Member Associations React to COVID-19

In March, I contacted each region and shared what cooperatives in the Potomac Association of Housing Cooperatives were doing to handle COVID-19 issues/concerns and asked the regional representatives to do the same. Below is the feedback I received.

Potomac Association of Housing Cooperatives

ANNE HILL: Some cooperatives in the Washington, D.C., Maryland, and Virginia area have implemented the following:

  • Closed the office to the public or with limited access to load laundry cards
  • Sent COVID-19 Fact Sheet/Information to each member, as well as posted it in each building
  • Closed community rooms except for the food Share program but serving one member at a time
  • Increased disinfecting of common areas to twice a day making it mandatory that staff wears mask and gloves
  • Restricted repairs/work orders to emergencies only.

Cooperative Housing Association of New England

KIMALEE WILLIAMS, president of CHANE, located in East Hartford, Conn., said the following changes have occurred:

  • Closed all site offices to the public, permitting only the site manager and maintenance occupy that space. This arrangement required the office staff to set up drop boxes in outer lobbies and vestibules large enough for packets to fit (certification paperwork, applications, etc.). Staff also placed applications in those areas next to the drop box for pick up.
  • Closed community rooms. In order to ensure access to the laundry machines, vendors removed the token machines temporarily from the community rooms and into the laundry rooms or vestibules outside the community room or office.
  • Maintenance only performs emergency and health and safety repairs, and all other time is spent making ready vacant units. Increased cleaning of handrails, doorknobs, etc., in common areas by maintenance that provides comfort to the residents and also supports full-time pay for staff as it supplements their time lost not doing routine repairs.
  • Our resident service coordinators are providing limited access to the community room on days where Share or Meals on Wheels delivers so that residents can continue to eat. Drivers leave the food in a separate room and require the residents to go in one at a time to pick up the meal and immediately leave.
  • At this point our staff has does not have in-person contact with anyone, including vendors, unless absolutely essential.

Marcus Management, Inc. (Midwest)

KIM MARCUS, chief operating officer and regional property manager of Marcus Management, based in Farmington Hills, Mich., said when maintenance staff receives work order requests that they go through the following protocols before considering entering a member’s unit:

  • Is the work order an emergency? If not, then it should be recorded for future repairs. Have you travelled outside of state within last 60 days?
  • Have you had a temperature in last 30 days?
  • Have you had a cough, respiratory issue or other immune diagnosis in last 30 days?
  • If any responses are “yes,” report any illnesses to the office when submitting an emergency work order.
  • Management also provides staff that is required on property a letter of authority based on the functions they perform as an essential service.

Federation of New York Housing Cooperatives and Condominiums (The Federation)

GREG CARLSON, executive director of the Federation, said:

  • In New York State both residential building management and staff are deemed as an essential service. This requirement will vary from state to state and locality to locality.
  • We are working with the union to develop a plan to prevent more doormen from becoming ill. Ideas include installing a barrier so residents stay 6 feet apart, reducing the days the doormen work but increase the hours for those days and changing staff hours to nighttime to reduce contact with the residents.

This article was featured in CHQ fall 2020 issue. Click here to read the PDF newsletter.

 

Anne Hill is president of the Potomac Association of Housing Cooperatives

Working From Home and Residential Use Restrictions

How Effects from the Covid-19/Coronavirus and Resulting Changes in Industry May Require Housing Cooperatives to Re-Assess their “Residential Purposes Only” Use Restrictions.

The fallout from the Covid-19/Coronavirus pandemic has resulted in a significant shift in the working environments for those still employed. From the onset of the pandemic and the responsive efforts of our government and private industries, many working Americans are now finding themselves working from home. Whether people are working from home for the first time, or are working from home more often than before, this change has a potential impact on cooperatives with certain use restrictions, or “residential purposes only” provisions in governing documents.

