Sunday, December 3, 2006

Court Ruling Protects Buildings' Boards

The New York Times
December 3, 2006
Your Home

AN appellate court ruling issued last month gives New York co-op and condominium board members the ability to do their jobs without fear of being held personally liable for decisions made in good faith on behalf of their buildings.

"This decision has far-reaching implications for thousands of New Yorkers who own apartments in co-ops and condominiums," said Lawrence D. Bernfeld, a Manhattan lawyer who represented the condominium and its board of managers in the case.

"The court has confirmed that people who volunteer to serve on boards do not have to live in fear of personal financial peril as long as they act in good faith and do not commit an independent wrong against their neighbors," Mr. Bernfeld said.

In its Nov. 21 ruling in the case, Pelton v. 77 Park Avenue Condominium, the Appellate Division, First Department, dismissed a $23.5 million lawsuit brought by an apartment owner against the condominium association, its board, its management company and each of the nine board members.

Dean Pelton, who owns one of the 104 condos at 77 Park Avenue (at 38th Street), asked the board to make it easier for him to navigate steps in the building because he has muscular dystrophy. The board, acting on the advice of its architect and lawyers, provided a temporary solution by installing a portable motorized "stair climber."

As a permanent solution, the board sought, and received, approval from unit owners for a $130,000 plan to install self-operating "mini-lifts," one on each side of the lobby, that can be used to reach the passenger elevators. The plan also included a modification of the front entrance to eliminate the step there.

But Mr. Pelton contended that the board discriminated against him by failing to resolve the problem for more than two years and sought $23.5 million in damages in State Supreme Court in Manhattan.

After the trial court judge rejected a motion to dismiss the case, the Appellate Division, First Department, which has jurisdiction over Manhattan and the Bronx, reversed that ruling and dismissed the complaint.

Justice Joseph P. Sullivan, writing for a unanimous court, said the business judgment rule, applied to co-op and condo boards by a 1990 Court of Appeals decision, prohibits courts from second-guessing the actions of corporate directors "taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes."

Justice Sullivan said that nothing in Mr. Pelton's allegations would provoke judicial scrutiny of the board's action.

He noted further that in bringing an action against the nine board members individually, Mr. Pelton was required to "plead with specificity" the discriminatory acts each member had committed. He concluded that Mr. Pelton had "failed to show that any board member, much less each board member, has engaged in individual wrongdoing."

Marc Luxemburg, a Manhattan lawyer who filed a "friend of the court" brief in the case on behalf of the Council of New York Cooperatives and Condominiums, said its outcome sent an unambiguous signal that volunteer board members should not be intimidated by threats of litigation.

"This case sends a strong message that you can't sue board members individually just because they're board members, even in discrimination cases," Mr. Luxemburg said. "It puts a stop to the tactic of plaintiffs' lawyers attempting to browbeat board members into submission or settlement by suing them personally."

Jay Gurfein, the Manhattan lawyer who represented Mr. Pelton, said: "We view this as a victory for the plaintiff. We got the condominium to make the building handicap-accessible, and that is what we wanted." He added that his client had not decided whether to appeal.

Supreme Court, Appellate Division, First Department, New York.

Dean PELTON, et al., Plaintiffs-Respondents,



John Horvitz, et al., Defendants-Appellants.

Council of New York Cooperatives and Condominiums, Amicus Curiae.

Nov. 21, 2006.

Background: Condominium owner brought action against condominium association, its managing agent, and its board members alleging that failure to make building handicap accessible was discriminatory. Board members and managing agent asserted counterclaims for declaratory judgment that proposed changes constituted reasonable accommodation. The Supreme Court, New York County, Judith J. Gische , J., denied managing agent and board members' motion for summary judgment, and they appealed.

Holdings: The Supreme Court, Appellate Division, Sullivan, J., held that:

(1) members were not subject to liability for disability discrimination, and

(2) agent was not liable to owner.


Defendants John Horvitz, Margaret Shaw, Aida Chinloy, Emil Dabora, Tom Brooks, Stuart Benton, Gretchen Morgenson, Robert Pasch, Dennis Gates and Buchbinder & Warren, LLC, appeal from an order of the Supreme Court, New York County ( Judith J. Gische, J.), entered January 24, 2006, which denied their motion for summary judgment.

Graubard Miller, New York (Lawrence D. Bernfeld of counsel), for appellants.

Law Offices of Jay J. Gurfein, New York (Mariam Anwarzai and Jay J. Gurfein of counsel), for respondents.

Snow Becker Krauss P.C., New York (Marc J. Luxemburg and Daniela Alba of counsel), for amicus curiae.



*1 This is an appeal from the denial of summary judgment dismissing the complaint asserting discriminatory practices in violation of the New York City Human Rights Law (N.Y.CHRL), and seeking, inter alia, $23.5 million in compensatory and punitive damages based on an alleged failure to make handicap accessible the residential condominium in which the disabled plaintiff and his wife, also a plaintiff, reside. The appealing defendants are the nine volunteer members of the board of managers of the condominium, also a defendant, who moved on the basis of the business judgment rule, and the building's managing agent, which moved on the basis of common-law agency principles.

Plaintiff Pelton, the owner of unit 5-G at 77 Park Avenue, is 62 years of age and suffers from muscular dystrophy. As a result, as alleged, it has been "a physical and emotional ordeal" for him "to navigate the steps" in the common areas of the building since the end of 2001. Specifically, the building is constructed with one step without a handrail at its street entrance, and three additional steps leading from the lobby to the passenger elevator. There are five more steps from the passenger elevator hallway to the freight elevator, which residents were required to use while the passenger elevator was being renovated. There are also steps leading to the laundry room and to plaintiffs' storage area.

In June 2002, Pelton advised defendant Horvitz, the president of the condominium's board of managers, that he suffered from muscular dystrophy and asked if the building could be made handicap accessible. Horvitz said he would look into it. For the next six months, whenever Pelton saw Horvitz, he would ask about progress with respect to his request. Each time, according to Pelton, Horvitz would repeat his prior response, that he "was working on it ." In July 2002, Horvitz told Pelton that he had been advised that the condominium had no legal obligation to provide handicap accessibility.

In June 2003, Pelton was diagnosed with a torn meniscus in his right knee, attributed by his physician to the strain placed on his knees at 77 Park Avenue. According to Pelton, his wife asked the building superintendent if the board of managers could install a ramp at the building's front entrance or construct a handrail to assist him. The superintendent responded that "we'll look into it," but nothing was done.

During the summer of 2003, Pelton contacted the New York City Commission on Human Rights (HRC), which, after an investigation, determined that the building could accommodate handicap access. In a September 26, 2003 letter, HRC notified the managing agent that Pelton had made "an informal complaint" regarding the lack of disability access at the building. The letter advised that city, state and federal law prohibited discrimination based on disability, and that HRC representatives had visited the building and determined that the building lobby could accommodate a code compliant ramp. Other than Pelton's conversations with Horvitz, this letter was the Board's first notice regarding plaintiffs' Human Rights Law claim. [FN1] In response to the HRC letter, the managing agent, by letter dated October 15, 2003, advised plaintiffs that the condominium had retained architects to investigate the possibility of modifying building access in conformity with code requirements.

*2 In a letter to HRC the following month, a law firm engaged by the condominium wrote that while the condominium wanted to make a reasonable accommodation for Pelton with regard to the building's entry, two architects had determined that in terms of "both physical impracticality and cost," the installation of ramps would appear not to be reasonable. The letter further stated that the condominium's board of managers was "reasonably certain" that, in terms of access to the lobby and elevators, there had been no significant alteration since the building was built in 1924. The letter concluded that the condition complained of existed when the building became a condominium and when Pelton purchased his apartment.

By letter of the same date, the managing agent advised HRC that representatives of both it and the board had met with architects and had discussions with legal counsel for the Condominium Association regarding their "options" and "responsibility" with regard to the complaint. By letter of March 8, 2004, HRC informed the attorneys for the condominium that a senior designer in the architecture department of the United Spinal Association had visited the building and proposed a plan for construction of a 21-foot ramp with handrails, leading to the building entrance, and the temporary use of an inclined wheelchair lift to provide access to the freight elevator inasmuch as the passenger elevator was temporarily out of service at the time of the designer's visit.

Plaintiffs' counsel wrote to the managing agent on April 6, 2004, stating the firm's opinion that Pelton had a meritorious claim against the condominium and its board, and expressing the hope that the matter could be resolved amicably. In the weeks that followed, after communicating with defendant board member Shaw and, later, defendant board member Benton, with regard to the problem, Pelton became "extremely encouraged."

