COOPERATORNEWS JUNE 2022

Orienting New Owners: Getting Smart About Condo & Co-op Life

BY A.J. SIDRANSKY

First-time buyers in condo associations, co-ops, and other multifamily residential communities are often surprised—and a bit confused—by the way in which their new building or HOA operates. Whether they are coming from a rental background or a single-family home experience, condo/co-op living, and its administrative and governance structure, differs dramatically from both. In a condo, you can’t depend on the super for everything as you might in a rental, nor can you undertake to do whatever you’d like without any prior approval, as you would in a single-family home.

Renter Mentality

“People who move from single-family homes into multifamily dwellings often have some trouble adapting to their new environment,” says Daniel Wollman, CEO of Gumley Haft, https://gumleyhaft.com/why-gumley-haft/a management firm based in Manhattan. “They don’t realize they are living in vertical housing, nor do they immediately grasp that there are reasons it’s called ‘cooperative living.’ Co-op and condo buildings have a series of rules and regulations that govern everything from how we live in the building together, to construction or alterations in our apartments. These rules are intended for everyone to have a fair chance to do the same things in their units as their neighbors, and at the same time preserve peaceful living in a vertical environment.  When you live in a private home, you can leave five pairs of shoes outside your front door; you can’t do that outside your apartment door.”

Also, “At the root of a lot of first-time owners’ misconceptions and misunderstandings is a lack of understanding and knowledge about what monthly assessments—also known as common charges or maintenance—are for, and what they cover,” says Eric Staszczak, executive vice president for property management with Westward360, a Chicago-based management firm. “People assume that anything and everything they have—including their furniture in the event of a damage event, for example—is the responsibility of the association. They assume the building will take care of everything. But that’s a renter’s mentality.”

Rita Sprudzs, a senior property manager also with Westward360, outlines another common problem: “Many times, co-op shareholders don’t understand that they don’t actually own the space they occupy. They are shareholders in a corporation that owns the property. They have a proprietary lease for their unit that is assigned to them by the corporation that owns the building.” This misapprehension can lead to a great deal of frustration and acrimony when a shareholder’s plans to alter or upgrade their unit butts up against the board’s authority—and duty—to review and approve (or reject) those plans based on how they may impact other units, or the building’s shared elements, including wiring, plumbing, or infrastructure.

“Another common issue is that many condo owners think their board has as much power as a co-op board to intervene in quality-of-life disputes, such as noisy neighbors,” says Stuart Halper, principal of Impact Management, a New York-based management firm, “but they don’t. A condo board cannot remove an owner due to ‘bad behavior.’ If you have an inconsiderate neighbor, the board can’t do a thing.”

Wollman agrees. “The board’s role is to set policy and procedure,” he says. “A manager carries it out. New owners usually go to the super or managing agents in New York buildings. They know there’s a board, but generally don’t understand what the board’s role is. In the city, though, it’s typical for people to go directly to the super or agent if they lived in an apartment before.” That may differ from communities where the residents are less familiar with multifamily living.

Staszczak says that another major issue that’s especially common in condominium associations is owners not really understanding percentage ownership and common areas. “Percentage of ownership seems to be a major source of confusion for new owners,” he says. The idea that the more space you have, the more percentage share you have—and hence the higher your monthly assessment—escapes many. “They want to know why different residents pay different monthly assessments, because they don’t understand percentage ownership and how that affects them.”

When it comes to common areas or elements, most new owners just think of a community room, an in-house gym, or garden-style courtyard—but the building’s infrastructure, including façade and roof, boiler and HVAC equipment, plumbing and electrical systems, as well as lobbies, hallways, and storage areas are also common elements, and as such are maintained and repaired using funds from residents’ monthly fees to the condo association or co-op.

Commensurate with this problem is a lack of understanding of budgets. “Residents may not understand how budgets are built,” says Sprudzs, “and so they don’t understand where their monthly maintenance goes, or the difference between types of line items, like fixed vs. variable costs. First-time owners also often don’t understand what type of insurance they themselves need. Renter’s insurance is not good enough [for a condo or co-op]. They need [homeowners or] co-op insurance. Renter’s doesn’t cover individual unit owner responsibility for common areas in an insurance claim.”

Relatedly, “New owners also often think the co-op or condo is responsible for repairs inside their units,” says Halper. “They don’t understand they own the interiors and what’s in them, and are responsible for them.” A good example is a refrigerator. If your refrigerator stops working in a rental, you call the landlord. In a co-op or condo, because everything on your side of the walls is your property, you have to replace it yourself.