It is not uncommon for housing cooperatives to have Bylaws and Occupancy Agreement that contain provisions restricting the use of the cooperative dwelling unit to that of “residential purposes only.” These provisions may not contain language or support for what happens wide-spread crisis, pandemics, or government restrictions, changes in industry, and the conditions in which general workforces perform their jobs and functions. This begs the question: How should a Cooperative approach enforcement of these use restrictions (i.e., “Residential Purposes Only” clauses)? Should these provisions be strictly enforced, or should they be relaxed due to the widespread change in the world we now find ourselves in? Will revisions or amendments to these restrictions and provisions provide relief?

These questions are just one aspect of how the change in times impacts the function and governance of housing cooperatives. Especially, how emerging and significant current events, such as all that has been brought on by the coronavirus pandemic, effects long-standing principles of cooperative living. This blog will focus on the specific “use restriction” noted above, a provision that restricts the “use” of the cooperative dwelling units for residential purposes only.

The short answer to these questions (should “Residential Purpose Only” use restrictions be strictly enforced against members/residents ​working from home during the ​pandemic and stay home orders?) is no. However, this does not suggest that ​these use restrictions be ignored. Rather, a case-by-case approach to enforcement is warranted. Neither is a complete or temporary cessation of enforcement of these restrictions recommended. Cooperatives should continue to assess these matters on a case-by-case basis, consulting its legal counsel when appropriate. In addition, now may be an appropriate time for Cooperatives to assess their policies to due to possible increases (whether temporary or long-standing) in members working from home.

One of the fundamental purposes behind the “Residential Purposes Only” use restrictions in housing cooperative governing documents goes to the foundational purpose of the cooperative corporation: to provide residential housing for its members. Although many ​ types of cooperative’s exist (i.e., farming cooperatives, workers cooperatives, banking cooperatives, etc.) housing cooperatives are unique. ​A housing cooperative’s Articles of Incorporation and Bylaws should state the intent, or purpose, in which the corporation was formed. Most commonly, these provisions state that the corporation’s purpose is to provide residential housing on a cooperative basis. The purpose of the corporation is a founding principle and building block of housing cooperatives, and should be lost or suffer due to economic changes from the coronavirus pandemic or changes in workforce industry standards.

With an understanding of the intent of the cooperative’s foundational and governing documents, ​the residential purpose of the cooperative corporation is furthered by certain use restrictions, commonly referred to as “Residential Purposes Only” clauses. These provisions bolster and support the corporation’s foundational intent. They are typically found in the Bylaws, Occupancy Agreements, and Policies, whereby additional covenants exist that prevent or prohibit members and authorized residents from using cooperative property and dwelling units for any reason other than residential purposes, such as running a business, or using the unit as one’s corporate address. Another reason for these restriction is tax related. The United States Internal Revenue Service “Tax Code” (see 26 U.S.C. § 1 et seq.) allows certain deductions for each member’s share of mortgage interest and/or real estate taxes. (see 26 U.S.C. §  216). ​The tax code’s allowable deduction distinctively applies to “cooperative housing corporations.” As part of the I.R.S.’ definition of “cooperative housing corporation” the code states that “each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation.” 26 U.S.C. § 216(b)(1)(B). Therefore, even the tax code incorporates a residential purpose context into its definition of cooperative housing corporation. As explained herein, ​the ​residential “use restriction” is entwined with other areas of the law that impact housing cooperatives.

While these use restrictions exist for a reason, we do find ourselves in unprecedented times. Many people have been required to work from home during the ​pandemic, and some have chosen to work from home for health and safety reasons. Depending on the State you reside, there may have been, or still in effect, executive orders restricting travel, restricting business, trade and commerce, defining what is an “essential function” or “essential service.” These restrictions have ​affected how we regularly conduct and approach the performance and function of our employment, our work and our jobs. If a cooperative takes a “strict enforcement” approach to these cases (i.e., finding that working from home violates these use restrictions), when the matter eventually gets into a court of law, a judge or jury may find that such action goes against higher governmental orders, is against new public policy, or is unjust under the circumstances. While this approach may all but unearth an ugly but inherent conflict between the functions of our government and a private housing cooperative corporation’s (and its members ability) to lawfully self-govern themselves, govern and restrict, where deemed appropriate, the corporation’s property and its allowable uses, ​ and the operation of the corporation, such strict enforcement is likely not the answer. Finding a member-resident in violation of a “Residential Purpose Only” use restriction for merely working from the confines of their cooperative unit, may not rise to a significant violation of the restriction. Under the current climate, such finding may not even rise to the level of a violation. Again, the main purpose of these use provisions is to maintain the purpose of the cooperative for “residential use” so as members and residents are not running a business out of their dwelling units.