By letter of June 10, 2004, the board of managers advised plaintiff that it had agreed to pursue a plan for handicap access "to the extent that same is legally, mechanically and economically feasible." The short-term solution proposed by the board involved a portable wheelchair lift to be operated by building personnel to assist Pelton in navigating the stairs to the passenger and service elevators. The long-term solution involved providing access through the snowblower storage room and the installation of platform lifts to both the passenger and service elevators.

In the same letter, the board also suggested that Pelton could "swap" his storage area for the "new storage room," which would be easily accessible, and that condominium rules would be waived to permit him to install a washing machine in his apartment. The letter also indicated that a new directive was being issued to the building staff, on duty 24 hours a day, to assure that optimum assistance would be available to him. The board requested that he sign the letter to indicate agreement to the proposals, but Pelton, on the advice of counsel, refused. At his deposition, he admitted that the "snowblower room" accommodation offered in the letter was reasonable.

*3 Pelton responded to the letter one week later by writing directly to board member Shaw, with whom he felt he had established a rapport. He stated that when he, Shaw and Benton had discussed the problem late in May, Benton had said a portable chair lift was going to be ordered and would be in the building within several weeks. "[D]ishearten[ed]" that accommodations had not yet been made, and that the board had only "outline[d] plans" and not made "more of a real commitment," Pelton stated that he was "unwilling to sign the letter without some changes."

On July 14, 2004, plaintiff, along with Shaw, Benton and a representative of the managing agent, attended a demonstration of the Garaventa lift, a portable stair climber, in the building lobby. After Shaw explained that the stair climber was intended to be used until June 2005, when the passenger elevator renovation would be completed, at which time a permanent access solution would be explored, Pelton complained that the board was "dragging its feet and was violating the law," discriminating against him by its failure over 2 1/2 years to resolve the problem.

Thereafter, on July 29, 2004, Shaw left a message on Pelton's answering machine that the board was taking the position that the portable stair climber was an acceptable permanent solution. Later that summer, a law firm retained by the building, the board and the managing agent contacted HRC in the hope of resolving the matter. After HRC advised Pelton of the building's interest in negotiating the matter, he refused to discuss the matter further, and instead commenced this action against the board members individually, the building and the managing agent, alleging that they discriminated against him by failing to make reasonable accommodations to allow him access to his apartment.

Meanwhile, the board purchased the Garaventa lift and placed it in operation on November 16, 2004, less than two months after the commencement of this action, at a cost of $13,000. Correspondence between counsel, which ended on or about November 19, after the installation of the lift and before defendants served their answer, reflects that the parties reached a stalemate. While Pelton indicated an interest in settling the matter, he wanted a full set of plans and a professional estimate of the starting and completion dates of construction. Defendants were unwilling to incur additional expenses, but would contract for a full set of plans and specifications, including--"if legally and economically feasible"--an estimate of the starting and completion dates, only if plaintiff would waive his objections to the snowblower room proposal (in addition to the existing Garaventa lift) as a reasonable accommodation.

On September 25, 2005, a newly developed proposal, the "east/west" plan, and a $130,000 assessment to fund the plan, were approved at a special meeting of unit owners, which plaintiffs did not attend or participate in by proxy. At his deposition, however, Pelton admitted that either the snowblower room plan or the east/west plan would reasonably accommodate him.

*4 In their answer, defendant board members and managing agent asserted counterclaims for declaratory judgment that the Garaventa lift, as implemented, and the snowblower room proposal, if feasible and as implemented, constituted reasonable accommodations as to Pelton's physical condition under the NYCHRL. Thereafter, by notice dated July 21, 2005, these defendants moved for summary judgment dismissing the complaint. The board members argued that since they acted in good faith and exercised honest judgment in responding to and handling Pelton's request for reasonable accommodations, their actions are shielded from judicial scrutiny. In so arguing, they stressed that they had relied on the advice of counsel and their architects and heeded HRC's recommendations in attempting to make the building handicap accessible. Furthermore, they argued that given the condominium's bylaw requirements as to expenditures, [FN2] they acted prudently in first attempting to obtain Pelton's approval before presenting their accommodation proposals to the unit owners for a vote. The managing agent argued that no cause of action lies for a third party against an agent of a disclosed principal based on the agent's alleged omissions or failure to act.

Supreme Court denied the motion in its entirety, rejecting the individual board members' argument that their actions were protected by the business judgment rule, which, it held, afforded no immunity where the board's decision is alleged to have been made on an unlawful discriminatory basis. As to the managing agent, the court, while acknowledging the general rule of non-liability upon which the agent relied, pointed to the exception that an agent for a disclosed principal is not shielded from liability for its affirmative acts of negligence. Significantly, however, the court failed to identify any such act on behalf of the individual board members or the managing agent. It also held, citing Human Rights Law (New York City Admin. Code) § 8-107(5) (the effect of which is to extend liability for discriminatory acts to the managing agent of an owner), that "the managing agent's status as the agent for a disclosed principal does not as a matter of law shield it from plaintiff's claims." We reverse.

[1] [2] "[T]he business judgment rule prohibits judicial inquiry into actions of corporate directors 'taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.' So long as the corporation's directors have not breached their fiduciary obligation to the corporation, 'the exercise of [their powers] for the common and general interests of the corporation may not be questioned, although the results show that what they did was unwise or inexpedient' " ( Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d 530, 537- 538 [1990], citations omitted).

[3] Recognizing the competing interests among unit owners that are often at issue in board decisions, the Levandusky court cautioned:

*5 A ... condominium is by nature a myriad of often competing views regarding personal living space, and decisions taken to benefit the collective interest may be unpalatable to one resident or another, creating the prospect that board decisions will be subjected to undue court involvement and judicial second-guessing. Allowing an owner who is simply dissatisfied with particular board action a second opportunity to reopen the matter completely before a court, which--generally without knowing the property--may or may not agree with the reasonableness of the board's determination, threatens the stability of the common living arrangement.

Moreover, the prospect that each board decision may be subjected to full judicial review hampers the effectiveness of the board's managing authority ( id. at 539-540, 554 N.Y.S.2d 807, 553 N.E.2d 1317).

Thus, the Court of Appeals decided that the appropriate standard for judicial review of decisions of boards of managers of residential condominiums and cooperative corporations "is analogous to the business judgment rule applied by courts to determine challenges to decisions made by corporate directors" (id. at 537, 554 N.Y.S.2d 807, 553 N.E.2d 1317).

This "deferential standard" that has become the hallmark of the business judgment rule (40 W. 67th St. v. Pullman, 100 N.Y.2d 147, 154-155 [2003] ) requires the courts to "exercise restraint and defer to good faith decisions made by boards of directors in business settings" (id. at 153, 760 N.Y.S.2d 745, 790 N.E.2d 1174). Thus, in Pullman, where a residential cooperative corporation terminated the tenancy of a shareholder-tenant, the Court of Appeals held:

To trigger further judicial scrutiny, an aggrieved shareholder-tenant must make a showing that the board acted (1) outside the scope of its authority, (2) in a way that did not legitimately further the corporate purpose or (3) in bad faith ( id . at 155, 760 N.Y.S.2d 745, 790 N.E.2d 1174).

[4] As a review of the record clearly reflects, plaintiff has failed to make a showing of any of the three elements that would trigger judicial scrutiny of the board's action. Nor, as already noted, could Supreme Court, in its denial of the motion, point to a single fact giving rise to liability on the part of any of the defendants. Distilled to its essence, the alleged wrongdoing is the board's delay in reconstructing the building to eliminate the steps that were in place long before passage of the Human Rights Law. But, as the board showed in moving for summary judgment, it has permitted Pelton to have a washing machine in his apartment and agreed to change the location of his storage locker so as to eliminate any inconvenience to him. It has spent $13,000 to purchase a Garaventa lift to eliminate the need for Pelton to ascend or descend steps leading to the building elevators. The board attempted to reach a mutually agreeable accommodation providing access enhancements, but Pelton refused to confirm in writing that he would accept such accommodations if implemented. When Pelton belatedly acknowledged that he would accept an architect's proposed structural alterations as a reasonable accommodation, the board, on the advice of counsel, followed condominium bylaw requirements and requested and received the unit owners' approval and a related $130,000 assessment, pursuant to which the unit owners would pay for the structural alteration plan. The individual board members' showing thus established that the board, in reliance upon the professional advice of its architects and counsel, satisfied the business judgment rule's requirement of taking action in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of the condominium's purposes.

*6 The burden thereupon shifted to plaintiffs, who, to defeat summary judgment, would have to offer proof of unlawful discrimination sufficient to raise a triable issue of material fact (see e.g. Hitter v. Rubin, 208 A.D.2d 480 [1994] ). Conclusory or speculative allegations of discrimination are insufficient to deprive corporate directors of the protection of the rule precluding judicial scrutiny of board decisions ( see Captain's Walk Homeowners Assn. v. Penney, 17 A.D.3d 617 [2005]; Jones v. Surrey Coop. Apts., 263 A.D.2d 33, 36-37 [1999] ).

