-style meeting in which we communicated more clearly why we were taking these steps.

We may have made a mistake. But at least we didn’t try to give them all numbers and take away their names. Hey! Maybe that’s not such a bad idea. It would certainly make things more businesslike.

From the Editor 16: Noise

 

MOT RETOS

from HABITAT, FEBRUARY 2010

It was the first time I had heard this particular theory of behavior. “In a co-op,” said the articulate board president, “it’s an 80/20 situation.” Initially, I thought he was talking about the (in)famous IRS requirement that 80 percent of a cooperative’s income had to come from the residents and only 20 percent could come from its commercial space. But no – that now-defunct rule was nowhere in sight. He continued: “Eighty percent of the shareholders are good neighbors; the other 20 percent are looking to cause trouble.”

I thought about this novel theory. Could it be true? Were some people in a co-op just variations of the impish Mr. Mxyzptlk, the bizarre character in the Superman comic books of the 1950s who seemed to exist solely to play practical jokes on Superman? (He could only be stopped by being tricked into saying or spelling his own name backwards.)

Later, attorney Bruce Cholst called me with a story. It seems a client of his – a co-op building in Manhattan – sat next door to a nightclub. The nightclub did what nightclubs do: created noise into the wee, small hours (and not Sinatra-style tunes, I’ll wager). The loud music kept a shareholder awake nights. But rather than call her precinct, she called her board.

Now, noise complaints are among the most difficult issues to resolve; the noise is sometimes hard to detect, it can involve bringing in outside experts with noise-measuring equipment (but would you really want to do that at two o’clock in the morning?), and it is often an issue between two neighbors, not involving the whole property.

In my own small building, I’ve made noise complaints myself, usually in vain – once, to my next-door neighbors, who must all be hard-of-hearing because they always seem to shout at each other, not in anger but just by way of conversation (I imagine them sometimes as comic book characters, who often talk with exclamation points as their principal punctuation, i.e.: “Good morning, my dear! Do you want some toast with that?!” “Thank you, darling!”) But I’ve never gone to the board about the problem.

Bruce Cholst’s co-op board members received the noise complaint and dealt with it as best they could – after making a request to the police and local politicians to come down on the nightclub, they put it aside. “After all,” said Bruce, by way of explanation, the nightclub had existed there before the woman had bought into the co-op. What did she think went on there? The board couldn’t be responsible for the sounds of the city, could it?

Some might say the board should have been more active (perhaps hiring someone like The Equalizer, the Edward Woodward TV character who took on villains the law could not touch, usually by speaking softly with a big gun). For this sleepless-in-Manhattan woman, however, the board had not done enough and the only answer was to sue the co-op, claiming that the directors had not fulfilled their fiduciary duty to let her get a good night’s sleep.

Needless to say, the case didn’t even get to full trial stage, as a judge threw it out as patently ridiculous (my phrase, not the court’s). Yes, I thought later, here was a clear example of the “80/20” rule of troublemakers that the articulate board member had been talking about.

Could there be others? I thought then of the couple who had frequently complained about their drain clogging up. After the third or fourth incident, the super came to the board and put in a complaint himself: the drain was clogging regularly because someone (and I’m guessing it was the tenants) was throwing vegetables in the drain!!! The same couple also refused to change their 20-year-old shower-body when they renovated the shower – and were surprised when it started leaking on the unit below!!!

I thought of other incidents by other tenants – of noise, odors, and crazy accusations. The “80/20” rule seemed more and more real. Was there some Superman-style way to combat it, like making the shareholders say their names backwards?

“No,” said the wise co-op owner who had devised this theory. “It’s what I love about co-op living. You have a microcosm of the human condition.”

Ah. That makes it alright, does it? Sigh. Maybe if I say my own name backwards? 


From the Editor 17: Cons

SNAKE OIL SALESMAN

from HABITAT, March 2010

            

Mr. Haney lives on. Not the actual Mr. Haney – actor Pat Butram, who played the unusual salesman on TV’s Green Acres from 1965-71, died some years ago – but a close facsimile.

Mr. Haney, as fans of the absurd series will recall, was a smooth-talking entrepreneur who always seemed to turn up at the farm of the series protagonist, Oliver Wendall Douglas (Eddie Albert), when Mr. Douglas needed something. It didn’t matter that Mr. Haney had sold the naive Oliver useless things in the past, he would often be able to talk the city slicker who wanted to be a farmer into shelling out his hard-earned cash for something that would purportedly save him time and money but actually did neither.

Mr. Haney should be on everyone’s mind when approaching capital work. Beware of the smooth-talking salesman, who seems to have the answers to your dilemmas – at just the right price, too! As a board member, you are always trying to save your building money. I know of one small, self-managed co-op that runs a pretty tight ship, thanks to the efforts of everyone, but chiefly because the treasurer is as watchful as King Croesus.

Sometimes, however, you can be too clever by half. When the board of this building needed some repair work on the roof, it took proposals from two firms, one small and one large. The large firm sent a lower-level fellow who gave what seemed to the board like glib answers. The smaller firm was represented by the president of the company, who lived in a co-op himself and seemed to know all the concerns of the owners. Why shouldn’t he? It was as though he was one of them.

The small co-op went with the small company. A match. Well, not quite.

Apparently, the small job was too much for the small, one-man firm. He made mistakes on measurements, on contractors, on materials. And when he was queried about it, he gave long, defensive answers – for which he billed the property. The work was completed – but not without a lot of pushing and pulling.

Never again, swore the board. But, after a good experience with a large firm doing rear-wall work, the board seemed to forget its incident with the one-man shop, and, like Mr. Douglas on Green Acres, allowed itself to be sweet-talked into another disastrous deal by an oh-so-sympathetic engineer, again a principal in a small company.

He had an impressive spiel – and he was knowledgeable, too. The board used him on a small consulting job in which he assessed the useful lives of some of the building’s systems and structures. Happy with the result, the directors asked him to obtain bids for some repair work that needed to be done.

When he was three months late on a bid deadline that he himself had set, he finally responded to a series of written questions – but kept shifting ground, like Mr. Haney or like the parrot shop salesman in Monty Python’s Flying Circus who tried to justify his sale of a dead parrot to an irate customer by claiming the non-breathing bird was “only resting.”

“He did not answer our first question directly and instead referred back to an old inspection report rather than the most recent estimates from July,” a board member said. “The bottom line is that in July, he recommended budgeting $50,000 for fire escape/masonry, and $10,000 for a scaffold, plus possible permitting fees. Then, in September, he recommended budgeting $115,000. He seemed to be dodging the question by using estimates from last year.”

As his excuses changed – one of them was to blame a since-dismissed employee for screwing up on the deadlines – one thing remained constant: his insistence that the board meet with him and discuss matters, as though his charming demeanor would mesmerize the board into forgetting the facts. The two parties eventually parted ways without ever meeting again.

The moral of the story? Don’t be fooled. Beware of Mr. Haneys bearing gifts – they will ultimately cost you more than they’re worth. 



From the Editor 18: Tenure

GOTTA SERVE SOMEBODY

 

from HABITAT April 2010

It all started with a handshake.

If you’ll pardon me for getting nostalgic, this month is my 28th anniversary editing and writing for Habitat magazine. In April 1982, I was 25 and had been without a full-time job for a year or so. My first gig out of college had been at Firehouse magazine, where I learned all I ever wanted to know about the fire service industry. After two-and-a-half years on that job, I left for an editor’s slot at Americana – which started as a promising partnership and ended up a disaster. I left after six months – writing about firefighters was more my thing apparently than making rocking chairs seem interesting – and I took off for a year to write a book about the James Bond movies.

Then I got my job at Habitat. Carol Ott, the red-headed publisher of the new magazine (there had been one 16-page issue published so far) asked me point blank: “Do you know much about co-ops?”

“No,” I replied. “But I didn’t know much about firefighters when I started at Firehouse, and I knew a lot by the time I left.”

Apparently, it was a good answer. Carol gave me her book, Paradise Loft, and, the next day, hired me. We shook hands on the deal and in the 28 years since then, I have learned a lot about cooperatives and condominiums and the people who live in them. I met board members and managing agents, lawyers and accountants, contractors and engineers. I bought a co-op myself in 1987 (not just to get story ideas, though it has helped), and immediately ran for the board. I have learned the basic lessons of being a board director – communication and clarity – though I haven’t always been as adept at practicing both as I’d have liked.

I’ve written about management successes and management failures – and lived through them as well. In my own small building, we’ve had sponsor-managers who didn’t care enough, shareholder-managers who cared too much, and outside managers who fell somewhere in between. We’ve had other professionals who ran the gamut from great to ghastly.

To me, over the years, the managing agents I have met are the most fascinating of the co-op/condo professionals. I can see why lawyers, architects, and engineers do the work, but managers? If being on the board is a thankless job, what is it to be a manager? Underpaid, overworked, and (often) under-trained, the typical managing agent must be some kind of masochist. I’ll always remember one of the first agents I met: a slightly built, nervous-looking man who seemed to be obsessed with what a competitor said and did in print. When I’d call him with questions for a story, he would always ask me up front, referring to his competition: “What did Jerry say?” And after the interview had ended, he would ask: “How was that? Was that as good as Jerry’s answer?”

But what was surprising was that, despite such insecurities, he was an extremely knowledgeable man, savvy in the world of real estate but especially savvy about dealing with people. I went with him on a building job interview once and marveled at how the twitchy, Peter Lorre-like character became as smooth as Cary Grant when handling questions lobbed at him by the board president.

It’s that strange dichotomy that makes this job, this business, this lifestyle so fascinating. The bottom line: I’ve discovered that the best professionals share a common thread with the best board members – they care enough (or are crazy enough) to put up with the long hours, low pay (did he say pay?), and frequent complaints from the residents.

It’s a cliché by now that serving on the board offers no reward, but that isn’t quite true. Sure, people are protecting their investments, but it’s more than that. I remember years ago, when I asked my father if something I wanted to buy was too expensive. “Does it mean something to you?” he said. It did. “Well, then it’s not too expensive,” he answered. Being on a board – serving someone to the best of your ability – is like that. It means something to you.

And it beats cursing the darkness.
 

From the Editor 19: Corruption

 

 

BY ANY OTHER NAME

from HABITAT May 2010

Our connection was bad, but I could make out the words “corruption” and “dishonest” and “board” from the voice at the other end of the line.

“Can you ring me back?” I asked my caller, intrigued by his words and feeling as though I were in an episode of Danger Man. When we got a better connection, I didn’t know whether he was telling the truth or just something like the truth. Charges of board corruption are hard to prove and, in my experience reporting on such accusations, there is often more smoke than fire to a lot of these claims. Like the woman who started off her complaint by charging that the board president was more evil than “Rasputin and Stalin combined” (considering that Stalin alone killed thousands of innocent people, this president must really have been some wicked dude).

Sure, there are the blatant examples of theft – shortly before Christmas 2009, Matthew Stoll, the treasurer of a Rockland County condo board, pleaded guilty to stealing $130,345 from the Sussex Condominium III Association – and a number of board directors were actually indicted in 1997 when the Manhattan D.A.’s office went after managers and boards with great gusto.

Still, even when things seem clear-cut, they can become muddy, because the truth can be muddy. Take a story I had written about the Greenhouse Condominium in 2003. As I wrote then: “Depending on who you talk to, the Greenhouse Condominium is the best-run/worst-run, most financially stable/least financially stable property in Queens. Its former board members were a highly efficient/barely competent group of people who only did what was best/did not have a clue about what was best for the 74-unit building.”

And, of course, there were the inevitable charges of self-dealing and corruption hurled at the Greenhouse board and the managing agent, both of which denied any wrongdoing. I spoke to the dissidents, I spoke to the managers, I spoke with the board. All seemed credible. But the bottom line was that money was missing and the finances were a mess.

The kindest explanation is that the board members did the best they could, but that it was too much for them. After all, there is no training for boards – outside of what they get at seminars held by the Council New York Cooperatives & Condominiums and the Federation of New York Housing Cooperatives & Condominiums – and certainly no compensation. Would it be so surprising, considering the hours and effort many board members spend on board matters that they didn’t take a perk here or there? No cash, but maybe accepting a gift from a contractor or two? Not that such gratuities are proper, of course.

I know that I never took a perk as a board president – in fact as an editor of Habitat, I once sent back a fruit basket given me by a source, who probably thought I was a bit fruity to carry objectivity that far – but that didn’t stop a bitter former manager of my co-op from hurling charges of self-dealing at my board when I met him at a conference. Although untrue, the accusation gave me pause: what self-dealing? He never specified (the conversation didn’t last long enough), but it’s the kind of thing that makes you think twice.

Not everyone is introspective, however. The dissidents who wanted to overturn the “Rasputin-Stalin” board had little knowledge of how a cooperative was run, and blamed their lawyer for their failure to oust the board members at a special meeting (they had used an incorrect voting procedure in their get-out-the-vote efforts and then misunderstood what had happened). They hired a new lawyer, and they are now talking about putting a lien on the board members’ apartments, which, of course, the board members will have to fight, using the co-op’s money. But the irony (lost on most dissidents) is that when they are suing the board they are suing themselves.

Such incidents should make us rethink the big issues of board compensation, training, and what a cooperative is all about. If the board members – and would-be board members – had more co-op/condo education, there would probably be fewer silly charges and baseless disputes because (hopefully) everyone would know better.

Then again, at a federal level, education and compensation haven’t spared us from the worst Congress in living memory.

Hmm. On second thought, maybe the volunteer system isn’t so bad after all. At least you get to hold meetings at home. 

From the Editor 20: Sublets

SHE'S NOT THERE from HABITAT June 2010  “It’s too late to say you’re sorry./How would I know, why should I care?/Please don’t bother trying to find her. She’s not there.” The old Zombies song rumbled through my head as I considered the case of the capricious cooperator. She had moved into the apartment next door with great fanfare. She had been the most promising of shareholders in the small Manhattan co-op. Friendly and talkative (perhaps a tad too much) at the interview with the board, she had talked about how much she loved the neighborhood, how busy she was at her work, and how she adored the co-op. The president of this small co-op had gotten accustomed to silence at night from his next-door neighbor. But this new owner was a talker. He could hear her talking on the phone, chatting with friends at parties, and schmoozing with someone while opening drawers at night. He spoke with her about it. She was friendly and apologetic, even writing a note saying she would try to tone the noise down. Then things got a little strange. The board president was preparing to sit down to dinner with his girlfriend when the doorbell rang. Upon answering, he found himself face to face with a young man who was very apologetic. “So sorry to bother you,” he said meekly. “I’m living in the apartment next door and I can’t seem to get the stove to work. Can you help?” The president was puzzled. That was the talkative lawyer’s apartment, he thought. “I can help you with the stove, but I’m afraid you can’t be living there legally. This is a co-op, I’m the president, and I know the owner of that apartment, and you’re not her. She has to make a formal sublet request.” The young man backtracked quickly, saying he was not subletting but that he was just house-sitting while she was away. The next day, the president got an angry call from the owner, saying that he was harassing her guest and that, of course, she wouldn’t sublet without permission. She and the president had other run-ins. He asked a stranger who was entering her apartment who he was (he said he was her boyfriend; she called the president the next day and complained that he was spying on her); and then, when at 2 A.M., the president’s girlfriend knocked on the wall to get her to lower the noise level, the shareholder came banging on the president’s door. Accusing him of having it in for her, she told him she was tired of his harassment. Things settled down after that and the board president made great efforts to get along with the owner, who said there were no hard feelings over what had happened. Finally, two years later, things seemed normal. But then he noticed a new tenant was apparently, living there. The president was afraid to get into another dust-up. Yet he felt he had a duty to perform. What should he do? “It’s too late to say you’re sorry./How would I know, why should I care?/Please don’t bother trying to find her. She’s not there.” I asked veteran real estate attorney Steve Wagner, a partner at Wagner Davis, what he would suggest as a solution. The first step would be for the president to remove himself from all discussions and decision-making in the matter. In fact, he should act in his capacity as a shareholder, sending a letter to the board, formally complaining. His role in investigating the situation any further should end. “If the situation persists,” Wagner said to me, “I would recommend an Action for Declaratory Judgment and Injunction (DJI) rather than a holdover proceeding. In a holdover proceeding, you are trying to throw someone out, and the court is reluctant to do that, and it is also easy to cure. They just move back in. In a DJI, however, you ask the court to establish the board’s power to act to enforce rules and regulations, and, in this case, to find that the tenant has violated the subletting rules and then permanently enjoin them from violating them again.” If they don’t obey, added Wager, the board can go back to the same judge, who will find the offender in contempt. “You don’t want to be in front of a judge who ordered you not to do something and you did it,” said the attorney. “If you do, it can mean fines and jail time.” Then she really would have to sublet.

