How Your Cooperative or Condominium Board Benefits from Hiring an Attorney

92614post.jpgAttorneys provide valuable legal services on behalf of cooperative and condominium boards. Some buildings with fewer than ten units and without disputes have managed without an attorney representing the board. Other buildings may continue with the attorney who originally represented the sponsor. The purpose of this blog post is to describe the services that can be provided by an attorney representing a cooperative or condominium board.

Transfers of apartments will occur at some point. It is not unusual for the building’s managing agent to conduct closings. While many managing agents conduct a variety of tasks and are indispensible to the building, their knowledge is largely operational and particularly relevant to the physical plant of the building. Attorneys are properly situated to evaluate legal situations presented before and during a closing. For instance, after a shareholder dies, the family may wish to transfer the apartment to a family member or sell the apartment to a third party. A managing agent is not the best person to evaluate whether the seller/transferor has delivered the proper documents. Does a managing agent know to ask for a Will to make sure that the deceased did not bequeath the apartment to a friend? It may be a mistake with potential legal liability to the cooperative if the apartment is transferred to a purchaser rather than to the friend. Can the managing agent properly review the Letters Testamentary or Letters of Administration to confirm that they are valid to pass the apartment in question? Sometimes estate documents could even be presented from other jurisdictions, requiring a trained legal practitioner to evaluate. The managing agent may mistakenly approve a power of attorney or affidavit of lost stock certificate and proprietary lease that is invalid for some reason, fail to obtain original documents that are necessary for the cooperative to hold, or fail to collect fees on behalf of the building. A variety of issues may be encountered by a transfer agent at a closing which require the judgment and discretion of the building’s attorneys. In this instance, our firm charges the parties to the transaction only, so that engaging our services to be the transfer agent for closings does not cost the building as a whole and potentially benefits the building as a whole by avoiding legal liability.

Cooperatives and condominiums should also engage an attorney for occasional but significant legal events, such as the refinance of the underlying mortgage of a cooperative or the negotiation of a major contract. Such a major contract could pertain to the replacement of windows, renovation of the elevator, or installation of a new roof. Vendor contracts, such as for the laundry room equipment or oil delivery company require review by the building’s attorney because they will contain provisions that are only favorable to the vendor. Since managing agents may have professional relationships with some of these vendors, it may be prudent for “checks and balances” purposes for the building attorney to review these vendor contracts. Certainly an experienced attorney will be in the position of offering terms that are beneficial to the building that an untrained eye may miss.

Every building may need to raise funds beyond ordinary maintenance and common charge payments. One way is to sell a portion of the common area to a shareholder. A building attorney is needed to coordinate the process by which shares are allocated to the common area space, application to the New York State Attorney General Real Estate Finance Bureau and subsequent closing. Through this process, a shareholder could buy the “superintendant’s apartment” or a portion of the hallway, enhancing her unit while providing funds to the building.

Attorneys representing cooperatives and condominiums also attend and may run board meetings or annual unit owner meetings. There may be several matters of building business that require the legal input of the building attorney, such as discussing whether to enter a contract with a vendor or how to legally decline a purchaser. Attorney preparation of the meeting notices, proxy and ballot is important so that annual elections are conducted properly. The conduct of the annual meeting by the building attorney certainly may not insure the result that all parties desire, but will insure that the process was conducted legally.

Unit owners do not always act according to the governing documents. Fees may be unpaid or there may be an illegal sublet or a pet in a pet-prohibited building. Building attorneys respond to such defaults by sending notices that correspond to the requirements of the governing documents and appearing in Court as needed. It is crucial at this stage to employ attorneys, rather than laymen, so that all notices comply with legal requirements in order to prevent a proceeding from being dismissed on technical grounds. Should a unit owner bring a claim against the building, attorneys for the board need to respond to protect the interests of all unit owners.

While we are on the subject of governing documents, it should be noted that most cooperative and condominium offering plans were written many decades ago. Since that time, Court cases have caused the reinterpretation of the language in clauses pertaining to pets, subletting and other matters. House rules are also often out dated. A building may need house rules redrafted to include current recycling regulations and the like. Further, the use of technology has developed during this time. Perhaps a building wants to revise the meeting notice clause to allow notices and even voting to take place by email. An attorney is needed to determine the proper means by which the governing documents can be amended. For instance, some clauses allow revision by the board, while other clauses require shareholder participation to make changes.

Our firm represents cooperative and condominium boards, as well as individual shareholders and unit owners. We welcome the opportunity to discuss these issues with you.