[5] In bringing an action against the individual members of a cooperative or condominium board based on allegations of discrimination or similar wrongdoing, plaintiffs were required to plead with specificity independent tortious acts by each individual defendant in order to overcome the public policy that supports the business judgment rule ( see Murtha v. Yonkers Child Care Assn., 45 N.Y.2d 913 [1978]; Konrad v. 136 E. 64th St. Corp., 246 A.D.2d 324 [1998] ). In Konrad, where the complaint failed to allege any independent wrongful conduct by an individual director of a cooperative, the court stated (at 326):

That the cooperative corporation's board of directors may have taken action that "deliberately singles out individuals for harmful treatment" does not, ipso facto, expose the individual board members to liability. The proposed cause of action ascribes no independent tortious conduct to any individual director, and plaintiff's proposed ... cause of action is therefore deficient as a matter of law [citation omitted].

Here, neither the complaint nor plaintiffs' submissions on the motion assert a specific claim against any of the individual defendants other than as a member of the 77 Park board. In Brasseur v. Speranza (21 A.D.3d 297 [2005] ), this Court, noting that the complaint failed to plead the individual members of a cooperative's board of directors had "acted tortiously other than in their capacity as board members," dismissed a cause of action as to the individual members ( id. at 298, 800 N.Y.S.2d 669). As in Pekelnaya v. Allyn (25 A.D.3d 111 [2005] ), where this Court rejected the claim of an injured party who sued the individual unit owners of a condominium for a defect in a common area of the condominium, the common elements of a condominium are solely under the control of the board of managers. The same reasoning applies here to the individual members of the board of managers, since control of the board's policies lies in the hands of the board collectively, not in the hands of any individual member.

Plaintiffs have failed to show that any board member, much less each board member, has engaged in individual wrongdoing. In fact, Pelton does not even allege contact with each of the board members, much less acts of discrimination separate and apart from the actions taken by the board members collectively on behalf of the condominium. Supreme Court's decision, if permitted to stand, would, without any evidence of individual wrongdoing, subject these defendants to expensive, intrusive and time-consuming litigation ( see Konrad, 246 A.D.2d 324, 667 N.Y.S.2d 354), hardly a fitting reward for those "fellow tenants who volunteer their time, without compensation" as members of a governing body that takes on the burden of managing the property for the benefit of the other owners (see Levandusky, 75 N.Y.2d at 536-537, 554 N.Y.S.2d 807, 553 N.E.2d 1317).

*7 The standard set forth in Levandusky, which permits review of board decisions "when the challenger demonstrates that the board's action has no legitimate relationship to the welfare of the cooperative, deliberately singles out individuals for harmful treatment, is taken without notice or consideration of the relevant facts, or is beyond the scope of the board's authority" ( id. at 540, 554 N.Y.S.2d 807, 553 N.E.2d 1317), should also serve as a minimum standard for challenging the conduct of individual board members. Nothing in this record offers even a suggestion that these criteria have been met as to any board member. Courts must hold those who would challenge the decisions of condominium and cooperative boards to the requirement of pleading with specificity claims of discriminatory conduct or wrongdoing. Otherwise, the threat of baseless litigation, with its attendant serious financial and personal burdens, [FN3] would pose a formidable obstacle to those willing to volunteer their talent, experience and knowledge for the common good of their homeowner communities by serving on such a board.

[6] As to the other moving party, the managing agent correctly argues that as an agent for a disclosed principal it is not liable to Pelton, a third party, for nonfeasance. It has long been an "established rule of law that the agent is not liable to third parties for non-feasance but only for affirmative acts of negligence or other wrong" ( Greco v. Levy, 257 App.Div. 209, 211 [1939], affd 282 N.Y. 575 [1939] ). The reason is clear. "Unless the agent has assumed authority and responsibility, as if he were acting on his own account, then the duty which the agent fails to perform is a duty owing only to his principal and not to the third party to whom he has assumed no obligation" ( Jones v. Archibald, 45 A.D.2d 532, 535 [1974] ).

[7] Here, plaintiffs have not pleaded or shown circumstances that would demonstrate either that the managing agent owed Pelton a duty or that it was affirmatively negligent. As managing agent, it lacked authority to direct structural alterations to the building. Nor, as plaintiffs contend, can it be held accountable to them for failing to counsel the board to perform the necessary alterations, since the duty it allegedly failed to perform would have been owed to its principal, the board, not to plaintiffs ( Greco, 257 App.Div. at 210-211, 12 N.Y.S.2d 470). In accordance with this "established rule of law," the managing agent cannot be held liable for a claimed failure to counsel the board to act to make the building disability accommodating.

In justifying the denial of summary judgment to the managing agent, Supreme Court cited Bartman v. Shenker (5 Misc.3d 856, 863 [2004] ), which noted that liability under the Human Rights Law could be imposed upon an owner's agent based upon a violation of New York City Administrative Code § 8- 107(5). [FN4] In Bartman, which is readily distinguishable, the building owner's agent refused to provide any reasonable accommodation to the handicapped plaintiff beyond agreeing to store a portable ramp that the plaintiff provided. Here, the managing agent was unaware of Pelton's request until it received HRC's letter, to which it responded and took immediate action, retaining architects to determine whether Pelton's disability could be reasonably accommodated.

*8 Plaintiffs' chief complaints against the managing agent--that it utilized stall tactics in providing unsupportable statements to HRC that the building had retained architects to address the access issue, and advised Pelton that elevator renovations were a higher priority than work required for handicap access--are without merit. Aside from engaging two separate architects to render opinions as to the building's handicap accessibility, it provided a reasonable accommodation to Pelton by way of the Garaventa lift during the elevator renovation, even if it did suggest that the renovation was of a higher priority. The HRL provides a remedy against a managing agent only upon a showing that the agent has committed a discriminatory act. None has been shown here.

We have examined plaintiffs' other arguments and find them without merit.

Accordingly, the order of the Supreme Court, New York County (Judith J. Gische, J.), entered January 24, 2006, which denied defendants' motion for summary judgment, should be reversed, on the law, with costs and disbursements, the motion granted and the complaint dismissed. The Clerk is directed to enter judgment accordingly.

M-1834--Pelton, et al. v. 77 Park Ave. Condominium, et al.

Motion seeking leave to file amicus curiae brief granted.

All concur.

FN1. The condominium's bylaws require written notice of any desired board action.

FN2. Under section 13 of its bylaws, approval by more than 50% of the unit owners is required to make structural alterations having an estimated cost of more than $50,000.

FN3. Here, plaintiff seeks the outrageous sum of $23.5 million in punitive and compensatory damages, a figure that may surface as a contingent liability on the individual board members' personal financial reports or have other adverse collateral consequences to them. And, of course, public policy precludes insurance coverage for punitive damage claims (see Biondi v. Beekman Hill House Apt. Corp., 94 N.Y.2d 659, 663 [2000] ).

FN4. It shall be an unlawful discriminatory practice for the owner, lessor, lessee, sublessee, assignee, or managing agent of, or other person having the right to sell, rent or lease or approve the sale, rental or lease of a housing accommodation, constructed or to be constructed, or an interest therein, or any agent or employee thereof:

* * *

(2) To discriminate against any person because of such person's ... disability ... in the terms, conditions or privileges of the sale, rental or lease of any such housing accommodation or an interest therein or in the furnishing of facilities or services in connection therewith.

--- N.Y.S.2d ----, 2006 WL 3365473 (N.Y.A.D. 1 Dept.), 2006 N.Y. Slip Op. 08674


Thursday, November 30, 2006

Façade Upkeep Proving Costly Surprise for Many Homeowners

New York Sun
BY GABRIELLE BIRKNER - Staff Reporter of the Sun
November 30, 2006

Amid the slew of cheerful cards and letters being sent out this holiday season, thousands of New Yorkers stand to receive at least one mailing they'd rather return to sender — a "Dear Homeowner" letter comprising a hefty bill.

With an approaching deadline to comply with a local law requiring mid- and high-rises to maintain their façades, many city cooperatives and condominiums are undergoing extensive exterior renovations. Often picking up the tab for that work, which commonly exceeds $1 million a building, are shareholders of co-ops and owners of condominium units.

A film producer and entrepreneur who six years ago bought a studio apartment on East 84th Street, Adam Riemer, recently received a letter from his cooperative board informing him that he'll be subject an assessment to cover extensive brick replacement work. "If the value of an apartment increases, and it keeps things safer for people walking below, I think it's fair — as long as it's not outrageous," he said.