With the considerations notes above, cooperatives should review these matters, both their current policies and any potential violations, on a case-by-case approach. These use restriction provisions may still be enforced ​where the intent and spirit of the use restriction is clearly being ​ violated. For example, if a member of a cooperative housing corporation is using their dwelling unit as to run a yoga studio, to run a hair and nail salon, or to run a shop or store providing other goods or services, ​surely those uses would violate residential use restrictions, even absent ​covid-19/coronavirus pandemic issues. However, it would be unjust to punish a member-resident who is required to temporarily work from home, by no choice of their own, or due to current public health and safety reasons brough upon by the current pandemic.

Middle ground may also be found, in limited circumstances, where a cooperative wants to allow for limited home occupation of dwelling units in addition to residential use. However, any policy should focus on maintaining residential use as the predominate use so as not to allow any occupational use dominate or conflict with the corporation’s purpose. This may require, at a minimum, a policy, in which case the cooperative should consult with its attorneys to examine state and local law pertaining to any ​“occupational-use” of the cooperative property. Conceptually, policies of this nature would require consideration of many factors, including:

  • Limiting the ability to conduct work or business being conducted within the unit, to that of the member of record only.
  • Maintaining the purpose of the cooperative (i.e., for residential purposes) and limiting the amount of space that a dwelling unit could be used for in-home work or business activity.
  • Limiting and restricting the storage of materials and goods used in the conducting of work or business within the unit.
  • Prohibiting any changes to the exterior or interior appearance of the dwelling units so they maintain consistent with their residential purpose.
  • Prohibiting of visuals, such as signage, advertisements, etc. regarding operating an in-home business or occupation, that indicate business use.
  • Prohibiting or restricting the sale of offering of goods or services within the dwelling unit.
  • Maintaining normal levels of traffic consistent with that which would be incident to residential purposes.
  • Prohibiting, restricting or limiting the types of equipment that can be stored, located or used within the dwelling unit.
  • Prohibiting anything that creates noise, vibration, glare, fumes, odor or electrical interference with other members in the cooperative.
  • Prohibiting outdoor displays or storage materials, supplies or equipment used in the business.

While these points do not constitute an exhaustive list of considerations that a cooperative would otherwise be required to consider when deciding on whether a limited “home occupation” use of the property may be extended to its members, it shows that there are many pieces to the puzzle.  Every cooperative is different. Locations, areas of industry that may employ a large group of members (i.e., automotive, farming and agriculture, pharma, big tech, etc.), and state and local law all play into the equation.

Times like this also remind us why governing documents should be regularly reviewed for needed updates and amendments to make sure they are fluid with unforeseen circumstances and changing of the times. Given that the effects of the covid-19/coronavirus pandemic are likely to remain to be seen for time to come, it is very possible this event may re-shape the work environment of many industries and businesses. There very well may be a shift in the number and types of employees who will continue to work from home. The fallout of this pandemic remains to be seen. Therefore, cooperatives should look to creating well-thought of resolutions with the insight of their management and legal counsel. Cooperatives should consult with their legal counsel and assess whether amendments or revisions to the corporation’s governing documents (Bylaws, Occupancy Agreements and Policies) can lay the foundation for resolving these issues and disparities due to changes in industries, practices and environments. While the pandemic alone, may not be reason for a complete overhaul of changes to a cooperative’s use restrictions, it does serve as an excellent opportunity for the cooperative to show that it can adapt to the changing of times, and provide its members with a sense of ease, communal living and understanding.

Matthew T. Nicols
Attorney at Pentiuk, Couvreur & Kobiljak, P.C.

