Laws Versus Rules
You Need to Know the Difference
New York's co-ops and condos are both governed by a multitude of laws and rules. For co-ops, the primary governing documents are the bylaws and the proprietary lease. For condos, they are the condominium declaration and, once again, the bylaws. In addition, both types of developments have rules and regulations, or house rules.
In addition, co-ops and condos, like everything else, are governed by laws. In New York State, co-ops are covered under the Business Corporation Law. Condos, on the other hand, are covered by the New York Condominium Act. There are also other housing-related statutes that cover dwellings of all types.
Laws are passed by the state Legislature (the Assembly and the state Senate) at the state level, or by the City Council at the city level. House rules and amendments to a building’s governing documents are generally set by the co-op or condo board, although the board may decide to take a particular issue to a referendum at times. Since life in New York City and its suburbs is so complicated, it follows that there are times when laws and rules and/or governing documents, on one hand, and laws, on the other, may conflict with each other.
Co-op and condo attorney Jeffrey Reich, a partner in the Manhattan law firm of Wolf Haldenstein Adler Freeman & Herz, LLP, says the main point of contention nowadays is the pet law. “The so-called pet law,” he says, “requires that if a pet has been openly in residence for more than nine days, you can’t get rid of the pet. The pet law is a city law, but some developments have no-pet laws.”
Another example Reich gave involves buildings that seek to prohibit any type of “home occupation,” meaning the use of an apartment for one’s livelihood. Zoning laws in New York, he says, allow an inhabitant to use part of his or her home for “home occupation” —to practice accounting, therapy, or similar professions—but some buildings still want to ban them.
Yet another area of conflict, he says, includes cases where boards expect the shareholders or unit owners to install window guards, smoke detectors, carbon monoxide detectors or the like. “But the actual law that requires these things,” says Reich, “may be placing the burden on the board itself.”
Attorney Phyllis Weisberg, a partner in the Manhattan law firm of Montgomery McCracken Walker & Rhoads, LLP, mentioned having roommates as a possible area of contention. The traditional “typical use” clause in a proprietary lease says a lessee shall not, without written consent, use the apartment for any purpose other than a private dwelling for the lessee, his or her spouse, children, grandchildren, parents—in other words, blood relatives. However, says Weisberg “The so-called Roommate Law requires that roommates be allowed, subject to the provisions of that law, regardless of what the lease says.”
In fact, any number of situations could result in conflict between laws and rules—no-kids policies vs. age discrimination laws, noise regulations, political and other “free speech” signs vs. house rules governing aesthetics; and even medical marijuana use in non-smoking buildings (although we trust that this would be more of an issue in Colorado than New York nowadays).
Sometimes, laws that are enacted that mandate change can cause conflict with co-ops and condos that are used to doing things a certain way. For example, the Fair Housing Amendments Act mandates that a multiple dwelling with a parking lot must provide reasonable accommodations for disabled people who drive, and not to do so entails discrimination.
This was the background for the Shapiro vs. Cadman Towers (in Brooklyn) case, in which the building’s management had argued that “reasonable accommodations” should not include taking away parking spaces from those residents who already have them. In the end, according to attorney Adam Leitman Bailey of Adam Leitman Bailey PC, the court ruled that although Ms. Shapiro needed a space near her apartment or else he wouldn’t be able to park at all, she could be given such a space currently used by one of the building workers, and that worker could park in a nearby commercial garage without any hardship.
As if these conflicts were not enough, there are also conflicts between state, city, and federal laws or mandates, says Bailey. “The biggest challenge to housing laws from a federal perspective in the last two decades,” he says, “are the green laws, or federal credits for building green, and the compliance with the lead paint law and building disability-friendly units.” Coming in the future, he says, are regulations requiring more buildings to have federal flood insurance to refinance and get a mortgage.
Condos vs. Co-ops
How do co-ops and condos differ as to how local, state or other laws govern the way they conduct their own business?