Still, Mr. Riemer, 34, said he's dreading the forthcoming assessment bill, which he expects will be slipped under his door any day now.

Local Law 11 of 1998 requires all structures six stories or taller to commission architects or engineers to inspect their facades, and then file detailed reports to the New York City Department of Buildings every five years. The next deadline is February 21, 2007. This statute, which applies to about 12,000 residential and commercial buildings, superceded a less-comprehensive Local Law 10 of 1980 — passed after part of a Morningside Heights apartment building fell off, killing a Barnard College student.

The engineering reports can be labeled "Safe," "Unsafe," or "Safe With A Repair And Maintenance Plan." Buildings that are "Unsafe" must immediately erect scaffolding. Structures called "Safe With A Repair And Maintenance Plan" five years ago must have completed the planned façade amelioration by the February deadline.

"All year, buildings have been doing this work, and trying to finish it up before the cold weather, and before the reports are due," a senior vice president of the Real Estate Board of New York, Marolyn Davenport, said. "Millions and millions of dollars are going into façade restorations right now." Ms. Davenport, who is also the board president of her Brooklyn Heights cooperative, said architects, engineers, and construction managers already have a so much work that it has been hard for buildings to secure even a handful of bids.

In apartment towers that don't have adequate rainy-day reserves, governing boards can choose to finance the project, which can drive up monthly common charges, or to levy "assessments" on homeowners. The assessments can range from a one-time payment of several hundred dollars to monthly installments totaling tens of thousands of dollars.

Assessments depend on a variety of factors, including the size of the building, the extent of the necessary repairs, the cost of the materials needed to fix the damage, and how much contractors charge for labor.

"Since so many buildings are doing work at the same time, I wonder if contractors are overcharging, because they know they're not going to lose business," an owner of a two-bedroom condominium on West 100th Street, Jeremy Caplan, said.

Mr. Caplan, 31, has been subject to two assessments in as many years — the first assessment was levied about two years ago to repair the pre-war building's plumbing system; the second was imposed just recently to pay for façade work tied to the 1998 law. Letters placed under doors notified unit owners of forthcoming assessments, he said.

Combined, these charges are costing Mr. Caplan, a magazine writer, $300 a month in addition to his monthly maintenance. "It's definitely an added expense, and there's little you can do about," he said. "It seems like this is just part of owning an apartment in the city."

The president of a cooperative on East 67th Street, Bruce Lee, said exterior maintenance would likely force the board to assess tenants in the 80-unit building early next year, adding: "We know that there is going to be a charge, but don't yet know how much."

Mr. Lee, a 75-year-old author, said that leading up to the last five-year deadline, shareholders in his building owed an average of $6,000, which could be paid off in installments over three years. He said the law was a "necessary evil" because so many buildings would otherwise put off making major repairs to keep down costs for its residents. "If you're going to cut the budget, building maintenance is often the first thing to go," he said.

Apartment owners who are not able to afford the assessments may be able to negotiate a less-formidable payment structure with their building's board or management company. "If an elderly person on a fixed income came to us, we might let them pay it out over a longer period of time," a board member of a West 55th Street cooperative Iris Shorin, 64, a real estate broker with DJK Residential, said. "We'd certainly be kind, but we couldn't waive it altogether."

A shareholder of an Upper East Side cooperative, Albert Weil, 64, said the cost of exterior maintenance seems to have nearly doubled in the past five years. "Essentially, there are very few contractors who do this kind of work, and we're really at their mercy," Mr. Weil, an insurance broker whose building is drawing on its reserve funds to pay for the required work, said. "It's one of these situations, where if you don't like their bid, there are five or 10 other buildings that need work. These people have enough business."

The president of the Council of New York Cooperatives and Condominiums, Marc Luxemburg, told The New York Sun that the city's one-deadline-fits-all approach drives up labor costs. "It's called the law of supply and demand," he said. "There's no statutory limit to how much a contractor can charge."

To ease the burden on contractors facing a bottleneck of work, and on property owners picking up the tab, the council has been lobbying the New York City Department of Buildings for a staggered filing deadline. That has not materialized, but the buildings department did grant an extension of up to nine months for finishing façade work — provided that the delay won't cause a threat to public safety, and that the necessary paperwork was filed by November 21.

Buildings that have not requested extensions face code violations that could lead to fines and even imprisonment if they do not complete their façade work and file their reports.

There is a two-year filing window for reports, but a spokeswoman for the buildings department, Jennifer Givner, said she expects a "significant portion" of buildings to file very close to the deadline. "It doesn't seem like it should come as a surprise," Ms. Givner said. "It's not a new law, and we've done a lot of outreach, but still buildings tend to wait till the last minute."

Sunday, November 5, 2006

Common Costs for Upgrades

The New York Times
November 5, 2006

DECIDING how to raise money for improvements can be as contentious as agreeing on how much to spend.

Boards typically choose from four options, said Paul J. Herman, executive vice president and director of management for Brown Harris Stevens Residential Management, which oversees around 140 midsize Manhattan buildings.

The buildings can draw funds for the projects through reserves, assessments, refinancing the mortgage or taking out a line of credit. Shareholders, Mr. Herman said, are less likely to revolt over assessments for aesthetic or lifestyle upgrades like a renovated lobby or new gym than for “back of the house” improvements they can’t see or enjoy.

Mr. Herman listed ballpark costs for some common improvements; the ranges are approximate, depending on a building’s size and the desired bells and whistles.

Renovated lobby: $40,000 to $400,000 for a lobby 30 feet by 40 feet; $250,000 to $1,000,000 for a larger Park Avenue-style building. The low end might include new lighting, painting, carpets, artwork and some furniture. More money buys frills like ceiling treatments, moldings, windows and elegant furniture.

Playroom: Around $50,000 for a nice room if space configuration is necessary, or less for an existing room.

Gym: $100,000 to $200,000-plus (equipment could cost $30,000 alone)

Roof deck: $100,000-plus; need to replace a deteriorating roof first.

Roof replacement: $25,000 to $250,000, depending on size.

Boilers and burners: $100,000.

Elevators: $15,000 for refurbishing the interior; $100,000-plus for replacement.

Full-time doorman: $62,000 annually per unionized doorman; to cover all shifts, a building needs at least four. Security guards cost less and are expected to do less. TERI KARUSH ROGERS

Which Building Improvements Really Pay Off?

The New York Times
November 5, 2006

PEOPLE who bought their New York City apartments before the real estate boom have spent the last few years reveling as their investments ballooned. Lately, though, the euphoria has dimmed for some as civil wars have erupted over how — or whether — to spend money to improve their buildings.

On one side of the deepening schism are boom-era buyers seeking to spruce up their buildings to protect resale values and surround themselves with a level of grandeur commensurate with the size of their investment.

But some of their more tenured neighbors (a portion of whom continue to be branded themselves as “yuppie scum” or worse by the renters they displaced) resist fixing what doesn’t seem broken. Some also shrink from anteing up for what they consider frivolous plastic surgery on top of maintenance charges already swollen by the spiking costs of fuel, taxes and insurance.

“There’s always tension between those groups,” said Harriet Kaufman, a senior managing director at Warburg Realty. “People who’ve spent a lot of money really want a lot of amenities, and they have more money than the other owners. They want nicer hallways and lobbies, better uniforms, better services. But if you’ve been there for a while, you think, ‘This looks O.K. Why do I have to go spend money and get assessed every month for this? I’m happy.’ ”

As the two factions forge uneasy compromises, both must ponder the same questions: Once the broken boilers, leaky roofs and crumbling facades are repaired or replaced, which improvements will provide the biggest bang for the buck? And which will enhance owners’ quality of life while instilling an acquisitive gleam in a buyer’s eye?

Advice from real estate experts yields ammunition for both the have-enoughs and have-not-enoughs, while identifying some overlooked cheap thrills that cost little or nothing but reap big rewards.

Casting an eye toward resale values, brokers recommended attending to the urban version of curb appeal first.

“First impression is everything,” said Toni D. Haber, an executive vice president at Prudential Douglas Elliman.

In other words, “the lobby, the lobby, the lobby,” said Anthony vanEyck Miller, a vice president at Bellmarc Realty. “Even though the average buyer is not a designer and has not been trained in design or construction, they sense a good lobby in the same way you sense whether an apartment is nice or not. A lobby that hasn’t been renovated in 20 years and obviously has scuff marks is not fresh.”

A dingy lobby can deliver a death blow to a deal: “I’ve had people say to me, ‘This is a really nice apartment, but I can’t live in a building like this,’ ” said Margaret Furniss, a vice president at Stribling & Associates.

Still, an appealing lobby isn’t necessarily elaborate or quadruple-mint. If there is a doorman, he should have a proper desk; the lobby should be brightly lighted and recently painted; any awning leading into the lobby should look crisp and untattered and should clearly display the building’s address.