From the Editor 21: Local Laws

LOCAL LAWS GONE LOCO

from HABITAT, JULY/AUGUST 2010

Ellen Kornfeld is on a tear. “The city goes ahead and changes the elevator code in December, not giving people who have already done their budgets an opportunity to know what costs they are going to incur in terms of retrofitting things to code. You don’t find out till January or February what these things are going to cost and by then, every budget is out of whack. Nobody expected $10,000, $15,000, $17,000 in expenses to bring the elevators up to code. All the elevators are going to need new equipment because the city is changing the code.” Kornfeld, vice president at the Lovett Group, is fired up because the city keeps adding new regulations, such as its December 2009 revamp of elevator safety regulations, giving those affected by them short notice and not considering the cost. “These changes are costing a fortune,” Kornfeld complains. “It’s become another Local Law 11.”

Local Law 11, of course, is the famous (notorious?) law that requires regular inspections of buildings over six stories. It’s a safety precaution that came about after a Barnard College student was killed by a falling piece of masonry back in 1979. The uproar that followed this tragedy (much like the uproar against BP Oil in 2010), led to a lot of finger-pointing and also to Local Law 10/80, the precursor to the more inclusive Local Law 11.

There are oddities here: the original law, Local Law 10/80, only dealt with the front of the property; Local Law 11 expanded the reach to the back (why falling bricks were considered more dangerous in the front than the back was never explained; it was also left unclear why a building under six stories didn’t need to be inspected regularly. Are brownstones and tenements somehow immune from decay or collapse?).

Don’t get me wrong: Local Law 11 is a good thing. But when managers like Kornfeld say, “It’s become another Local Law 11,” they don’t mean it as a positive. Like many well-intentioned but speedily enacted ideas, this one created a number of unforeseen problems: the city passed a law, but didn’t give a thought to the practical consequences and costs. It was a question of “Costs? Who the devil cares about costs? A girl died, damn it.”

But these things do matter. A mandated two- and three-year inspection cycle means that some people will be happy. The architects and engineers who inspect the buildings are among that group as are the contractors who erect all the sidewalk bridges and scaffolding that has become almost as common as pigeon excrement (and about as attractive). The law has created regular employment for these folks and also for site safety managers, who, by a subsequent law passed in the wake of another accident, must now inspect the contractors’ sites to be sure a loose crane or two doesn’t topple into the street.

Naturally, safety is paramount, yet the costs of safety are not borne by the city. They are handled by the owners of buildings, most of whom are facing rising fuel, water, and other costs. Sure, if you’re a landlord seeking to cut corners, you might do what Columbia University, the largest landowner on the Upper West Side, did to most of its buildings: go to the façades and, regardless of what it does to the delicate character of the properties, rip off the decorative moldings (after all, they had only been inspired by similar moldings on structures in Paris). What the hell, it’s cheaper than constantly repairing the moldings, right?

Or you can do what cooperatives and condominiums do all the time: struggle to keep it all together. Monitoring leaks. Borrowing money. Challenging unfair tax assessments. Working long hours for no pay to keep their homes in the black.

But it is hard. And the motive for some of the new laws, may be less than pristine. “The city needs money,” claims Kornfeld angrily. “Since people don’t know about these changes, the city can generate additional fees” – i.e. fining them for non-compliance – “and there’s no, ‘Here’s the proposed legislation, let’s discuss it and make changes.’ We are just told to jump. We’re told safety is just the cost of doing business.”

From the Editor 22: Racket Squad, 2010

IT COULD HAPPEN TO YOU 

Scams, Both Large and Small

from HABITAT  September 2010

Sometimes being on the board of a cooperative is like being on Racket Squad. Only baby-boomers with long memories will recall Racket Squad, a sort of Dragnet wannabe from 1950s television that supposedly re-enacted cases ripped from the police files. Unlike today’s Law & Order, however, these were not murders but scams perpetrated against innocent “marks” (victims) who were easily taken in by the clever bunko artists. “Remember,” Captain Braddock (Reed Hadley), the host and narrator of the documentary-like program, said at the conclusion of every episode, “a man can pat you on the back with one hand – and pick your pocket with the other. And it could happen to you.”

I thought of Racket Squad the other day as I listened to a managing agent tell me about a scam perpetrated against one of his buildings. The board had paid a mortgage refinancing company $5,000 to get a special deal, and later found that it was a castle built on sand. The scam apparently worked because the paperwork was quite convincing and the professionals were kept out of the loop by appealing to the “let’s make a deal” nature of many board

s (the scammers suggested that the manager not be consulted because "he'll charge you a fee").

Captain Braddock would have had a field day with Michael Richter, too, the former management executive who was arrested and charged with all sorts of embezzlement crimes. In a perverse example of “Don’t ask, don’t tell,” the boards whom he scammed and even the agents who worked for this alleged bunko artist supreme, didn’t ask too many questions. Why should they? Richter seemed trustworthy. He was cer

tainly affable.

A scam doesn’t always have to involve big bucks, either.  Sometimes, it can be as simple as misleading the board about who’s staying in the apartment you own or taking advantage of a board’s neighborly nature. After illegally subleasing her apartment, for instance, one owner I heard about was two months behind in her maintenance. There had been a notice of non-payment and a $50 late fee charge sent to her not once, but twice, along with an e-mail communication from the board. After the second e-mail went out, warning her of legal action, she finally responded, saying that she had been too busy traveling to notice the notices and that her bank was supposed to automatically send in the maintenance checks, anyway. Sorry about that but hey, she added as though responsibility were not a word in her vocabulary, “Could you send me a personal reminder if I’m late again?” And, “Could you also waive the late fee?”

Can you spell chutzpah?

So, how do you deal with these more common little “scams”? By acting quickly and getting tough, say professionals. The shareholder in the above story had been notified twice concerning the issue and didn’t have a very powerful excuse (“Um, I forgot”). Attorney Mark Hankin, a partner at Hankin & Mazel, is quite clear on this point: “You should definitely not waive any late fees, since it negates the purpose of the fees. Once you do it for one person, you have to do it for everyone, otherwise you are open to charges of favoritism or discrimination. People can refuse to pay late fees because of the

board's previous actions. And they would be upheld in court.”

Now, if you have already waived the fee, you can’t rescind the action (without causing more trouble than it’s worth) but you can send out a letter re-stating the late fee policy, saying from that point on there would be no exceptions to the rule.

Hankin’s advice is sound, but may have come too late for this particular board, which, in the spirit of being a good neighbor, waived the fees, saying rather toothlessly, “Hope it doesn’t happen again.”

It’s that kind of friendly attitude the scammers count on. Captain Braddock would have been appalled.

July 21, 2010

From the Editor 23: Board Service

 

NO THANKS

from HABITAT, OCTOBER 2010

 

    I was with my boss in her car, waiting at a stop light at 23rd Street and Eighth Avenue. A woman in a wheelchair was proceeding slowly across the street. The traffic light was blinking red and it didn’t look like she would make it across by the time the signal turned.

“Maybe you should go out and help her,” my boss said.

Dutiful liberal, I hopped out of the car and said to the woman, “Let me help you,” and started pushing her. If I expected gratitude, I was in for a long wait. “Hurry up!” she screamed shrilly at me. “Why are you going so slowly, you loser! Faster, faster, we’re not going to make it!” The verbal abuse continued until we got across the street, and, -rather than follow my gut feeling and run the crabby woman into a parked car, I consoled myself with the cliché, “Virtue is its own reward.” And, I might have added: “No good deed goes unpunished.”

Many boards must often have similar feelings. Board service is called a thankless job, but it’s really more than that: it’s a sadomasochist’s dream come true, with the board members serving as punching bags for shareholders who don’t understand what board living is all about.

It is a concern. For as abuse mounts, the volunteers dwindle, fewer new members sign on, and, as the same directors serve year in and year out, burnout increases.

Take the situation at an Amagansett cooperative. With complaints about dogs mounting, the board instituted a new policy forbidding canines outright. It may not have been the best choice – and it may not have been presented to the shareholders as diplomatically as possible – but no one expected a group of owners to take the board to court. They did, even though by suing the co-op, the owners were, in effect, suing themselves. And costing everyone time and money. But, hey, this is America, land of the lawsuit.

Then there’s the plight of another building, this one in Manhattan. The four directors (one seat was empty because of a recent resignation) dealt with all the usual problems of a small, self-managed property: staying on top of bills, balancing the budget, and keeping abreast of ever-changing city, state, and federal laws. One ongoing concern was the roof. It had been re-covered three times since the building had co-opped in the 1980s and was due for a complete overhaul. The board researched engineers, talked with contractors, and had a great deal of internal debate about how to cope with the three roof decks.

Should they be replaced? Should they be banned? If replaced, who would pay? Could the roof be insured with the decks in place? If they were removed, would the top-floor tenants, who had paid a premium to have exclusive roof rights, be reimbursed? What about the top-floor resident who had his apartment on the market? Should he be informed that he possibly might lose his roof deck? If he wasn’t, and he sold it, and then the board decided to remove the decks, would he have grounds to sue?

The board did its homework, and then consulted with its lawyer to devise what it thought was a reasonable procedure, going ahead and also reasonably explaining it to the shareholders in what it thought was a reasonable letter, sent in a timely fashion.

Reasonable response? Forget it. Just repeat: no good deed unpunished, virtue and rewards, etc. etc.

Indeed, faster than you could say, “Whip me hard and whip me good,” a top-floor resident shot off an e-mail, addressing the board members as though they were errant children who needed instruction in the fine art of running a co-op: “We would like copies of all bids pertaining to the replacement of the roof and removal of the roof decks, as we assume that you are getting at least three bids for this construction. We require reviewing all bids as an owner prior to any vote by the board.”

No “thanks for the good work you’ve done” or “can we ask…?” Just “We require…” as though the board members were paid servants and not volunteers doing the best they could to protect the property’s interests.

The president replied with a polite letter saying the board would make decisions without a vote by all the shareholders because that was what its members were elected to do. It’s called a representative democracy, he said. Not a collective. And, oh, by the way, the letter went on, there’s an empty seat on the board if you want to serve.

Serve? On the board? This time, there was no reply. Of course.   

From the Editor 24: Discipline

(DON'T) LET THEM EAT CAKE

from HABITAT, DECEMBER 2010

Being on a board is like being on a diet. You know it’s for your own good, but it can get very tedious. Sure, you should eat soup and salad but doesn’t the cream-filled chocoate cake seem so much tastier? It must be better for you, right? You feel good after eating it – until you’ve eaten so much that when you look down you can’t see your feet anymore.

That’s the way it feels to some boards. Sometimes, members spend an inordinate time on the tastier treats – redoing the lobby, adding a children’s playroom, and other useful amenities – that they neglect the salad portion of the meal – the nuts-and-bolts stuff like boiler maintenance – that should be kept up for the long-term health of the building but, because it is out of sight, it is easier to put out of your mind. Until that below-zero day comes around and your boiler has quit.

It has long been a common phenomenon in the world of co-ops and condos, starting with the gentrification process of the 1980s and 1990s that brought new wealth into old buildings. “Any neighborhood where the co-op conversion process is successful, you’ll find that co-ops provide stability,” attorney James Samson, a partner at Samson Fink & Dubow, said to me once. “Co-ops provide funds to fix up buildings and so the pioneers – like the Soho artists who bought their $30,000 lofts with $3,000 down and a $27,000 promisory note – are now all millionaires – and it has nothing to with their art. The problem is the guy who paid $1.8 million is living right above the person who paid $30,000 and he has a different motivation and a different economic perspective. The artists, the rent-controlled tenants, they want cheap living and maybe play it safe. The guy who pays a million dollars wants it to look really, really good and wants to make a statement not just inside the apartment but in the hallways outside as well.”

Neither the artists/rent-controlled tenants nor the newcomers, of course, paid much attention to the boiler back then. That was the owner’s job, right? But, hey, aren’t they the owners now? Doesn’t that make it their problem? That darn renter mentality is as hard to shake as a habit for milkshakes.

Indeed. It is important for boards to be on top of the situation. I remember our first superintendent. Ours is a small building, and he was only a part-time worker. But realizing that the super was the one we had to rely on, we paid him well for what he did, giving him a generous bonus each year, as well as substantial salary increases as the years went by.

We thought we were getting what we paid for. A man who would stay on top of little problems so they didn’t become big ones. Instead, we got chocolate cake. Not literally, of course: it was just that our super was nutso about cleaning the hallways. He would mop the six stories of our small building at least three times a week. And the front door! I don’t think a day went by when he wasn’t out front polishing the glass and the metal so that you could actually see yourself in it.

He was aided in his efforts by our in-house manager, an aggressive, loquacious man who also happened to be a shareholder in the building (that’s another story). This manager also preferred figurative cake over figurative salad. At least, some of the time. I remember he spent a lot of time choosing new light fixtures for the public hallways and even a new, large sign for the front door. And he was all for the new storage bins – so pretty with their varnished wood, so impractical since they were potential fire hazards.

Both men were well-intentioned and the board at the time was just as responsible for not taking more control. But like any dieter, control depends on how much self-discipline you have (or haven’t). I like to think the board has learned from its past “meals”: we recently had to put in a new intercom system. What we got was (relatively) inexpensive, works well, and is even lovely to look at (handsome silver metal).

Now, if only they could make a salad that tasted as good as blueberry pie. 

 

         

From the Editor 25: No Dithering

 

SECURITY & SARCASM

The three incidents at the Manhattan co-op happened within two weeks of each other, and each was disturbing in its own way.

 

Incident No. 1 came to the attention of the board via e-mail. “Dear Distinguished Board,” the e-mail began with what was apparently sarcasm, “Tonight I entered our condo and it appears that someone else has been in the condo without notification. (1) Please be observant of anyone entering 6B without authorization. I am changing the locks for good. (2) Please take ‘Smith’ off of the door directory. He has requested that he be removed via e-mail and we have requested that he be removed. He was a renter. (3) If any of you have keys and/or have entered, please disclose yourself and return the keys to my husband and me immediately. (4) Please offer the same board consideration and oversight that you would offer to your own families. Thank you.”

 

The board members on the receiving end of this missive were both alarmed and irritated. Alarmed that anyone could enter a shareholder’s apartment and irritated by the patronizing tone of the comments.

 

The co-op board president looked into the matter immediately. Then, he wrote the complaining shareholder a letter. “As you know,” it began, “we are preparing to do capital work on the building. One of the projects we are repairing is the fire escape. Our engineer needed access to the front fire escape from an apartment, and [the super] let him in through your apartment...I apologize for this unauthorized entry. I have talked with [the super] and [he is] sorry for the incident and has been instructed that in the future he should notify you, your husband, and the board before entering anyone’s unit.”

 

The letter added a warning: “...if you change the locks, the house rules require that the board have a duplicate set. If there is a flood or other emergency in your apartment, we will need to gain access to your apartment. If we do not have keys, we will be forced to break down your door, at your expense...And,” he added in a polite knock, “just for your information, you are living in a cooperative housing corporation not a condominium housing association.”

 

Incident 2 occurred within a few days of Incident 1, when the treasurer was leaving the building and noticed a stocky man inside the (doorman-free) lobby apparently polishing the glass.

 

“Excuse me,” the board member said, “were you hired by the super?”

 

“No.”

“Well, then who told you to enter our building and clean the windows?”

 

No answer.

 

“Who was it?” he repeated.

 

“I can’t say.”

 

“Then you had better leave.”

 

No one knows where the mystery cleaner came from – there was speculation that he was paid by the mob to keep neighborhood businesses clean and had somehow gotten confused – but it did convince the board that it was time to (at the least) change the locks.

