Press Mentions

Back

Policing the Craze to Combine Apartments

Habitat_logo

What the board needs to do before the walls come down.

By Matthew Hall

April 2016


 

Actress Marisa Tomei won an Oscar for her role in the comedy My Cousin Vinny, but one of her most recent productions turned into a drama that left no one laughing. The 51-year-old Brooklyn native, who collected her Academy Award as best supporting actress in the 1992 hit, lived in a modest Greenwich Village one-bedroom apartment until she purchased a neighboring unit and knocked down walls to double her living space.

Tomei recently told Elle Decor magazine that she was “scarred” and “exhausted” by the project, which was capped with a lawsuit when insurance companies representing three downstairs neighbors, including filmmaker John Waters, alleged that Tomei’s negligence led to $128,000 in water damage to their apartments.

Despite such potential headaches, combining apartments is a solution that an increasing number of New York City residents are using to create more floor space in a tight housing market. According to architect Oswald Bertolini, who designs conjoined spaces and reviews project proposals on behalf of co-op and condo boards, a once-common path taken by many New York City residents has come to an end. In the past, he notes, “the Wall Street guy [would have] an apartment on the Upper East Side and [commute home on the weekends to] a wife and five kids in Connecticut. [Now] they’re bringing their families back to the city.”

“Since 2006 it seemed like wealth showered on New York City and the city got much safer,” adds attorney Adam Leitman Bailey, principal in his eponymous firm. “Then we had a baby boom. All that together means more people want to stay here, but they want bigger apartments to raise their families in.”

Doing It Right

Industry experts say Tomei’s experience need not have been such a drama. A simple but iron-clad alteration agreement between the building and the owner doing remodeling should end anxiety. “There is a lot of litigation involved in combining apartments, but that can all be avoided with a proper alteration agreement,” says Bailey, who insists on a non-negotiable checklist for all apartment combination projects. “Boards should not be nervous. The key is to do preparation before beginning the alteration to prevent litigation.”

According to Bailey, there is “no excuse” for not establishing an application process that includes the following:

•   The application, which should include exact detailed plans of the intended work.

•   A time frame, which should state start and expected completion dates.

•   An insurance policy, which names the condo unit-owner or shareholder, the board, and the building.

•   A fee for processing the application and a fee for the co-op or condo for hiring its own engineer or architect to review the plans and approve them.

•   An agreement between the co-op or condo and the contractor to make sure the owner and building are protected from any problems that may occur.

•   An agreement indemnifying the building and the board for anything that may go wrong.

“It’s very simple,” says Bailey. “An owner or shareholder signs the alteration application, obtains insurance, follows the list of rules provided by the board and writes a check for the necessary fees, including the building’s enginner. The board approves the application, the managing agent delivers it to the person who wants to do the alterations, and you sign it. If it is not signed, then you don’t do the alterations. There is no negotiation in this. I have never seen anyone debate signing it. They follow the rules because if they don’t, the board won’t allow the alteration.”

Inspections Needed

Boards should also consider demanding the right to inspect work during the demolition or construction, as well as the power to enact a stop-work order, if necessary. Also important: an incentive to complete the work on schedule.

“These projects usually take [from] three months up to one year,” says [an attorney]. “The alteration agreement should have a time limit. If the job is delayed because they run out of cash or the contractor is slow, most agreements provide for liquidated damages to the board once you go over the agreed-upon termination date.”

It’s possible to add a safety net. “Most alteration agreements also have a provision for an escrow account to be in place, which is used in part to cover any damages to other apartments, [plus] fees incurred by the co-op or its own engineers,” [an attorney] says.

The Department of Buildings (DOB) has very clear guidelines that must also be followed. Indeed, one of the most important – and unseen – factors in apartment combination projects is modifying existing utilities and infrastructure.

“You have to be very careful with any natural gas lines and any structural beams,” says [an attorney]. “If electrical and plumbing systems are going to be changed, you must have notice from a contractor, the management, or an engineer that describes what impact the building might experience in terms of down time, so that it doesn’t interfere with other residents.”

Shares in a co-op will also have to be reassigned, which will affect monthly maintenance payments, taxation rates, and voting allocation. Combining apartments will also affect your building’s Certificate of Occupancy, the key document used to certify the legal use and occupancy of a building.

The C of O describes how a building is used – for example, as a two-family home, a parking lot, a 40-unit dwelling, or a store. The document is required when selling a home or refinancing a mortgage. But not all apartment combinations require a change in C of O. Laws were changed in 1997 to simplify the bureaucracy around apartment combination projects. If the goal is to create a larger living space and not alter the size of the building, the alteration is categorized as “Type II,” and a new C of O is not necessary. The key points to qualify for a Type II alteration include:

•   The apartments must either be on the same floor or adjacent floors connected by interior access stairs of not more than two stories.

•   Natural light and air requirements must comply with city codes.

•   Egress from any floor of the building is not altered.

•   The second kitchen must be eliminated and plumbing connections capped unless approved plans provide for an alternative use.

Some projects require special attention. Bertolini, the architect, recalls an “only in New York” project he recently reviewed where a well-known supermodel bought three apartments in one building and promptly launched a combination project. Her plans included installing a four-foot-high glass tub.

“She said she needed the tub as part of her beauty treatment,” explains Bertolini. “I don’t know why she needed it to be a glass tub, but I asked for her architect to send all the details. They did build it, but some things – like a marble staircase going up to the tub – had to have a safety handrail installed. Sometimes a lot of the plans that need revision are just common sense.”

Worth the Trouble

So, for a shareholder or unit-owner, is a conversion worth the cost and the effort? “If you can combine two apartments in an aesthetically pleasing manner, you can improve the value above the individual costs of the two separate units,” explains [an attorney]. “There is a premium for multiple bedroom apartments in New York City.”

The Number 1 piece of advice? Communicate, says Bertolini. “For the board, make sure you agree that this is good for the building. Then be positive, and inform everybody what is going on. For the apartment owner, tell the truth. Be upfront about the project from the beginning. We might have different interests, but we are all going to live together.”

Adam Leitman Bailey, P.C.

NEW YORK REAL ESTATE ATTORNEYS