If the lobby lacks a doorman, the debate over hiring one can be both economic and status driven. A study to be published next summer in the University of Chicago Journal of Legal Studies found that even factoring in the higher monthly carrying charges, apartments in full- or part-time-doorman buildings sell for about 12 percent more than comparable dwellings in nondoorman buildings. One of the study’s authors, Jonathan J. Miller, president of the appraisal firm Miller Samuel, said he examined 100,000 transactions in more than 6,000 Manhattan buildings over two decades.

In smaller buildings, the cost of a doorman can significantly raise maintenance charges. “If you only have 50 apartments, how do you afford a doorman?” asked Rochelle Bass, an executive vice president at Bellmarc. “Is it worth having to spend $1,500 more a month?”

Gloria Sokolin, senior vice president of the Fox Residential Group, thinks so. She owns a seven-room apartment in a 30-unit building near Central Park in the West 70s with a part-time doorman and favors full-time doorman service because she believes it would increase her resale value, despite the additional $1,000 a month maintenance fee. “I could sell for an extra $700,000 to $1 million,” she said, using sales at comparable buildings on her street as a benchmark.

After tending to the lobby and hiring (or not) of a doorman, many buildings add the sorts of amenities found in newer developments. The most popular are gyms, followed by roof decks and/or playrooms, depending on available space and the particular demographics of a building’s residents. With more people choosing to raise families in the city, retrofitted basement playrooms are in vogue among buildings populated by young families and grandparents.

“A playroom is not terribly expensive if you find room for it,” Ms. Kaufman said. “It’s a very attractive thing, to have a place to go with parents and nannies.”

Done well, it can also serve as an entertaining or meeting space. When the Extell Development Corporation bought the Belnord, a prewar building on West 86th Street, where sprawling apartments with three to six bedrooms rent for $10,000 to $40,000 a month and surround a vast courtyard, the company converted a large chunk of ground-floor space into a daytime playroom in which the toys can be stowed behind cabinetry and the room transformed into an area for adult use.

But as developers have already discovered, the most popular amenity — measured in use by residents and demand by buyers — is a gym. In a city crammed with strivers who work out at 5 a.m. or midnight, such exercisers appreciate not having to don a coat, raise an umbrella or waste time treading to a treadmill (or to their squash or basketball courts).

“People want the convenience even if they belong to a gym,” said Gary Barnett, president of Extell, a condominium developer whose long résumé of gym-laden buildings includes the Orion near Times Square as well as the Avery and the Rushmore, now under construction on Riverside Boulevard in the West 60s.

Still, Ms. Kaufman said: “There are gyms and there are gyms. I think you have to stay with the feeling of the building. If you’re in an average nice building, you’re not going to put in a $500,000 gym, but people are happy to have a little fitness room with a TV.”

On the other hand, warned Jonathan Phillips, a vice president at Halstead Property, those little fitness rooms can become outdated fast. “You’re looking at equipment models from five years ago, and it’s such a snobbery-driven thing,” he said.

When it comes to roof decks, it appears that Manhattanites would rather work out than chill out.

“We show apartments in buildings that have lovely roof gardens that are very charming and seductive, but there’s never anybody there, while there’s always people in the gym,” observed Roberta L. Golubock, a senior vice president at Sotheby’s International Realty.

This phenomenon can be most acute in buildings where many residents own weekend homes. Yet while it won’t necessarily close a deal, brokers said, a rooftop terrace exerts an almost gravitational pull for buyers who can’t afford private terraces or who never had the opportunity to underutilize a roof deck. “It’s wonderful to have and people use it at the beginning, but they don’t get the use you would think,” said Phyllis J. Pezenik, the director of residential sales a DJK Residential.

In one prewar co-op building on West 81st Street, a block from Central Park, discussions about a roof deck began five years ago at the behest of the board president, who persuaded others that property values in the building would rise by 15 percent if the building’s black tar roof — with open south-facing views of the Museum of Natural History, Central Park and Midtown Manhattan — could be converted into outdoor space.

This campaign “built a groundswell of support,” recalled Larry J. Wente, a principal of GWK Architects in Manhattan and the board member who led the roof deck committee. But the project was delayed for several years by more essential and costly work, including repointing the exterior.

The planning for the lushly planted and expensively furnished roof deck finally started a year ago. The $259,000 project (budgeted at $288,000) took two months to complete, with funds coming from the building’s reserves.

Yet despite positive feedback from shareholders since the deck opened in July, only a few use it. “Usually, there were two or three people up there on a summer night in perfect weather,” said Mr. Wente, who noted that the building is now considering adding a gym on the ground floor or in the basement. So far, none of the 120 apartments have been sold, leaving the value-added theory untested.

Mr. Miller, whose appraisal firm has been hired by boards to help prioritize projects, voiced skepticism about the value of a roof deck or any standalone luxury upgrade. One or two “à la carte” amenities “seldom have an impact” on values, he said.

“It’s the package of amenities that a building offers that is inherent in the value of the building,” he said.

As they consider the Big Three amenities (gyms, roof decks and playrooms), buildings also address the ever-present desire for more storage.

“When it comes to what New Yorkers really need and complain about not having, it’s always space, and they can never have enough of it,” Mr. Phillips said. “Most of all, they need space for all the things they don’t really need.”

Some buildings continue to perfect themselves through additions like wine cellars, centrally filtered water, central air-conditioning and soundproofed windows. After the blackout three years ago, some buildings even considered installing generators.

“A lot of buildings looked at that, but I wouldn’t say a lot of buildings did it,” said Paul J. Herman, the executive vice president and director of management at Brown Harris Stevens Residential Management. “It’s noisy and dirty and an expensive proposition. It might cost $250,000 for a 100-unit building just to power the water and elevators.”

There are far cheaper frills to be had, like a clean and cozy laundry room with potted plants, chairs and a bookshelf “library” where residents can exchange books.

There are also some measures a building can take to increase resale values without spending a dime, including liberalizing house rules to allow washer/dryers in apartments, permitting pets, allowing strollers to be parked outside front doors and easing down-payment restrictions from 50 or even 100 percent to a more standard 20 or 25 percent.

But the most overlooked cheap fix of all may be teaching staff members to be nice to others.

“It is amazing that more boards, supers and managing agents are not aware of this issue,” said Mr. Miller of Bellmarc. At an open house on the Upper East Side a few months ago, “one of the doormen had a temper tantrum when my buyers didn’t realize they had to sign in at the desk. He reduced the wife to tears, and her husband and I were consoling her in the elevator.”

While that is an extreme example, Mr. Miller said: “It costs the board absolutely nothing to train staff not to shout into walkie-talkies as they march across the lobbies, or keep staff from yelling at each other and having loud conversations. I have even heard them use vulgarity. If a client arrives first and hears this, especially when you’re asking them to part with over a million bucks, this is not a good image.”

Of course, in established condos and co-ops, any improvement requires the board to come to a decision and then implement it. The typically glacial pace of progress may protect conservative pre-boomers for a while, but even one strong personality can tip the balance.

“Many board members act like little lambs going to the slaughter,” Ms. Bass said. “They follow whoever takes the lead.”

When residents clash, “sometimes there’s a real problem that sort of creates some bad feeling in the building,” said Suzel Stampleman, a senior associate broker at Bellmarc. Usually, boards “end up doing not as much as the new people would like and more than the older people would like.”

In the end, as Ms. Kaufman of Warburg observed: “It’s just a question of numbers. The new people will prevail as they outnumber the old people.”

Piotr Redlinski for The New York Times

VIEW OF THE PARK Shareholders in a co-op on West 81st Street decided to spend $259,000 to build a roof deck on their building expecting property values to rise.

Nancy Boszhardt

The rooftop about a year ago.

Monday, October 30, 2006

Room at the Top: There's a huge vacant lot for sale on West 72nd Street. No, up there!

New York Magazine
By S.Jhoanna Robledo
October 30, 2006

Traditional co-ops are leery of decisions that will disturb residents—approving ambitious construction work, for example. Then again, the Franconia isn't particularly traditional. Decades ago, mobster Arnold Rothstein ran his business from this building, brokering a deal here (known as the Franconia Treaty) with another branch of the Mob. And despite its brass-and-marble lobby and dreamy address (across from the Dakota), "it's a classy joint but … not a 'Good morning, sir' kind of building," says board president David Wineberg. And it's groundbreaking, even: The Franconia hopes to be the first co-op to sell its rooftop for such a high price. The board is asking $8.7 million.

