Cultivating an Owner's Mentality Renters vs. Owners

Talk to enough property managers and board members, and eventually you’ll hear the phrase “owner’s mentality” mentioned in reference to co-op and condo dwellers. Usually the phrase is uttered by way of a complaint, as in, “Our residents just don’t have an owner’s mentality about their units or their building.”

The charge can be made against a variety of residents—not simply those who are new to living in multi-family buildings. Whether they are new owners or long-time residents, it’s sometimes difficult for co-op and condo dwellers to understand that their board and management company are not responsible for maintaining, repairing, or managing every facet of every unit in the building.

In short, the board /management team are not landlords. They’re volunteer administrators and hired personnel, respectively, and their duties are clearly defined in their community’s governing documents.

Of course, in an ideal world every new co-op shareholder or condo unit owner would read their building’s governing documents from cover to cover and get clarification on any points they weren’t 100 percent crystal-clear on. In reality, the onus of educating new residents on their own responsibilities as owners in a multi-family building falls to boards and managers. Insuring that everyone understands what they are—and are not—responsible for lessens the chances for misunderstandings and discord between boards, management, and residents on down the road.

Comparing Apples to Apples

According to Robert Braverman, an attorney specializing in co-op and condo law with Manhattan-based Braverman & Associates, landlord/tenant and shareholder/board relationships certainly have their similarities. “The board member/shareholder relationship is not totally unlike a landlord-tenant relationship,” he says. “There’s a lease between the co-op corporation and the shareholder. That’s one layer of the relationship. The biggest distinguishing factor is the [presence of] a board of directors that owes fiduciary duty to the shareholders [of a co-op.]”

And therein lies the biggest difference between the culture of a co-op or condo and that of a rental building. The professionals agree that it’s vital for residents to understand that the building is truly their building, and that the board is not their landlord looking to make a profit but rather a panel of volunteer administrators. Even more vital to remember is that those volunteers are also their neighbors—and they have as much a vested interest in the building’s health and prosperity as any non-board resident.

“You often find that people think everything is the responsibility of the board,” says Mark Levine, vice-president of business development for Excel Bradshaw Management Group, with offices in Long Island, Manhattan and Brooklyn. “There are certain issues [with a unit] that might be both parties’ concern. But some people don’t even know that the proprietary lease exists,” says Levine.

While it’s true that co-op and condo administrators do carry out many of the same duties and responsibilities associated with rental building landlords—collecting fees, maintaining common areas, and shoveling snow out front in the wintertime, to name a few examples—neither board nor manager “owns” the building. Beyond the aforementioned duties and some important others, it’s up to shareholders and unit owners to hold up their end of the bargain. But since many residents come from an apartment building or single-family home prior to occupying a co-op or condo, this is often a tough concept to convey. Many newer shareholders or unit owners may be laboring under the misconception that their super is at their beck and call 24/7 to change light bulbs or unclog toilets, or that their monthly maintenance fees should cover all repairs on their apartment. This can lead to acrimony and unnecessary disharmony in an otherwise well-run building.

“Renter” is Not a Dirty Word

A 2005 article in New England’s Bay Weeklydefines a “renter’s mentality” as one that “puts a premium on short-term economic benefits against long-term capital investments. That mentality makes it difficult to envision, never mind plan for, a brighter future.” The feeling is that renters have a lower expectation of their residence and its upkeep because they don’t plan to be there forever. Put that way, it’s perhaps easier to see why co-op and condo boards—who themselves must think in the long term in order to plot a sensible, prudent course for their buildings—are keen to instill a more ownership-oriented attitude among their residents.

That being said, it would be unfair to characterize all—or even most—renters as being unconcerned with the condition and well-being of their building. It would also be wrong to assume that they all move on after a couple of years, leaving a trail of scuffed walls, battered elevators, and cigarette burns in their wake. According to Tasia Pavalis, a former board member in her condo on Manhattan’s Upper West Side, many renters are every bit as conscientious about their buildings as any owner.

“We have renters who have been here forever, since before the building was a condo, who care deeply about the building,” Pavalis says. “We have investment owners [who rent out their apartments] as a way of making money; and we have resident owners who really care about the place.”

Resident owners, of course, are the heart and soul of a co-op or condo community. Their unit or shares can be leveraged against their income; they get a mortgage interest deduction on their taxes. With a few notable exceptions—such as city- or state-subsidized developments—they can also sell their apartment for profit, current economic woes notwithstanding. Shareholder/owners have a clear-cut incentive to improve their apartment and/or building that a renter simply doesn’t have; every dollar they contribute to the maintenance and improvement of the unit or building increases its value, and thus strengthens their investment.

At the same time, says Rosemary Paparo, a property manager with Buchbinder & Warren in Manhattan, “At the end of the day, the cooperative corporation has to operate in the black.” A shortfall in any expenses, whether capital or operating, is bad news for everybody. It means that the building may not be as maintained as well as it should be. Building systems and amenities may begin to develop problems—and that could lead to a special assessment or fee increase, which may hit shareholder/owners first, but will be inevitably passed along to renters in the form of increased rent.

Important Divisions, Common Misconceptions

Clear communication of building/owner boundaries and duties is vital in order for owners to take full ownership and responsibility for the care and upkeep of their building. The usual standard for determining what a unit owner is responsible for and what falls under the building’s jurisdiction is that the owner is responsible for repair and maintenance of everything from the walls of their apartment inward.

