Cooperative and Condominium

August 2, 2012

A New York Bidder’s Expectations Concerning the Property Auction Process

Those who bid at property auctions in New York are confronted with many potential issues. Auction properties are often attactive to first-time homeowners and to investors because they are perceived as being less expensive than comparable properties. If the property is residential, the bidding process differs based upon whether the property is a single-family house, a condominium unit or a cooperative unit. The type of property, whether it is commercial or residential, may have implications for tenants already in occupancy and whether such tenants may have statutory occupancy rights.

The auction process for a single-family home is similar to the auction process for a condominium unit, because both types of property are real property. The major difference is that common charges are levied by the Board of Managers of a condominium, allowing for the filing and foreclosure of a lien for unpaid common charges by the condominium Board. However, once the matter is in foreclosure, it is supervised and directed by a Court, meaning that same is litigated and requires a judgment of foreclosure issued by a judge before proceeding to auction. In a condominium, mortgage balances take priority over unpaid common charges. As such, in many cases, an auction bidder in an auction for unpaid common charges will likely be taking the unit subject to the outstanding mortgage, requiring the successful bidder to pay mortgage arrears and keep the mortgage current to avoid foreclosure.

Cooperative bidders will experience an auction process that is non-judicial (not supervised or litigated in the Court) unless a party requests that a Court issue an injunction to prevent or delay the auction. Since cooperative maintenance charges take priority over a share loan, it is possible for an auction bidder to obtain the unit for only the amount of the maintenance arrears and sever the security interest of the lender, provided that the auction is properly noticed. Our readers should note that this is an unlikely scenario because most lenders will choose to cure a maintenance default by paying it themselves, because a cooperative unit is likely to be more valuable than the maintenance arrears due to the cooperative.

July 26, 2012

Fair Housing in Westchester County, New York

By Weiss & Weiss

A recent article in the Journal News discusses the latest developments in the Westchester County, New York fair housing settlement. For those who are unfamiliar with the situation, a lawsuit was brought by a public interest group against Westchester County, alleging housing discrimination. In order to settle the lawsuit, then-County executive Andrew Spano agreed to build at least 750 units of “affordable housing” in Westchester. This blog post will discuss the ramifications of the settlement, as well as the legal issues associated with the sale and resale of affordable housing.

Long-time Westchester residents will recall that in 1980, a similar case was brought against the City of Yonkers, also alleging discrimination in housing. While it is beyond the scope of this post to address the merits of this case (as well as the case against Westchester), the legal issues become important for potential buyers and sellers of property in Westchester. In the Yonkers case, Judge Leonard Sand ruled that Yonkers had discriminated against minorities and ordered the city to provide low-income housing in all areas of Yonkers for minority applicants.

Of course, implementation of such a remedy is far from simple, and the Yonkers case involved many years of litigation over the issue of whether the city was in compliance with Judge Sand’s directives. Unfortunately, the same issues now seem be arising in the Westchester County lawsuit. Once a municipality enters into a settlement of a discrimination lawsuit, as Mr. Spano did on behalf of the residents of Westchester County, there may be no end to judicial enforcement of a remedy. It seems unlikely that a Court will ever reach a finding that no further discrimination exists and end its supervision of the construction of affordable housing.

July 5, 2012

Legal Responses to Defaults by New York Cooperative and Condominium Unit Owners- Part II

By Weiss & Weiss

Our readers should be aware that if the default remains uncured and an auction is necessary, that the distinction between cooperatives and condominiums becomes pronounced. The auction procedure in a cooperative is non-judicial, meaning that it does not require the intervention of a Court, unless a party specifically requests judicial intervention. After a lien is filed against a defaulting condominium owner, all proceedings, including the foreclosure proceeding and the oversight of the auction process, require the intervention of a Judge and take place in a Court.

Cooperative clients should understand what is accomplished once the Proprietary Lease is terminated. In order for the cooperative or another party to obtain legal ownership of the cooperative, the legal auction procedure is then commenced. A Notice of Auction is placed in a newspaper of general circulation and delivered to the unit owner in a legally compliant manner. At the auction, the Terms of Sale and a Memorandum of Sale as prepared by our firm are presented and read aloud by the auctioneer. The successful bidder will obtain the transfer of the apartment in the time frame provided by the Terms of Sale.

While the auction process allows for the obtaining of legal ownership, a Landlord-Tenant procedure is then required to obtain physical ownership of the unit. This proceeding is even required if the unit owner does not leave the unit during the default response procedure. Once the auction notice is advertised in the newspaper, it is not uncommon for our attorneys to entertain telephone calls where a person states incredulously that they can get the apartment for “only $18,000.00” (the amount that may be owed for maintenance). We will remind the caller that there are no warranties as to the status of occupancy or unit condition. The “successful” auction bidder may merely be buying what may be a protracted landlord-tenant case.

June 28, 2012

Legal Responses to Defaults by New York Cooperative and Condominium Unit Owners- Part I

By Weiss & Weiss

The efficient operation of a cooperative or condominium building in New York depends upon unit owners respecting and abiding by the rules contained in the governing documents. Unit owners in cooperatives should refer to their Proprietary Lease, while those in condominiums should refer to their By-Laws. In both cases, the building’s House Rules should also be consulted. As described in our website , those who own a cooperative or condominium unit have common legal responsibilities, including the payment of maintenance or common charges, adhering to house rules, compliance with renovation and subleasing restrictions, and the like. In the event that a unit owner fails to abide by the rules and regulations of the building, our firm has extensive experience in responding to defaults and enforcing compliance by the issuance of the proper legal notices as required by the applicable governing documents. Said procedures may lead to litigation or auctioning of the units, depending upon the development of the case.