Rooftop penthouses have been added to buildings before, cake-topper-style, but usually by individual homeowners who want to expand upward. This deal is different, because shareholders are inviting outsiders to buy and build. To a point, anyway: It's in a designated historic district, so the structure can't be visible from the street, meaning it has to stand ten feet back from the parapet and rise no higher than two stories. Bottom line: The buildable space amounts to 4,000 square feet.

Why the gamble? In 1993, explains Wineberg, the cooperative took out an unusually rigid mortgage that couldn't be paid down partially, refinanced, or split up. (Residents would like to convert the building into a condo, and the loan precludes that.) It also prevented the co-op from taking on extra debt, requiring punishingly high monthly charges. With thirteen years to go on the loan, the board wanted out, and to do so it had to pay off the mortgage entirely, all $8 million–plus of it. "They're not doing it for a profit," says listing broker Elie Khen of Bellmarc Realty. "Each dollar is spoken for."

Still, $8 million will buy a fully finished townhouse in the area, so will someone bite? "It's the location," says broker-architect Moriah Kosch, who's consulting on the deal. "To be able to customize with these views"—the building peeks into Central Park—"is a rarity." Wineberg says most residents are onboard, despite the headaches ahead. After all, if they get the asking price, their maintenance charges could be cut in half. "They see the dollar signs," he says.

Thursday, October 26, 2006

Is There a Time Limit on Collecting Late Fees?

October 26, 2006
Q & A

Q I serve on my co-op's board of directors. We have a apartment owner who is consistently late with her maintenance fees. Although she eventually pays her base charges, the late fees have accumulated to more than $1,000. Should the board be concerned about a statute of limitations?

A "Collecting late charges from co-op shareholders is a common problem, as the amounts are generally small and collection proceedings are expensive," said Elliott Meisel, a Manhattan co-op and condo lawyer. He noted that the oldest late fees may be deemed part of a "continuing performance obligation," and in that case, the six-year statute of limitations begins to run after the last charge was imposed.

"The safest course for the co-op is to apply all payments made by the shareholder against the oldest outstanding amounts due," he said, "allocating any remaining arrearages against the current maintenance charges, and making it clear, in writing, that any unpaid balance consists of all or a portion of the most recent charges."

Address questions to Real Estate Q&A, The New York Times, 229 West 43rd Street, New York, N.Y. 10036, or by e-mail to: Answers can be given only through the column.

Sunday, October 1, 2006

Can a Board Restrict The Use of the Roof?

The New York Times
October 1, 2006

Can a Board Restrict The Use of the Roof?

Q -- We own a co-op apartment on the top floor of a town house. When we were shown the property, the broker told us we could use the roof above the apartment. During our interview with the co-op board president and his wife, the wife said that she used to go up there ''to sun with the children.''

Three years later, the board president issued a letter stating that the building's insurance policy restricts the use of the roof to emergencies and that it must remain closed at all other times. We have asked to see a copy of the directive from the insurance company but have had no response. What can we do?

A -- Arthur I. Weinstein, a Manhattan co-op lawyer, said that a co-op may adopt rules that limit or prohibit use of a common area for any cause that the board deems reasonable. ''This can include insurance requirements, structural limits of the roof or the inappropriateness of the roof surface for walking, furniture or plantings,'' he said.

Mr. Weinstein noted that comments made by a broker or a board member's wife are not binding on the co-op and do not limit its right to change its rules.

He noted that the only circumstances under which a court might review the reasonableness of the board's decision would be if the proprietary lease or offering plan made it clear that the letter writer had exclusive rights to use the roof.

Assessments Can Affect the Tax Basis

The New York Times
October 1, 2006

Q -- Can regular monthly payments that are made along with common charges but are listed separately under Capital Reserve Fund be used to increase the tax basis for a condominium when calculating capital gains?

A -- Martin M. Appelbaum, a certified public accountant in Manhattan, said assessments levied by a condominium board for capital improvements, whether paid as a lump sum or in monthly increments, can indeed be used to increase the tax basis of individual units, thus reducing the profit when the apartment is sold.

This assumes that the board has complied with Internal Revenue Service guidelines. Mr. Appelbaum said that under I.R.S. regulations affirmed in numerous court decisions, the board must pass a resolution and notify unit owners that the funds being raised will be used for capital improvements only and not for operating expenses or ordinary repairs.

In addition, he said, there should be a separate line item on the monthly bill for the capital assessment. And finally, he said, money collected for the capital assessment should be held in a different account than the one used for other funds collected by the condominium.

"The condo board should consult with its C.P.A. firm to ensure they are following the proper procedure for billing and collection of the funds," Mr. Appelbaum said.

Friday, September 29, 2006

Can Owners Be Assessed to Construct a Gym?

The New York Times
September 29, 2006
Q & A

Q Our co-op has imposed an assessment to build a gym. Since the gym will be available only to shareholders who pay a membership fee, can all shareholders be made responsible for the cost of building it?

A "The short answer is yes," said Howard Schechter, a Manhattan co-op lawyer. "Decisions on how much to assess shareholders and how to spend the money are within the discretion of the board of directors."

Mr. Schechter noted that while it might seem that the gym will benefit only those who pay membership fees, this is not necessarily the case. "The addition of such an amenity may benefit all shareholders, even those who do not join, by making the entire building more desirable to prospective purchasers," he said.

He pointed out that buildings often spend money on amenities — playgrounds, roof gardens and parking garages, for example — that are not used by all residents.

Tuesday, September 5, 2006

Blight on the block

New York Post

September 5, 2006 -- AFTER the arrival of "The Apple," everyone on West 94th Street has an opinion - few of them positive.

A documentary filmmaker who's lived across from the building (formerly the Mount Royal Hotel) for the past five years says, "You noticed right away that the neighborhood changed, literally overnight. You now notice people stumbling down the street, clearly chemically incapacitated."

Marina Higgins, a longtime Upper West Side resident, fears The Apple will drag down local property values. A real-estate manager at The Argo Corp., she saw a drop in value for a property she oversees on West 101st Street in 2003 - when the city opened The Frant, another "temporary" shelter, across the street.

With The Apple open on her own block, she says, "I have a concern for the quality-of-life issues based on what has occurred in and around this facility and its impact on other residents."

A woman who's lived nearby for years said, "One night while walking home, a druggie said something very rude. Now, I walk down 93rd Street instead, just because there's an uncertainty." And she's not the only one who now avoids the block.

"Some of these people shouldn't live in this area," agreed one Apple resident/Department of Homeless Services client, herself a former crack dealer. "I seen a 20-year- old pregnant crackhead, [offering acts of prostitution] on the corner . . . There are at least two crack dealers in The Apple."

"The drug gangs are operating out in the open," reports Aaron Biller, a spokesman for Neighborhood in the Nineties, a community group that has spent the last 20 years cleaning up the area. He said the 91st Street Playground and Riverside Park are now sprinkled with crack vials. "You now see a congregation in Riverside Park and on Riverside Drive; people are sleeping in the park. None of these things we've seen before," said Biller.

Residents also report rampant panhandling since The Apple's arrival.

"The first night it was open, I was panhandled in several places. On Broadway between 91st and 96th, there's been a tremendous increase . . . it's the worst I've seen since the Dinkins' administration," said Biller.

"But frankly, I'm sympathetic with some of the panhandlers - and usually I'm not. After having moved from Brooklyn, they're in sticker shock. Food on the Upper West Side costs a multiple of what it costs in Brooklyn. They get vouchers that don't go very far. That's a serious nutritional value situation - DHS put nine pregnant women in this facility," said Biller.

DHS is trying to quell community concerns, say Apple residents. "They tell us we're not allowed to stand around on this street," one pregnant resident said, pointing to 94th Street between West End Avenue and Riverside Drive. "So everyone just walks around the corner to smoke."

Many residents told of a client who gave an interview to a NY1 reporter, bemoaning The Apple's squalid conditions - then, on returning to the shelter, was told by an official, "Give another interview, and you're evicted."

Inside, the most popular complaint is bedbugs. "There's bedbugs everywhere, people are running to the doctor everyday," said one DHS client, who claims to have lived in 315 W. 94th St. since April.

Do they remove the infested mattresses? "No, they tear up the place, spray every three weeks, but there's still bedbugs. There's mice and everything," she says, showing her arms with multiple bites.

Many also complain about the bathrooms - just one for every 12 residents. "They're very nasty - they have some Mexicans [to clean], but they do nothing to help you," said one.

"My main complaint is the showers; they don't hold the water on the inside and everything gets soaked," said Hopkins, 33. A three-year veteran of "the system," as he calls it, his review of The Apple is more positive, saying: "It's not as bad as the last facility" the city put him in, the Auburn shelter in Brooklyn.

After he left, his wife said she disagreed, saying her husband wouldn't know how bad The Apple is, because he spends all his time at his girlfriend's house.

