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May 2021

COVID-Related Legislation Affecting Boards & Managers: When the Law Meets a Pandemic

COVID-Related Legislation Affecting Boards & Managers: When the Law Meets a Pandemic 1200 803 Matthew Adam Properties

Even as businesses, schools, and even entire economies shut down at the start of the coronavirus pandemic last year, the task of running residential buildings and communities never ceased. In fact, it could even be argued that as people were more or less confined to their homes for weeks and months, the decisions made by co-op, condo, and HOA boards and managers had even more impact on their communities than in the Before Times.

Now that widespread vaccine distribution and a federal administration that takes the matter seriously is beginning to flatten and even ebb transmission of the virus in many parts of the country, lawmakers (who themselves were sidelined for a time last spring) are starting to put legislation on the books relating to—or motivated by—COVID-19 and its effects on lives and livelihoods.

Virtual Governance

In New York, a change to the Business Corporation Law (BCL) went into effect just before coronavirus was declared a global pandemic. “This [change] amended section 602 of the BCL to allow for annual shareholder meetings in business corporations to be held virtually,” explains Margery Weinstein, an attorney at law firm Ganfer & Shore in Manhattan. Subsequently, in response to COVID, she continues, “executive orders further amended that you actually didn’t need to have a location specified for a meeting. So the question is: Is the legislature going to codify the executive orders going forward to dispense with the need to have an actual location [in the announcement of a meeting and] some form of in-person meeting?”

In Massachusetts, the state legislature is considering such a bill. House Bill 1416, “An act relative to electronic meetings and voting in condominiums,” addresses the need that boards and owners of condominium units have had over the past year-plus to conduct community business electronically and/or virtually. Matthew Gaines of Braintree, Massachusetts-based law firm Marcus, Errico, Emmer, and Brooks, P.C. indicates that most governing documents of housing associations were drafted decades ago and refer only to in-person meetings of boards and unit owners.

“There’s some question about all these Zoom meetings that boards and unit owners have been having for the last year,” says Gaines. “Are they really valid? So because of that, [the New England chapter of the Community Associations Institute (CAI)] proposed this legislation that basically says, notwithstanding any provisions in your documents that may require in-person meetings, the association is permitted to have Zoom or any type of remote electronic board meetings, electronic unit owner meetings, and electronic voting.” Partially in response to adaptations made during COVID, and partially to modernize governing documents to reflect current realities, this bill “is trying to bring the condominium world here in Massachusetts into the 21st century,” Gaines says.

Nevada is also considering a bill that would provide for electronic voting in homeowners association elections. Assembly Bill 313 has gone through amendments and passed out of committee, advises certified property manager Barbara Holland in her weekly column in the Las Vegas Review-Journal. “If passed,” she says, “this will be an interesting regulation and potentially a difficult regulation as associations will need to protect the integrity of the voting.”

COVID Immunity

In addition to the Herculean effort to achieve COVID immunity through mass vaccination, another type of COVID immunity is being sought by state legislatures in the interest of community association leaders: immunity from liability for COVID-related claims.

In the New Jersey Assembly, according to community association lawyers from the Morristown office of law firm Becker & Poliakoff, there is pending legislation in the Garden State “that would, essentially, offer community associations immunity from legal action regarding any illness, injury, or death from or related to exposure to or transmission of COVID-19 on the premises of a planned real estate development.”

This bill, supported by CAI New Jersey’s Legislative Action Committee, arose from the actions—not all of them popular—that boards and property managers had to take to mitigate the spread of coronavirus on their properties and through their communities. Closure of amenities, mandatory masking and social-distancing rules, suspension of community activities, and strict policies related to elevator capacity, outside guests, and renovations were some of the measures instituted to slow or stop the viral spread in housing communities. But these actions were met with resistance from residents in some cases, and even the threat of litigation. Equally concerned about being sued if they did not enact such measures and a resident became infected on the property, boards and managers found themselves in very tricky legal waters.

So far, as CooperatorNews has previously reported, insurers are not covering for claims related to COVID, so even with Directors & Officers (D&O) insurance, boards and board members can be held financially responsible in the event that a resident, visitor, or staff member succeeds on an action against them claiming negligence or breach of fiduciary duty. They would be responsible for their own legal defense as well. “There are always liability concerns,” says Scott Piekarsky, an attorney with Phillips Nizer, a law firm with offices in Manhattan and New Jersey. “People may get injured due to the pandemic through infection. … A condominium association is a business, and boards have a fiduciary duty to protect the members. We are hearing now that if someone gets COVID and sues the association, insurance will not defend or indemnify. No defense and no payout, until this is adjudicated.”

Passage of the COVID Immunity Bill (A4979/S3584) would alleviate these concerns, and perhaps encourage boards to reopen amenities sooner, advocates argue.

