Your Rights and Obligations Governing Documents Give Answers

Your roof terrace leaked and the neighbor below you sued for damages. Do you have any recourse? The

heating system in your apartment failed to work and the managing agent sent you the bill for its repair. Do you have to pay? You bought a dog for your child, and six months later the board has demanded that it be removed from the building. Do you have to comply?

The answers to most questions raised by co-op and condo residents are contained in the governing documents of the corporation or, in the case of a condo, the unincorporated association. These documentswhich include the proprietary lease, the by-laws and the house rulesare generally filed away for safekeeping in your attorney's office. Or, perhaps you have a copy that you keep with your other important papers. Whatever the arrangement, these documents should be read (and periodically re-read) by every co-op and condo owner because their contents govern the terms of your ownership as well as your rights and obligations.

A Hierarchy of Documents

To make some sense of the maze of rules, laws, doctrines and codes that affect ownership of shares and property in co-ops and condos it is important to view these documents in some sort of hierarchical order. At the top, in a co-op, is the certificate of incorporation filed with the Department of State as required by Section 402 of the Business Corporation Law of New York State. The equivalent, for condos, is the declaration of the condominium required by Article 9B of the Real Property Law of the State of New York, commonly referred to as the Condominium Act. These documents may contain specific provisions for making amendments. A copy of this document may be obtained from the Secretary of State, Department of State, Division of Corporations, in Albany if it is not available in the corporate files.

Next in the hierarchy are the by-laws of the co-op corporation or condo association. The by-laws form the basis for conducting business within the organization, and this document generally details the purpose of the entity; its form of government; the method of elections; the voting process; the type and frequency of meetings of directors, shareholders or owners; the specific form of agenda for the meeting(s); a description of the directors and the number of officers along with a description of their duties, responsibilities and liabilities.

Also included in the by-laws is the manner in which directors may change, both in number and by replacement or removal. One of the most important features of many by-laws is that they contain specific guidelines for amending their contents. The by-laws of a condo contain other significant provisions having to do with the form of ownership and method for changing it, a description of the property, the operation of the property and the duties and responsibilities of the owners and occupants of the condo.

Since condo owners possess real property rather than shares in a corporation, there is no proprietary lease as in a co-op. Therefore, condo by-laws are multi-faceted documents that are difficult to ignore. Most condo by-laws contain special provisions relating to the sale and rental of units and the approvals or waivers required in order to allow clean transfer of title. Failure to adhere to these requirements may result in the transaction being voided under law. Fo ffb r this reason owners, members of the board and managing agents alike pay particular attention to the specifics in condo by-laws.

At co-ops and condos alike, the by-laws afford you the most important vehicle for exercising your rights to make changes or reinforce your specific needs. They provide you with your right to vote and the manner in which your vote takes form. The by-laws also define who may be a director or officerresident or not, owner or notand may allow you to implement new organizational and management policies.

Any change to the by-laws should be prepared by an attorney, presented to the shareholders or owners in the specific manner and form specified; and, if so changed, should be filed with the Attorney General of the State of New York as an amendment to the plan so it is formally part of the public record.

The Proprietary Lease

Next in the hierarchy of governing documentsbut one that only pertains to co-opsis the proprietary lease. Granted by the corporation when the shareholder purchases shares of the corporation, the lease forms the basis of the rights and responsibilities of the shareholder and the co-op corporation. It is the most important document in terms of the day-to-day relationship between the shareholder and the corporation. The shareholder is responsible for paying rent and is given the right to occupy the premises and the right to quiet enjoyment of the apartment. He is protected under the umbrella of a warrant of habitability issued by the co-op corporation.

In most cases, the proprietary lease clearly defines all the provisions related to the use of the apartment including occupancy, modification, repairs and a host of other significant provisions. By and large the condo's by-laws and house rules provide the same provisions. In order to change the provisions of a co-op's proprietary lease, it is necessary to refer back to the by-laws and the terms of the lease itself to determine exactly how these changes can be brought about.

Usually it will require consent of at least two thirds, or more, of the owners of record either with respect to the total number of shares or in a condo, the percentage of common interest. The change itself should be drawn by an attorney, presented by resolution with the specific language to be changed to all owners, and, if approved according to the by-laws and/or proprietary lease requirements, filed by an attorney with the Attorney General's office so it becomes part of the public record.

Defining Inappropriate Behavior

At the bottom of the hierarchy of governing documentsbut certainly no less importantare the house rules. Almost always incorporated into the proprietary lease for the co-op or the by-laws of the condo, the house rules usually specify all the no provisions such as no storage of personal property in the hallway, no pets and no excessive noise. It is incumbent on the managing agent and the board to review the house rules and to update them as may be necessary. It is incumbent on all owners to take the time to review these rules periodically to avoid embarrassing situations or inconveniences.