Before DHS converted the Mount Royal into The Apple, the building housed 65 single-room-occupancy tenants, with the rest of the building used as an illegal tourist hotel.

A project director for the Goddard-Riverside Community Center's West Side SRO Law Project, Molly Doherty, said the remaining SRO tenants are scared.

"Tenants are concerned that [the new landlord] Alan Lapes has entered into a relationship where he has no incentive to protect rent-stabilized units. Lapes stated that he would not take on any new stabilized tenants."

"We're concerned about the SRO tenants," said Gale Brewer, the City Council member representing 94th Street. She's against Mount Royal being used as a shelter: "The building is not appropriate for a homeless shelter. There are no kitchens, no places to prepare food, no refrigerators. We're trying to move people out, to a better location. The commissioner has stated it will be closed by the fall."

What if it's still open by Christmas?

"I truly believe it will close by the fall."

Tom Elliott ( is a member of The Post's editorial board.

Thursday, August 10, 2006

Love the Building's Exterior? It May Affect Your Interior

The New York Sun
BY GABRIELLE BIRKNER - Staff Reporter of the Sun
August 10, 2006

Many New York apartment hunters find it easy to fall in love with cooperatives and condominiums in buildings that have lavish turn-of-the-century exteriors. What these would-purchasers find less endearing than the intricate stone carvings and terracotta cornices are the possible complications and tremendous cost of maintaining these extreme façades.

Often, the more architecturally ornate a building, the higher the hurdles tenants face when making even interior renovations, and the more costly the assessments can be, a senior vice president at Prudential Douglas Elliman, Corinne Pulitzer, said.

Ms. Pulitzer, herself a longtime tenant in one pre-war Park Avenue cooperative, said she and other shareholders recently absorbed the $1 million cost of repairing the building's façade and elaborate cornices. "It's a privilege to buy in a building with such a history, but it's also an obligation to maintain,"she said.

Some New Yorkers drawn to apartment buildings with extensive façades have a keen appreciation of Old World architectural elements and the upkeep they require, she said.

Others don't understand how restrictive these buildings can be when it comes to making renovations, even common ones like installing through-thewall air-conditioning units or new windows, another broker, Andrew Phillips, said. "Mostly, they're not thinking about it when they're buying an apartment," Mr. Phillips, a senior vice president of Halstead Property, said.

A highly decorative exterior is generally a "selling point" for a buyer looking to make a pre-war apartment purchase, an executive vice president at Elliman, Tamir Shemesh, said. "It's obviously pretty rare, because there's a limited amount of ornate façades"he said."You need to realize that if the façade needs reappointing, it's going to cost a lot more than it would in a regular building."

If the Alwyn Court, for example, were to undergo a large-scale façade restoration, as it did in the early 1980s, it would be a mega-million project.The exterior details of that West 58th Street French Renaissance-style building appears more suited for a Loire Valley castle than a Midtown apartment building. Its intricate terracotta ornaments, covering the entire façade, make the 1909 structure eye-catching amid some more modest neighbors.

Situated off Seventh Avenue, the Alwyn Court is among Manhattan's most ornate façades. Other examples include the Ansonia, the Pythian, and the Lucerne, all on the Upper West Side; the New York Yacht Club in Midtown; the Bayard-Condict Building in NoHo, and the former Loews Theatre in Washington Heights, architectural scholars said.

Such decorative exteriors — evidence of the nation's burgeoning wealth and prosperity — finally fell out of favor following World War II, and the style was never fully revived, despite a short-lived effort to reintroduce them during the 1980s, the scholars say.

"The style endures, but not among the elite architectural practitioners," the director of technical services at the New York Landmarks Conservancy, Alexander Herrera, said. He added that the city is peppered with "failed efforts" of contemporary designers who have attempted to revive elaborate building ornaments.

"The hardest thing to get right is the proportions, and the proportional system used by traditional architects, which is very complicated and something practically nobody understands anymore," Mr. Herrera said.

Today's top architects are more interested in experimenting with new forms and materials than in reviving more classical styles, Mr. Herrera said, citing Frank Gehry and Zaha Hadid. "I think they want to use their imaginations, and come up with something new, like every other generation," he said.

Mr. Herrera said city façades became progressively grander during the 19th century, through the early 20th century. He said the Art Deco movement of the 1920s and 1930s proved to be ornamental architecture's "last gasp" before a more austere form of modernism took hold.

A fellow at New York's Institute of Classical Architecture and Classical America, Francis Morrone, a columnist for The New York Sun, said he rejects the notion that the cost is too high or the craftsmanship too intricate to create cost-effective buildings with façades as detailed as their counterparts from a century ago. "There's no reason why we can't do that today," he said.

According to Mr. Morrone, the Institute of Classical Architecture is one of two American schools of architecture — the other is at the University of Notre Dame — where the curricula are based on classical technique.

An architect and a real estate developer for JSS Advisors in New York, Eugene Sisco, said he knows of few contemporary developers willing to build in elaborate Old World style. "People want light, and they want air," he said, referring to the boom in glass residential construction. "They don't want punched openings, the type of windows you see when you go down Park Avenue. Modernism, not Postmodernism, remains the dominant theme in architecture today."

Wednesday, August 9, 2006

The Heroes of Housing Just Say No

The New York Times
August 9, 2006
David Leonhardt

THERE'S an old "Saturday Night Live'' skit in which Eddie Murphy sets out to experience life as a white man in New York. He starts in a dressing room, where makeup artists lighten his skin as he studies up by reading Hallmark cards. Duly prepared, he wades into Midtown Manhattan calling himself Mr. White.

His first stop is a newsstand, where the white cashier conspiratorially tells him to take a newspaper without paying for it. Then comes a ride on a public bus that morphs into a lounge with cocktails and music after the last black rider gets off.

Finally, Mr. White enters the Equity National Bank to ask about borrowing $50,000 even though he has no identification, no collateral and no credit history. But no matter. Such things are mere "formalities," a loan officer says, while removing stacks of cash from a metal box. "Just take what you want, Mr. White. Pay us back anytime. Or don't. We don't care."

Back in 1984, when the skit was shown on NBC, nobody would have imagined that it was poking fun not just at race, but also at banks' lending standards. At the time, not even a white man in a gray suit could have gotten a loan without any documents and paid it back at his leisure.

But if you watch the skit today on YouTube or a DVD, you can't help but see another, unintended layer of satire. In the last few years, so-called no-doc and low-doc mortgages — in which loan applicants can avoid formalities like pay stubs and instead simply state their income — have surged in popularity. Critics call them "liars' mortgages."

And banks, which often sell a mortgage to a group of investors shortly after issuing it, sometimes seem downright relaxed about how quickly borrowers will repay a loan. The hottest mortgage for the last year has been something called an "option ARM" that comes with a choice of payments on each monthly bill. In California, more than 25 percent of new mortgages this year have been option ARM's, up from about 5 percent in 2004, according to LoanPerformance, a mortgage data firm.

The main point of these innovations has been to sustain the housing boom by allowing a family that can't really afford a house to buy it anyway. But clearly, this can't last. Already, it has raised the risk of a sharp housing downturn and, eventually, of a recession. The Federal Reserve acknowledged as much yesterday by halting its campaign of interest rate increases.

So the housing industry is going to have to find a new business plan. Fortunately, there is one small sliver of the market — here in New York, as a matter of fact — that has kept its wits and can serve as a model. The trouble is that it's not usually considered to be a model for anything. Indeed, it may be the most hated institution in New York.

Let us now praise the co-op board.

COOPERATIVE living got its start in the 1880's, inspired by Charles Fourier, a French socialist who argued that cooperation bred efficiency. A French immigrant to New York named Philip Hubert picked up on the idea and built arguably the first co-op, the Hubert Home Club, near the current site of Carnegie Hall.

Despite their utopian origins, co-ops quickly turned into a celebration of capitalism and exclusivity. Soaring new Hubert Home Clubs opened on Madison Avenue and next to Central Park, offering the sort of living space that has always made New Yorkers envious, according to the writer Elizabeth Hawes.

Today, co-ops — which sell shares in a corporation that owns the building, rather than individual apartments — make up about three-quarters of the city's apartments. As always, the boards have the right to reject any buyer who doesn't quite fit, however they define "fit." More than a few co-op boards would have made good fodder for the Mr. White skit.

Anyone who has ever been interviewed by a board knows what a humiliating process it can be. Its members can demand bank statements from you, ask about intimate details of your life and then reject you without saying why. Or the board can admit you and make life miserable once you have moved in. In the 1990's, one co-op resident on the Upper West Side was moved to have a party after the board president died.

