Protecting Your Building from Renovation Nightmares

You might not expect it, but your alteration agreement might be setting your building up for years of headaches and potential lawsuits. In this episode, Ingrid Manevitz, a partner in the law firm Seyfarth Shaw, reveals how paperwork oversights can turn routine apartment renovations into costly legal nightmares that drag on indefinitely.

She explains the three most dangerous pitfalls that blindside even experienced boards: a never-ending renovation that lasts years because of one missing date; unauthorized work that proceeds without proper permits while everyone looks the other way; and the maintenance disasters that can fall through the cracks when apartments change hands. You'll learn exactly why violations end up hitting your building instead of negligent owners, and how poor record-keeping can leave you defensively scrambling to prove who's responsible for what.

Most importantly, get practical strategies for bulletproofing your alteration process, from mandatory check-ins with reviewing architects to creating ironclad electronic filing systems that survive management company changes. Habitat's Carol Ott conducts the interview. 

The business of running a building is demanding work that requires making endless decisions — some that can quickly lead your board into a quagmire of legal difficulties. Legal Talk interviews New York's leading co-op/condo attorneys to find solutions, and get some guidance, on these challenges. For more co-op and condo insights, sign up to receive Habitat's free newsletters or become a Habitat subscriber today!

Transcript

[00:00:00] Carol Ott: Welcome to Legal Talk, a conversation about governance issues that New York's co-op and condo boards are tackling today. I'm Carol Ott with Habitat, the New York City magazine for co-op and condo board directors, and my guest today is Ingrid Manevitz, a partner in the law firm, Seyfath Shaw. 

Apartment alterations in co-ops and condos can go sideways in so many ways. Not only for the residents of the apartment being renovated, but for the board and all the other residents of the building. Ingrid, you have worked with three clients in particular, where these types of problems have occurred and each offers a lesson for board directors. I wanna start with the problem of the never ending alteration.

If you could tell us what happened there and what could the board have done differently? 

[00:00:48] Ingrid Manevitz: Sure. So the board in that case was using a form alteration agreement that had blanks in it, various blanks for this amount of the security deposit, and a blank for the time period in which the unit owner, in this case, it was a condominium, had to complete their alteration.

And when the alteration agreement was processed by the management company, the blank for the date by which the alteration needed to be completed was never filled in. The alteration ran over the amount of time that the board had anticipated it would take. And the unit owner took the position that there, because there was no day they could continue on indefinitely, and the dispute landed us in court.

[00:01:30] Carol Ott: How long did the alteration continue? 

[00:01:33] Ingrid Manevitz: It was during Covid time, so it lasted several years actually, on and off for several years. 

[00:01:40] Carol Ott: And let me ask you, the alteration agreements. Give me the backstory, how that works. The board is not actually handing the alteration agreement to the tenant. Is it the managing agent, is a lawyer? Who does what? 

[00:01:55] Ingrid Manevitz: It depends on the building. A lot of times though, a unit owner or shareholder will sign and submit an alteration agreement and it will get countersigned by the managing agent as agent to the board or as assistant secretary. It's not actually being countersigned by the board.

[00:02:11] Carol Ott: I see. So there was no double check. The managing agent, I assume overlooked it and there wasn't a double check. Nobody else is reviewing this. 

[00:02:22] Ingrid Manevitz: I think that's what happened, yeah. 

[00:02:24] Carol Ott: And I'm just curious because alteration agreements with end dates must be very typical in all buildings.

Is that correct? 

[00:02:33] Ingrid Manevitz: Yes. Our recommendation here at Seyfarth is to include some standard timeframe in an alteration agreement. Six months for example, or nine months, depending on how extensive the alteration is. And then when you're finalizing the agreement, if more or less time is needed to complete it, you can always tweak that time, but at least you have a placeholder timeframe in there so you don't run into this situation where there's a blank that never gets filled in. 

[00:03:00] Carol Ott: All right. So a little error caused a big issue. Now it's even a bigger issue 'cause it's in court. But there are other cases where somebody has signed an alteration agreement, but they've actually failed to follow through with what they said they were gonna do, or they did something a little bit different which was not in the alteration agreement.

Give me an example of how that occurs and what the board could do to mitigate that. 

[00:03:30] Ingrid Manevitz: Sure. So a lot of time there's a lot of lead up in paperwork to an alteration agreement being finalized and plans being approved. But what I've encountered over the last few years is that there's not a lot of follow through on the paperwork once that agreement is signed.

So in this case, an owner submitted a signed alteration agreement, was required to apply to the Department of Building for permits and get approval. But the unit owner ended up not doing that, and the alteration proceeded without appropriate approved plans from the Department of Buildings and permits in place, and there was no check.

Again, it's a sort of a paperwork-- I hate to blame the managing agents, but it's a paperwork managing agent issue where the agreement was finalized and then there was no follow through on the approvals in permits that needed to be obtained for the work to proceed. 

[00:04:21] Carol Ott: Don't most buildings have an architect or an engineer who reviews plans?

