Breaking Bad Dealing with Rule Breakers

Breaking Bad

 As the old adage goes, one bad apple can upset the apple cart. The same theory  holds true for residents who choose to ignore bylaws or house rules, even if  they are well-intended and in place to serve the greater good of the community.  In the end, it’s the board that must take the pulse of the community and determine what rules  are appropriate and instruct the managing agent to enforce them as necessary.  

 Setting the Rules

 “The board has the task of setting the rules and policies and the management  company has the responsibility of implementing and following through with those  decided upon by the board,” says Mark Levine, the vice president of business development for New York-based  property management firm Excel Bradshaw Management Group, LLC. “The board often has an idea of where they would like to go with the policies  that they will set in place and being that managing agents manage multiple  properties and have a wider-view of how such rules are actually implements and  enforced, we can lend guidance to the whole process based on other experiences.”  

 Actually bylaws and house rules are not one in the same. Bylaws usually conform  to how the board or the association operates as a corporate entity and the  specific powers and duties therein. House rules and regulations usually relate  to use restrictions on the part of residents.  

 And there are numerous “experiences” that call into question that validity of a rule or a resident’s or tenant’s willingness to adhere to said rules. These include pet policies, noise  complaints and issues such as whether smoking is allowed in common areas, or  not at all. “The goal of any rule is to allow a great number of people living in close  quarters to live peaceably together. Good rules also make or save the building  money at the same time and the best rules allow for all of this and for  amenities that benefit the lives of the residents,” says Adam Leitman Bailey, founder and partner of the real estate law firm Adam  Leitman Bailey, P.C., with offices in Manhattan and Rockland County.  

 “Setting rules for smoking and noise have been quite effective,” he says. “Banning smoking in common areas such as hallways and requiring measures to be  put in apartments to stop the spread of smoking has been beneficial to many  buildings.”  

 There are other examples of beneficial rules, Bailey says, including regulating  hours for piano playing, holding parties, and moving in and out of buildings.  And then there are the rules that are considered unreasonable or biased. “Rules do not usually work when they benefit one or two board members over the  interests of the building,” says Bailey. “For example, allowing parties on the roof may be good for the building but very  bad for penthouse owners with terraces. This is a common problem in buildings  where there is no winner.”  

 Can Good Rules Go Bad?

 In most cases, the common house rules included in the governing documents are by  and large deemed “good” by the board and residents. Stewart E. Wurtzel, an attorney and partner with  New York-based law firm Tane Waterman & Wurtzel, explains that some existing rules are “antiquated” and require periodic revisiting. “When a new board comes in they might have to adopt new rules,” he says. “Most rules serve a purpose and I am drawing a blank as to what might be  considered a bad rule.”  

 Wurtzel says that a unit smoking ban is an example of a questionable rule  because it is could be considered an “infringement” on a shareholder’s rights. A rule that might be considered a “good” rule is yearly bed bug inspections, but this too is somewhat open-ended. “It is difficult to enforce compliance because this is usually done once a year  and requires entrance into the unit,” he says.  

 Eric Goidel, an attorney and partner with the New York-based law firm Borah  Goldstein Altschuler Nahins & Goidel, P.C., says a “good” rule is one which is supported by all residents and serves a legitimate  corporate purpose, i.e., promoting issues such as safety, preservation of the  building and/or quality of shareholder life.  

 “A bad rule is one where you either cannot get buy-in by the residents, have  difficulty in enforcement or where the rule is potentially counterproductive to  being able to sell apartments,” says Goidel. “While a bad rule can vary from building to building, possible examples can  include an absolute prohibition of pets or an absolute prohibition of smoking  in individual apartments.”  

 As Wurtzel noted, often times a board will have to revisit existing rules and  determine if there are any changes required due to new legislation. In some  cases, a rule might simply be outdated and require removal. In the latter case,  these rules are rarely enforced and a general sense of apathy sets in for  residents, the board and the managing agent.  

 “The board of directors or managers have the ability to strictly or loosely  enforce the rules. The key to a well-run building is understanding the needs of  the residents and listening and hearing the problems between the residents or  with management or the building employees,” Bailey says. “Although buildings are corporations, and they should run like an efficient  business, board members should have and display empathy for their fellow  residents. Most of the hundreds of the buildings we represent have very good  standards of conduct.”  