But say this for most co-op boards: they take their fiduciary duties seriously. They generally require at least a 25 percent down payment, and while the rest of the real estate business has been getting more permissive, co-op boards have been using the sellers' market of the last few years to crack down. Some Park Avenue co-ops require buyers to have a net worth equal to four times an apartment's price, up from the old standard of three, said Jonathan Miller, an appraiser.

So thanks in large part to co-ops, the shadiest parts of the housing boom are less common in New York. Less than 8 percent of mortgages issued in the metropolitan area this year have been option ARM's. The share is closer to 30 percent in most other cities as expensive as New York.

It's hard not to conclude that New York's high prices are based more on economic fundamentals than those in California or South Florida. (And no, I don't own property in New York, though I have relatives who do.) The city surely won't be immune to a downturn, but it does seem less likely to crash. In the last year, price increases here have slowed far less than those in San Francisco, San Diego, Boston, Connecticut or Long Island.

Most real estate experts still consider a crash — say, a 20 percent decline — to be unlikely, even in California. But there is now a legitimate risk that the excesses of the housing boom have laid the groundwork for an economic downturn. At the very least, some families are going to regret having taken out such aggressive loans when the higher payments eventually come due.

In coming months, federal regulators plan to issue new guidelines that will remind banks of the risks inherent in their new products and will encourage them to disclose the risks to borrowers. But the guidelines are pretty mild, and they're not exactly ahead of the curve.

The real lesson of co-op boards, then, will have to fall to those of us doing the borrowing. When you're about to take on hundreds of thousands of dollars in debt, you will probably do well to be conservative, to ask whether you can make the payments even if something goes wrong, rather than only if housing prices keep rising, interest rates start to fall and you get a big raise. Consider it a mantra for a newly sane real estate market: Embrace your inner co-op board.

Thursday, July 20, 2006

A Porch and Flowering Meadow, 6 Floors Up

New York Times
July 20, 2006

DAVID PUCHKOFF, Eileen Stukane and their daughter, Masha, were sitting on their porch, looking out over a carpet of sedums topped with tiny yellow, white and purple flowers and watching storm clouds build over the Empire State Building.

Front porches are hardly the norm in high-rise Manhattan, nor are rooftop meadows, but the couple have managed to create both, inspired by a visit eight years ago to a friend in Elk Lake, Pa.

"We were sitting on the porch, the lake was only 20 feet away, and I said, 'That's what I want — I'd love to have a porch,' " said Mr. Puchkoff, who is in his mid-60's.

Mr. Puchkoff, who lives with his family on the top floor of a six-story building on Greenwich Street in the West Village, went to an architect friend, Lawrence Tobe, and told him he wanted a porch. "David wanted a folly, something to take him away from New York," Mr. Tobe said. "I've done some roof terraces, but nothing that cool."

The porch is basically a glorified bulkhead over a hole punched in the ceiling of the family's loft to make way for a nautical stairway that rises to a landing with a galley-like kitchenette, with two paned windows and a door that opens to the roof. Now, the couple — he is a developer, she is a writer — don't have to leave the city to hear the slam of a screen door, or watch a flock of mourning doves pecking for insects and seeds across the meadow.

"What I find so wonderful about a green roof, as opposed to potted plants, is you really feel like you're looking out at unbroken land and nature," Ms. Stukane said. "And it's restorative."

This 1,200-square-foot meadow is planted with thousands of sedums. Native mostly to Europe and Asia, these fleshy plants thrive in heat and drought. (When it rains, they absorb water like a sponge.)

They grow here in about seven inches of a lightweight soil medium — 83 percent expanded shale, 17 percent compost — that does not strain the weight-bearing capacity of the roof.

A series of liners prevent both root penetration and water leakage. Drip irrigation lines, used only when needed, snake beneath the soil layer. And 2,200 plants, shipped from Emory Knoll Farms, a green-roof nursery in northern Maryland, were planted in three days in June 2005 by the family and two friends.

"I had a lot of fun doing that, probably because I got my hands dirty," said Masha, 13, who loves to sit cross-legged among the plants, watching the monarch butterflies sipping nectar from the flowers. "It's not bad getting dirt between your fingers."

Mr. Puchkoff, who has developed half a dozen small commercial and residential projects over the past 30 years, acted as his own contractor and did much of the labor himself, resulting in a cost of $12 a square foot rather than the $17 a square foot it might have been.

The benefits of a green roof are many: the plants insulate the building from heat in summer and cold in winter, and they reduce storm-water runoff by absorbing rain.

The family lives in the first building Mr. Puchkoff ever developed. The building, a former wicker and basket warehouse built in 1906, is brick, with stout wood girders and joists.

To begin this project, he went to a green roof symposium in 2003, offered by the Earth Pledge Foundation (, where he picked up the basic principles of design and construction.

His biggest concern was that the roof would leak. But the layered construction, with sealants and barriers to root penetration, guards against that possibility.

To make sure it wouldn't collapse, he hired a structural engineer who calculated how much weight the roof could support. The answer was 35 pounds per square foot, dry weight, or 60 pounds per square foot, if saturated with rain.

That calculation limited Mr. Puchkoff's green roof to no more than eight inches of soil, so he chose seven, just to be safe, even building a little crest of a hill, over a lightweight polystyrene mound, "because I didn't want it perfectly flat," he said.

He sealed the roof with a combination of polyethylene and woven polyester from the Andek Corporation, whose products he had used over the years to seal custom-built bathtubs. (Cost: $1,500, including labor.)

Then he was ready to install the four-layered system he chose from American Hydrotech.

The layers consist of a five-millimeter polyethylene membrane that keeps roots from penetrating the roof; then a spongy moisture retention layer, which absorbs any water that overflows the next layer of "Floradrains," from a German company named ZinCo. These are cup-like plastic units that look like upside-down egg cartons; when laid together, they hold water that seeps down through the layer of soil, which is laid over a filter that prevents sifting and clogging of the drains.

The multilayered system establishes not only a reservoir of water for plants, but also a backup supply, held by the moisture retention sponge, which evaporates slowly, in dry times, to moisten plant roots.

At the final stage, drip tubes are laid down on top of the soil filter, before the soil medium is spread. These drip lines, plus some early top-watering, supplied water to the young plants — which arrived as plugs with three-inch roots, and were planted eight inches apart — until they were well-established. (The Hydrotech system cost $3,800, plus $800 labor.)

The arrival of 2,400 pounds of soil ($2,000), from Laurel Valley Soils, a company based in Avondale, Pa., was a family event. River Valley Organics, a company in Wrightsville, Pa., arrived with a truck and blew the soil mix up a five-inch tube snaked up the side of the building ($4,000 for the entire job).

Six stories up, the family watched a river of soil pour onto their layered roof. The depth was kept consistent because Mr. Puchkoff had the foresight to collect two dozen chopsticks from Sushi on Hudson, a Japanese restaurant in the neighborhood, and mark them at seven inches.

Once the soil was in place, Mr. Puchkoff called Edmund Snodgrass, the owner of Emory Knoll Farms, a sedum nursery in Street, Md., to let him know the roof was ready; 2,200 succulents ($1,100 plus $500 labor) arrived two days later.

Sedums are ideal roof plants, because they can close their stomata, or pores, to reduce transpiration under a hot sun. They open them again at night, when temperatures cool, releasing oxygen and taking in carbon dioxide. Grasses and perennials can't do this, so they die a lot faster if they run out of water on a hot roof.

Sedums also grow well in shallow soil, needing no nutrients other than the compost of their own decomposing leaves. Other plants need deeper soil, which adds weight to the roof, and fertilizer, which leaches nitrates and phosphorus into storm water, and then into bodies of water.

The Puchkoffs never have to prune their sedums. Mr. Puchkoff just spends an hour or so, every other day, weeding. Fortunately he loves to weed.

"It's calming, " he said. "And it brings me closer to the plants, which are beautiful."

Masha loves to watch Talinum calycinum, a drought-tolerant Great Plains native, one of the few plants on the roof that is not a sedum. It opens its delicate rosy-pink flowers with the sun, and closes at sundown.

She observes the ants and ladybugs, the bees and butterflies. But the birds may be her favorites.

"We have a mockingbird that sounds like a car alarm," she said. And this spring, she watched many birds flying off with bits of mulch, used to protect a small Japanese maple, for their nests. The maple will eventually form a mound over its boat-like container, blending into the landscape. Fragrant lilies follow spring daffodils in planters near the porch; there is a planter for basil and mint, and another for Rosa rugosa.

No matter what the weather, when Masha comes home and can't find her dad, she usually discovers him up here, on the roof.

"It's comforting," Mr. Puchkoff said, looking out at the rain. "I hadn't thought about the coziness of porches."

John Lei for The New York Times

Eileen Stukane, David Puchkoff and their daughter, Masha, created a porch and a miniature meadow on top of their West Village apartment building.