Our first course of action is usually to discuss the specific breach with our client contact, be it the representative Board Member or managing agent for the building. If monies are owed, we identify the period of time for which the money is due and the type of charges, such as maintenance, common charges or an assessment and any late fees, interest or other penalty charges properly added. If the breach involves “behavior”, rather than money owed, we determine whether same relates to an illegal sublet, an unapproved alteration or even a behavior that may not fall neatly into any particular category, such as being too noisy or permitting “unreasonable” odors to escape from the unit. Our initial discussion will also identify if any prior written notices have been sent to the unit owner.

Following our initial fact gathering, the next step involves insuring that any further legal notices are completely in compliance with the building’s governing documents. Failure to comply with such details could invalidate legal notices and proceedings at a future date. This step is important because clients may become impatient and demand that actions be taken without regard to the requirements of the governing documents and because well-meaning but not legally trained managing agents often send “legal letters” which ignore the legal requirements contained in the governing documents.

June 13, 2012

Advice to Cooperative Boards: Apply Properly Tailored Rules Evenly to Protected Classes

By Weiss & Weiss

In order to prevent discrimination claims brought by members of legally protected classes (i.e. racial minorities), it is crucial that cooperative boards construct rules with legitimate purposes (beneficial to the cooperative without being a means to exclude) and evenly enforce said rules. Federal Law prohibits the unavailability or denial of a dwelling to any person because of race, color, religion, sex, familial status or national origin. Cooperative boards are most vulnerable to these claims during a proposed resident’s application process.

Habitat Magazine recently contained a discussion of a Federal lawsuit pertaining to the Edgewater Park Owners Cooperative in the Bronx. Seizing upon a description in the New York Times that the cooperative was “not open to anyone,” the Fair Housing Justice Center sent both white and black testers to meet with a well-known real estate broker who frequently showed units in the cooperative. Said cooperative had a policy of requiring three letters of reference from existing shareholders as part of its purchase application. The white testers were advised that the rule could be dispensed with if they did not happen to be acquainted with current residents. The black testers were advised that if they did not know people who could provide the required references, that they should not pursue their purchase application.

The problems faced by the cooperative board in this case are as follows. The rationale behind the “three references” rule was weak in that it may be a pretext for excluding minorities who do not happen to know someone in the mostly white development. Further, as unevenly applied, the rule is detrimental to minorities and has less of an effect on whites. Even though the cooperative board never met with the applicants at issue and the real estate broker who was involved was not an agent, employee or representative of the cooperative, the cooperative was unsuccessful in its motion to dismiss the lawsuit because it promulgated the policy.

June 1, 2012

Regulation of Smoking in Cooperative and Condominium Apartments in New York

By Weiss & Weiss

The regulation of smoking by cooperative and condominium owners in New York has become increasingly contentious in recent years. The New York Post recently reported that a condominium owner in New York could not be forbidden from smoking in his apartment. While this particular case was decided based upon the specific facts presented, smokers should not assume that buildings in New York will leave their behavior unregulated. As reported by the New York Times , it is becoming increasingly difficult for a smoker to locate an apartment that explicitly “welcomes” smokers.

Michael Bloomberg, the current Mayor of New York City, has proposed legislation that would require buildings to disclose their smoking policies to potential residents. The policy is meant to encourage people to match their lifestyle to the building in which they intend to live. While most people do not appreciate having their lifestyle policed by the government, people who feel strongly about either side of the issue may find it appealing to reside in a building suiting their lifestyle.

Some residents feel that if they own the apartment that they can smoke in their own home if they so desire. Smokers resent that their behavior is regulated in public and want at the very least to be able to smoke within the confines of their own cooperative or condominium apartment. Other residents, claiming to be disturbed by the smoke and fumes traveling through shared ductwork into their apartment, have demanded that their building enact regulations prohibiting smoking and enhancing their health concerns. In particular, smoky fumes travel readily through the ductwork of newly constructed buildings. In a communal living situation, cooperative and condominium boards are confronted with requests to enact building rules.

February 9, 2012

New York Condominium’s Pet Rules Result in Suicide for Building Resident

By Weiss & Weiss

The New York Post recently reported the tragic story of a soap opera actor who was so despondent over his building’s pet regulations that he took his own life. The New York condominium building in which he resided enacted rules pertaining to pets that forbid pit bull breeds in the condominium building. Reluctant to send his dog to a shelter, the New York resident had the dog euthanized. In a further dramatic turn, the actor committed suicide, citing his unwillingness to continue life without his best friend.

When living in multi-family housing, New Yorkers often face regulations concerning allowance of pets. If you are not an animal lover, it may be prudent to ask your real estate broker to target buildings that prohibit pets. Then, you avoid the perceived annoyance of having your neighbor’s large dog crowd the elevator and sniff you on the way upstairs after a long day at work.

On the other hand, there are many New York residents who consider pets to be part of their family and do not wish to live without them, such as our soap opera actor. While many buildings may allow cats, presuming that a resident does not have an undue number of them, dogs and more exotic animals can be an issue.