Cooperator News February 2022
Boards, Managers, Landlords: Understanding the Difference
BY A.J. SIDRANSKY
By its very nature, life in a co-op or condominium community is different from living in a rental unit or a private home. While that statement may seem pretty obvious, many owners of co-op and condo units lack a clear understanding of what exactly those differences are, and how they determine the parameters of what residents can and can’t do in their units and in the common areas of their building or HOA. There’s also frequent confusion about what physical, administrative, and maintenance elements boards and management are responsible for in a community, versus what falls to individual owners. All too often, owners think of their board as a landlord, rather than an elected governing body, and mistakenly expect them to handle everything from sorting the recycling to changing a lightbulb in their bathroom.
While there is a fair bit of overlap between the respective roles of boards, managers, and landlords, they’re not interchangeable. Knowing the difference—and even more importantly, respecting it—can go a long way toward smoother, more amicable relationships between co-op, condo, and HOA residents and their community administrators.
Is the Board a Landlord?
In a word, no. “The board is not a landlord,” plain and simple, says Daniel Wollman, CEO of Gumley Haft, a New York-based management firm. And while some more obscure legal positions take the view that co-op boards are a kind of “stand-in” for the landlord or property owner (as the widespread confusion over the rent protection legislation passed in New York State in 2019 demonstrated), in reality, it’s not equivalent to either of those roles.
“The board members, like all the shareholders, are proprietary lessees,” notes Wollman. “They have the same rights and obligations as the rest of shareholders. The board [members] are the elected representatives of the corporate shareholders in a co-op, or the unit owners in a condominium, [and the] governing documents of the building dictate their authority. As such their responsibilities vis-à-vis individual units are not the same as a landlord.”
What About Management?
In a rental setting, the owner and the management of the property are often the same entity. Scott Wolf, CEO of BRIGS, a property management firm based in Boston, notes that his responsibilities as a manager in a rental building are basically the same as they are in a condo building. The difference is that in a rental building, “I have one contact person—the landlord, whereas in a condo,” in which each unit is individually owned, “I often have multiple contact persons.” While having one contact person is clearly simpler than having dozens or even hundreds, the day-to-day operational and administrative tasks needed to keep a building or association running smoothly don’t necessarily change with scale. “Overall,” Wolf explains, “the nature of the work remains the same.”
Not My Job
Of course, the average shareholder or unit owner is likely not well-versed in the legal distinctions between rental and owner-occupied multifamily properties. Indeed, despite it likely being the single biggest investment in their portfolio, most purchasers of co-op and condo apartments don’t take the time to read the governing documents of the building they’re moving into. Additionally, many owners come into a condo or co-op community directly from the rental market, bringing their ‘tenant mentality’ with them. This often leads to misunderstandings between residents and their board-management teams about who is responsible for what kinds of repairs, maintenance, and other property-related tasks.
In the context of a co-op, condo, or HOA, often the unit owner must take on responsibilities that would fall to the landlord in a rental setting. Wollman breaks it down: “In both ownership structures, property owners and boards are responsible for maintenance of the common elements. https://gumleyhaft.com/services/preventive-maintenance/In rentals, all interior operations—including painting, plumbing, and appliances like garbage disposals, dishwashers, etc.—are the landlord’s responsibility. In a condominium or a co-op, unit owners and shareholders—not the association or corporation—are responsible for the unit interiors, including those internal components.”
As with most things, there are exceptions to that general rule, in which division of responsibility can get a little blurry. One such case is original fixtures and components in co-ops. According to Wollman, “Typically in a co-op, the building is responsible for the floors, ceilings, and walls that are original to the building. So, if there’s damage to your parquet floor that was put down when the building was built, the corporation is responsible for repairing it. It’s like no-fault insurance—how the floor was damaged is unimportant. But if you renovated the unit and put in a new floor and that is damaged, you as the shareholder are responsible for its repair.”
“As property managers, we often must communicate the difference between an individual shareholders’ or unit owners’ responsibility versus the corporation’s or association’s responsibility when conducting and paying for repairs,” says Anthony Colon, a management executive with AKAM management, which has offices in New York and Florida. “While repairs inside an apartment are typically the unit shareholder’s responsibility, there are nuances within each governing document that may provide further clarity. Situations can get complicated, especially with shared walls and pipes, and some residential communities have limited common areas, such as private patios on a shared rooftop, that can create further confusion when determining responsible parties. We must understand these differences to adequately explain and enforce the policies.”