[00:04:27] Ingrid Manevitz: Yes. Yes. And I think a good workaround for a situation like that is to keep the reviewing architect or engineer engaged as an alteration proceeds. Instead of just reviewing the plans from the outset and approving them, the engineer or reviewing architect should have the opportunity to check in on the apartment as the project proceeds to ensure that the work is happening in accordance with the plans that were approved.

Many buildings will have a resident manager or superintendent check on an alteration, but they're not always equipped to ensure that all work is proceeding in accordance with the approved plans. 

[00:05:06] Carol Ott: And I'm curious. So they didn't file for the permits that they needed.

How will it come back to the building ? 

[00:05:12] Ingrid Manevitz: It could come back if an issue goes awry with respect to the work and it turns out a violation gets issued. Violations could be issued against the building itself and not necessarily the resident who performed the alteration.

[00:05:25] Carol Ott: Okay. Alright. And then we have the final thing, and that's people do alterations. They do pass from owner to owner, and the question is, how do you make sure that the current owner takes responsibility for whatever has happened historically? 

[00:05:45] Ingrid Manevitz: Sure. So this has been a big issue. It seems like the theme here is maintaining good files and having your paperwork in order.

But in our formal alteration agreement, we include what's called an assignment and assumption agreement. So the shareholder or unit owner who's performing the alteration commits in the alteration agreement to having whoever purchases their apartment sign this assignment and assumption agreement taking responsibility for all of their obligations under the alteration agreement.

An alteration agreement is often a good time to shift responsibility for maintenance, repairs, and replacements from a condo board or a co-op corporation to the resident who's performing the work: " you touch it, you own it now" mentality. And by having that assignment and assumption signed by whoever purchases they're taking over that responsibility, that was shifted by the resident who performed the alteration. But what I've seen a lot lately is that managing agents change and files aren't maintained properly, and someone new purchases an apartment and that assignment or assumption never gets signed. And then something goes wrong with, for example, the plumbing, that was altered by the resident who performed the alteration, and then it's hard to hold that next owner responsible because they didn't assume the responsibilities of the prior owner under that prior owner's alteration agreement. 

[00:07:15] Carol Ott: So you have to sign something to assume the responsibility. It isn't just a given that it's a responsibility?

[00:07:21] Ingrid Manevitz: It depends on the governing documents, but in most cases it's better. And you would need to actually sign something to assume the responsibility. 

[00:07:32] Carol Ott: And when does that happen? 

[00:07:34] Ingrid Manevitz: At the closing table. 

[00:07:35] Carol Ott: And is it the building's attorney? Is it the board? Is it the managing agent? Who is it that should be the check that this has been signed or is one of the pieces of paperwork? 

[00:07:48] Ingrid Manevitz: The seller is responsible for getting their purchaser to sign the assignment and assumption. They've committed to doing that in their alteration agreement, but sometimes they don't remember or it falls through the cracks.

So the check really should be on the managing agent who's involved in the closing to ensure that all alteration related paperwork gets transferred to the incoming purchaser. 

[00:08:11] Carol Ott: That makes a lot of sense to me, but, you know, alterations happen over the years, over the decades. How would you ever determine who made an alteration and when?

[00:08:21] Ingrid Manevitz: Oh, you gotta keep really good files. And that's a problem too. I think every management company and board should have a database with electronic files for every single apartment in the building. And every time an alteration is made, those documents go into those files. So if you are two or three owners down the road, you have all of these documents in a repository and you can say to the shareholder or unit owner, you are responsible for this because the person that owned the apartment two owners before you performed this work, and here's all the documentation to establish that.

Otherwise, you could get into sort of a battle of the experts: was this pipe original to the building or was this installed by a prior owner? 

[00:09:05] Carol Ott: I'm curious, you said it's really the responsibility of the seller to make sure this is signed.

Does the seller even know this? 

[00:09:13] Ingrid Manevitz: The seller who, in this case, is the person who performed the alteration, when they signed that alteration agreement with the co-op condo, they agreed in that alteration agreement when they go to sell the apartment, that they are going to have the purchaser sign this document, this assignment and assumption, and it's an exhibit to the alteration agreement.

So it's a contractual obligation that the seller/ owner has. But they don't always remember that they have, if they've done an alteration to an apartment and 10 years later they're going to sign it, it's very unusual for someone like that to say, wait a second, I think I had that one provision in my alteration agreement that has me obligated to have a purchaser sign something.

So that's why the managing agent should be a check on that. 

[00:09:57] Carol Ott: Okay. Bottom line, you had mentioned that, and particularly these three examples are sort of paperwork gone awry. What would be your advice for boards about all this paperwork? Who keeps it? Who's responsible? How it should be kept? Who's tracking it? 

[00:10:16] Ingrid Manevitz: Yeah, so I think it should be kept electronically. I'm seeing now more and more that boards use different electronic platforms to store records like Building Link for example. And there are others where there are files or Google drives or Dropbox folders, et cetera, where there are electronic files that are kept and maintained, and I think it should be both the managing agent and the individual board members who have access to those files. So if there's a change in management and files don't get transferred over, someone on the board has the ability to access those documents and they don't get lost in the shuffle.

[00:10:55] Carol Ott: Sounds like very good advice to me. 

Thank you very much for joining us this morning. 

[00:11:01] Ingrid Manevitz: Thank you for having me.