Everybody sometimes disagrees with the decisions of their co-op, condo or homeowners association board. Maybe the choice to rearrange the garbage receptacles out front seems ridiculous, or the ongoing clattering of machinery on the roof is driving the top-floor residents nuts—but the board seems determined to let it fix itself. These are the kinds of inevitable complaints that every board has to deal with sooner or later, and most manage to handle such issues with prudence and aplomb.
But what if the board does things that seem to be beyond the pale—perhaps even illegal? Where do boards’ powers end? While the board is the governing body of the co-op or condo association, there are certain boundaries and limitations that they should operate within.
There are numerous examples across the country of alleged abuse of power by condo boards and HOAs from preventing owners to put up political signs or flags or changing the color of their paint trim or window shades. Pets are also a sticking point as this California woman found out: Pamela McMahan didn’t expect her cocker spaniel Ginger to become a problem at a historic condominium building in Long Beach. But she was fined $25 each time she walked her dog through the lobby because HOA rules required all dogs had to be carried. McMahan, an elderly woman who walks with a cane, said she couldn’t carry the dog. She racked up $1,600 in fines and has since moved from the building.
Overreaching boards may call to mind white-glove, old-money co-ops in prestigious zipcodes, but the truth is that the issue is just as troublesome in suburban condo developments as it is in ultra-exclusive urban high-rises. One recent example of the turmoil caused by board stagnation and overreach is the 450-unit Shadowood condominium complex in Reston, Virginia. According to a recent article in The Washington Post, "the Shadowood Condominium Association imposed fees for things like calling the management office or having the wrong color blinds. It towed tenants’ cars for unpaid fees—on the day before Thanksgiving. It turned off the heat or air conditioning to apartments of owners who were in arrears or in violation of its many rules."
In 2011, a judge ruled that the association could not level fines and fees not explicitly spelled out in the condo's original master deed, and issued a legal injunction prohibiting the Shadowood board from collecting any more such fines. The board appealed to the state Supreme Court—and lost. Even with the most recent decision in favor of the condo's residents however, the issue is far from settled. According to the Postcoverage, residents are still furious at the association board for allegedly spending common funds on legal bills, failing to provide documentation for contracting expenses, and fostering an antagonistic, "intimidating" atmosphere in the development. On the other hand, Shadowood administrators argue that collecting fines and fees is the only effective tool they have to enforce house rules and insure that residents and renters pay their fair share of the complex's operating expenses.
Regardless of which side of the board/resident divide one falls on, says Pia Trigiani, an Alexandria-based lawyer with extensive expertise in community association law who was quoted in the Post article, “Every association needs to evaluate what their governing documents grant them the authority to do. And...they’re going to need to think of how this case impacts them.”
The Law Says
How are board's powers spelled out? How do boards know what they can and can't do under law? Fortunately in New York City, there are laws that serve as guideposts that apply to real estate:. For example, condos are governed by the New York Condominium Act, and the Real Property Actions and Proceedings Law (RPAPL) deals with landlord-tenant issues between a co-op and its shareholders. Case law interprets these statutes and sets legal precedent for co-op and condo owners; indeed the law governing co-ops in New York is mostly created by judge-made case law.
One statute originally created to regulate businesses, the Business Corporation Law—or BCL, for short—primarily governs how cooperative corporations, including housing co-ops, must be run.
“In condominiums, the powers are spelled out in the bylaws and there is usually a long list of examples of what those powers are,” explains attorney Jeffrey S. Reich of the Manhattan-based law firm of Wolf Haldenstein Adler Freeman & Herz LLP. “These can include items such as 'the board has the right to borrow X amount of money' and 'the board has the right to amend, add to, or supplement the house rules'.”
In most co-ops, there isn't a general authority provision in the bylaws as there is in condominiums. “Boards usually derive their rights from the Business Corporation Law of New York which says that the corporation is operated by its board of directors,” says Reich. He advises co-op boards and shareholders to check with the governing documents, their bylaws and certificate of incorporation in order to familiarize themselves with board rights.
“The board of directors or board of managers in the condominiums or co-ops would have control over and absolute discretion over what are called business judgments. In fact, there's a concept in the law called "the Business Judgment Rule" meaning, any decision by a board, so long as they're authorized to act for the condo or co-op and as long as it meets the Business Judgment Rule, the courts won't second-guess boards,” explains Abbey Goldstein, an attorney at Goldstein & Greenlaw in Queens. This means that if a board chooses to paint the hallways green, put in new equipment or raise the maintenance fee, they are authorized to do so and can proceed because all of these decisions are deemed to be reasonable and within their business judgment, he says.
Co-ops vs. Condos
In terms of the power of the board, a few significant differences exist between condominiums and cooperatives. “Co-op boards generally have broad discretion in terms of approving or denying purchasers or sublet applications,” says attorney Steven D. Sladkus, a partner at the Manhattan-based law firm of Wolf Haldenstein Adler Freeman & Herz LLP. “The only way a condominium board can keep someone out of their building is exercise the right of first refusal, which means that then their only recourse is to buy the apartment on the same terms that the purchaser would buy the apartment. The seller would get the same price from the board as with the potential purchaser but it doesn't matter to them who is getting the apartment, since they are receiving the same price. This way a board restricts the purchaser but they would have to purchase the unit.” This right of first refusal applies to both purchases as well as leases in the condominium.
Aaron Shmulewitz, a partner with Manhattan-based Belkin Burden Wenig & Goldman, and head of the law firm's co-op/condo practice, says generally, the governing documents tell the tale. “Co-op boards have significantly greater rights than condo boards do, just because in terms of practice, in terms of actuality, condo boards generally only have the right of first refusal for purchases, sales and leases. And that’s what makes condo apartments more attractive, especially to foreigners, and that’s what makes the prices for condos higher than co-ops. And generally speaking, therefore, co-op boards have the right to inquire into anything.”
