New York Cooperator February 2020
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February 2020                                  COOPERATOR.COM  One of the unique aspects of life in a   co-op or condo is that a building or HOA   is in many ways a microcosm of the larger   world outside. It can suffer from the same   factionalism and partisan bickering as any   political entity, only on a much smaller,   more intimate—and therefore potentially   more damaging—scale. Conflict and divi-  sions in co-op and condo communities can   and often do bleed into the community’s   administration: the manager and board of   directors. Even a seemingly minor conflict   can upend a residential community if it’s   not dealt with diplomatically—so boards   and managers must be prepared to step up,   step in, and do their part to defuse such   issues  before  they  turn  into  something   worse.    Board Obligations  Michael Davidson is the president of, a Manhattan-based   company  that specializes  in  nonprofit   board development and management sup-  port, including coaching. Davidson ex-  plains that board members of nonprofit   entities (including co-ops and HOAs) have   three main duties to which they must ad-  here: “The duty of care, the duty of loyalty,   and the duty of obedience.”    With regard to the first, the duty of   care, “Board members must basically un-  derstand what’s going on in terms of the   building,” Davidson says, adding that their   primary responsibility is to make sure the   property is well and effectively managed.  The second duty, the duty of loyalty,   “Requires  adherence  to  conflict  of  inter-  est obligations.”  In simple terms, that   means that a board member must put the   co-op or condo’s welfare before their own.   A good example would be that if your   brother-in-law owns a roofing company,   continued on page 6   Co-op, condo, and HOA boards across the country are made up of volunteers who are com-  mitted to the governance of their community. Among their most important duties is selecting   vendors to provide goods or services—everything from lawn care to roof repair; surveillance   to extermination. Often these volunteers have little to no direct expertise in the industries and   occupations related to their properties, so the task of even finding qualified vendors—let alone   evaluating and choosing the best one for the job—can be daunting. By understanding the pro-  cess and keeping a few caveats in mind, however, boards can make solid choices for their com-  munities while steering clear of conflicts.   Let Your Manager Manage   Your first and likely best resource in navigating the bidding process is, of course, your prop-  erty manager, says Steven R. Wagner, principal at law firm Wagner Berkow in New York and   also president of his own Manhattan co-op. “You need somebody who’s familiar with building   systems to be able to help you cover what needs to be done,” he advises. A competent manager   is a professional who knows the ins and outs of the industry, has contacts and relationships   with a broad range of companies, and is experienced in contract negotiations and procure-  ment. He or she also acts as an intermediary between the board and the third parties they   engage. Ideally, your manager will be involved with all selections of third-party suppliers from   the very beginning of the process.  The Process  And just what is that process? First comes a needs assessment. Whether the gym needs new   equipment, or the boiler needs repair, or the windows need replacing, the first step is for the   board and its relevant advisors to determine the parameters or expectations of the deliverable;   do they want to totally overhaul and upgrade the gym, or just install a couple of new stationary   bikes? Do they want to purchase the equipment, or lease it? Have residents who use the gym   been requesting specific features or items? All of this might go into what’s called a statement/  After nearly a decade of expansion,   New York’s luxury co-op and condo-  minium market has taken an undeniable   downturn—and it’s not a gentle slope   either.  According to several prominent   industry players, prices at the high end   of the market have experienced a drop   of approximately 25% from their peak in   2015.  Of course, this begs the question:   what’s behind this double-digit decline?    Overbuilding? Tax policy? Economic   confidence? Other factors? Perhaps it’s a   combination of all those and more.  The Perfect Storm  Jonathan Miller is the president and   CEO  of  Miller  Samuel,  a  real  estate  ap-  praisal and consulting firm located in   Manhattan. His firm compiles quarterly   and annual reports on market conditions   in cities around the country. “Since 2014-  15,” he says, “in the luxury market north   of $10 million, you’re talking a 25% drop   for new development units. The overall   range is 15% to 40%, depending on how   aggressive the pricing was at the peak of   the market. Pricing on existing product,   or  resales,  is  also  down  approximately   25%.”  “This decline is a result of several fac-  tors coming together at one time,” Miller   continues. “They include the changes to   state and local tax (SALT) deductions   and mortgage interest deductions in the   2017 tax law, the increase in the New York   State mansion tax, and the unintended   consequences of the new rent law and   guidelines passed into law by the New   York State legislature this past year. The   new rent law has crushed investors who   bought a lot of these units.”  The 2017 Tax Act  At the time of its passage, 2017’s Tax   Cuts and Jobs Act inspired a great deal of   discussion over what effects its changes   to the provisions for deducting SALT and   qualified mortgage interest charges would   have on NYC’s co-op and condo market.    New York is a particularly high-tax state   and locality that benefited from the prior   tax regulations. The general consensus   seemed to be that these deductions were   less of a consideration for the luxury end   scope of work, or SOW. Using this as a guide, the manager will produce   a request for proposal (RFP) and distribute it to a list of qualified bid-  ders.   How many bidders get the RFP depends on the nature of the work.   For some jobs, there might be only a couple of vendors who provide a   particular service, while for other categories like painters or insurance   providers, there could be hundreds. Either way, it’s a good idea to so-  Bidding Basics   RFPs, Outsourcing, and Avoiding Conflicts   BY DARCEY GERSTEIN  Managing   Conflict  When Boards and Residents   Take Sides  BY A J SIDRANSKY  NYC Luxury Market   Takes a Dip  Multiple Factors Drive    Prices Downward   BY A J SIDRANSKY  continued on page 2   continued on page 9   205 Lexington Avenue, NY, NY 10016 • CHANGE SERVICE REQUESTED

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