 

Incident 3 was even more alarming. A strange odor permeated the lower regions of the six-story property. Upon investigation, the board discovered that the smell was coming from a leak of waste products from the building next door into its property. The leak had started on Monday, and on Tuesday, the board talked to its neighbor’s manager, and he assured them he would take care of it. By Friday, with the smell continuing and the waste possibly eroding the co-op building’s foundation, the board again contacted the manager. He had, he said, put the job out for multiple bids and had gotten no takers.

 

Multiple bids? Hadn’t he ever heard the term “emergency” – or the phrase, “hang the cost”?

 

He was clueless. The board got tough. In a letter, the president made no bones about where the directors stood: “The situation needs to be corrected today. If you do not do so, we will hire a plumber and bill it back to your building. We also have an engineer coming to look at the damage, and we will bill your building for his services, as well, and also bill your building for any repairs to our foundation that need to be made. This is an emergency, not a time to wait for multiple bids. It is your responsibility because the leak is coming from your property.”

 

The manager replied tersely: “Send in your plumber.” The board hired Roto-Rooter, who came in and fixed the problem within 24 hours. (As their motto summed it up, “Away go troubles down the drain.”

 

The overarching moral of these stories: if you’ve got a problem, don’t dither. Deal with it. That’s why you get paid the big bucks. (Ha ha.) Money aside, it’s your home, so protect it.

From the Editor 26: Paranoia

 

On People, Policy, and Paranoia

from HABITAT, February 2011

 

 

I was on the No 1 local as it slowly pulled into the 96th Street station. There was an express train waiting across the platform. Our conductor made an announcement: "Ladies and gentlemen, we will be here for some time. The express across from us will be leaving immediately. If possible, take the express."

Like lemmings or a rat in a Skinner Box, dozens of people crowded into the expess train (I stayed on the local). As soon as they had done that, the doors on our No. 1 local closed and we pulled out immediately – and the express sat and waited.
Can you spell frustration? Can you also spell manipulation? A conductor enjoying himself and his power?

Of course, the possibility that the conductor intentionally misled the passengers is unlikely, but feeds into most people’s everyday paranoia about life in the big city. That paranoia is well in evidence among some shareholders and unit-owners who, when a decision is made that they don’t like, immediately suspect the board of malfeasance.
To these folks, the board members are growing drunk on its power to change the lives of their neighbors. Never mind that the power is limited and that with it come long hours of meetings (with the oft-asked question, “Whose apartment will be the site of our next get-together?”), research (“Who wants to call the references for this potential buyer?”), and complaints (“Couldn’t we talk about this when we aren’t riding in a crowded elevator?”)

I remember when I reported on the May 12, 2005 crisis at the Castle Village co-op in upper Manhattan. A section of the 75-foot-high retaining wall at the 580-unit, five-building cooperative complex in upper Manhattan, had suddenly collapsed onto the Henry Hudson Parkway. For the seven-member board, it would be the beginning of a journey that sometimes appeared to be never-ending: a journey of callous insurance companies and cash-strapped shareholders, of increasing costs and frustrating ignorance, of raised voices and quiet talk.
This was not a board that had been asleep at the switch, either: it was a dedicated group of residents that worked long hours before, during, and after the crisis to keep the co-op running smoothly. Yet, to many in the buildings, the wall collapse was the icing on the cake, a “Truth Is Out There” X-Files moment in which the dark underbelly of the board was exposed. I know because one of the residents called me after I started reporting the story.

“Can you meet me in a coffee shop on the corner?” she asked.

“Why can’t you just come up to the office?”

“They’d know,” she said.

We finally agreed to meet after hours in my office. She wore a dark topcoat and clutched a four-inch thick folder of papers in her hands. When she opened it I found it contained memorandums, newspaper clippings (“Co-op blame game!” screamed a New York Post headline), and hand-outs (“The Castle Village board has chosen to malign your neighbors without cause,” as if maligning them with cause was any better).

She told me that the board was looking out for its own agenda, that the collapsing wall was the tip of the iceberg of board malfeasance and/or mismanagement, etc., etc., etc. That wasn’t my experience of them, I thought, but one man’s hero can be another’s bette noir, and we all know what Lincoln said about pleasing all the people.

So that’s the board members’ dilemma: they may tell everyone that the express train is leaving first (so hop to it), but stuff happens that is outside their control and plans change. It’s the job of the board to explain that to shareholders – and convince them that shooting the messenger is an exercise in self-destruction. 

From the Editor 27: Sublets

 

From the Editor 28: Recalls

 

At the meeting a week later, nearly 300 people gathered in a huge auditorium for a piece of theater that seemed to confirm the view of the shareholder with whom I had been chatting: it was a lot of talk, much of it heated.

From the Editor 29: Boards

 

CARRIED AWAY Tom Soter with Jen Wu at Habitat in 2011 April Fool’s Day came a day early for me this year. March 31 began darkly. It was a rainy Thursday morning, and I was standing at the end of a line of people boarding a southbound M60 bus on Amsterdam Avenue and 122nd Street. The line moved up, the woman in front of me stepped onto the bus, and I had my hands in front of me, getting my MetroCard out of my wallet. Then, without warning, the driver closed the door on me, trapping my outstretched arms inside the bus – while leaving the rest of me on the outside. Oblivious to my situation, the bus driver started pulling the bus away from the curb. Feeling not unlike a fish on the hook, I called out, “Hey! Hey!” – although I don’t know if the driver heard me over the roar of the motor. But all the other passengers saw me and started yelling at the bus driver to stop. He stopped and opened the doors. And now it was his turn to yell. He berated me for “moving too slowly.” Not realizing that entries and exits were on a timer, I angrily said to the driver: “You’re blaming me? You’re saying it was my fault?” The other passengers began shouting at him. “It’s your fault!” “We all saw it!” “Don’t try to blame him!” “Why don’t you apologize!” “Take responsibility!” The driver, not contrite in the least, said, “I did apologize” (I guess I didn’t hear it), adding, with an unfortunate turn of phrase, “It’s you folks that insist on dragging this out.” Let’s not go there. My misadventures with the bus are not unlike the dilemma of every board (honest!). Like the driver of that bus, the board members are going about their business, doing what they believe is the right thing, when they are suddenly caught up in a controversy. Take the Elmwood Park II Condominium in Staten Island. A judge recently determined that the board of the condominium could not fine or restrict the five senior citizens and unit-owners from sitting in the common-area lobby, where they had gathered to chat on many afternoons for 14 years. Even though the board thought it had been behaving reasonably in trying to clear out the lobby, the court saw it differently, saying the board was abusing its power. Such “abuse” leads politicians to push “protective” legislation that variously creates an ombudsman to investigate and supervise boards or else forces them to reveal reasons for rejecting applicants. Even as I write this, the city council is considering a proposed law called the “Fair Cooperative Procedure Law” that is designed to combat “credible anecdotal evidence of instances of discrimination in certain cooperative buildings.” (Could we be more mealy-mouthed, please? “Anecdotal evidence...in certain cooperative buildings.” Does one usually create a law based on anecdotes?) Is this a trend? Are boards overreaching? Or are residents and politicians overreacting? “It’s often not clear when boards overreach,” veteran co-op attorney Art Weinstein said to me when I asked him the question. Then, in an unconscious inversion of Spider-Man’s famous insight, “With great power comes great responsibility,” Weinstein added, “With responsibility comes power. A board must exercise it wisely.” On the other hand, shareholders and unit-owners must realize that, in order to operate efficiently, boards cannot be restrained by over-protective rules. “The board is also responsible for following the law,” Weinstein noted. “The board has to have the power to conduct business. If, for instance, shareholders try to limit board spending by a bylaw amendment that the board must get shareholder approval before spending money over a set amount, the board could become hamstrung in carrying out its legal responsibilities to maintain the property. They may need to spend above the arbitrary limit imposed by the shareholders, and it becomes harder to operate if they have to consult with everyone in the building on most major decisions. There has to be some trust that the board is making decisions for the good of the building. Otherwise, you can have a bad situation.” Like being dragged away by a bus, for instance.  HABITAT, May 2011

From the Editor 30: Lies

 

From the Editor 31: Liars

A CONFLICT THAT WASN’T
When in doubt, accuse.

“It’s a conflict of interest.”  In co-ops, that’s the rallying cry of suspicious shareholders. But is it, really?

This issue came up in a recent series of e-mails between the board of a small Manhattan building and a longtime shareholder. It started out with an e-mail that praised with faint  damns: “The building is clean. The super [is] great. Repairs required by Owners get done. Laundry works. Storage bins are full. Place is clean. Bills are paid. New mortgage properly in place. Financials look good except for one item. But, I'm sure you won't ask me what it is because you know … is it because the Board acts only in the best interest of the sixth [top] floor Owners when it comes to large building repairs?? Called conflict of interest.”

The board sent a pro forma response to this bizarrely phrased letter, but the secretary took it more personally (feeling he was the sixth-floor owner that was referenced) and wrote a brief reply that listed all the capital work performed in the co-op within the previous ten years. He also attached a detailed description (that had been presented to the shareholders in 2007) of the past and future work. “As you can see,” he concluded, “there seems to be little evidence for any bias toward specific shareholders. If, however, you have reason to believe otherwise, I invite you to clearly present your case before the shareholders...”

Reasonable, right? Well, never let it be said that facts get in the way of a good innuendo-drenched, mudslinging “debate,” for the shareholder responded with mock surprise, smiling as he twisted the knife: “You misunderstand! I'm not angry at you. I think you have done a great job. The perception of the Owners is that nothing gets done except for the sixth floor Owners… You have the [largest apartment and the] biggest investment in the building. If I were you I would do my best to protect that investment. Unfortunately, you are wearing two hats. That is a conflict of interest…

It was at this point that the board president stepped in. “Anyone who serves on the board of a co-op or condo faces a conflict of interest because of the nature of the job,” he wrote to the bullying shareholder. “We all have a self-interest in the place because it is our home. When we repair the roof, we are making choices that affect the corporation's bottom line but also affect our home. And everyone – not just the top-floor shareholders – has a stake in every decision we make. Leaks that get in through the roof ultimately affect the stability of the structure of the entire building; should we NOT repair the roof because the top-floor shareholder is on the board? We have shareholders from the third, fourth, and fifth floors on the board, and they all have votes in these matters. Nonetheless, we are constantly aware of the appearance of self-dealing, which is why everything we do is clearly documented, and why we only take action after consultation with experts…If you are accusing [the treasurer] of self-dealing, that is a serious matter and any evidence you have should be brought to the board for investigation...

“As to your other comments: flowers are nice (would you like to volunteer to plant some?), but we feel that offering financial stability is the best thing we can do to help owners sell their apartments. That is our priority.
“Finally, I have worked with [the treasurer] for over eight years now. No one on the board has worked harder and more selflessly than [he] has for [the building]. He has researched and implemented ways to save us thousands of dollars; worked closely with [professionals] to see that the building gets the best deals and stays financially and structurally healthy; he has responded rapidly to requests from shareholders – indeed, I can go on and on about the huge amount of time, energy, and intelligence he has put into making the building a success. For you to make a comment like ‘If I were you, I would do my best to protect that investment’ is not only insulting to [the treasurer] but tells me that you don't know what you're talking about.”

The shareholder did not respond.

May 18, 2011 (HABITAT, July/August 2011)

From the Editor 32: Stupid Owner Tricks

YOUR MOTHER SHOULD KNOW

 

Effie, with Tom and Nick, Cape Cod, 1960 My mother, who died this past July,  did not suffer fools gladly and, when something seemed wrong, she didn’t mince words. “That’s stupid,” she would say in her pronounced Greek accent. “Really stupid.” I wonder what she would have made of the recent goings-on at a small, self-managed Manhattan cooperative. From what I have learned, the board president came home to find a long-winded message on his home answering machine. “Hey, I’m just calling to tell you that, last week, we noticed we had gotten some bites, and we were concerned that we had bed bugs. We had someone come and inspect and apparently we do have some bed bugs in our apartment. So, we are going to be taking care of it. My sister-in-law is going to be helping us out. She was there yesterday with the inspectors to look at what was going on. We do think we have bed bugs. We have them, but we’re going to take care of them as soon as possible, like next week.” Now, was this shareholder acting responsibly? To a point. He was taking some steps to deal with the problem. But, probably because of the stigma associated with bed bugs, he waited an awfully long time before notifying the board (one week is an eternity of breeding in bed bug world). Rather than waiting and/or trying to handle the issue himself – as though he were dealing with roaches or ants – he should have brought in the board. If, in fact, he had bed bugs, it was his responsibility to let the directors know so that they could conduct their own investigation. That’s important because the board, ultimately, has the legal responsibility to deal with this issue. Under a new protocol for issuing violations, the city now requires owners and managers of properties where bed bug infestations have been identified to inspect and treat units on either side of and above and below the bed-bug-infested unit, to use a licensed pest control professional to treat the infestation, and to employ a variety of treatment strategies rather than depending on chemical pesticides alone. Where bed bugs persist, or occur in multiple apartments in the same building, the health department will require owners to take several additional pest removal steps (i.e., notify residents that bed bugs have been identified in the building, and develop and distribute a building-wide pest-management plan to all residents). There are penalties for non-compliance. Building owners who are repeat offenders must have a licensed exterminator complete an Affidavit of Correction of Pest Infestation. Owners who fail to provide this will be issued a violation and be required to appear at a hearing before the city’s Environmental Control Board, where fines may be issued, and non-compliant owners may end up with liens on their buildings, which was not possible before. This co-op knew that – and had, once upon a time, gone down to the Department of Buildings to get a lien lifted (a Byzantine process to be avoided at all costs) – and swung into action as soon as it got the report. An inspector with a bed-bug-sniffing dog was scheduled to come the very next day and, as the law required, all the adjoining apartments were to be inspected. The residents were notified as well. Then, everything was turned upside down. The super, who had dealt with the same problem at another building, talked to the owner with the afflicted apartment. So did the board president. Now he was singing a different tune. Maybe there weren’t bed bugs. Maybe they were mosquito bites. What about the inspection he had conducted? Well, the bed-bug-sniffing dog had barked at the couch, but it was all deemed inconclusive. The board canceled the multiple inspections and just had the “afflicted” unit examined. No bed bugs were found. The board got kudos from many of the shareholders for its fast response. And as for the owner who cried wolf? Well, as my mother would have said, “It’s stupid, just stupid.” HABITAT, September 2011

                   

From the Editor 33: Seat, Anyone?

DON'T SLEEP IN THE SUBWAY, DARLING

 

 

Riding on a subway is like living in a co-op. Or is it? Subways are full of people from all walks of life – young, old, white, black, male, female – all crowded together in a place (a train, an apartment building) until they reach their destination. And on the journey, they must get along. I thought of this as I boarded a crowded train to work carrying a bulky package. Now, as any regular subway rider knows, the train at rush hour is no picnic (I always marveled at people like my mother, who said she enjoyed riding the train because “It’s quick and gets you there, 1-2-3”) and finding a seat is a rarity. In any event, I had my package and saw what looked like an empty seat. There was a young woman apparently sleeping in one seat – her eyes were closed – and the empty one was next to her. Empty, that is, except for her handbag. When a young man saw me with the package, he graciously tried to help out. He tapped the woman on the shoulder. “Miss,” he said. “We need that seat.” “There’s no room here,” she said, her eyes closed. My advocate persisted. She resisted. Until finally, he blurted out, “Boy, what a bitch.” She seemed startled at this criticism, and I took advantage of her surprise by forcing my way into the seat. “Sorry to disturb your slumber,” I quipped. She glared at me and we rode together – bag, man, and woman – for two stops before she got up and exited at 96th Street. However, not without a parting shot at my advocate: “People who call other people bitches have their own particular problems.” Communication? Cooperation? Confrontation? Certainly elements of co-op living. And just because you’re neighbors, that doesn’t mean you get along. I remember a dispute over noise that took place in my 22-unit Upper West Side co-op some years ago. A fifth-floor owner complained to me – as her neighbor and as board president – about the noise being made at night in the apartment above her. “I can’t sleep at night,” she said. “They’re always clomping around up there, opening drawers, and making all sorts of racket.” She said she had talked to them – a nice young couple – and asked me if I’d talk to them, as well. The husband, a board member, told me that they were trying to be quiet but that their downstairs neighbor was a little over the top. “She was hitting her ceiling with a broom, telling us to be quiet,” he recalled. “But we weren’t making any noise.” This certainly seemed strange – although noise can be a funny thing. I remember being disturbed from a deep sleep once by my father picking up something from the table next to my bed. I sat up and complained to him about the noise, saying, “Why don’t you bang cymbals in my ears?” Then he showed me what he had picked up: it was a wedding ring. The noise it had made was slight but had somehow been exaggerated in my sleep. In any event, the fifth-floor/sixth-floor noise dispute died with a whimper and not a bang. The fifth-floor owner phoned me one night at 10 and said, “They’re at it again, opening drawers and clomping around. Can you come up here and listen to what I have to put up with?” I dutifully went upstairs, sat in a chair, and listened. And heard nothing. “They stopped,” she said. “Wait. It’ll start up again.” So I waited. And waited. And waited. For 20 minutes. But no noise. “They must have heard you were coming.” Although I thought she was nuts, I smiled politely and said, “Well, at least it’s quiet now.” Courtesy, politeness. That’s part of co-op living. But is it part of the subway? I looked around me, with people jamming into the train, holding open doors so they could squeeze into the car, talking loudly, pushing and shoving, refusing to give up seats to people on crutches or with packages… No, I guess the parallel breaks down when you start looking at it. In a co-op, you can have a say on whom you “ride” with (i.e., vetting your potential neighbors) and, unlike a train, you are responsible for the upkeep of your building. So that parallel bites the dust. But, hey, thinking about all this did have one positive: the subway ride was over before I knew it. Empty seat, anyone? HABITAT, OCTOBER 2011

                   

From the Editor 34: Staff

FALLING UPWARDS

Loser Takes All

Let’s call the super Pete, and the only other thing I’ll tell you about him is that he’s honest, hard-working, and knowledgeable. Oh yes, and I’ve known him for 25 years. When he complains about something, it isn’t idle talk.