Matthew T. Nicols is an associate attorney at the Pentiuk, Couvreur & Kobiljak, P.C., with offices in Wyandotte, Michigan and Chicago, Illinois.  Mr. Nicols focuses his practice primarily in the areas of cooperative housing law, and other community and condominium association law. He is licensed to practice law in the states of Michigan and Illinois.

Please note this content is provided to our readers for educational purposes but it is not intended and should not be regarded as legal advice. Readers are encouraged to consult with competent legal counsel for personalized guidance.

 

Swimming Pools and COVID-19

As states begin to slowly reopen, the question as to whether pools will open for the summer has become a hot topic. For states that have been hit hard with COVID-19, it is likely that public pools will remain closed for the rest of the summer. However, some states are permitting public and private pools to open/reopen for the summer months with strict guidelines.

Per the CDC’s website, “there is no evidence that the virus that causes COVID-19 can be spread to people through the water in pools, hot tubs, spas, or water play areas. Proper operation and maintenance (including disinfection with chlorine and bromine) of these facilities should inactivate the virus in the water.”

The CDC’s Water and Covid-19 FAQ website further stated that “it is important for individuals as well as owners and operators of these facilities to take steps to ensure health and safety: Everyone should follow local and state guidance that may determine when and how recreational water facilities may operate. Individuals should continue to protect themselves and others at recreational water venues both in and out of the water – for example, by practicing social distancing and good hand hygiene. In addition to ensuring water safety and quality, owners and operators of community pools, hot tubs, spas, and water play areas should follow the interim guidance for businesses and employers for cleaning and disinfecting their community facilities.”

The CDC has offered considerations to help keep public pools safe during COVID-19. The CDC considerations cover good hygiene, face coverings, adequate supplies, signs, cleaning and disinfecting, modified pool deck layouts, physical barriers and guides, safe and healthy operation of pool staff, and a preparedness policy for when someone gets sick.

For the states that are permitting public and private pools to reopen, strict guidelines are being set in place. Some examples of strict guidelines include:

  • Reducing occupancy limits to permit one person to use the pool at a time regardless of pool size;
  • Prohibiting gatherings of any size on pool decks, with the exception of parents/guardians for when minors are using the pool;
  • Prohibiting the use of all outdoor pool furniture (pool furniture to be stacked/chained to render use unusable);
  • Prohibiting the use of drinking fountains and showers;
  • Social distancing measures;
  • Requiring the use of face masks when not swimming;
  • Hand washing/sanitization stations;
  • Frequent sanitation of high touched areas such as hand rails, restroom surfaces, light switches, faucets, door knobs, gates, etc.; and
  • Continuing to maintain pools in accordance with laws and regulations to ensure proper chemicals and safety measures.

Of course, as every state is implementing its own protectionary measures, it is vital that Cooperative Boards reach out to their Cooperative Attorney for assistance with interpreting Executive Orders with respect to opening/reopening pools

For Cooperatives, the reopening of the pool does not come without concerns. Such concerns include:

  • Suspending of the Community Pool rules that are currently in place;
  • Drafting of temporary pool rules complying with Government Mandates for pools due to COVID-19;
  • Restrictions of member’s guests to use pool for health concerns;
  • Opening of the pool by pool contractor;
  • Obtaining chemicals;
  • Ability to obtain and maintain pool cleaning chemicals;
  • Enforcement issues of the temporary Community Pool rules due to COVID-19;
  • Hiring of a Lifeguard or informing members to swim at own risk;
  • Reducing pool occupancy to one swimmer at a time;
  • Limiting the time frame that a member can use the pool;
  • Keeping the pool deck, shower, and drinking fountains closed;
  • Social distancing issues regarding members waiting to use pool; and
  • Cleaning of surfaces that are regularly going to be used (i.e., doors, gates, pool handrail, etc.).

Cooperative Boards should work closely with their Cooperative Attorney to ensure that any temporary pool rule due to COVID-19 complies with local, county and state guidelines in addition to any and all guidelines and considerations set forth by the CDC.