“The rule of thumb is that if you have to break a wall to get to it, it’s usually the building’s responsibility,” Levine says.

In general, that means that when it comes to painting, repairing damage to walls, the unit’s plumbing and all appliances, the owner has to foot the bill. There can be exceptions, of course. According to Marc H. Schneider, an attorney based in Garden City, Long Island, if there’s a pipe or line in an apartment that services parts of the building aside from the individual unit, the co-op or condo may be responsible—and the building’s governing documents should make that clear.

Other things can vary, depending on the particular building. Schneider points to limited common elements—things like decks and terraces, or stairs leading to a single owner’s unit—as examples of this, and adds that apartment owners and shareholders are also responsible for any action (or negligence) committed on their part that damages another apartment.

“If the apartment above doesn’t properly caulk their bathtub, and the water leaks to the apartment below,” Schneider says, “the upstairs shareholder is responsible for the damage [he or she causes.] Not the co-op—because the co-op didn’t do anything wrong.”

Schneider also adds that some buildings also require owners to carry a certain minimum amount of insurance coverage, an idea that he recommends. “So that if there’s ever a problem where they didn’t make the proper repairs and it causes damage to another unit, there is recourse against the unit owner,” he says.

Educating Residents

There’s no correspondence course or night class a prospective homeowner is required to take before being allowed to purchase a co-op or condo apartment. Co-op boards do have a lot of say in who is allowed to buy into their buildings, but once a buyer has the board’s endorsement, there’s no formal orientation or new homeowner education curriculum to help them understand exactly how this new relationship works. And that lack of information and education can contribute to shareholders and unit owners bringing their renter’s mentality into their new building.

For example, in addition to thinking of their maintenance or common charges as “rent,” many owners also make the mistake of thinking that, like monthly rent, their fees will remain flat, or only be increased a percentage point or two a year. When their building has to level an assessment to pay for repairs or capital improvements, or when fees are raised 20 percent in one year to cover sky-high fuel costs, new owners can often be caught unaware.

According to Alvin Wasserman, a director for Commack, Long Island-based management firm, Fairfield Properties, “We often find that the first time there is a common charge increase for a property, people who just purchased in the community complain that they thought monthly charges would not go up. They don’t get the concept of ownership, because they didn’t do their homework before they bought their apartment.”

Wasserman’s homework analogy is apt; co-op and condo owners should receive copies of their building’s governing documents during the closing process, and should make it a point to at least familiarize themselves with their contents. In a co-op, these include a proprietary lease, bylaws and house rules. Condo owners have no proprietary leases, but they do have bylaws, and most have conditions, covenants and restrictions, commonly called CC&Rs.

While the onus to understand building rules falls largely on residents, boards and property managers also can help in the process by making themselves accessible to residents who may have questions or need clarification, and by providing information about rules, changes in procedure, and other important updates to residents. This can be accomplished by publishing a newsletter or maintaining a website, distributing the minutes of meetings, or putting notices under residents’ doors. According to Wasserman, a monthly newsletter can include anything from short articles on good-neighbor etiquette to “little things like articles urging residents not to run their heat too high, because it costs everyone money.”

Another way to cultivate a more owner-oriented mentality among residents is to actively publicize and encourage everyone in the building to attend shareholder meetings, and also add any special skills or expertise they might have to a building committee or another committee.

According to Steven Levine, a principal of Excel Bradshaw Management Group in Manhattan, co-ops must hold at least one annual shareholders’ meeting to discuss building business, budgets and other administrative issues. By going above and beyond that once-a-year requirement however, residents can be more actively involved, which can make a big difference in community spirit and overall cohesiveness, he says.

Braverman agrees, adding that in addition to the usual annual meetings, boards can also call informational meetings to tell people about improvements and quality-of-life issues. “This way,” he says, “people feel they are being kept in the loop.”

Including owners in building decision-making can help alleviate the widespread apathy among shareholder/owners that many boards and managers complain of, and it can curb the tendency of many to throw flyers and newsletters in the trash without reading them. Any effort a board can make to break through that apathy and “not-my-problem” attitude will be a step toward improving the administration and sense of community in their building. The more co-op and condo unit owners go to the building’s meetings, vote in board elections and volunteer to serve on committees, the more they are developing a true cooperative mentality and moving away from the us-vs.-them, landlord-tenant position.

“It’s not an easy job,” says Pavalis. “There are so many different personalities, different interests. It’s difficult to get people to really care.”

Benefits for All

The benefits of having residents who care and are on the same page with managers and board members can amount to money in everyone’s pockets. Owners who embrace that responsibility will diligently care for not just their own apartments, but the building as a whole, which benefits everyone in the community, says Levine. “The greatest benefit is that the values will be at their highest,” he says. “You have to take pride in your apartment and common areas.”

So, when a former renter buys an apartment, he or she must often go through a transition period, learning the do’s and don’ts of unit ownership. Fortunately, the manager, the board and other owners can serve as a resource to help that person adjust. In the end, it’s to everyone’s benefit to have shareholders and unit owners understand and appreciate their personal stake in the building they call home, and to take an active, dynamic role in making that home the best it can be.

Jonathan Barnes is a freelance writer and a frequent contributor to The Cooperator and other publications.

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