At this moment, he was pretty incensed: “This guy,” he said, referring to another super he knew, “shouldn’t have gotten that job.”

Pete was talking about a colleague we’ll call Patrick, who seems to reflect the old idea of failing upward. Patrick was working in his second property as a porter when he got a job – Pete doesn’t know how – at an Upper West Side co-op near Columbia University. One of his first actions was to cut a loose wire in the basement…and see the building plunged into darkness.

Then there was the purported leak, which he thought was a problem with the pipes, but that, on further inspection by a plumber, turned out to be a caulking problem in a shower.

Patrick was in over his head – and he knew it. Whenever he had a major systems problem, he asked for help from his old friend Pete, who good-naturedly lent a hand until Patrick got his “sea legs.”

Then, he moved on…up. Being promoted in inverse relation to how much he knew, Patrick was appointed super at a tony East Side building. Not only did his wardrobe improve – he was told to wear a suit and tie because he was now a resident manager – but so did his pay. According to Pete, Patrick’s salary had doubled to $100,000 per year (plus $400 a month for a garage and $10,000 for a Christmas bonus).

Pete says Patrick got the job because of lobbying by the Emerald Guild Society. That’s not some offshoot of The Wizard of Oz’s Emerald City, but instead a collection of Irish-American supers/resident managers who look out for one another. As the society’s website (www.emeraldguild.org) puts it: “The Emerald Guild Society, founded in 1992, is an association of Irish and Irish-American Building Managers brought together by our common heritage and our employment in the property management field. While there had been an informal network of Irish Superintendents for many years in New York City, it was decided by the Guild’s founders to organize into a club for the mutual benefit of all and especially to help with opportunities and advancement in our industry. Our members range from recently arrived immigrants working in starter buildings to experienced building managers running some of New York’s largest apartment complexes and most prestigious addresses. Our goals are to support our colleagues in the apartment building industry, to provide the best possible service with integrity and professionalism, to foster a sense of community and a spirit of cooperation among our members.”

That cooperation, complains Pete, put an ill-equipped super into a cushy position.

“Let me tell you, it’s just not fair. Here’s this guy who doesn’t know anything about being a super, and he gets that job.”

But that leaves out other factors, says Don Levy, a vice president at Brown Harris Stevens, the management firm that employs both Pete and Patrick. “Sure, we take recommendations from the Emerald Guild,” he says. “And there’s a reason for that: they usually recommend good people. But a recommendation from the guild is not enough to get them the job. We vet them and the board interviews them. They go through a rigorous process.

“Not that it couldn’t happen,” he adds quickly, when asked about Patrick’s promotion. “If it did in this case, then shame on the board for not asking the right questions, and shame on the manager for not vetting them properly.”

For most boards, this is a cautionary tale. When hiring, due diligence is a must. The board that hired Patrick may have called the references the super provided – but both of them were to his jobs as a porter. If board members had checked with the president at his last place of employment – the Upper West Side building – they would have gotten a scathing report from the president. “But,” says Pete, “she told me they never called her.”

Don’t forsake your responsibilities. And that’s no blarney.

From the Editor 35: Crazy

Her delivery was reminiscent of a character offering a monologue in James Joyce’s unique, experimental novel Ulysses: run-of-the-mouth and breathless, crazy but also strangely sane.

“In the magazine, what is it, on page 6, about rating your building,” she begins, without any preamble. “You know the city law requires – I don’t think the city requires any laws. You know there are a lot of rentals. It’s always co-op and condos, you know, they get after. The rentals are so neglected, these rental apartments in these cities, in this New York City – in all the boroughs – are so full of violations and the city does nothing to correct these violations. Inspectors come and go – you don’t even think they’re qualified. They look at you like morons; they write it down, like 311, and nothing is ever followed through – they expect you to go to court, to get a lawyer and go to court – they don’t get after these landlords...

“The landlords don’t care. The doors are all busted. The filth…they pass a filthy mop and sometimes they don’t. They don’t sweep. It’s terrible – they spit in the hall – I mean it’s just disgusting. It’s just disgusting. And the landlords destroy you, too. The tenants destroy the buildings. The landlords destroy the buildings, and there’s no one to come here and city, state, state housing, Gert Plaza, does nothing. And the city, code enforcement, does nothing where a lot of the tenants there have so much violations, and nobody does any nothing to correct it.”

It was a strange, rambling rant (that went on for another minute or two – but who’s still listening?), and although it came to me as an editor at Habitat, it put me in mind of some of the eccentrics you have to cope with on a co-op or condo board. As president of my board for over 20 years (yikes!), I often find messages on my answering machine that ramble on about some issue that concerns the caller – the doors are the wrong color, the laundry room is messy, there are marijuana smells in the hallway – that may not be as wild as the Joycean phone rant but can sometimes feel just as disjointed. It starts to get to you.

I remember the last time that I began to feel that way. It was years ago, and the board had just passed a new, more restrictive sublet policy. We felt we were protecting the interests of the building – too many sublets would destabilize the building and make it harder for buyers to get mortgages (since banks frown on buildings with huge numbers of sublets). But some shareholders saw it differently. One longtime investor didn’t understand why she had to give up her lucrative renter (and complained bitterly to the board). My own cousin, who sublet his unit there, called it unfair and wrong (in more colorful language than that). And one shareholder, a traveling salesman who had barely lived in the unit before he took off and sublet it, left a message on my machine that rambled quite a bit (not unlike my recent Joycean caller), and ended with a charge that the board was acting like a “bunch of Nazis.”

Of course, that’s extreme – I don’t think we beat up anyone or burned books we didn’t approve of (at least I didn’t) – but it still hurt. Indeed, when people call being on the board a thankless job, they’re not kidding.

But then, you think about why you’re doing it – to protect your investment, to help your neighbors, to create a better quality of life – and you take a deep breath. And then you keep on keeping on. After all, a co-op is like a family, and families have disagreements, disputes, and harsh talk. Still, you’re in it for the long haul, and the work should be its own reward.

And, hey, you don’t always have to answer the phone. You can just listen to the crazies later.

Habitat, January 2012

Licensing Managers

LICENSE TO MANAGE

By TOM SOTER

JANUARY 2002

For a medical problem, you see a doctor; for a legal one, a lawyer; for a financial one, an accountant. It’s the same with your building, too: for a management difficulty, you should turn to a managing agent. It’s the same, except it’s not. Doctors, lawyers, and accountants are all licensed by the state and face the loss of their license if they act incorrectly. A managing agent, however, is unlicensed.

That’s no joke. Unlike most other professions, almost anyone can hang out a shingle and call himself a manager. And many do, with impunity. “Right now, anyone can become a property manager,” says Leonard Jones, president of the New York Association of Realty Managers (NYARM), a trade association. “The property is valuable, but we have instances, where people who never managed property before do so. They have a lot of influence over a lot of people. Our organization offers training but no law says they have to do that. A lot don’t.”

The consequences can be dire. An incompetent agent can run a property into the ground, mismanaging finances and capital systems. A corrupt manager can steal – and many have, as two rounds of kickback indictments, plea bargains, and confessions have made clear.

“Property managers are responsible for the life and safety and funds of millions of people,” says David Kuperberg, president of Cooper Square Realty. Having [no requirements] is unconscionable. Plumbers and taxi drivers have to be licensed, So should property managers.”

Yet boards seem unaware of the lack of licensing, while many in the industry seem content with the status quo. How did we get here – and is there anything that can be done?

LICENSE TO KILL
In general, when is licensing necessary? According to Douglas Kleine, executive director of the National Association of Housing Cooperatives (NAHC), licensing is most obviously necessary when there is a need to protect the health and safety of consumers (with electricians, for instance). Less obvious situations involve:

(1) KNOW-HOW. Some licensing may be necessary where the practice or profession takes a very high degree of knowledge. Minimum educational requirements from accredited sources are the usual response. “A disparity of knowledge between provider and consumer may leave the consumer at a disadvantage in the transaction,” Kleine notes. “The appropriate response is to level the playing field by restricting certain practices or requiring ‘best practices’ and enforcing through licensing and revocation.”

(2) DECEPTION. Some situations are rife for deception by the party with the greater knowledge. “The correct response is consumer protection, restitution, and criminal sanctions,” he says.

(3) ADVERSARY TRANSACTIONS. Some transactions are adversary transactions (such as buyer-seller and landlord-tenant) in which, Kleine states, “licensing is necessary to protect one of the parties, usually though disclosure to ensure fair play, and sometimes with cooling off periods as an enforcement mechanism.”

So what about managers? It is not completely accurate to say that agents are unregulated. Legally, a management firm must have a license. But it is not one that has much to do with the skills needed as a property manager. Under state law, a firm must have a broker’s license.

The reason goes back to the origins of modern management: when the licensing requirements were put in place, most New York City agents worked for owners of rental properties; they usually answered to one person – the landlord – and were primarily licensed because they had to handle financial transactions: collecting the rent and negotiating leases. The law clearly spells that function out. Article 12-A of the Real Property Law provides that anyone who, on behalf of another and for a fee, (1) negotiates a sale, exchange or rental of real property, (2) collects rent, or (3) negotiates a commercial loan secured by a mortgage must be licensed as a real estate broker, must be licensed as a real estate broker.

In order to qualify for licensure as a real estate broker, an applicant must have at least one year of experience as a licensed real estate salesperson or at least two years of experience in the general real estate field (e.g., buying and selling property or managing property owned by an employer), have satisfactorily completed both the qualifying salesperson course of 45 hours and an additional 45-hour real estate broker course as approved by the secretary of state, and have passed a qualifying examination administered by the state.

The courses, offered by a number of organizations including the Real Estate Board of New York (REBNY) and New York University, cover a range of topics, including management. The REBNY course is typical, including courses in estates, deeds, leases, contracts, titles and closing costs, land use regulations, construction, valuation, human rights and fair house, the environment, real estate mathematics, taxes and assessements, rent regulation and sign ordinances, and real estate property management.

“A substantial portion of the course requirements relate to property management,” says Marolyn Davenport, at REBNY. “We have tried to make ours very relevant to property management.”

Yet, out of 26 sections in the REBNY course, one is devoted to management for commercial, industrial, rental, and co-op/condo properties. Ronni Lynn Arougheti, a principal in Heron Management, teaches the management portion of the course: a five- to six-hour, one-day session, from 9 to 4. She admits that the session only touches on each subject but says: “Nothing can be a substitute for practical experience. When I teach the course, I try to give them lessons from practical experience in how to solve problems.”

Many argue that the courses do not adequately address the full-range of management duties – and that the skills needed by a good manager are vastly different from those needed by a good broker. “Management is a minute portion of the REBNY course,” says Michael Wolfe, president of Midboro Management. Adds NYARM’s Jones: “It doesn’t doesn’t teach you how to deal with the technical and practical side of property management. It’s really a broker’s course.”

Arougheti, also an officer with REBNY, says that the initial license is just a first step – managers can and should take more comprehensive, management-related courses under the continuing education portion of the law. But there is no absolute requirement that agents take rigorous management courses; they can opt for less-intense broker-related subjects.

without one.Or, practically, they can do nothing at all. According to many in the industry, countless managers practice without even getting the broker’s license. For instance, the manager of a 22-unit Upper West Side co-op in Manhattan has operated as the agent for the property for almost a decade with impunity. Jones says that he is not alone. “A great many managers are functioning without brokers licenses. You can become a manager without a broker’s license. The law is not strictly enforced.”

There are a number of reasons why. Some operate under the premise that only the principal in the firm needs to have a license. Others interpret the broker law as not being applicable to them since it states that agents must have a license in order to collect rents. Because co-op managers collect maintenance and/or common charges, no diploma is necessary.

Even if both arguments are wrong, most managers have little to fear legally. To track down unlicensed brokers, the state relies on complaints from the general public. Any cases are turned over to state investigators and charges are made by the attorney general’s office. The fines are underwhelming to non-existent: operating without a broker’s license is a misdemeanor. Theresa Wright, a spokesperson for the Division of Licensing Services, could not report any case of a manager losing his broker’s license or being penalized for operating

STATUS QUO?
So what is the result of this? An industry in which managers can – and often do – operate without proper supervision, punishment, and education. Incompetence occurs more often than not, and the business leaves itself open for corruption.

After the last round of indictments, State Senator Karl Kruger (D-Brooklyn) drafted a bill to require management licensing. Among its features were annual registration of residential managers, judicial review, education and renewal requirements, and a provision for penalties.

Predictably, a democratic bill in a Republican-run body went nowhere. But there is more than partisan politics at stake. There is industry politics. Although many say they want licensing, a greater number seem to be against it. For instance, REBNY, the largest industry trade group, is opposed to Kruger’s bill, arguing that the current licensing requirements do not need a major overhaul – just tinkering.

“There are already requirements in place,” says REBNY’s Davenport. “The goal of the broker licensing law was to be as comprehensive as possible. Our position is that you can make it better. We are not advocating a new license. Over the years, we have made suggestions for ways to improve the law, but the legislature has not acted. We also feel we cannot support legislation geared towards specific certifications. No one in the industry wants to limit choices.”

There are possible financial reasons behind such opposition. “REBNY is against it because the organization is controlled by large real estate owners and they do not want to have to pay for education or higher salaries,” says the principal of a mid-sized management firm. “REBNY has a lot of power in Albany.”

“REBNY doesn’t want to see licensing go through,” observes Greg Carlson, principal in Carlson Realty and executive director of the Federation of New York Housing Cooperatives. “When you get down to it, it’s a fight over who’s going to control the educational piece of the pie. REBNY makes a lot of money on its membership and course fees – for its broker broker license program, salesman license program, continuing ed program.”

Carlson adds that the rental industry is also against licensing because “they fear will it will cost them more money for their property managers, who will demand more as licensed managers.”

Davenport says that such arguments are untrue. “If there were required management educational requirements, we would be in the forefront of that. There is no conflict of interest [in our opposition].” She adds that many agents do not want additional red tape or the costs of further licensing. “There are already requirements. We don’t want to put people in the position to meet multiple requirements.”

Then there is the honesty argument: you cannot legislate integrity. After all, licenses among lawyers and accountants do not stop corruption there. And if the threat of jail doesn’t hold them, what will threat of license revocation mean?

“The broker licensing has a code of conduct. If you’re convicted of a felony, you can lose your license; that’s adequate,” says Gerard J. Picaso, principal in Gerard J. Picaso, a management firm. “All those people were caught [in the Manhattan District Attorney’s kickback investigation], people still kept doing it, even though they knew an investigation was underway. Bad people do bad things no matter what the consequences.”