Florida condo and HOA leaders might have less to worry about in this regard now, says Donna DiMaggio Berger, Board Certified Specialist in condominium and planned development law and shareholder at Becker’s Fort Lauderdale office. According to her, SB72, which Governor Ron DeSantis signed into law on March 29, “[Provides] civil immunity to business entities, not-for-profit corporations, hospitals, nursing homes, government entities, schools, and churches for COVID-19 related claims as long as the alleged negligence doesn’t involve gross negligence or intentional misconduct.”

Florida condominiums, cooperatives, and homeowners’ associations are classified as business entities that this bill protects. “However,” continues Berger, “the new law is not a protective blanket under which all associations can take shelter regardless of how they handled this crisis. … The association boards who took steps (and continue to take steps) to comply with local, state, and federal guidelines should be able to rely upon this new law for protection.”

Berger stresses that the law does not provide or imply license for community leaders to completely abandon health and safety protocols in attempts to get back to “normal,” especially as the majority of Floridians remain unvaccinated and viral variants continue to spread. “It is not only reasonable, but prudent for boards to continue to exercise due caution when operating and opening common amenities and enforcing COVID-19 safety protocols,” she concludes.

Planning for the Next Disaster

Although not necessarily a direct response to the pandemic, Rep. Jerry Nadler (D-NY) has committed to introducing federal disaster assistance legislation this year in the U.S. House of Representatives, according to CAI. The Disaster Assistance Equity Act (DAEA), as the legislation is called, would streamline the approval process for the Federal Emergency Management Agency (FEMA) to reimburse local governments for the cost of removing debris from community association roads, and would allow condominiums and housing cooperatives to use FEMA disaster assistance payments to fund critical repairs for common elements.

One thing this year has taught us is the importance of acting quickly, intentionally, and informedly when a disaster threatens the health and safety of our homes and our neighbors. Helping community associations plan for disasters and improving recovery coordination with local emergency management officials will go a long way toward resilience, restoration, and recovery in the face of ever increasing threats from natural and biological disasters.

Managing Exterior Repair Projects; Advice from a Legal Pro

Managing Exterior Repair Projects; Advice from a Legal Pro 1000 1003 Matthew Adam Properties

Leaks are a common problem in multifamily buildings, including co-ops and condominiums. It’s not unusual to see watermarks and dampness on plaster near or below interior widows, but since such infiltration usually stems from an issue on the exterior of the building – including the roof, cornice area, and other locations – repairs are neither easy nor quick, and are often left unaddressed until there is Local Law 11-related facade work being performed from the outside.

Homework Ahead of Time

Organizing and coordinating these repair projects requires a lot of time, energy and funding. In order to run smoothly, exterior work also requires a lot of planning in advance. Let’s say a building has leaks on the roof and cracks in various other locations. The building will need to first retain engineers to survey the building and ascertain the extent and scope of the work that needs to be done. In addition to a contract, plans and specifications will need to be drawn up, and bids will need to be obtained from contractors for pricing. The final plans will also need to be approved by and filed with the New York City Department of Buildings before work can legally commence.

Even after all of this advance work is done to prepare, it’s still quite common to find ‘hidden conditions’ on a project that require additional work – and money – that’s not accounted for in the plans or the budget. Therefore, when money is allocated for a project, additional funds must be set aside for these inevitable contingencies. Sometimes securing those funds means refinancing an underlying mortgage. In those instances, the advance planning may take over a year – which is why you sometimes see a building in obvious need of repair, and may wonder why no work has been done. The answer may be that the owner or board is still trying to arrange for the financing – though that’s not really an excuse for delaying needed maintenance or repair.

A Necessary Inconvenience

Since exterior repair work is by its nature hazardous and will take a while to complete, most buildings will need to have a sidewalk shed and other protective measures in place to protect the public and workers from any falling debris. Sheds are part of the overall cost of a project, and usually extend 20 feet or so past the building being worked on, onto the adjacent property or properties.

Despite the obvious need to ensure the safety of passers-by and work crews alike, sidewalk sheds are often met with hostility by neighboring buildings and commercial tenants who may claim that the structures block their view and/or signage, and discourage foot traffic.

Sheds are sometimes left in place for long periods of time while a board tries to obtain funding for the needed repair work, or sort out other administrative or bureaucratic issues. For example, in one case a sidewalk shed was interfering with the installation of a handicap access ramp by a commercial tenant – a mandatory safety measure conflicting with a mandatory accessibility measure. Sometimes disgruntled neighbors threaten to take such issues to court, but given the balancing of the issues and the need for such repairs, it’s doubtful a court would order the removal of a scaffolding until the exterior work is fully completed.

Papers, Please?

Among the key documents spelling out the scope, cost, and parameters of a facade project, there must of course be a fully thought-out, well-drafted and negotiated contract with the contractor hired to do the actual work. The contract should articulate the full scope of work, including plans and specifications, and the legal terms and conditions regarding the project. All too often, people show me what they are calling a ‘contract,’ but which is really only a list of the work they want to have done, and a payment schedule. More often than not, these schedules require payment at specific intervals – but don’t say a word about the amount or percentage of work that’s expected to be completed by that time. In a worst case scenario, payment could be due according to the contract, but the work itself could be way behind schedule. That should not be the case – and a competent, savvy consultant can catch (and hopefully correct) such discrepancies during the contract vetting process before the first worker sets foot on the property.