 Enforcement and Removal

 When rules are ignored or otherwise overlooked, there are ramifications, which  can happen immediately or gradually over time. To this end, house rules that go  unenforced can compromise the overall operation of the building. “Whether it’s allowing pets to enter in the front door and soil the carpeting in the lobby  or unabated noise complaints between two neighboring apartments, the failure to  act upon and to penalize those who are breaking the rules can be detrimental  for the physical and social components that make up the community,” says Levine. “Lawsuits can be levied against the board for inaction on various issues, so it  is in everyone’s best interests that all of the rules are followed and violators penalized.”  

 While Wurtzel says boards operate in a “mini-democracy,” he adds that board members can be voted out. This can be an issue if a board  insists on drafting and enforcing rules that a resident or residents deem  unfair, illegal, or otherwise infringe on their use and enjoyment of the  building.  

 “Shareholders always have the ability at an annual or special meeting of  shareholders to vote to amend house rules and, thereby by vote of the  shareholders, to overrule decisions of the board. Further, house rules adopted  by a board also cannot overrule proprietary lease provisions which can only be  amended by shareholders,” says Goidel. “Where there is a runaway board, shareholders always have the opportunity to vote  in new board members at the next annual meeting. Most house rules can be  changed by either the board or the shareholders.” He adds that certain rules can only be changed by the shareholders. “Houses rules specifically adopted by the shareholders cannot be overruled by any  future board.”  

 As the case often is, one or two residents might find issue with a rule or two,  and continually break them, which forces the board’s hand and causes them to react. Boards should be proactive and deal with an  issue promptly before the conflict escalates. “The penalties range from monetary fines to an eviction, as per the building  documents. The board should not throw out arbitrary amounts for different  violations of the house rules,” says Levine. “The fine structure should be readily available in the house rules so that each  and every shareholder who receives them acknowledges and understands that for  each rule that is broken, the fine will be X amount of money.”  

 Levine says there should be a sliding scale for enforcing any breach of the  house rules. For example, the first offense should be a $50 penalty, the second  offense, $100, while the fourth offense might be a $500 penalty plus eviction  for violating the proprietary lease provisions or similar rule. “Depending on how serious, they could have different fine structures, such as an  illegal sublet, which might be a $2,000 fine plus removal of the illegal  subtenant.”  

 Wurtzel says documentation is critical when dealing with a repeat offender. “If the rules are being ignored whether it is excessive noise, pets or lack of  carpeting on the floor, there has to be substantial communication between the  board and the managing agent, and everything has to be well-documented.”  

 For many well-intended boards and managing agents, determining at which point to  involve an attorney is often confusing. “Most boards spend much less money on a problem when they get the attorney  involved early on to make sure the board is following the proper protocol and  its own governing documents,” says Bailey.  

 And he adds that cooperatives often have an edge on condominiums when addressing  issues via the courts. “Cooperatives have much more power as they can use landlord-tenant court to  address their problems in fast proceedings called a summary proceeding.  Condominiums are limited to state Supreme Court where a resolution can take  years.”  

 Remember, whatever your board’s approach to rulemaking and rule-breakers is in your building, professionals  stress that establishing a sound, rational set of fair and enforceable rules is  always best and the easiest way to promote harmony in your building community  for all concerned.  

 W.B. King is a freelance writer and a frequent contributor to The Cooperator.

 

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2 Comments

  • What about Boards and their counsels that constantly break the Law, Make things up and not follow the By-Laws of corporation? Most people don't even know their rights are being violated because they never read the By-Laws.
  • Yep, I see wayward association governance thriving on apathy which is abundant. The winners of board elections simply make friends or gain the trust of owners to look out for them. Voters will look the other way if stuff doesn't directly affect them significantly. They are busy. If challengers are too ugly in their criticism even when justified it seems to backfire. Politics is the lion's share of achieving a seat, not who is correct. This is bound to be frustrating to many of the good guys out there trying to do right but our governance in a free country is still better than most of the world.