In a co-op, the board has much broader powers to enforce the terms of a proprietary lease than a condo has in terms of enforcing a set of bylaws, says Reich. For example, in a co-op, the board has the ability to send out a default notice or to threaten or carry out the termination of a lease if a shareholder is delinquent on the payment of charges. In a condo, the board has few tools for residents who do not follow the rules: they can go to court and get a court order, which is costly, or if their bylaws have a fine provision, they can enforce them, he says.
Lastly, co-op boards generally do not have restriction on how much they can spend for alterations, improvements and repairs. Condo boards do have limits in the bylaws saying for instance that they cannot spend more than $100,000 in a given year or $5,000 on a given project without resident approval.
Safety and Security
Security is a top priority for co-ops and condos. Many choose to install security cameras, have doormen or guards and may require guests sign in. These measures are meant to protect residents and the property and for the most part, the board has the right to make security decisions.
“The board is responsible for the security of the property so they can make decisions as needed,” says attorney Dean Roberts of Norris McLaughlin & Marcus, P.A. “Residents do not have an expectation of privacy in common areas, hallways, lobbies, laundry rooms, so any security measure installed there is usually reasonable.” Roberts continues to say that security only can become a problem if say, a camera is pointed at the interior of a particular unit or measures target individual owners or shareholders.
Shmulewitz agrees. “Because the common areas are governed and managed and controlled by the building, it’s the discretion to operate the building as it deems appropriate, and maintaining security is a very laudable goal.” As for monitoring—and entering—private apartments on the other hand, Shmulewitz says that's a very different matter. “If we’re talking about an actual emergency, a fire that is actually burning, the board...has the right to break down the door and put out the fire. The same thing with a flood that’s happening—if a pipe bursts and water is actively flowing. Next on the list down one notch is a slow active leak, water is seeping from a pipe slowly. The board probably doesn’t have the right to break down the door. It can try to make appointments with the apartment owner to enter on written notice. If after several attempts the owner does not grant access, the board has the right to go to court, to get a court order.”
“You couldn't use [security] to harass,” Goldstein adds. “In other words, if I don't like my neighbor, I can't decide, if I'm the board president, to set up a camera outside their apartment, just so they know they're being watched. That would be bad faith. Boards always have to act in good faith. They can't act in bad faith. So, something would be lawful so long as done in the best interests of the co-op. If it's meant as a vendetta or based on personal animus, automatically becomes illegal.”
In general, larger buildings may have more security because they can be more susceptible to breaches. For example, a large highrise would have more stringent measures such as a 24/7 door person, electronic controls on all doors leading into the core of the building that require an electronic key card, security cameras at all building entrances and exits, procedures requiring residents to come to the lobby to accept deliveries of food and similar items and procedures requiring telephonic resident authorization before a visitor is allowed to pass through the door leading to the core of the building. On the other hand, a smaller community would just have locks or maybe a buzzer system.
Access to Units
Situations may arise in which the management or service provider may need access to a resident's unit to fix a leak or check on a electrical problem. In what situations does the owner have right to privacy and when can their unit be accessed?
Both types of boards have the right to access units in order to inspect, repair and maintain the units, says Reich. He adds that in co-ops, if a shareholder refuses to provide access or give a key to the unit, that can be a lease default; it is a faster way in to send a default notice of termination than to go to court seeking access to the unit.
Roberts adds that boards are required to give “reasonable” notice before entering a unit, the exact time frame usually specified by the by-laws. If the situation is an emergency, affects other units or common elements, the board has the power to enter immediately.
Right of access is put in place to ensure that unit owners and shareholders are in compliance with house rules but also determine if any repairs are necessary or check on situations that may be affecting other apartments, Goldstein says.
The co-op or condo board has on hand many resident records such as personal information, financial statements, delinquencies, complaints, comments, just to name a few. While certain members of the board and management are able to view this information, not all third parties have access to it.
Sladkus explains that in a co-op, the business corporation law spells out certain circumstances that apply to personal information. “You are allowed to ask for a list of names and addresses of other shareholders so long as you are not using those names for a business purpose, such as solicitation. Boards can give push back, because most boards don't like to give out personal information. But boards are required to give contact information, under the law.”
There is no law or bylaw provision that states that boards are required to keep information private, for instance, not share the financial information of a resident, but the board does have a fiduciary duty, protecting personal information says Reich. So, there is no law that would prohibit the board from making copies of your tax returns, but it would certainly be a breach of their fiduciary obligation, says Sladkus.
Roberts likens board executive meetings and discussion with the humorous analogy of “What happens in Vegas, stays in Vegas.”
“Board members need to realize that they will be learning a lot of personal information which they cannot disclose or talk about amongst themselves once they exit the meeting. You don't know how many times I've had board members talking about a particular person they have just discussed at a meeting and it turns out that the person is right there in the elevator with them. Boards need to exercise confidentiality.”
Any confidential personal or financial documents should be kept secure, adds Goldstein. “You don't want anyone to be able to wonder into the basement area and just go through the records or take the records, etc. Usually the vast majority of records are maintained by the managing agent and some co-ops will have significant records on premises, existing contracts, sometimes files for individual shareholder complaints, and repairs. They should be secured, should be under lock and key both to make sure that records aren't taken, but also so everybody can't find out about everybody's business surreptitiously.”
Condo and co-op boards are put into place to make sure the association runs smoothly. While board members have the power to make decisions regarding many association operations, they have to make sure not to overstep their boundaries and intrude on the privacy or security of residents.
Maggie Puniewska is an editorial assistant at The Cooperator and other publications.