A more complicated example is a clogged sink. If the clog is in a portion of pipe inside the wall, the co-op or condo owns it, and therefore has to repair it, and pay for the repair. If the clogged section of pipe is inside an individual unit, the unit owner or shareholder has to fix it—and foot the bill. Not understanding the distinction between private and common elements, and how that distinction determines who’s responsible for what is at the root of a great many disputes between residents, boards, and property managers.

How Common is the Problem?

In a word, pervasive. The problem of owner and shareholder ignorance spans co-ops and condos, HOAs, and over-55 communities. Younger buyers upgrading from rentals and older buyers downsizing from private homes are often ignorant of not only rules and lifestyle conventions in their new communities, but of the documents governing those communities.

Staszczak has a few recommendations that can help correct the problem. “Leading up to purchase,” he says, “at contract, as documents start coming through from the association’s attorney to the buyer’s attorney, the attorneys should make sure the buyer is reading them. Savvy buyers should also request and read through the minutes of past board meetings, which are available to them. They should understand the community they’re buying into. It’s to their benefit to become familiar with the community and how it runs. There are lots of small details a buyer should know that are found in these documents. You should know if you have an assigned parking space or if they’re separately deeded, for instance. If it’s the latter, and the buyer didn’t buy a space along with their unit, they don’t have parking”—which would be a nasty shock if part of the reason a buyer chose a particular building or HOA was that they thought their unit included a parking spot.

Sprudzs adds that “some condo associations have a website and [make their] governing documents available online. The buyer can go there to learn about the documents and what they contain.” She says that “it’s also important to have a realtor who is familiar with the specific community and community living in general—not one who is only familiar with single-family homes. Buyers often assume things without asking questions. New owners will ask me, ‘Where do I get my keys?’ You get them at closing, from the broker, not like in a rental situation. And if you need to change the locks, you call a locksmith—not the association.”

“In an ideal world,” says Halper, “we should educate buyers, but in reality, it just doesn’t work that way. Buyers must educate themselves. Most co-ops and condos don’t require that buyers educate themselves about co-op or condo life. Requiring it would be a turnoff for many buyers as well. Buyers won’t take an ‘ownership orientation’ class, so you can’t require it. It will never happen. Honestly, I’ve never seen it. There are a few buildings that have assembled a sort of handbook for new shareholders or owners, a kind of ‘Living in Our Building for Dummies’ manual. It’s referred to as a welcome package, but it’s up to the owner to use it. Bigger buildings with a long history as a co-op usually do this.”

Interestingly, Staszczak notes that HOA townhouse communities often have community manuals, because they’re so different from living in a multifamily building. And in co-ops, there is an interviewing process with the board before approval of the sale of shares to a new shareholder. That interview is helpful in making the new owner aware of many of these issues.

Staszczak says that “another factor before going to contract that can make a big difference is working with the right professionals—brokers in particular. Many realtors don’t have the best background in how a co-op or condo operates. Use one who does. Also use an attorney who specializes in co-ops and condos—not just a real estate attorney. Work with the right professionals.”

The Board’s Role

When faced with questions (or complaints) from a new member of the community about any issues, the pros agree that the best response from board members is a smile and a suggestion for how to find an appropriate answer to the question—at least the first time. If a new owner or shareholder persists in badgering board members and refuses to educate themselves, the board member is well within their rights to suggest—sternly, if necessary, though not rudely—that the owner or shareholder contact management for more information or resolution of their problem.

Much of this will depend on the individual co-op or condo, of course. Some associations and corporations prefer to have all questions directed to management; others prefer those questions to be directed to board members. Often this depends on the size of the community. Smaller communities may not have full-time or even part-time management and may be serviced by a superintendent or building engineer. Residents in any multifamily setting should understand the channels of communication and responsibility in their particular community, and direct their questions, complaints, and comments accordingly.

Finally, perhaps the best answer to this problem is for buyers to be aware of the rules and requirements that govern their most important investment, and to educate themselves about what exactly it is they’re investing in. Doing so will not only make them better, more informed community members, it will also stop a lot of misunderstandings before they start.

A J Sidransky is a staff writer/reporter for CooperatorNews, and a published novelist. He can be reached at alan@yrinc.com. 

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