Attorney Ronald Gitter, who runs the www.coopandcondo.com blog for co-op and condo sellers, buyers and owners, explains, “A co-op operates, to a great extent, like any other business corporation and is subject to the Business Corporation Law. They elect directors and officers and authorize officers of the corporation to act in accordance with the Business Corporation Law. A co-op looks to the principles of corporate law. This is very different than the way a condo operates. A condo is completely a creature of statute, created by the Condominium Act.”
Another answer has to do with the relationship between the owners and the board. Co-op shareholders, says Weisberg, are considered to be in a landlord-tenant relationship. “Therefore,” she says, “laws generally applicable to that relationship, as for a rental building, will apply.”
Indeed, lawyers and articles in legal publications often refer to co-op residents as “tenant-shareholders.”
“Condos, however, do not have a landlord-tenant relationship with their unit owners,” says Weisberg. ‘And so many of the laws that apply to co-ops, such as, for example, the Warranty of Habitability [which gives tenants the legal right to a livable, safe and sanitary apartment] do not apply to a condo.”
These legal differences can translate into “facts on the ground” in a variety of ways. For example, says Reich, there are both city and state rules that an apartment building must have a superintendent. However, he says, this has been interpreted by courts to the effect that in a condo, because each unit owner is considered an owner by law, the condo board may not have to have a 24-hour on-site super.
“Courts treat condos and co-ops the same in some cases, such as the Pet Law, and differently otherwise,” he says. This can even vary by location – between courts in one borough and another, or one municipality and another.
Getting back to the “rules” side of things, house rules, as we’ve mentioned above, are typically decided by the board. The board’s governing documents, such as a proprietary lease, offering plan and bylaws, “were based on old residential lease forms and are decades old, so progressive buildings have been amending these so that the hand fits the glove of these buildings,” says Bailey.
So what precautions should boards take to make sure that their house rules aren’t going to come in conflict with the law, and to keep up with changes in the law? First. they can consult with their managing agent, and/or an attorney familiar with co-op and condo law, and ask a lot of questions. Other sources of information are publications like this one, seminars given by co-op and condo organizations (as well as The Cooperator'sannual Co-op & Condo Expo), and newsletters and websites put out by attorneys that give updates on the law.
With all the help available to boards and managers, however, conflicts between laws and rules still exist. Weisberg recalls that a number of years ago, some co-ops enacted “flip taxes,” or fees paid by buyers or sellers of co-op apartments when the apartment is sold, by authority of board vote only, without a corresponding statute. “They were challenged in court and held to violate New York laws, specifically the Business Corporation Law, or BCL,” she says. Subsequently, though, the BCL was amended by the state legislature to allow for flip taxes, provided that they were enacted in accordance with the amendment.
Reich cited a recent situation in which a board he represents proposed a rule that pet-walkers who are not shareholders (such as professional dog-walkers) would have to use the service elevator. “A shareholder vehemently opposed this—she didn’t feel her pet should have to take the service elevator. She felt the pet should be able to `ride in style.’ But we’re standing firm.”
Bailey says battles over second-hand smoke are among the most hotly contested items in today’s condo and co-op world. “The law is still being developed respecting second-hand smoke,” he says. “At present, there are few recorded cases but, given the amount of poor new and renovated construction that occurred over the past decade, it is likely there will be a significant amount of litigation over smoke issues in the near future.”
In an article on his website called “Advising Condominiums, Cooperatives and Landlords on Smoking Issues Affecting Buildings,” he outlines the issue and gives sample lease amendments and sample letters from the board to an individual owner. He also summarizes specific cases dealing with the issue.
Does the whole topic of rules and laws corresponding with each other sound confusing? It certainly can be. In general, before boards enact changes to house rules or policies, they should consult their attorneys to make sure everything’s legal.
Raanan Geberer is a freelance writer and a frequent contributor to The Cooperator.