2018 – and the first half of 2019 – have been anything but dull, from the global level all the way down to co-op, condo and community association communities. While it’s somewhat beyond The Cooperator’s scope to opine on geopolitical currents or the latest round of congressional testimonies, we reached out to an array of real estate and legal professionals across several different markets to discuss how the events of 2018 spilled into 2019, as well as what they think the second half of 2019 may bring to the multifamily housing industry.
David A. Brauner, Counsel with Windels Marx Lane & Mittenford, LLP in New York City
“Over the past few years, the New York City Council and New York State Legislature have been attempting to restrict co-op board action via legislation, stemming from arguments about transparency, and that boards should be mandated to provide reasons for all their decisions. I think that would effectively reduce the impact of the Business Judgment Rule. They’ve also discussed term limits and other related matters. And while I recognize that there were a handful of bad instances which triggered the concern, in my mind effecting legislation of this nature could undermine the ability of a board to effectively function. In particular, it would make it increasingly difficult to get people willing to serve on the board out of fear of exposure to liability, and out of fear of second-guessing good faith decisions that these people—who are essentially volunteers—make.
“What overregulation can do is foster a landlord/tenant mentality between board members and shareholders, which co-ops were originally formed to try and overcome. I’m not claiming that’s the intended goal, but it may be an unintended consequence. Sometimes the failure of those with legislative powers to understand how good co-op boards work, and then establishing rules that are focused on the small percentage of boards that are problematic inhibits the activities of all those good boards.
“The other issue I see having increased relevancy is reverse mortgages for co-op shares, which have been largely unavailable despite proposed legislation kicking around for awhile. I’m not sure exactly what the goal of that proposed legislation was, but the issue itself I think is an important one. The value of reverse mortgages—particularly as more and more co-ops have long-time residents whose economics are unequal to the current value of their apartments—comes through retaining a diversity of economic status among co-op membership; they enable older shareholders to tap into the equity of their apartments in order to continue living there, without being forced to sell. It’s about allowing people to stay in their homes, and not accelerating the diminution of different economic points of view.”
Reginald D. Cloyd III, an attorney with with Tressler LLP in Chicago
“A super hot topic right now is the amount that can be collected from a third-party purchaser at a judicial sale after a foreclosure judgment. Section 9(g)(4) of the Illinois Condominium Property Act provides that an association can collect up to six months of assessments that came due prior to the initiation of a collection action against the prior owner and which remain outstanding. Section 9(g)(5) provides that attorneys’ fees and costs incurred by the association to collect from the prior owner can also be collected. However, various appellate courts have held that no attorney’s fees and costs (associated with the prior owner) can be collected from a third-party purchaser, reasoning that Section 9(g)(5) is merely a ‘notice’ provision, and does not actually give the association the ability to demand these amounts. This doesn’t really make sense to me. Why have a notice provision if it can’t actually be enforced? Surely this issue will be further litigated in the near future, and the Illinois state Supreme Court will have to provide some clarity.”