DEALING WITH DISSIDENTS

With the city's real estate market growing more bearish by the day, a growing number of co-op and condo board members report that their neighbors are suddenly turning into watchdogs. Some of these neighbors hope to create a shadow board to monitor the elected board's every move. Others want their boards to put major expenditures to a vote of all residents. And some, panicked by the softening real-estate market, want to set minimum resale prices.

Coleman can empathize. "The prices of apartments are dropping and taxes are killing co-ops right now," he says. "People are getting squeezed — they feel very out of control, so they're grasping for ways to get control. But the worst thing you can do is try to reorganize the way the corporation operates. What you should be doing is getting the best, most qualified people on the board. And once you have them, give them your full support."

"Everyone's into populism right now," adds Phyllis Weisberg, an attorney at Kurzman Karelsen & Frank, who represents numerous co-op and condo boards in the city. "People in co-ops very often think it should be a participatory democracy rather than a representative democracy."

At one Manhattan co-op Weisberg represents, shareholders tried to institute a policy that would have required approval from a majority of shareholders for any capital outlay greater than $100,000. Weisberg spoke out forcefully against it.

"It sounded like a good idea – shareholders would have had more say," Weisberg says. "But when you look closely, it doesn't make any sense. It interferes with the board's ability to do its job. If there's an emergency, the board has to be able to react quickly." Besides which, she adds, "People might be unwilling to serve on boards if their discretion is taken away," Weisberg says. "Who needs the aggravation if you can't do the job?"

James Samson, a partner at the law firm of Samson Fink & Dubow, says the gloomy economy has pushed many boards and residents to seek safeguards that are counterproductive. "I've seen more and more proposals over the past three months on tightening sublet rules, tightening financial restrictions on potential buyers, and setting minimum resale prices," Samson says. "But that's the exact opposite of what boards should be doing. It will only lead to foreclosures. One co-op cannot stop the avalanche of price reductions."

Watchmen

At one Brooklyn condo Samson represents, residents have set up the Unit-Owners Association, with its own elected officers and its own bylaws. Samson likens the group to a "shadow cabinet."

"There are always people who want to look over the board's shoulder and second-guess," he says. "They're concerned, but they don't understand the relations between the managing agent and the board, [and] between the staff and the unit-owners."

Of course, watchdogs are nothing new to New York City's co-ops and condos. They were around long before the current economic slump set in, and they're sure to be around long after it's a dim memory. But in tough times, the impulse to second-guess a board becomes especially powerful.

Jerry Fingerhut knows what it's like to deal with watchdogs. In spring 2005, a large portion of a retaining wall at his co-op, Castle Village in upper Manhattan, collapsed (see the Habitat Archive: "The Wall Came Tumbling Down," October 2006, and "The Wall Redux," November 2007). Fingerhut, an accountant, helped many of his fellow shareholders file insurance claims that covered all or part of ensuing assessments. Then, after winning election to the board in late 2005, he helped fight off dissidents who wanted to oust four of the seven members, himself included.

"Dissidents are usually a very small but very vocal minority," says Fingerhut, who is now board president of the 585-unit co-op. "They appeal to people who are ill-informed."

Lynn Schulson, a leader of the dissident group at Castle Village, begs to differ. She says she and other shareholders were upset by the $25 million price tag on the wall repairs, and felt cheaper options should have been pursued. Beyond that, Schulson hoped to bring about greater oversight of board actions.

"A co-op board can basically do whatever it wants, and there should be checks and balances beyond board elections," says Schulson, an administrative assistant at a market research firm. "Doctors have the AMA [American Medical Association]. Lawyers have the [American] Bar Association. There should be some sort of system that's responsible for the ethics of the way boards are run."

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