In New York City, condominiums (condos) are managed by a group of individuals called the Board of Managers, or simply, the Board. Similarly, for cooperatives (co-ops), the building is run by a Board of Directors, also referred to as the Board. The Board is responsible for maintaining the building, collecting common charges and maintenance fees from residents, and handling the finances. Whether a building is a new construction or a conversion from a different type of building, the Sponsor appoints the first Board. This is where potential issues often arise for those who purchase these recent conversions or new developments. If a Board is appointed by the Sponsor, it will typically prioritize the Sponsor’s interests over those of the residents.
At Bergstein Flynn Knowlton & Pollina PLLC, we have seen (and litigated) many cases of irresponsible and negligent Sponsors, supported by the Board they appointed. We offer a unique path forward, exclusive to BFKP and our team. As an alternative to litigation, we work with co-op and condo Unit Owners under a Sponsor-Controlled Board to collectively bargain for more power. We don’t just fight for a seat at the table; we battle for the whole thing.
The primary goal of a Sponsor-Controlled Board of Managers is to obtain a Certificate of Occupancy. In New York, Sponsors are only required to secure a temporary Certificate of Occupancy to begin selling units. Beyond that, Sponsors and their Boards aim to maximize profit and pay off any outstanding debts. This creates an incentive for Boards to suppress issues that could lower property values or incur costs for repairs.
Currently, construction defects, structural issues, and general resident complaints are rampant throughout New York City. Developers have cut corners, ignored regulations, or faced supply issues, leading to problems in many units across the city. We have worked with Unit owners dealing with bug infestations, massive water leaks, burst pipes, and structural defects. These problems not only diminish the quality of living but also significantly impact the long-term value of the property. In such cases, having legal representation can make all the difference in protecting your investment and ensuring your voice is finally heard.
How long a Sponsor has control of the Board depends on the building’s bylaws, which are written by the Sponsor. Generally, five years from the time the first unit in the building is sold is the maximum period a Sponsor can control the Board. Unfortunately, this five-year period is also the standard. Some buildings may transfer control after a certain percentage of units have sold, typically 50%. In some buildings, the Sponsor-Controlled period is the shorter of five years or reaching a percentage of units sold, while in others, it is the longer of the two.
On the extreme end, a Sponsor can set the sold unit threshold much higher than 50%—we’ve seen up to 90%. If the period is the longer of five years or reaching the percent sold threshold, it is possible that the Sponsor will never relinquish control of the Board. This can happen, for example, if sales are slow and the Sponsor chooses to rent units rather than sell them.
Negligence has a three-year statute of limitations, and Sponsors can maintain control of the Board for that entire period. Not every Sponsor will lie or obscure facts, but protecting yourself from this potential risk is always the smart decision.
The sooner unit owners can work together toward an Owner-Controlled Board, the sooner issues can be addressed; the sooner the Board can represent the actual community living in the building; and the sooner finances can be properly monitored. Once the Board is no longer Sponsor-Controlled, its priority shifts from selling as many units as possible to maintaining and improving the building. An Owner-Controlled Board can create a Capital Plan to ensure projects and expenses are budgeted for, regular maintenance is handled, and the building’s finances are in good standing.
The Capital Plan also assesses the current state of the building’s maintenance, the need for future construction projects, and financial health. With a comprehensive Capital Plan in place, residents can then confront the Sponsor with these issues, ensuring that their concerns are addressed. An Owner-Controlled Board fosters a sense of community and accountability, leading to a more transparent and effective management of the property.
Throughout the entire process of fighting for control of your Board, running the Board, and pursuing the Sponsor for ignored issues, Bergstein Flynn Knowlton & Pollina PLLC stands by your side. To learn how you and your neighbors can reclaim the power within your building, schedule a free consultation with our firm today. Call us at (212) 803-9025 to take the first step toward effective and empowered ownership.