But can licensing mitigate some criminality? “The threat of eliminating someone’s ability to work is very powerful,” says J. Brian Peters, director of management at Rose Associates. “It may, in fact be easier to enforce that than to try and bring a legal case beyond a reasonable doubt that somebody was a crook. We have the lesson of these two rounds of indictments. The district attorney was successful in bringing the indictments, but the actual number of those convicted is relatively low because of the high standard needed for conviction. You would not need as high a standard to revoke a license.”

“This is not a panacea which will insure honesty and integrity,” admits Kuperberg. “I agree: you can’t legislate honesty. However, with mandatory certification, you can create several positive results. One would be a central registration system of all managers so that if someone is indicted or convicted of a crime, it would be on record.”

Currently, after paying a fine or doing jail time, a convicted manager can – and often does – go back to work as an agent and boards are none the wiser. “You have all those people who pled guilty to kickbacks and they’re still managing,” Kuperberg says. “That’s ridiculous. If you you lose a license of certification, you lose the ability to ply your trade. That makes it worth keeping, and they may think twice about jeopardizing it.”

A management license could also improve the image of the manager as a professional, and could help recruit newcomers to the industry. “If you’re an accountant, or a CPA, or an attorney it means something to obtain a license,” Kuperberg says. “You work and study for it. I don’t know anyone who goes to college and says I want to be a property manager. Everyone has fallen into it. This would make it more of a profession.”

“My personal view is that co-op boards often view the manager as just another another vendor,” says PRC’s Khazzam. “They try and knock them down on fees, and as a result, you get the minimum level of fees. The work suffers because the agent is not viewed as a professional. Licensing and certification would help that.”

BUT WHAT STANDARDS?
Just as important – and perhaps the biggest road block – is deciding what kind of standards are needed. License requirements should start with the question, “What do managers do and who does this kind of work?” says NAHC’s Kleine, who adds that licensing discussions “need to address the ‘who.’ Should the firm be licensed or the individual? If the individual, which ones – principal, comptroller, property manager, site manager? If the firm is to be licensed, what are the licensing criteria? Firms don’t have education or experience, people do. Firms can’t be tested. Firms can’t be put in jail. Most licenses of firms simply require that they have adequate insurance. Remember, buildings do not have to hire a firm. They can self-manage and they can staff manage. And then defining the licensee and the bottom can be slippery. When I was president of a 90-unit townhouse association with a budget of $50,000, one proposal by the realtors in Virginia would have required our treasurer to get a license because we paid her $600 a year.”

There are are other areas to define. Is mandatory certification sufficient or should there be state-supervised licensing? Kuperberg is “strongly in favor of mandatory certification [because] licensing to me assumes a governmental-issued and overseen program along with whatever tests and procedures a governmental agency puts in place. That’s a lot of red tape. And every licensing regulation proposed [under state law] ends up being has been so watered down my 15-year-old son could pass. I don’t think the Department of State has the wherewithal or expertise to come up with something. There are several existing property manager certifications. One of those should be made mandatory.”

Any license should establish a baseline level of competence. “A continuing education requirement would help standardize the basic knowledge and qualifications of people within the field and help establish a threshold level of ability before somebody could be professionally involved in management,” Peters says.

“The benefits, especially for co-op or condo boards who come to their roles without real estate experience, is that they know they have a manager who has a minimal education,” Carlson says. “Licensing will not cut out fraud, or negligence, or stupidity, but it does tells the boards that they have someone running the property who has, at least, a minimum knowledge of the business.”

So, where does licensing stand? The industry says it is up to the legislature. The attorney general’s office, which regulates co-ops, also says it is waiting for the state lawmakers. But the legislature bows to lobbyists and the industry’s wishes. Until the trade associations get together and agree on a common goal, the politicians will not act. “As long as they’re split, nothing will happen,” NAHC’s Kleine says. “The turf wars in the industry and the money from lobbyists stop action in such situations.”

“There really isn’t a body that gets together on a non-competitive basis,” says Khazzam. “There is no body that speaks as one, providing unity and dialogue within the industry. Somebody has to stand up and unite; management companies have to get together and have a summit on the industry, but that’s nowhere near happening. We are so much at each other’s throats.”

“If all the trade groups would get together and set up a committee to work it out, something can happen,” Wolfe adds. “There should be a consensus. No one can convince me that a broker license is enough. All these organizations have different interests; if they could get together, legislation could more easily be accepted and passed.”

For change to occur, the bottom line is simple: co-op and condo owners need to get mad as hell and say they’re not going to take it anymore. “If boards push for it, more managers will get behind it,” argues Khazzam. “But you have a difficulty because of the nature of boards. They are volunteer, with a one-year term situation Once you educate him about why management licensing is needed, he’s gone and the process starts all over again. Ultimately, your client has to make that push.”

As long as boards accept the status quo, nothing will happen, except perhaps more incompetence, more indictments, and more trouble for an industry that, in general, insists on keeping its head in the sand. The issues are stark: the manager is often responsible for the financial life or death of a co-op or condo, and must guide a frequently unskilled and untrained, part-time volunteer board.

“In order to qualify to manage millions of dollars of money for clients all an agent has to show is a slip of paper that says he had 45 hours of schooling as a broker,” Kuperberg says. “Learning how to list exclusives is not a skill you need to have for management.”

No Smoking

 

Margaret Enloe doesn’t remember whose idea it was, but it sure made a lot of sense. “Air purifiers,” she says now. “You have a problem with the air and that certainly helps.” Enloe, who has served on her seven-member co-op board for at least half a dozen years, also doesn’t remember when the complaints about secondhand smoke started – “Before I was on the board,” she observes – but she knows when they stopped: after the board successfully banned smoking inside apartments at the 76-unit, prewar cooperative at 15 West 84th Street. How they did it is an object lesson in implementing a potentially controversial measure.

To begin with, the board at 15 West 84th started with an advantage: it had always had a good relationship with its shareholders and had been transparent in its decision-making, even going so far as to distribute copies of the minutes for everyone to see.

When the secondhand smoke complaints increased, Enloe says, the board examined options. Someone – possibly an agent from the building’s management firm – suggested that they try installing air purifiers. Fred Rudd, the president of Rudd Realty, recalls utilizing purifiers at the 200-unit 215 East 80th Street in Manhattan, a building his firm manages.

“People were complaining about secondhand smoke [at 215],” he notes, “so we asked the tenant [who was smoking] to install two air purifiers with charcoal filters in his [two-bedroom] apartment. The building bought them and will pay to change the filters as necessary. The building is also paying for the electricity.”

He reports that each device costs about $400, while the electric usage, if running constantly, comes to $75 per device annually. Rudd adds that the expense in such cases is minimal – and the results could be major. “You’re not talking about a great deal of money – and you’re dealing with someone else’s health,” he says, adding another plus: “Many, many people prefer to be in a building without smoke. Taking these actions help sales.”

Back at 15 West 84th Street, Enloe felt the air purifiers – which in her building were paid for by the smoking shareholders – were not enough. The devices kept the air cleaner, but the smell and the smoke often lingered. The board members discussed the possibility of banning cigarette smoking altogether, which led them to attorney Richard Klein, a sole practitioner who gave them the practical steps for doing it. They were told that, while they could pass the ban by a resolution in the house rules, in order to protect the ban from legal challenge, they needed to make a change in the proprietary lease. That meant they had to achieve a super-majority vote from the shareholders.

The board members approached the upcoming vote methodically. The co-op’s attorney drafted the amendment, suggesting that they grandfather in the four existing smokers, exempting them from the ban for three years. At the end of that time period, the smokers would have to give up cigarettes – or their apartments.

Enloe says the limited grandfathering clause was inserted partly to make the smoking ban “more palatable” to (and thus gain votes from) a number of shareholders who had expressed concerns about banning an activity that was occurring in the privacy of someone’s apartment (smoking has long been banned in the building’s public areas – which include the area directly in front of the property).

Klein adds that the board thought that putting a ban in place – and still allowing a handful of people to smoke for an unlimited time – defeated the point of a smoke-free building. Three years, he notes, is a reasonable amount of time to give someone to quit the habit.

The board distributed the amendment to the owners and then held a pair of informational meetings with the shareholders, explaining what was happening and addressing any questions and/or concerns. The ban meant that new buyers or even guests of current owners could not smoke anywhere on the premises. Buyers had to sign a statement acknowledging that they knew it was a smoke-free property.

“They listened,” recalls Faith Brenner, a manager from Rudd Realty who has handled the building for the last two years. “There were non-smokers who stood up for the rights of smokers... It is a family building and people would say, ‘There’s smoke going into my child’s bedroom.’ It was a concern.”

Then, at a third meeting, the shareholders voted in favor of the ban. “The vote was quite a bit beyond what we needed to pass [the measure],” Enloe recalls, about 17,000 shares for and 3,000 against.

That was in February 2010. In the ensuing three years, two of the smokers have quit and a third has turned to mechanical, smokeless cigarettes. A fourth, however, is hanging in there. The board will not comment, but the question remains: what happens if that last smoker would rather fight than switch?

There may be grounds for a battle, too, argues attorney Stuart Saft, a partner at Dewey & LeBoeuf, who was not involved with this building but has successfully implemented bans in other co-ops. His particular area of concern is the limited grandfathering measure.

“I’m not sure, legally, if you can retroactively tell someone that they cannot smoke in their apartment. You can tell them that smoke can’t leave their apartment, but – as much of an anti-smoking advocate as I am – if somebody already owns the shares and has a lease and is living in the apartment, I don’t think you can take away their right to smoke if they’re not affecting anybody else. [Even] if they amended their proprietary lease, there’s a fair likelihood that it wouldn’t survive a challenge [from the grandfathered people]. I don’t know anything in the corporate documents that gives the board that kind of authority. They could bring an objectionable conduct action [to evict him], but the smoke would have to emanate out of the apartment.”

Klein, the attorney who drafted the change, disagrees. “I’d be worried about [losing] a court challenge if we had simply done it by board resolution,” he says. “But we did it all by the book. We got a super-majority of the shareholders to agree, and we amended the proprietary lease. Under the Business Judgment Rule, I believe the board acted within its rights, and I think the courts would concur.”

Enloe, for her part, feels the board did what it had to do. “You need to do it thoughtfully, without rushing it. To be effective, you need to do it as a change to the proprietary lease. You need to let people air their views, both the pros and the cons. It’s not something you can jam down people’s throats because it touches everyone in a very visceral way, close to their homes, so they have very strong views about it. Nobody came to the [final] meeting unaware. Part of our thinking was you have people smoking, which is not a protected activity, and it is incumbent on you as a board – if you have people affected by that – to take care of the complaints. We felt we had a responsibility to do something about it.”

Habitat, January 2012

Paying for Performance

 

SHOULD CO-OP BOARD MEMBERS BE PAID?

I never thought much about it, but some cooperative housing association board members think they should get paid for what they do. My small, 22-unit Manhattan co-op, like others of its type, flirted with this idea some years ago when a board member took over as the manager.  Our smallish management company had been falling down on the job, and one director – who worked at home anyway – found himself taking on more and more of the manager’s duties: dealing with contractors, keeping watch on the building systems, responding to shareholders’ requests, even going to the Department of Buildings to appeal rulings.  When we had finally had as much as we could take from our manager (at one meeting, I asked why some long-standing task had not been completed, and her response was: “Well, you can pick up the phone and make a call to the contractor, too, you know”), we decided to hire our director as manager. We had to pay him, of course, but we were traditional enough to have him step down from the board.

And that brings us to the question of the hour. Why are professionals and most board members so dead set against the notion of paying for board service? To hear them talk, you’d think the discussion was about bribery and corruption not compensation for time spent. “I don’t think it’s appropriate. Most bylaws prohibit it,” says Arthur Weinstein, a veteran co-op and condo attorney. “It might create the wrong incentive for a person to serve on the board. They’d be serving for the money rather than for the good of the building. And I don’t think you could ever compensate people fairly for the amount of time they put in. It would be inadequate.”

“It doesn’t seem that ethical from the outside,” notes CPA Jay Menachem. “The board isn’t supposed to make money off the building operation – to take compensation for what is supposed to be a voluntary job.” ”

  “If they are running for the board to make a financial windfall, then that’s the wrong motivation,” argues attorney Steve Sladkus, a partner at Wolf Haldenstein Freeman Adler & Herz. “Board members should not be paid,” agrees attorney Matthew Leeds, a partner at Ganfer & Shore, adding unequivocally: “They would be looking at the job for the money.

So what, you might ask, is wrong with doing a job for money? Does a corporate board expect its directors to serve without compensation? Of course not. And with the compensation, say some, those corporations get top-notch people, picked for their expertise not their personality or popularity with the shareholders. After all, would you rather invest your life savings in a corporation with a “professional” board that is trained in the matters with which the corporation must deal, or would you prefer to put your money down on the corporation with the “amateur” board that was learning as it went along?

What’s stopping more boards from getting paid begins with tradition. The reluctance to offer a salary goes back at least to the 1940s, when the “Model By-Laws,” issued by the Federal Housing Association, required that the unanimous consent of the shareholders be sought in order to compensate board members. But that hurdle can be overcome: although the bylaws generally prevent compensation for boards (other than reimbursement for money spent), there does not appear to be a city, state, or federal statute or regulation prohibiting it.

So, should you try compensating your board members? What are the pros and cons of paying board members for their services? What might be the consequences? The issues raised by professionals include:

The Expectations Game. “You would just be raising expectations among shareholders,” Sladkus notes. “We’re paying you all this money and you’re running the building into the ground.”

Do They Care? If you recruited from outside the property to hire board members for their qualifications, you get people, “less interested in the building because they don’t live in it,” claims one veteran attorney.

The Discipline Conundrum. If you are paying resident-shareholders for their service, it is harder to discipline them. I know that in my building, the ex-board member/manager we paid, would often do what he wanted, regardless of board instruction. He was our neighbor, so it was difficult to come down on him. Similarly, one co-op that CPA Menachem once represented had a problem because the board president was a three-man band. “We found some financial irregularities,” he notes. But to whom was he to report them? The president was also the salaried bookkeeper and manager. He finally wrote a carefully worded letter to the board. “Normally, it’s much easier to rectify a problem when there’s a segregation of duties,” he explains. “There may be nothing wrong with it, but when you’re paying someone who is also in charge, there can be the appearance of impropriety.”

Nonetheless, there are boards that pay members for doing work. “These particular boards are not using a management company and are paying for less than they would for a management company,” says Menachem. “They’re doing a lot of extra work and paying a little money.”

He cites a 51-unit condominium in Queens where the board president and the treasurer, two long-time residents and retirees, were “paid” by not having to pay common charges, about $500 a month. “The president and the treasurer would split the tasks, getting together the revenues, paying all the bills, keeping the books. You have to keep track of common charges. Possibly sending fines. And so on. It was a great deal of work.” The treasurer has since given up the job and it is now handled by an outside, salaried bookkeeper. The president still gets paid, and says Menachem, “does a lot; he walks the grounds every day. You could go out and get an outside management company, and they’d pay more.”

There is also a nine-unit Manhattan co-op in the East 50s that pays a shareholder/board member about $515 month to handle the property. That’s no surprise, says the cooperative’s CPA Menachem, because the co-op, with five people owning the property’s eight units, doesn’t have the cash for outside management. And, anyway, the manager has building maintenance experience in his day job as an outside project manager; for his building, he pays all the bills and handles all the problems. He has been on the job for over 20 years.

That said, how then do we answer the question, “To pay or not to pay?” If you can cope with – or are at least aware of – all the issues raised by professionals, then you can at least make an informed decision. But, perhaps the best answer is to sidestep the question altogether. If it’s a question of no-nothing boards vs. savvy ones, then we might agree with the position of managers and attorneys who say that the answer to the  “amateur board” problem is not compensation but education. A number of managers and law firms told me that they do this by staging regular educational seminars for their boards, and also encourage the members to attend seminars at the

Council of New York Cooperatives & Condominiums – and to read Habitat and other real estate journals.

“I think a training program is a great thing,” says Sladkus. “I’m surprised that more businesses haven’t been started to train board members. If someone were to organize that I’m sure boards would pay for that.”

