The Meter is Running
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A bad bed bug situation escalates when shareholders are uncooperative.
AUTHORSteven R. Wager, Wagner Davis
Keeping shareholders informed and being proactive helped a board avoid major litigation when dealing with a bed bug infestation.
Steven R. Wagner, Partner
Bed bugs invaded an Upper West Side cooperative. Two apartments on the fourth and fifth floors had been identified as “ground zero” of the bed bug infestation. These two apartments were owned by the holder of unsold shares and were occupied by two non-purchasing tenants who were, unfortunately, less than cooperative. Upon the recommendation of the co-op’s regular exterminator, the ground zero apartments were “fogged” rather than chemically treated, and the bed bugs rapidly spread to several other apartments. Although the holder of unsold shares made some effort to cooperate, it was not moving quickly or assertively and the bed bugs continued to move throughout the building. Word of the crisis spread among the apartment owners even more quickly than the bed bugs. Tenant-shareholders, particularly those with infants and small pets, were demanding information about the treatments being used and strongly expressed their fears regarding the use of insecticides. When the exterminator recommended a very expensive extermination program, the board criticized the exterminator for the previous fogging and refused to pay him; he subsequently refused to return to the building. Other exterminators either refused to bid on the job or gave proposals with prices of six figures. And just when you thought it could not get any worse, it was discovered that one of the tenants was a decorated Vietnam War veteran who claimed he suffered from post-traumatic stress syndrome and had a cache of unlicensed weapons and hundreds of rounds of ammunition.
The board quickly regrouped and held a meeting in the lobby of the building to describe everything that had been done, to lay out its plan, and to answer questions the shareholders had about the crisis. The board also sent notices to cure to the holder of unsold shares as a “push” to obtain its cooperation. It worked. The holder of unsold shares had a meeting with the board to discuss the bed bug crisis and the responsibility for payments. Arrangements were made to accept maintenance charges from the holder of unsold shares “without prejudice.”
This allowed the board to collect rent while negotiating with the holder of unsold shares. Based on a recommendation by the holder of unsold shares, the board also hired another exterminator, a highly qualified company that was willing to treat the building because of its relationships with both the managing agent and the holder of unsold shares.
Treatment alternatives were offered to shareholders who wished to upgrade to “green” extermination techniques, and a credit was given toward the cost of the green extermination up to the amount the co-op would have paid with chemical extermination.
The board worked with the exterminator to develop protocols for moving property out of infested apartments and for preparing apartments for bed bug treatments.
Finally, by pure coincidence, the holder of unsold shares was in the process of refinancing its apartments. In order to obtain a “clean” recognition agreement for its lender without showing any defaults, the holder of unsold shares offered to pay $25,000 toward the expense of the bed bug treatment for its apartments and to finalize the issues regarding the notices to cure.
By keeping the apartment owners informed, by establishing alternatives for bed bug treatment, and by meeting and talking with the holder of unsold shares, the board finessed an emotionally charged and dangerous situation and averted costly litigation with the holder of unsold shares and some very angry apartment owners. Charges also are being pursued by the district attorney for the unlicensed weapons. It was an exhausting effort for the board, but the bed bugs were safely eradicated at a reasonable cost, the shareholders were kept informed and given options, and the relationship with the holder of unsold shares is looking up.