As mentioned previously, many condo and co-op owners are coming from years of living in rental units. Even after making the jump to ownership, they often equate their monthly fees or maintenance payment with ‘rent,’ and think of the board as their ‘landlord.’ They don’t understand what their responsibilities are as owners, and assume that the board should take care of everything in their apartment. For example, say a shareholder has a leak in their kitchen sink—but that sink features a $1,000 faucet, and the super doesn’t want to work on it for fear of damaging it. The shareholder may become angry and argue that they pay maintenance every month, and are therefore entitled to repairs—but that’s not how it works, says Wolf.
To head off such conflicts, Colon says, “I recommend that owners learn about their responsibility versus the association’s responsibility. For instance, with windows and doors, you should know whether you’re responsible for the hardware, glass, and frame. When it comes to plumbing, knowing that while the portions of pipe that serve other units may be the association’s responsibility to maintain and repair, all the fixtures are the owners’ jurisdiction.” And, Colon adds, this isn’t just academic; “these are important, unique areas of repair that can have a financial impact on shareholders down the line.”
For managers of co-op and condo properties, this ‘tenant mentality’ is one of the biggest hurdles in getting resident owners and shareholders to understand exactly what their rights and responsibilities are. “Frankly, there should be a class for first-time buyers,” says Wolf, “because new owners need to be educated. They don’t think they’re responsible for anything. They don’t understand what it means to own their home.”
Wolf points out another issue: that of new condo or co-op owners assuming that because they’re no longer renters, they can do whatever they please in and around their new home, despite the fact that that home shares walls, floors, and ceilings with other people. “This problem is prevalent in New England,” says Wolf. “As a tenant they had rules, but as an owner, they don’t think they should be limited by anything—they don’t understand that they can’t just do whatever they want. But part of ownership is realizing that the association has certain rules and requirements, that those rules apply to you, and you must abide by them. Like no smoking, or rules about parking, or how loud and during what time you can play music. In an HOA, you can’t just plant whatever you’d like in front of your house. Or in practical terms, say there was a fire in your unit. Often the unit owner doesn’t understand that they have to contact their own insurance carrier. It doesn’t fall under the condo association policy.”
Wollman agrees with Wolf. “We see it all the time,” he says. “Usually with renovations. The owner wants to redesign their apartment—say they want to extend the master bath into the bedroom, or something similar. There are a myriad of reasons why you can’t just do that. You can’t place a new ‘wet’ space [like a kitchen or bath] over a ‘dry’ space [like a bedroom or living area] on the floor below.” In addition to the nuisance caused by water rushing through pipes in someone’s bedroom walls, such projects have the potential to cause costly property damage claims if there’s a leak mishap, either during construction or afterward.
According to Wollman, both challenges—the owner who emails the board demanding that someone come fix a drippy faucet, as well as the owner who embarks on a full bathroom renovation without so much as notifying the board—emerge in force when a rental building converts to cooperative or association ownership. “We see it less now than we used to, because original owners are becoming extinct,” he says, but even so, “often, owners who were renters in the property and then went with the conversion [to become owner/shareholders] still view the board as a landlord. They don’t like to spend money to maintain and upgrade the building, so they often take a band-aid approach to making necessary building-wide repairs.” Needless to say, this kind of penny-pinching can lead to much bigger problems—and bigger costs—down the road.
Condo vs. Co-op
As is the case in most instances, there are some fine differences in how these matters are treated in co-ops and condos. With respect to building and mechanical issues such as plumbing, repairs, etc., condo and co-op situations are very similar, with exceptions occurring more as a result of individual governing documents than law or statute. The main area of difference is found with regard to issues of subletting and sales. In a co-op, the board has the right to review and approve both. In a condominium, an owner can sublet without board approval. An owner can sell a unit without board approval as well, though in most states the condo board does have a right of first approval to act as a substitute buyer.
The key takeaway here is that your board is not your landlord, nor can you as an owner do whatever you might want at any particular moment. Overall, co-op and condo living is a hybrid. Owners should know their rights—but also their responsibilities.
A.J. Sidransky is a staff writer for CooperatorNews, and a published novelist. He can be reached at email@example.com.