The documentation needed for a major exterior undertaking may also need to include an Access Agreement with neighboring buildings that might be affected by the project. Since this can take time to negotiate, the agreement should be part of the advance planning. The nature and location of the work may be such that materials may need to be moved up and stored on a neighboring roof for easy access. Permission for that type of access needs to be requested, negotiated by knowledgeable legal counsel, and obtained in advance in a written license agreement. Sometimes a fee may need to be paid to the neighboring building allowing the access; to encourage keeping the project on track, there may also be liquidated damages written into the agreement for each day the building needing access is late in completing the work.

Who’s in Charge?

Contracts and specifications for any type of exterior work should be prepared by legal counsel knowledgeable in this area, in conjunction with the project engineer. People need to know who is responsible for performing various tasks, by when, and who is responsible for payment. On one client’s project, the project engineer was supposed to obtain the work permit after the expediter filed the plans with the DOB. The engineer mistakenly thought the contractor was handling that, and valuable work time was wasted until the issue was resolved.

Another client once related that their contractor had failed to obtain a building permit – which the property manager did not realize until after the contractor had walked off the job. The client claimed they didn’t even know about the need for a permit until their new property manager pointed it out. There was also no electrical or plumbing inspection, which meant that the new contractors would need to open walls and perhaps redo already-completed work in order to pass inspection.

Along with vetting contracts, double- and even triple-checking permits and filing deadlines, consulting with your building’s insurance broker before an exterior project gets underway is a good idea as well. Having the right insurance in place that names the correct parties as additional insureds is essential. One building owner told me at a seminar I gave that just as work was ready to begin on their project, they realized they did not have an ‘action over’ insurance provision and had to delay the commencement to sort out obtaining it and who would pay for the additional cost.

The prospect of undertaking – planning, funding, and completing – a major exterior maintenance or repair project can definitely be daunting for any board, regardless of its level of experience. The above considerations are only a few of the many things that need to be kept in mind – but the guidance of experienced legal counsel can help formulate a game plan ahead of time, reduce the chances of something going wrong during a capital improvement project, and keep things on track for a timely completion.

C. Jaye Berger, Esq. is an attorney and Principal at the Law Offices of C. Jaye Berger, based in New York City and focusing on the areas of construction, real estate and co-op and condo law and litigation.

The Backyard Restaurants Are Coming. What’s a Co-op to Do?

The Backyard Restaurants Are Coming. What’s a Co-op to Do? 1920 1515 Matthew Adam Properties

A backyard restaurant can depress nearby apartment values by 20% or more.

As New York City continues to open up, restaurants are using every inch of available outdoor space to attract customers. The rear apartments in one co-op face a backyard that a restaurant wants to turn into a dining area. Residents in those apartments are worried about noise, odors, vermin and light pollution – as well as the impact on property values. What, a shareholder asks Brick Underground, can residents of such a co-op or condo do?

Options, it turns out, are limited. “A restaurant is always a concern,” says Deanna Kory, a broker with Corcoran. “Buyers don’t love living close by because of the noise and vermin, and it is not great for a building from a quality-of-life perspective. It’s OK if it’s an established place, but the value of a similar apartment without a restaurant could be as much as 15 to 20% higher, or more. The lower the floor, and if the windows face the restaurant, the more the apartment value is negatively impacted.”

This is likely to be a source of anxiety for more New Yorkers than ever, given the number of restaurants that opened new outdoor seating areas over the past year in response to pandemic restrictions on indoor dining. And while this change has helped to save a number of businesses, there are certain drawbacks.

“Unfortunately, vermin are often associated with food establishments,” says Gil Bloom, president of Standard Pest Management. “While proper restaurants have assorted health codes to adhere to, the outdoor dining concept is unstructured and without guidance.”

Shareholders and unit-owners may have the opportunity to state their concerns at the hearing for the restaurant’s liquor license, a legal requirement for new establishments that will serve alcohol.

“If the restaurant requires a variance or needs a liquor license to operate as proposed, you could look into attending the city hearing at which the variance or liquor license application is being discussed and state your objections,” says Jeffrey Reich, a partner at the law firm Schwartz Sladkus Reich Greenberg Atlas. “This information and some support may be obtained from the local community board or council person, but if the restaurant may operate ‘as of right,’ there is little that can be done.”

Note that the State Liquor Authority is now holding all meetings remotely via webcast; according to a spokesperson, members of the public can submit written letters in support or opposition to pending applications. These letters will be reviewed by SLA members before they make a determination on licensing applications.

If the restaurant is approved, boards can take steps to reduce the risk of pests. “The first step in defending your exterior is sanitation,” Bloom says, “followed by exterior pest exclusion with rodent-proof door sweeps and screens.”