House rules are usually drafted with language that has less of a constitutional flair than that used in by-laws or the proprietary lease. House rules generally deal with very specific living requirements in and about the building, and they tend to be associated with quality of life issues. As laws changeas has been the case with environmental requirements, lead paint and recycling, to name just threethe need for updating becomes more important. Under the terms of the by-laws and proprietary lease, the board of directors has the unilateral right to amend house rules without shareholder or owner approval. It would be prudent, however, to solicit comments from the ownership before imposing requirements, which may be both difficult to adhere to or enforce, and then to amend the house rules from time to time, perhaps once yearly. Any change to the house rules need not be drafted by an attorney, but should be distributed to c75 all present and future owners, a step often missed when a new buyer acquires an apartment. The transfer agent, secretary of the organization or managing agent should assure that the proprietary lease or the by-laws contain the most recent set of house rules for the new owner.

A Wealth of Knowledge

Even if you are already knowledgeable about your co-op or condo's governing documents, you may want to revisit them every few years. If you are becoming informed for the first time, start with the offering plan which contains the proprietary lease, by-laws and house rules. Read them cover to cover. Contact your managing agent or the organization's attorney to assure that you have all the amendments that have been filed. The entire effort may only take a few hours, but the result will be a wealth of knowledge. It is your right to be informed, and to be able to make decisions based on this knowledge. It may also save you time and money in the future.

Mr. Cohen is president of A. Michael Tyler Realty Corp., a residential property management firm based in Manhattan.

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10 Comments

  • This article was very timely for us. I have a question and would really appreciate it if you could answer it. We live in a condominium in Bay Shore, New York. Our Offering Plan contains 14 By-Laws, one of these by-laws being a list of House Rules. Within these house rules, the board of managers has the power to make rules and regulations. My question is: Because the House Rules are part of the By-Laws, can a by-law only be changed by a vote of 2/3 of the homeowners, not by a decision of the Board? And can rules and regulations passed by the Board not conflict in any way with the House Rules. My email address is mfinnell40@aol.com Please let me know - Thank you so much.
  • What recourse do condo owners have when the Proprety Manager AND the Condo Board do not enforce house rules?
  • Unknown user: See the paragraph regarding House Rules. It states that: "Under the terms of the by-laws and proprietary lease, the board of directors has the unilateral right to amend house rules without shareholder or owner approval." Key word being "amend". In simple terms, the answer is yes.
  • Does state enabling legislation or case law require that condo board meetings be open to any and all unit owners,or does that require a specific provision in the by-laws of the condo association?
  • Can you tell me what are a condo unit owners rights in reviewing the minutes from an open meeting? I was told that they would not be available until just before the next meeting, one year hence. thank you.
  • powerless in new york state on Tuesday, April 6, 2010 9:15 AM
    i question what i have read on the proprietary lease. my cooperative has a retained attorney for 15 years who reports to the board as acts solvely in their interest. changes to the provisions of the propriety lease, such aa fee for apatment renovation or sublet provisions are not approved by 2/3 shareholders but simply mandated to sharehowners without notice. howerver, board membes and special friends are not required to pay or refused subletting rights. attorney general's office does not enforce business corporaton law so there is no where to turn
  • Im in the process of selling my condo and the contractual buyer is in process of securing a loan through an FHA loan and the lender wants the management agreement between the management company and the condominium where I live but the management company will not release the document and has not given a reason as to why they will not release it. I have contacted board members who has said they will help but was unsure if the management company would release to them. What is my legal recourse at this point and what obligation does the management company and the condo board owe me as a condo owner. I need to know what my rights are to obtain this document since selling my home is now contingent on the underwriters receiving the agreement. Thank you for you help!
  • I live in a Coop in Washington, DC and would like to know if I was approved to transfer in a large unit, do I have to pay a transfer fee or a membership fee? We are having problems on our Coop because management will not explain to us the difference. Some members have paid little transfer fees and others they seem wants to pay a large membership as if they were new members. We can't seem to get any information or anyone to explain this to us. Thank you
  • "One of the most important features of many by-laws is that they contain specific guidelines for amending their contents." What happens when neither the bylaws nor the proprietary lease have any provisions regarding amendment of either document? Is there a statutory or caselaw procedure that must be followed? Thanks.
  • I own a co-ops on staten island, ny and we seem to be having a problem with our board, managing agent and voting by laws. At our yearly meeting in June there were a couple of individuals who want to run for the board. One person is interested in becoming president. The by laws clearly state that only the individuals who came to the meeting are entitled to vote. The managing agent has decided that he is going to send everyone a ballot. 1st the by laws clearly states HOW the election should be done. 2nd if you do not bother going to the one meeting a year held the third week in June. Where we discuss the workings of the co-ops, meet the people who want to run. No one has run in a couple of years so there has not been an election. There USE to be a format on running,like introductions, resume so you know who and why what they will bring to the co-ops. That has stopped. So the by laws protect us uninformed voting. We just got over almost losing it all due to our managing agent steeling from us and not paying the bills. We just went through this type of mismanagement with the attorney general. It just does not seem like it can be legal for the managing agent and the board can change the rules of voting to keep themselves in office. The by laws are to protect against these types of things. We have been informed that the board does not want to leave but as shareholders who are truly dissatisfied with their work should be able to know they have right to elect other people in. Do they have to go according to the by law. Or can they change it a week or two before elections.