“We often have sessions with board members explaining their roles to them,” adds attorney Steve Wagner, a partner in Wagner Davis. “We explain what a fiduciary is, why they are fiduciaries, what that entails in terms of their conduct and the liker. I think it’s very valuable because a lot of times people haven’t served on the board and don’t know what’s involved, and rather than ad-libbing it, that puts a frame on what they should and shouldn’t be doing. The training process isn’t that you get a two-hour training session and then you’re qualified to be a fiduciary. Education is an ongoing process.”

August 24, 2010

WAS HE A RACIST?

Was co-op board president Nick Biondi a liar? Biondi was widely branded as a racist – in fact, as a symbol of racism – after the co-op board of which he was president rejected an African-American man for an apartment in Biondi’s posh building. I talked to Biondi years after he had lost a lawsuit (and thousands of dollars in punitive damages) over the matter, and he insisted he was innocent.

Was he lying? Hard to say. Even though my first boss once said to me, “The best lies are those which you yourself believe,” I don’t think Biondi was lying to me or to himself. For proof, you have to follow Joe Friday’s dictum on Dragnet: “Just the facts.” And the facts in the case – the logic of the story – seem to indicate that Biondi and his board got a bum rap.

As I said in a story I wrote on the subject in March 2001: “If it was racism...this board seems an odd candidate for the charge: [board director Michael] Silverman, who had lived in South Africa and had known Nelson Mandela in the 1960s, notes that he left that country many years ago because of its apartheid policies. Biondi says that he rented one of the two apartments he owned [in the co-op] to a black woman, while Lawrence Wiener, the sponsor and [a] board member...has a stepbrother and stepsister who are black...”

Racist? I don't think so. But who knows for sure?

May 9, 2011

Discrimination

DANGEROUS WATERS

By TOM SOTER

Additional reporting by Alan Saly

from MARCH 2001

Nick Biondi.

You’re sitting on the board. You have to meet with a proposed sublessee of one of the apartments in your building. He arrives and you think he’s a bit arrogant. He also doesn’t show up with his wife, who plans to live there with him. You have your doubts about him because he seems overly aggressive, and you ultimately turn him down.
Oh yes, and he just happens to be black.

Guess what? You may have problems. Big time. In fact, you may face a discrimination lawsuit like the one that hit Manhattan’s Beekman Hill House cooperative. In that 1997 case, a federal jury found that the board had illegally discriminated against an interracial couple who were awarded $640,000 in damages, $410,000 of which was paid by the individual board members themselves.

Most everyone in the cooperative housing world has heard of the “Biondi case,” so named for Nick Biondi, the board president at the Beekman Hill House at the time of the suit. What most know about the story is that someone named Biondi was a board member who turned down an African-American who wanted to live in his building. That, after the rejection, the African-American sued for discrimination, and that Biondi – or someone in the interview process – had written “black man” on a piece of paper. That Biondi and his fellow board members subsequently lost the case and had to pay damages out of their own pockets. Many who heard the story think of it in – if you’ll pardon the expression – black-and-white terms: Biondi was a racist who got what he deserved.

The story is more complex than that, however, and boards need to learn a different lesson from the story: a tale of bad advice, of clashing egos, and of a lawsuit which never should have happened.

TAKE-CHARGE GUY The saga begins with the Beekman Hill House, a 66-unit cooperative at 425 East 51st Street. Built in 1929, the property is a ten-story, red-brick building which went co-op in 1986. A driving force in the conversion was Nick Biondi, who had been a renter since 1981. An aggressive, take-charge individual, Biondi fought with the sponsor, Lawrence Wiener, to get the best deal for those tenants who bought. After the conversion, Biondi served in various positions on the board before being elected president in 1990.

By all accounts, Biondi was the man who ran the place and got things done. “He was an excellent board president,” recalls Simone Demou, a former renter who bought her apartment and had worked closely with Biondi during the conversion. “He dealt with the sponsor, the manager, and the super constantly.” Adds another former owner and board member: “Nick had a lot of say. He was pretty strong. He has a bulldog tendency about things.”

Biondi himself admits he did the job because few others wanted it. Of the five active board members (an additional two were sponsor seats), only Biondi and Michael Silverman actually lived in the building. “People were apathetic,” he says. “You know how it is: I did the work because I had to. No one else wanted the job.”

In many ways, Biondi was a typical president: assertive, knowledgeable, and self-sufficient, who got things done because no one else cared as much. “I was the one,” he says. “I did all the work. I was no more hands-on than anyone else [in my position]. It was because of the peculiarities of our building. We had five board members, one was an absentee-sponsor, [Katherine] Cundey – you never knew where she was; [Richard] Appleby didn’t live in the building. Who’s left? The super, me, and Silverman… There were no [other] directors around.”

THE WRONG AD The problems for Biondi and Beekman Hill House began in June 1995, and everyone agrees that it all started with a misunderstanding. Wiener, the sponsor, was still renting a number of apartments that he owned. He took out an advertisement pushing his units, promising applicants, “No board approval needed.” The ad caught the attention of Gregory and Shannon Broome, a young interracial couple – he is black, she is white – who had recently moved from Maryland and were looking for a place near Gregory Broome’s office. He worked a few blocks away as an associate at Skadden, Arps, Meagher & Flom (she drove to work at General Electric in Fairfield, Conn.). They came to the building and looked over Wiener’s apartments; when they didn’t like those, the super also showed them a unit owned by Simone Demou. It needed board approval, although the super didn’t tell them that.

The Broomes were eager to move in and immediately met Demou. The parties quickly agreed on a two-year sublet, beginning with a rent of $2,400 a month. It was then that Demou told them that board approval would be necessary. Gregory Broome, feeling a bit sandbagged, was slightly annoyed and said so. “We didn’t realize until some point later on that there had actually been two ads in the paper,” he explains. “We thought Demou had placed an ad saying, ‘No board approval.’ We didn’t see the other ad. Not being from New York, I did not know that sponsor apartments often don’t require board approval.”

Demou, however, told them that approval for sublets was perfunctory and that the couple should have no problem. She told Broome to call Nick Biondi to set up a meeting.

In many buildings, such interviews are generally arranged by the managing agent and usually take some time, often as long as 30 days. But at Beekman Hill House, Biondi handled such matters. According to Demou, the president had frequently approved her past sublessees – she had had four or more already – after a single interview in which he alone vetted the prospective renter. Biondi, however, says that he always had a second board member at the interviews.

Broome called Biondi to introduce himself – accounts differ as to when, but it was either on Friday morning or Friday evening – and Biondi says he tried to be as accommodating as possible. Broome told Biondi that he needed to move in on the coming Wednesday; could they meet before then? Biondi told him that he and Michael Silverman, another board member, could meet the Broomes on Monday evening. Broome says he told Biondi that his wife might have trouble making that date.

“I talked to Biondi, and he said that he normally gets one board member, usually Silverman, to interview people who wanted to sublet, and that I should walk over after work, and we scheduled a meeting for a Monday,” says Broome. “...He knew that we had signed a lease, which would have commenced in early June, and I forget the date on which the lease was effective, but it was some time in the early part of June. Based on that call [to Biondi]…we had arranged for movers. I was convinced that the board approval was not a big deal.”

THE FIRST MEETING On Monday, Broome met Biondi and Silverman. “We met at 6:30. I quickly looked through the [application] package,” recalls Biondi. “It was a little light, there was a couple of things missing, nothing of any import… [We told him] we had to meet the wife.”

According to Broome, however, the two board members were not very communicative or inquisitive. “They asked what I did at [Skadden, Arps, Meagher & Flom], whether we had any pets; perfunctory questions. Nothing that sticks. It was a short meeting, less than a half-hour,” remembers Broome. “Biondi wasn’t as nice as he was on the phone. Over the phone he said, ‘I know Skadden, and I know the firm you worked at before’…. He was pretty chatty on the phone, and it gave me the impression that I would say, ‘Hi,’ and that would be it. When I got there, it wasn’t like that. I didn’t think a whole lot of it at the time.”

Biondi says he was concerned because Broome had not come with his wife. They told the applicant they would have to meet Mrs. Broome on Tuesday before they could give an okay for a Wednesday move-in. Silverman recalls that after this first meeting, Biondi told his fellow director, “We may have trouble with this guy.” Silverman said, “If this is because he’s black, don’t go there. We could get sued.” Biondi said it wasn’t about that; it was about Broome’s personality, that he found him overly aggressive. Biondi denies saying this. He admits that he did warn Silverman of problems with Broome, saying it was the absence of the wife and that he got a “strange feeling” from Broome.

Demou says she was surprised that the board had requested another interview since, in her experience, past sublet applications had been approved after one meeting. (Biondi, however, says he viewed the second meeting simply as an extension of the initial interview.) Concerned, she made calls to other board members and even visited the subleasing agent at American Landmark Management, Maria Capraro.

The board, the superintendent, and the agent, in later court testimony, claimed that Demou made heated charges of racism against Biondi and the board and was threatening to sue for discrimination if the board didn’t approve the sublease. “I felt angry when she threatened me personally with getting my vote,” board member Richard Appleby recalled in trial testimony. Demou says she simply spoke of the virtues of the Broomes and made no threats, implied or otherwise. “I didn’t threaten the co-op,” she says. “Why would I? I’m an owner.”

THE FULL BOARD MEETS The Tuesday meeting was canceled. Biondi says it was because he couldn’t find a second board member to come to the interview; he also recalls that another director, Katherine Cundey, wanted to meet the Broomes but was unavailable on Tuesday. Biondi also notes that everyone on the board was becoming angry at the calls being placed by Demou, feeling that she was trying to unduly influence them, and that many members were requesting a full meeting both with the Broomes and Demou.

The Broomes, who had impeccable financial and personal credentials, were surprised by the brouhaha, and only now began thinking that discrimination might be involved. “I thought it was strange,” says Broome. “I started to think that there might be something going on when I called Mr. Biondi to find out what was going on and he said they needed a full board meeting. It didn’t seem entirely consistent with what what Ms. Demou had told me.” He adds: “I had not faced any sort of discrimination before. I mean, I’ve had empty cabs pass me by, but [there had never been] discrimination when someone had information about me; never in an employment case.”

If it was racism, however, this board does seem an odd candidate for the charge: Silverman, who had lived in South Africa and had known Nelson Mandela in the 1960s, notes that he left that country many years ago because of its apartheid policies. Biondi says that he rented one of the two apartments he owned in Beekman Hill House to a black woman, while Lawrence Wiener, the sponsor and the board member who actually wrote “black man” on a note pad at the second interview with the Broomes, has a stepbrother and stepsister who are black.

Nonetheless, the steps the board had taken so far were dangerous not because the board members were racist but because it could give the appearance of racism to anyone who was paying attention. In this case, the board had seemed to stray from its own procedures: a single interview and then approval. And in discrimination cases, where appearance and reality can become indistinguishable, that meant the board was stepping onto thin ice. In fact, what is remarkable is not that the board began getting angry at Demou’s actions, but that its professionals seemed to be AWOL or unaware of the dangerous waters that the Beekman Hill House was entering. Biondi had the presence of mind to call the corporation counsel, Herbert L. Cohen, of Manhattan-based Stiefel & Cohen, to get his advice on how the board should proceed. Cohen said he thought he should attend the upcoming board meeting. (Cohen, who is currently being sued by Biondi, refused to comment on the facts of this case.)

On June 13, the full board met, first with Demou and then with the Broomes (Cohen was only present at the talk with Demou). The directors angrily charged the Broomes with stirring up a legal hornet’s nest by saying they would sue if rejected. Gregory Broome says that was the first time he had even heard of the threatened discrimination suit. “That [meeting] was tense,” he recalls. “The first thing they asked was if we had threatened to sue, accusing them of discrimination. We had not made any threats to sue; absolutely not.” The meeting became one of charges and counter-charges, and then the Broomes and Demou left.

REJECTION After the meeting, the board discussed the issues with its attorney, Cohen. According to Biondi – and confirmed by the minutes penned by Cohen himself – Cohen said, “They’re obviously litigious. If Broome were white and was making these threats, would you approve them?” The directors said no. “Well,” Cohen said, “then you must turn him down.” In Cohen’s view, the board could not give in to blackmail, that accepting a subtenant after the owner had threatened the co-op with litigation, would be setting a dangerous precedent. Board members present recall that he also argued that the Broomes were potentially litigious and could start lawsuits even if they were approved. Based on this advice, the board voted unanimously to reject.

That Cohen would give such advice is amazing, considering the fact that the Broomes were both lawyers and that Gregory Broome was a member of a legally protected class who would have strong grounds to sue if rejected. But the board members had no way of knowing that: they trusted their lawyer, did not think they were racists, and were buoyed by the feeling that they were in the right. Rather than try to get them to avoid trouble, however, Cohen was steering the directors right into it.

Another remarkable fact is that the managing agent was nowhere to be seen. The manager was the one who, supposedly, could bring to bear his wealth of experience, counter-balancing the attorney with street-smart common sense and advising the directors on how to avoid more trouble. But, Biondi says, “We never heard from him once during the whole thing. He just took a powder.” (American Landmark no longer exists; Maria Capraro, the leasing agent for the building who now works for Brown Harris Stevens, says she has no comment on any aspect of this case.)

The Broomes were stunned when they heard the news of their rejection. Gregory Broome says he had now come to believe that racism was involved and the two decided to sue as a matter of principle. “Part of our disappointment was that you felt you got hosed. That could be the only explanation. We couldn’t think of any other reason that we would be turned down for a two-year rental. It seemed odd. You want to believe that racism was not the reason. But it became harder to dismiss that possibility.”

When the Broomes sued, Biondi says that Cohen and the insurance company’s lawyers, Epstein Becker & Green, argued that the board needed to go to trial. (Through spokesmen, Chubb Insurance, the firm that handled Beekman Hill House’s insurance and defense, declined to comment on the case, as did Epstein Becker & Green, which is being sued by Biondi.) Biondi admits to feeling helpless, that the board thought of settling before trial but was dissuaded by its professionals. “The attorney would say… ‘These people [the board] did nothing wrong, and we’re going to fight it to the end.’ [After that,] you have no say. You’re the board member. It’s out of your hands. You’re gone. It’s in the hands of the lawyers.”

The federal trial, in May 1997, took about one week. Demou testified that Biondi had made racist remarks in the past and denied threatening to bring a discrimination lawsuit; Biondi, the other board members, Capraro (through a deposition), and the superintendent all testified that Demou had threatened them with a discrimination suit if things didn’t go her way. In the end, the jury found for the Broomes, awarding them $640,000 in damages, including $410,000 in punitive damages against the Beekman Hill House and its board members. Of that, Biondi was personally liable for $125,000. The jury also awarded Demou $107,000 in compensatory damages and $57,000 in punitive damages.

The corporation’s Directors & Officers’ liability insurance paid $230,000 in compensatory damages against the corporation and its directors but did not cover the punitive damages. Since, in New York, it is illegal to insure for punitive damages, the court of appeals ultimately rejected Biondi’s insistence that the co-op pay the judgment. Biondi argued that he was acting on behalf of the building; but the co-op and its carrier refused to pay. He sued and lost.

IT CAN’T HAPPEN HERE So what went wrong? Legally, say attorneys who were not involved in the saga, the directors made almost every mistake they could. “It sounds like it was a series of bad mistakes from day one,” observes James Samson, a partner in Manhattan’s Bangser Klein Rocca & Blum. “If the defense was ‘My personality and his personality didn’t mesh,’ that’s a tough defense in a civil rights case.”

More to the point, however, the directors made mistakes that were based on advice given to them by their attorney, a trusted professional who was supposed to keep them out of trouble. Unpardonably, too, the managing agent – who presumably was more knowledgeable than the volunteer board members – was nowhere to be seen during the whole affair.

“It’s only reasonable for the board to take their professional’s advice,” notes Arthur Davis, a management consultant based in Manhattan. “These are volunteers who are not trained in running a corporation. This case is an indication of an inherent problem. If the board members have a legitimate attorney steeped in real estate who gives them advice on some matter, then they’ve done all they can. How can these people second-guess their professional? There is no way to know if he is giving good advice or bad advice. If you have an engineer who tells you your facade is fine and then it falls down, you sue the engineer. But, before the fact, you don’t say, ‘I’ll get another engineer’s opinion.’ You have to trust them. You don’t have the experience to do otherwise.”

