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The New Rules Of Renovation: Part Two – The Solution!?

Now that you know the problems of renovating, it’s time to take a look at the proposed solutions and what they mean for you.  The new Alteration Agreement imposes few new restraints on the types of work owners can do, but it vests boards with considerably more control over the process by empowering them to use advance cost shifting as well as stringent monetary and other sanctions.

These are some of the major changes:

  • Under the Agreement you’ll have to pay upfront a Review Deposit – an advance on account for all the fees the building says it may incur as a result of the work you’ll be doing, from engineer to attorney’s fees to whatever else the board sees fit. (Par. 1.d) It’s the next step in cost shifting.  Instead of reimbursing the board for actual charges, the board will be able to bill you in advance for estimated costs. These charges will be in addition to administrative fees and a security deposit, which if reports are accurate, may range from a minimum of $5,000 upwards to $100,000 – an amount that is closer to the cost of renovations themselves in lots of buildings.
  • On top of that, if work goes beyond the required completion date, you have to pay in advance a specified amount per day before you’ll be allowed to continue. (See below.)
  • Add to all that, an inartfully drawn provision of the Agreement (Par. 3, Definition of Claims, Liabilities, Expenses ), seems to say that if you don’t pay on demand any amounts claimed due by the building (among other items) you’ll be liable not only for those sums (which are deemed additional rent and could trigger a default), but also for the payment of interest on them equal to the lower of 12% a year or the maximum legal rate (currently 9%).
  • And if you seek to modify these, or any other provision of the Agreement, odds are you will pay not only for your lawyer, but also for the building’s attorney.
  • There’s more.  If the board spends down the money you gave it up front, it can demand more, and if you don’t refill the coffers within 3 days, you’ll be in breach of the Agreement (Par 10), which carries potentially serious consequences. (See below.)
  • The Agreement does away with the notion of after-the-fact liquidated damages for late completion, and replaces them with a before-the-fact payment for a certain number of days at a fixed rate per day as a quid pro quo for the board granting an Extension Period to continue work for that number of days.  (Par. 6.d) The intent of these changes is at least twofold:  First, it’s an attempt to legitimize late fees for renovation delays, which courts increasingly have struck down as unreasonable penalties, by creating the illusion of owner consent to the fees. But it’s at least questionable whether a court would deem such consent as freely given, when it’s a condition for finishing your bathroom. Second, by collecting the cash upfront, the board no longer will  have  to go after non-payng owners, but you’ll likely have to take the building to court for a refund, paying your own and possibly the board’s legal fees, depending on the outcome.
  • It’s pretty standard that if you’re responsible for repairs, you pay for them, and if the building is responsible, it pays.  But under the Agreement even if the building is responsible for the repair, you have to pay if what it does impacts approved renovations you previously performed – even if the proprietary lease says just the opposite.(Par. 13)
  • Commit any breach of the Agreement, even though your transgression had nothing to do with work itself, but was some other infraction, like not paying up within 3 days any sum the building says is due, and the board can make you UNDO all the renovations you just did, and restore your apartment to the way it was. (Par. 17)
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