Alyssa Gunsorek is an associate attorney with experience in contract negotiations. She has contributed articles for various publications including the MAHC Messenger, NAHC’s Housing Cooperative Quarterly, and Pentiuk, Couvreur & Kobiljak’s Cooperative Law Journal.

 

Carrying and Occupancy Charge Obligations During COVID-19

It is fair to say that by now, every single American and business across the country has felt the impact of the SARS-CoV-2 (COVID-19) virus, commonly known as the “novel coronavirus.” On March 11, 2020, the World Health Organization (“WHO”) declared the coronavirus a pandemic. Since then, the United States has been one of the most impacted countries. Through a number of federal, state and local governmental orders, schools have been forced to close, courts are temporarily closed, “non-essential businesses are closed, and many areas are faced with mandatory “stay-at-home” orders. While these measures are being taken to alleviate the spread of the virus, they have also come with a corollary rise in unemployment that is likely to affect many housing cooperatives, community associations, and the like.

Many anticipate that community associations, including housing cooperatives, will soon begin experiencing an increase in delinquency of assessments, rents and monthly carrying charges. Given the nature of the current events, and how the world has changed due to the coronavirus pandemic, questions arise as to how should a Condominium Association or Cooperative Housing Corporation enforce their collection policies. Despite the passing of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act) (S. 748), we anticipate further guidance to be issued that will hopefully provide non-profit corporations and cooperative housing corporations with various levels of economic and hardship relief. In the meantime, we recommend continuing to enforce current collection policies, with a few caveats.

Housing cooperatives and their agents should maintain open communications with their members. Especially in this particular time of national crisis. Housing cooperatives should not discourage members from communicating with the board of directors, or management, as to economic hardship.

The undeniable fact is that the current coronavirus pandemic has, or will, place many individuals and families in financial hardship. Given that many courts throughout the country are closed, issuing a Notice to Quit or Demand for Possession and filing a lawsuit will be futile for obtaining immediate relief. In fact, the CARES Act contains a moratoria on evictions of tenants in certain properties that are classified as “other covered housing,” with certain tied to HUD programs.

By being receptive to member’s open communications about financial hardship, alternatives such as repayment agreements can be entertained. If a repayment agreement is not obtained, for whatever reason, at least the cooperative will be able to maintain at a later point (whether in a court of law, or otherwise), that they explored and exhausted alternative options before resorting to enforcement proceedings.

In addition, state governors have been issuing executive orders. In Michigan for example, Governor Gretchen Whitmer most recently issued Executive Order 2020-54. Pursuant to Order 2020-54 (an extension of the “Stay-at-Home Order”), which is more expansive than some provisions in the federal CARES Act, places certain prohibitions and restrictions on property owners and landlords from initiating certain eviction proceedings.  Michigan’s Executive Order 2020-54 states in part “… no person shall remove or exclude from leased residential premises or residential premises held under a forfeited executory contract a tenant, a vendee of a forfeited executory contract, or a person holding under a tenant or vendee, except when the tenant, vendee, or person holding under them poses a substantial risk to another person or an imminent and severe risk to property. . .” Executive Order 2020-54 also prohibits landowners from personally delivering a demand for possession to any tenant based on non-payment. This Order prohibits Landlord from issuing notices or initiating non-payment summary proceedings actions seeking possession. Therefore, at least in Michigan for the time-being, summary proceedings to regain possession of the premises (whether based on non-payment or other defaults that do not rise to the level of immediate and significant threats to the property or other persons) are unavailable until further Order from the government.

It is worth noting that many Cooperative Bylaws contain provisions that state that the Cooperative has a “lien” on unpaid financial sums due to the Cooperative. While recording of a lien with the County Register of Deeds, or Recorder’s office does not occur, these Bylaw provisions (providing for a lien on unpaid sums) is important in any Bankruptcy proceedings initiated by the Member. Keeping in mind that while many Courthouses throughout the country are closed, or limited to “emergency services” only, Bankruptcy courts are still operating (mostly handling matters by telephonic, or other remote means). Having a lien on unpaid amounts, means that when a Member files bankruptcy, the debt owed to the Cooperative is a “secured debt” not otherwise subject to discharge in a simple Chapter 7 Bankruptcy case. Given the spike in unemployment over the last few weeks, we anticipate to see a corollary rise in Bankruptcy cases, unless the economic relief provided under the CARES Act is systemically utilized by individuals and businesses alike.