Cohen and the manager should have both warned the board not only of the bad precedents that existed in turning down the Broomes, but also of the difficulty in fighting a discrimination suit. “The general consensus is that it should have been settled,” observes Stuart Saft, a partner in Wolf Haldenstein Adler Freeman & Herz. “It should definitely not have gone to trial. The fact pattern as such was problematical. In discrimination suits, you have to prove the negative – that you did not discriminate – which is next to impossible.” And, he adds, there was evidence against the board: “Writing [‘black man’] on a piece of paper demonstrates that they were paying attention to [race],” says Saft. “They saved [the paper], too, and that became evidence that race was a factor.”

The attorney notes that a professional should have told the directors that the intensity of their emotions was disproportionate to the situation: the Broomes were not attempting to buy the unit – when greater financial scrutiny is required – but merely rent it. Demou was still the owner and still financially responsible for the apartment’s maintenance. “You know, this was just a sublease,” says Saft. “It should not have been a big deal. Someone should have guessed that, based on their finances and that they are professionals and lawyers, that this would escalate if the board took the wrong steps. It had trouble written all over it.”

A professional advisor should have cooled down the hot rhetoric, not stoked it with calls of doing what was right. “[You have to] step back,” Samson advises. “This is a touchy judgment call. Was it simply a case of two aggressive guys going at it? There could have been resentment by the applicant about going through the [interview] process. Going before the board is a demeaning process no matter what you do and no matter who you are.”

Better advice would have been to try and avoid a lawsuit and, then, if it came to a suit, try and settle before going to court. “In most situations like this, a lawyer should be helping the board find how to get to ‘yes’ rather than ‘no,’” observes Steve Wagner, a partner at Wagner Davis. “Don’t try to figure out how to say ‘no,’ try to figure out how to say, ‘yes.’ When boards want to sue or fight a suit in situations like this, I take an active role in convincing them it’s not a good idea.”

Indeed, Wagner, Samson, and Saft all agree that the board was poorly served in the advice it got, since the case had all the earmarks of a disaster waiting to happen. In discrimination cases, plaintiffs look for deviations from the normal procedures that might indicate illegal biases. Although the board members felt they had good reasons for what they did – the second interview was scheduled to meet Mrs. Broome, the full board meeting was set up to deal, primarily, with Demou’s phone calls – to an outside observer looking for discrimination, Beekman Hill House was varying its normal interview process after having met once with an African-American applicant.

“Co-ops should run themselves in a business-like fashion,” explains Wagner. “There should be procedures. They apparently varied from their own procedures here. Had there been standards, or policies, or written house rules, they might have pointed to that. You want to eliminate the possibility of someone saying, ‘Why do you do it for them and not do it anywhere else?’ If you make up procedures on an ad hoc basis, you’re making a terrible mistake.”

Cohen, or the absent managing agent, should have pointed out that rejecting an applicant – who was a member of a legally protected class – for anything but a solid (i.e., financial) reason was extremely dangerous. Says Saft: “You have to have an objective standard [concerning how you] made the decision. If it’s finances, you have to see financial statements.”

In that regard, Beekman Hill House was on the shakiest of grounds since Skadden Arps is one of the city’s top law firms, offering handsome salaries to its employees. “Skadden Arps attorneys are very – you could say grossly – overcompensated,” observes Samson. “So if you’re going to reject, that’s not a good reason in this case. A rejection can’t be because of personalities; it should be because of what you saw on the [financial] papers. To say someone is ‘being aggressive’ is so subjective.”

The other main argument – that the Broomes were potentially litigious – was also weak. “The board or the attorney should have looked at whether the applicants had been litigious in the past,” Saft argues. “Just because they’re lawyers and litigate for a living doesn’t mean they are personally litigious. So that wasn’t a good reason to turn them down.”

Finally, the attorney should have warned the board about the nuances involved, about how boards are perceived by the general public (i.e., the jury): as arrogant, domineering, and capricious. “There is this perception of boards of co-ops and condos as somehow being arbitrary and mean-spirited,” notes Wagner. “People see boards – sometimes rightly, sometimes wrongly – as fruitful fields for small-minded people with Napoleonic complexes. In certain respects, that perception is a result of cases like Biondi in which boards continue to act, apparently, without regard to their constituents.” Such views could weigh heavily against the directors at trial, as most attorneys would know.

AFTERMATH In 2001, Biondi, Broome, and Demou all seem like sensible, reasonable people. Although Biondi says he has tried to move on with his life, he sounds bitter, feeling he was wrongly convicted of racism. Broome, soft-spoken and currently living in San Francisco, admits that the board may not have been or seen itself as racist but nonetheless acted in a discriminatory way. “I’m absolutely convinced my race had something to do with it. Maybe [Biondi] thought I should have been more deferential to him... Maybe he convinced himself [that race had nothing to do with it]. But it was partly because I am black.” Demou, who still owns a unit in the building, insists that Biondi got what he deserved.

But did he? No one can judge the complete truth of any situation; however, it is safe to say that Nick Biondi is a forceful individual who took charge of matters when others wouldn’t and that he was used to having things his own way. Perhaps Gregory Broome, who admits he was peeved by what he saw as a demeaning process, came across to Biondi as unnecessarily aggressive in wanting to move in so quickly.

Whatever the reason, the issue became personal when it should have stayed professional. Demou’s calls – whatever she said – put everyone involved on edge, and rather than cool off, the board got more heated. In his court testimony, Biondi claimed that charges of racism “devastated” him. “This was, in my view, so unfair. Here, ten years on the board, impartial, reasonable, always did the right thing, and here, some shareholder wants to rent her apartment and would turn on me with these lies, it was just – I was completely disgusted with the whole thing.” And by their actions – the lawyer offering incomplete advice and the manager offering nothing – the professionals let the board walk right into a roaring fire.

Biondi, an ex-boxer, saw a fight and, egged on by the lawyers, he and his fellow board members took on the battle with all the determination of a Rocky Balboa. But that fighting spirit was wrongly placed, as a good professional should have noted. “When two people get into a fender-bender type fight, the two start screaming at each other and it becomes traumatic,” observes Samson. “The rejection of a subtenant is a traumatic experience. You have to be sure racial [issues] don’t come into play when both sides are under stress.”

In the end, boards involved in such situations should search for ways out of trouble, not ways to win an expensive lawsuit. The Beekman Hill House case was extraordinary not because the board made every wrong step it possibly could, but because the professionals let them.

“You have a mixed racial couple, with excellent finances, who are members of a prestigious firm, one of whom is a member of a protected class,” Saft says. “The board turns them down. How is it not discriminatory? It’s unfortunate for Mr. Biondi, but the way the board made its decision gave every impression that it was racially motivated. And in cases like this, perception is just as bad as reality.”

The Beekman Hill House story is, in fact, the scariest of scenarios – the board as the Titanic, with the professionals as the captains of the ship, guiding them directly into a legal iceberg.

Now and Then

 

Blowing the Whistle

By TOM SOTER

NOVEMBER 2005

Larry Simms just thought that he was doing his job. As board president at the 165-unit Future Condominium in Manhattan at East 32nd Street, he was given a standard accounting form to sign: the so-called “rep letter,” which essentially said that, to the best of his knowledge, the financial reporting for the building was accurate. But he refused to sign it. The reason: he had found four areas that he could not verify as proper and that might actually have involved fraud (those included an unauthorized $15,000 bonus to the super and $61,000 of unauthorized overtime).

“I’ve always insisted – whatever my position on the board – in reviewing the actual invoices,” explains Simms, who is no longer on the board. “Because I know that if the agent understands that somebody’s looking at these things, they’re going to behave differently. I said, ‘Here are four instances of what looks like potential fraud. And none of these things should’ve happened. Now that they have happened and been identified, somebody has to rectify them.’”

That’s when it started: the charges of corruption against Simms, the attempts to get him to step down, the claims of theft of board property, the lawsuits, the verbal – even physical – attacks by neighbors who saw him as the enemy. It had become an uncivil war. Intentionally or not, Simms had inadvertently become a whistleblower.

The dictionary defines a whistleblower as “an employee, former employee, or member of an organization who reports misconduct to people or entities that have the power to take corrective action. Generally, the misconduct is a violation of law, rule, regulation, and/or a direct threat to the public interest.” If you’re on the board and you note something that seems unusual – either ethically or financially – should you “blow the whistle”? What does that involve? And what should you expect from your fellow board members?

Very few actions you initiate on the board are as consequential or as dangerous – and yet so necessary – as knowing when and how to inform on your neighbors. But like Terry Malloy, the tortured protagonist in the film On the Waterfront who testified against his friends, whistleblowing usually comes with a steep price. Although some may applaud you, a good number will probably end up hating your guts.

Signs of Trouble
Many get on the board for the wrong reasons – following a personal, not building-wide, agenda, for instance – while others find the power positively heady. “There are a lot of people that get to be in a position of power on a board that don’t have real estate experience or don’t have business experience, and can’t [differentiate between their interests and the corporation’s interests] and realize that you do have a fiduciary obligation when you’re on the board of a major corporation,” observes Morrell Berkowitz, a partner in the law firm of Gallet Dreyer & Berkey, who represents Larry Simms in two lawsuits against the Future Condominium “Usually, when there are problems, they are caused by people who say, ‘What can I get out of it?’”

Still, even if you suspect someone of self-dealing, you need to be sure of your facts. If something seems odd, experts say you should check it out quietly before acting publicly. It is crucial that you talk to other board members and – without making any accusations or charges – find out what you can. Being confrontational right off the bat is usually counterproductive: people will shut down and get defensive and you will find out little. “You start by asking questions,” Simms notes. “If you don’t get reasonably responsive answers, then you should begin to suspect a problem.”

To Robert Grant, director of management at Midboro, there were warning signs as soon as he took over management of a posh East Side co-op. “My take was that there were some real conflicts of interest. It was obvious from the day I started. A lot of the board members were art dealers, and ran galleries in their apartments in the upper floors, and the building’s not zoned for that. So right off the top, I started sensing something was wrong. I just noticed that the way they would decline or approve applications for apartment sales – sometimes it was tied into their own desire to buy those same apartments.” Grant eventually resigned the account.

If you suspect something and the board members are of little help, talk to your professionals (unless they’re the ones who are arousing your suspicions). See if there’s a simple explanation for the questionable action, since you may just be missing a key fact or misunderstanding an essential point. “The first place usually to go is to the professionals. Speak with the accountant or the attorney,” advises Mindy Eisenberg Stark, a forensic accountant, “because one of them generally is going to know what path you should take.”

“If you think the board has acted inappropriately, as a board member, you do have the right to contact the outside attorney, the outside auditor, the insurance carrier, and a managing agent on your own,” adds Aaron Shmulewitz, a partner in the law firm of Belkin Burden Wenig & Goldman.

What you don’t want to do is go public. At least not yet. “One of the worst things to do is to start a letter-writing campaign to the shareholders [before you have the facts..],” says Stark. “Because what you’re doing then is alarming people, and you cause the entire building to start choosing sides. You will start a ‘he-said-she-said’ kind of war.”

There are also liability questions that should concern you. If you’re wrong and you make an accusation to the shareholders, you could be held liable for defamation and other claims. The only legal reason to go public to the shareholders is if you are demanding that they use the information you are providing to remove one or more of the guilty directors from office. And if you do that, you’re crossing a point of no return. Things will get incredibly ugly very, very quickly.

“There’s a dual problem here,” explains James Samson, a partner in Samson, Fink & Dubow. “On the one hand, discussions by the board should stay within the board. You don’t get an open and frank discussion of the issues if the parties can’t feel like whatever they’re talking about is going to stay within the board. On the other hand, when you see wrongdoing, the board members have a duty to report it to the shareholders or to deal with it.”

The catch-22 is that after you offer your criticisms to the full board and/or the rest of the building, you will possibly be ostracized and forbidden access to useful information. For instance, Simms, the Future condo president, found that, once he was considered a whistleblower, the manager no longer allowed him to review the financial records. “I begged these guys,” he recalls, referring to the management firm. “I said, ‘You have a responsibility to seven equally elected members of the board who are fiduciaries. And you have to give financial information to each of them. I’m not telling you to favor me over anybody else. But you cannot under any circumstances cut off the flow of financial information to a board member.’” But that’s exactly what the manager did, reportedly under the board’s direction.

One step you can take is to wait for the next election and quietly campaign for change. Says Grant: “If it’s a member in the minority uncovering something, they should prepare really carefully and do a very intense campaign to get people’s proxies. They should have very private, discreet conversations with the shareholders explaining why they should give them their proxies to clean things up. And then they become the majority.”

Common Mistakes
Whistleblowers make mistakes. Typically, they trust too much and pay a price for it in the end. Most whistleblowers are “straight arrows” and believe in the system; so, when they find an oddity, their instinct is to turn to the president or the manager. They often don’t imagine that the president or the manager may actually be involved in the wrongdoing. A whistleblower is typically not cynical (but perhaps should be).

For instance, when a new board took over at an Upper East Side building – reformers had a narrow majority of four out of seven seats – they found a number of oddities. In one case, the board president had requested to be paid for contracting work that she had done. “And, of course, she was reminded that board members can’t get paid,” says a professional who had worked for the co-op. “Shortly after that, as the story goes, one of their contractors issued an invoice for the exact dollar amount that the president had been asking for. And the co-op promptly paid it, because this president was in control, and the property manager was under her spell and signed off on it. So this contractor got his money – coincidentally, the same amount that the president thought she should be given.”

To look into that issue and other matters, the reformers, in a closed executive session attended by six members (the former president was not present) hired a forensic accountant. He found a host of problems, including missing vendor invoices, a questionable payment of nearly $70,000 to the manager, and personal use of a lawyer by the ex-president for over $2,000 that was paid for by the co-op. But after the report was delivered, most of the board members lost their nerve – except for two directors, who then became defacto whistleblowers.

“I wanted to make sure that, when the time came, these people [on the board] would do the right thing – that they would not be afraid if the results found that [the former president] was involved in a lot of possible crimes,” recalls one of the two directors. “And I was wrong. What happened was, we got the report and we were talking amongst ourselves, and I realized that we needed to get the advice of somebody who is a criminal lawyer. There was a board member who said, ‘Well, how much, at most, does the forensic accountant think is missing?’ And I said, ‘It could be between $1 million and $2 million.’ And this woman said, ‘Well, $2 million, doesn’t seem like a lot of money.’ And then, this other board member said, ‘You know, maybe there’s another way, maybe we shouldn’t pursue this at all, maybe this could backfire.’ Something was weird.”

But the two determined directors met with a criminal lawyer anyway, who warned them: “Your board is in such deep trouble and you don’t realize it, because you have a fiduciary responsibility to report this. And if you don’t, five years from now, when somebody finds this report, they can come back and sue you in civil court about it, saying that you didn’t fulfill your fiduciary responsibility by not reporting it, and also that you didn’t take it to the authorities. This is a really huge issue. You’ve got to get a lawyer and you’ve got to protect yourself.”

So the two board members began calling their colleagues, saying, “Listen, we’ve got to meet. I’ve got to tell you what this lawyer said because there are some very serious implications.” Nobody wanted to meet. All of a sudden, everybody was busy. “And the next thing you know,” says one of the dissident directors, “we get this e-mail that the board had accepted our resignations. They were trying to force us off the board.”

So much for trust.

Other mistakes whistleblowers often make include not collecting enough evidence on the problem they’re trying to expose, not building support among colleagues and others, and not waiting for the right opportunity before they come forward.

Indeed, this last point is vitally important. Experts say that, when coming forward, timing is everything. “Once they blow the whistle, the stream’s going to dry up, so to speak,” observes Michael Kessler, president of Kessler International, a forensic accounting firm. “Nobody’s going to be cooperative anymore, especially when people know you’re going after them. I had a case where a prospective client started checking bills. She went to the Environmental Protection Agency (EPA) and pulled a contractor’s business records to see how much asbestos was removed from the building. What was reported to the EPA was considerably less than what she was being charged for. So, one of the documents had been falsified. And she’s got a number of incidents like that. My suggestion to her was to put it all together, and then we’ll make a request to see the books and records. If they deny her, then she has a perfect opportunity to go to law enforcement and say, ‘Not only have I found X, Y, and Z, but I also suspect there’s a lot more they’re not allowing me to see.’”

