New York's Cooperative and Condominium Community
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An update on the crisis at Castle Village.
When a section of the co-op’s 75-foot retaining wall collapsed onto the Henry Hudson Parkway, Castle Village’s financial and emotional wounds seemed overwhelming. Fast forward two years – Habitat sees how far Castle Village has come and the surprising boons that came out of the unfortunate collapse.
For the residents of castle village, May 12, 2005, was the day the world came tumbling down – literally. A section of the 75-foot-high retaining wall at the 580-unit, five-building cooperative complex in upper Manhattan suddenly collapsed onto the Henry Hudson Parkway. Although no one was physically injured in the incident, the financial and psychic wounds were immense. To cover the cost of repairs, a portion of the $25 million needed came from the shareholders. They were assessed anywhere from $11,000 to in excess of $40,000 an apartment, for a total of $11 million. To ease the pain of the assessment, arrangements were made with three lenders to provide streamlined shareholder loans. Information was also supplied for shareholders to claim a casualty loss on their 2005 income taxes. (For a full account, see “The Wall Came Tumbling Down,” Habitat, October 2006.)
By mid-October 2007, the board of the beleaguered complex was seeing some light at the end of the tunnel. Although lawsuits against the engineer, contractor, and managing agent continued, repairs on the wall itself were finally complete.
“It is breathtaking,” says Jerry Fingerhut, the treasurer (now president) who had worked out the deals with the lenders, the contractors, and the city. “The story of the backyard is that it’s bigger, and better, and more beautiful than ever. And we are right on budget.”
There was a side benefit, too: the board used the interest engendered by the incident – a vocal minority opposed the board’s actions, which in turn caused other shareholders to rally to its defense – to call for changes in the bylaws.
“The board put before the shareholders this year extensive governing document revisions, including significant revenue-raising provisions like a flip tax, storage fees, sublet fees, user fees, and late fees,” explains Theresa Racht, a partner at Racht & Taffae, the attorney for the co-op. “Other amendments included upgrading the indemnification provisions, clarifying voting procedure in the election of directors, implementing staggered terms of directors, and, perhaps most important, reducing the super-majority needed to amend governing docs from seventy-five to sixty-six and two-thirds percent.”
According to Racht, the board vowed after the 2006 election, which had a record annual meeting turnout, that it was “going to spend whatever good will and political capital it had amassed during the retaining-wall crisis to get revenue-raising and other governing document amendments passed so that the building [would be] in a healthier position to move forward.” Fingerhut says the amendments would make it easier to pass fund-raising measures that have become more urgent than ever as the board looks for funds to pay off its $25 million debt and builds a bankroll for future capital work.
Many of these amendments have been put before the shareholders before and failed – mostly from apathy. This time, notes the attorney: “We had a 93 percent response rate – meaning 93 percent of the shareholders voted.”
Fingerhut says that result was achieved by a strenuous get-out-the-vote drive initiated by the board and carried out by a dedicated group of non-board volunteers. “I was merciless,” says Fingerhut. “I was on everybody’s case every day. I’m exhausted.”
The proxy ballot went out on June 30, and over the next two months, board members and the non-board volunteers alike phoned, went door-to-door, and staged many large and small shareholder meetings explaining the issues. That was supplemented by memos and newsletters. “We answered every question raised, and contacted shareholders individually to make sure they voted,” Racht observes. “It worked.”
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