Unfortunately, when it comes to enforcement of monetary obligations at the present moment, there is no one single answer until the impact of the coronavirus pandemic begins to taper. However, as legislative acts and economic relief bills are passed, disseminated, and further guidance on potential loans, grants for non-profit community and housing associations becomes available, many Housing Cooperatives may continue to have unanswered questions involving member delinquencies and available remedies that were once enjoyed before the coronavirus pandemic. We hope that further guidance is issued that will provide answers to many questions and assistance to help stop financial losses. In the meantime, working with members on repayment plans is a compassionate and meaningful way to help both the member and the Cooperative weather this storm. Until then, Cooperatives should maintain open communications with its members about member financial hardship.

While remedies such as demand for payment, seeking possession or filing lawsuits in landlord-tenant courts were once widely recognized and enjoyed, the current effect of this crisis has put a temporary halt on many of these options. Cooperatives should continue to monitor member defaults and default rates, and maintain open communications with members.

About the author:

Matthew T. Nicols is an attorney, providing legal advice and assistance to cooperatives in resolving conflicts amongst the Board of Directors. He has experience in litigating disputes involving directors’ wrongful and harmful conduct to the cooperative.

Please note this content is provided to our readers for educational purposes but it is not intended and should not be regarded as legal advice. Readers are encouraged to consult with competent legal counsel for personalized guidance.

COVID-19 and Cooperative Values

By now we have all heard of the existence and spread of coronavirus (COVID-19). But have you heard that the more common seasonal flu is causing many more infections and deaths than COVID-19?  The Centers for Disease Control and Prevention (CDC) estimates that more 34 million people have been sickened by the common flu, from 350,000 to 620,000 people have been hospitalized, and from 20,000 to 52,000 people have died from during the current flu season.

On the other hand, as of March 12, 2020, the COVID-19 virus has affected 129,838 persons and led to 4,751 deaths worldwide.  “Right now, the number of COVID-19 cases pales in comparison to the number of flu cases,” says Dr. Gregory Poland a Mayo Clinic infectious diseases and vaccine specialist. “Unlike COVID-19, seasonal flu is in every state and every community in the U.S.”

Nevertheless, Cooperative Boards and Management may wish to consider posting the following advice on their bulletin boards, in common areas, and in member mailboxes.

In light of the Flu and COVID -19 concerns, the Cooperative encourages members, visitors, management and staff to:

  1. Practice handwashing and covering coughs and sneezes.
  2. Stay in your unit when sick and notify management of illness.
  3. Regularly clean and disinfect frequently touched surfaces, like doorknobs, keyboards, cell phones, and light switches.
  4. Ensure hand hygiene supplies are readily accessible throughout the facility and common areas.
  5. If caring for an individual living in a cooperative, monitor the situation, and ask about the health of the other members frequently.
  6. Implement social distancing measures as feasible, such as reducing large gatherings, reduce the use of common areas, and limiting programs with external staff.
  7. Limit visitors to only those persons who are absolutely necessary.
  8. Communicate with Staff and Management by phone or text, rather than coming to the office if possible.

During this time, it is important to also remember the values upon which our Cooperatives are built.  Cooperatives are grounded on the values of self-help, self-responsibility, democracy, equality, and community.  Cooperative members believe in honesty, openness, social responsibility and caring for others.  With news reports bombarding us daily, let us not forget the needs of our neighbors and the values that make cooperative living desirable.

Attorney Kerry Lee Morgan has extensive experience in matters related to federal housing discrimination law and has worked with cooperatives to resolve disputes and enhance cooperative quality of life. He previously served as an Attorney-Advisor with the United States Commission on Civil Rights in Washington, D.C.