Some experts also suggest that you create a paper trail after you’ve gathered your facts. Explains Shmulewitz, the attorney: “You should certainly put your allegations in writing to the board, especially if you’re in the minority. If you believe that the other six people have done something inappropriate, one way to insulate yourself from liability down the road, should there be any shareholder lawsuits against the board and/or the individual directors, is to go on record having said that you were not involved in this and that you were demanding that they rectify the situation.”

Blow That Whistle?
Once you’re sure something that is possibly illegal is taking place, you need to consider your options very carefully. As a whistleblower, you can expect to be vilified, attacked, and isolated. Do you have the stamina for it? It is not just about speaking out; it is about fighting an ugly war of charges, countercharges, and (often) outright lies. You have to be tough. So does your family. So do your supporters.

“When you say that the board is a bunch of thieves, you’re going to be shunned,” warns Kessler. “You’re going to have your supporters behind you, no doubt about it; but the [accused] – if they are still in power – will see that you do not get what you used to be able to get.”

“It’s not pleasant,” admits Simms, the former board president, who adds: “It’s my home. My wife is here, my kids are here, and it’s very uncomfortable. There have been times when she would not go down to workout in the gym unless somebody went with her, because some of the people have said and done crazy things. So she did not feel safe. We raise our kids here, and we have to explain to them why people are saying bad things about their dad. I was physically assaulted in the lobby, in plain view of many witnesses.”

Adds another whistleblower currently involved in a dispute: “It’s horrible, because, on the one hand, what keeps me going is that I know that I’ve done the right thing and I know I’m on the right side. On the other hand, what price do I have to pay for it? I got accosted in the elevator the other day by a woman. She blocked the door – her hands were flailing all over the place – and I’m thinking, ‘Oh my God, is she going to strike me?’ It was ridiculous.”

Frightening as that is, such harassment can get even more serious. Berkowitz, the attorney, recalls a client he represented at an East Side co-op. When the board neglected to act on needed capital repairs that he had pointed out to them, this former board member called the Department of Buildings, which subsequently forced the co-op to perform the work. For the next year, however, the contractor used the whistleblower’s terrace as a dumping ground for supplies and debris – reportedly on the board’s orders. He saw it as retaliation and ended up suing the co-op.

With such incidents in mind, some say that it is important to consult with a lawyer before you blow the whistle. The consequences can be so severe – you can be falsely accused of the crimes yourself and your reputation ruined – that added protection is advisable. An East Side Manhattan co-op owner, who accused a board member of possible crimes, found herself named as the person who had misappropriated thousands of dollars in funds. Luckily, she had had a lawyer advising her from the start, and had protected herself with a paper trail, showing that all board expenses were authorized. She is now suing the board, and expects to win – and have the board pay her legal fees.

The Board’s Role
A whistleblower wouldn’t be necessary if the board did its job correctly. Many directors depend on the manager or the accountant to keep the building on course. That’s a dangerous mistake, since you are giving up control of your property to an outsider who doesn’t have the same stake in it that you do. Warns Mark Shernicoff, an accountant at Zucker & Shernicoff: “The board members can delegate, but it’s their [ultimate] responsibility. They have the obligation. They can’t rely on the professionals totally; we rely on the board. We’re not forensic accountants. We’re not cops, we’re not investigators. We can’t look at everything, so we rely on the existence of controls and on the integrity [of the board].”

When a board member raises serious questions, the board should probably turn to a forensic accountant, who will do a thorough review of all the paperwork backing up the numbers, interview the staff, the super, and, if necessary, contractors. “What we generally do is, we listen to what the problem is, what the suspicions are, and we go in and test the waters,” explains Stark, the forensic accountant. “Before we do a full-scale, expensive forensic audit, we go in and see what the issues are. We look at a limited test period, to at least see what’s going on in the building.”

“In most cases, the books and records are made readily available to us,” adds Kessler, the forensic accountant. “We conduct a forensic audit searching for irregularities. We do investigative work on some of the subjects that might be involved in the questionable transactions conducted. Then we issue a report and, upon the request of the board, either go to law enforcement and make a presentation or just issue the report. I’ve had situations where it’s frustrating, where you come up with clear-cut cases of fraud and nobody wants to do anything.”

Many boards ignore reported corruption, seeing it as the cost of doing business. They shouldn’t. “I constantly am amazed at how tolerant cooperatives are of corruption. It’s like they expect it,” Samson, the attorney, observes. “But the only way to root it out is to expose it immediately when the problem arises. As much as the rest of the board may want to put it under the rug and not embarrass somebody, the fact that it existed in the building is something every shareholder should know about, because that also prevents it from happening again.”

One East Side board director and whistleblower notes that the most important thing is to assemble the board and “get advice from a co-op lawyer and also a criminal lawyer. People think of co-op boards as their own little fiefdom or their own little kingdom, but actually they’re governed by the New York State corporation laws. This is a corporation and there are things that you have to abide by, and it’s really important that a board gets proper advice about the seriousness of what’s going on.”

The bottom line is accountability, or as some would put it, “the blame game.” Says Simms: “You’ve got people that have never done this before, who above all don’t read the bylaws. They have no clue as to what their fiduciary responsibilities entail. They don’t know what the board and what individual board members are allowed to do or required to do in any circumstance. They always wait for somebody to tell them. There’s no excuse for that in my book. They have to understand, first, their accountability to the owners, second, the accountability of professionals to the building through them. Most people that I’ve seen in board service do not understand that and are unwilling to do what’s necessary to hold outsiders, let alone each other, accountable. But, in the end, that’s your job.”

Charles Grodin

THE RIGHT KIND OF PEOPLE

BY TOM SOTER

July/August 2005

Charles Grodin

To many co-op and condo owners, the following scene may be startling: a board meeting filled with petty (and not so petty) prejudices writ large.

“It’s not on the agenda, but I think we need to talk about the use of the elevators,” says Coles, a 70-something co-op board director, who is sitting with other board members and a managing agent in a posh Fifth Avenue apartment.

“What’s the question?” asks Doug, an intense 40-year-old director.

“Well, who rides on what elevators?”

“The tenants ride on the front elevators,” Doug says. “What’s the issue?”

“Well...what about the people who work for the tenants?”

“Our maid has always used the front elevator.”

“Oh, I don’t have any problem with your maid. She seems like a very nice young woman. She’s an Irish girl, isn’t she?”

“Yes.”

“Well, I’m the least prejudiced person in the world, but the other day I got on the elevator and there was a strange black man in there.”

“A strange black man?” asks Doug, amused.

“Yes. I’m not embarrassed to say I was somewhat uncomfortable... The minute he got off, I asked David, the [elevator] operator, and he said he’s the new houseman for the Willoughbys... Please don’t misunderstand me. I don’t have any problem with black people. It was just startling. He was a large man and it is a smallish elevator.”

The discussion continues (“We wouldn’t want a strange man, black or any color, riding the elevator with our wives,” argues one director). After voting to require hired help to ride in the freight elevator, the board soon turns to pets, and Bill, who works for the manager, talks about requiring height limits for dogs in the building. “You wouldn’t want to get on an elevator and have a Great Dane staring you in the eye,” he says.

“Or a strange black man,” deadpans Doug.

Can a board actually have been involved in such a discussion? Well, yes – and no. It is, in fact, only a reflection of real life in the days before the famous Nicholas Biondi case made such discriminatory talk less blatant and board members more circumspect (Biondi was a board president who was held personally liable for damages in a discrimination lawsuit brought by an interracial couple who were rejected for a sublet in Biondi’s building). The exchange cited above actually comes from actor/writer/radio-talk-show-host Charles Grodin’s new play, The Right Kind of People, which will open at New York’s Primary Stages, at 59 East 59th Street on February 7, 2006. (Three scenes from the play were read by Grodin and a group of actors at a gala benefit for the Lower East Side Tenement Museum at the Roosevelt Hotel in midtown Manhattan on May 19.)

A scathing satire of the absurdities – and often ignored responsibilities – of co-op board members, the play is drawn partly from Grodin’s own experiences from 1986 to 1992 when he served as a director at a luxury Fifth Avenue cooperative off Central Park. Grodin, much like his surrogate in the play, Doug Bernstein, was drafted by a fellow director to serve on the board. “They asked me on because they didn’t think I was a wild partygoer or a Hollywood type,” he says.

The idea for the drama came to him during his first meeting, following a discussion of a prospective purchaser for an apartment. “The board said something which I thought at first was a joke. They were going to turn someone down because he bought his suits off the rack. I said, ‘Well, I buy mine off the rack.’ And someone said, ‘We can tell.’ That was when I thought, ‘There’s a play here.’”

It all seemed absurd to him – but also a little frightening, since boards were allowed to practice what Grodin terms “legally sanctioned bigotry.” He began taking copious notes at meetings – “I was respected for my dedication to the job; no one imagined I was taking notes for a play” – and sought out real estate attorneys and brokers for more information. What he found was that his board was not an anomaly; abuses existed citywide. “I’m sure it’s a national problem,” he says.

Although he acknowledges that co-op boards fulfill a necessary function, he thinks that a great number of people get carried away by their power. He points to his own co-op. During his term of service, a dissident group, angry at the way things were being run, rose up and replaced the sitting board. Seeing Grodin as a kindred spirit, the rebels asked him to join them. He did, but says that the new board quickly became as bad as the old one; the only difference was that they were focused on different issues.

“There’s a lot that’s good about co-ops,” Grodin admits. “After all, they own the building and they’ve got to take care of the property. But a lot of it is about prejudice. Lawyers tell them not to give reasons for why they turned a purchaser down. They know what they’re doing.”

Grodin, who moved to Connecticut after leaving the co-op, spent 12 years writing and workshopping the play (which has seen four incarnations and had its premiere in San Francisco last November). With each version, he has tried to strengthen the characters and make them more complex. His intention, he says, is not to slam co-op boards but to shine a light on problems that currently exist in co-ops in particular and society in general.

“I don’t think it’s all black and white. People are not all good or all bad. This is a complicated situation,” he admits. “On my CBS radio commentary, whenever I talk about a controversial subject, I try to give a very balanced view, because the issues can be complicated. What I’m saying here is that with co-op boards, there is a possibility for abuse.” He adds: “My intention was to be provocative. To get people thinking about the issues. I think the situation reflects the world at large. Bigotry exists everywhere, in all 50 states. Some people feel more uncomfortable when they see a black man coming down the street than they would if it were a white man. It’s ingrained. People have a comfort level – they look for ‘our kind of people’ – the right kind of people.”

Air Rights

July/August 2008

It seemed like a slam-dunk. When a developer approached the seven-member board of 270 Fifth Street, a 35-unit Brooklyn cooperative, about buying the building’s air rights, it was a no-brainer. A million dollars for something the co-op never valued, never even thought about? Sure, why not? Images of capital improvements and new reserve funding danced in the directors’ heads.

But not for long.

Faster than you could say, “Sign here,” the holder of the four-story Park Slope co-op’s underlying mortgage, J.P. Morgan/Chase, put the kibosh on the agreement.

“We were stunned,” recalls Jason Wagenheim, the president at the time. “We thought it was a simple matter of getting them to sign a document.” The board didn’t realize that the air rights are considered an “asset of the corporation, so if we were going to sell an asset, we had to get the approval of Chase. This was totally new territory to us.”

In these belt-tightening times, when boards are looking for any number of ways to raise extra cash, be warned: if you don’t check with your lender, selling air rights, roof space, or other such building “collateral” can cause you to run afoul of the holder of your underlying mortgage.

The story of 270 Fifth Street is an extreme but not surprising example, as the board learned the hard way that the best offers in life are rarely free. In the spring of ’07, a developer offered a million dollars for 13,500 of the 37,500 square feet of unused rights.

“We approved the architecture and engineering plans, and were all set to pop a cork, when we learned that Chase needed to approve it,” says Wagenheim. Chase essentially said, if you go ahead with this deal, we’ll call your mortgage. The bank’s stance puzzled the board. The corporation’s original 20-year mortgage with Chase was for $1.1 million and expired in 2018, and “our building, as a co-op, is probably worth only five to eight million dollars,” Wagenheim notes. “We didn’t understand why Chase was putting up roadblocks. We had never considered the air rights as collateral and, in fact, felt they had a diminishing value because if we didn’t sell them to [the developer] now, we would have no other opportunity to sell them” (because the developer would put up some sort of building, even without 270’s air rights).

After further negotiation, Chase said the co-op could go ahead with the transaction – if it placed the million dollars in an escrow account until 2018. The board rejected that – “What would be the point?” says Wagenheim – and then Chase came back with another idea: it would let the cooperative out of the loan entirely for the price of the prepayment penalty: $250,000.

After a year of – sometimes tempestuous – negotiations, Chase finally allowed the co-op to make the deal, with a discounted prepayment penalty of $141,000. “They allowed us to pay a million dollars immediately,” says Wagenheim, “and the balance, which is $231,000, three months later.” The co-op took out a new underlying mortgage for $500,000 and paid off the Chase loan, minus $6,600 in closing costs. Their net gain on that deal was about $850,000. When you subtract $30,000 in closing costs on the new loan, their final profit on the transaction will be about $820,000. “But it shouldn’t have been so painful,” notes Wagenheim, who stepped down after spending over a year on the bruising negotiations (he was replaced as president by Cynthia Shaw Simonoff). “We paid a penalty because Chase acted in a manner that we thought was unreasonable,” adds Jeffrey Reich, a partner at Wolf Haldenstein Adler Freeman & Herz, the attorney who handled the 270 Fifth deal.

Some would disagree. Such steps – prepayment penalties and calling the loan – are not a question of greed or whimsy but simply a matter of business. “Prepayment penalties are almost always based on some form of yield maintenance,” explains Patrick Niland, principal in First Funding, a mortgage broker. “That is, the interest rate on the loan is the yield to the lender or investor. The lender is counting on six percent interest from now till ten years from now. If you prepay in year six, you give them the value of the remaining four years of interest. In essence, you’re maintaining the yield of the investor. You’re making them whole under the contract.”

Getting approval to sell air rights is a way for the lender to protect its investment. From the bank’s point of view, selling such commodities as air rights is getting rid of loan-securing collateral. “Most loan documents have a clause that says that if the borrower sells any significant portion of the collateral of the assets, then the loan becomes due,” explains Niland. “Selling development rights would be looked on as selling a significant portion of the assets. Most lenders charge a fee for changes made in the documents because there is some cost involved.”

“We have to know about air rights in advance,” adds Mindy Goldstein, a senior vice president at NCB, a major lender to cooperatives. “If they want to lease air rights to an antenna company or put up billboards or sign a new commercial lease, they need our consent. Anything that affects income needs our approval.”

Therefore, before signing agreements affecting your property’s value, you should check with the lender’s “investor consent department.”

“In the event the mortgage documents are silent or require release, you will need the consent of the lender,” observes Matthew Wehland, senior vice president at NCB’s investor compliance and credit review department. “When you have a partial release of the collateral, you need permission.”

But why would a lender, like Chase in the 270 Fifth Street deal, turn down a moneymaking opportunity or, at least, put up roadblocks? “Sometimes, a bank may not have as large a portfolio [in this area] as we do and may not be as flexible,” says Wehland. Other times, notes Reich, the lender may simply want to “get out of the business of making loans to cooperatives.”

More significantly, Niland notes, the overall market climate has changed in the last five years, making it more likely that lenders will not be as receptive to such speculative ventures as they once were. “The effect of the subprime mess rippled through the marketplace, like a stone in a pool,” he says. “The way the market has developed is that Wall Street takes every kind of debt – credit cards, home mortgages, and so on – and packages it; they buy these debts and put them all together in a big basket and then they issue a bond to the investing public, which is secured by the payments of the interest on the principal of whatever the assets are in that basket. If the assets are junky, then payments don’t come on a regular basis. Now, bond-holders don’t get paid and their bonds go into the toilet.

“What that has caused is an increase in the risk premium spread of the loan, and the ability of lenders to refinance their own debt at an affordable rate has lessened.” As a result, many lenders are more likely to turn down a deal or else call a loan, taking the short-term money over the long-term uncertainty.

Wehland suggests that a board considering any new money-making opportunities options consult its loan documents, talk to its professionals, and consider ways to simplify matters.

“If the co-op has an idea that they might sell air rights in the future, for example, they might have the air rights placed under a separate tax lot. That way, the building would be in one parcel and the air rights in another. Then the loan is only secured by the real estate portion and there is less difficulty in selling off the air rights.”