If a slate of candidates mails a letter to residents soliciting proxies, and any of them are ineligible because of term limits, is this action a violation of any law? If a shareholder is actually elected who is ineligible because of term limits, is this a violation of any law? What remedies are there legally? What type of legal action can be taken?
JG in NYC
I guess you would have to contact the state attorney general’s office with that question. I would like to think that the shareholders would not vote for the person if they were aware that there are term limits and this person should not be running. On the other hand, having someone with experience on the board is an asset, unless that person is self-serving, showing favoritism to specific owners or residents, etc. I’ve only seen maybe a half-dozen prospectuses and didn’t see term limits in any of them, but that doesn’t mean some plans don’t exist that do have limits.
I agree with JG about contacting the AG’s office and term limits in general. Contacting the AG, while a no-cost option, could take months to get any results. A better option (but one with a cost) would be to consult with an attorney who specializes in co-op and condo law. Do not ask the board’s attorney because they work for the board and not for you so their response can be biased in favor of the board.
Which document specifies the term limits? Proprietary lease, bylaws, house rules, other? Do you know if they were they in the original document or added as an amendment? I’m asking because I also find having term limits to be a non-standard condition. It’s often difficult enough to get shareholders to serve on the board, let alone limit how long they can serve.
Term limits were established several years ago with an amendment to the bylaws. Last year, a mailing by a slate solicited proxies. One candidate was ineligible and he ultimately withdrew, but no notification was given to shareholders until it became obvious at the annual meeting. Thus, proxies were solicited under false pretenses.
JG in NYC
So, the situation came up last year and the candidate withdrew. I doubt that the AG or anyone would take any action at this time. It would be a different story if the person was elected and is serving a term now. What would happen if there were five positions on the board and only four candidates (excluding the ineligible candidate)? Would the board function with only four members until the next election?
The bylaws permit a minimum of three directors. My post is in anticipation of the next annual meeting in March.
Ned in Toronto, Canada
Do you know others in the building who share your concerns and are like-minded? (Two others, as you mention that you need three directors.) If you do, solicit their help and simply do a petition. You need to canvass the building and explain to people why you are petitioning for a new board to be put in place; no financials, elderly board members who don’t understand what is going on, concern for all of your investments, etc. You may be surprised at how many signatures you will obtain. Then simply present it, via a letter to the board a couple of days before the meeting or even at the meeting. If you get the majority signing, they’re out, and you and your team will be in. It takes work and effort, but it can be done.
I don’t think that petitions supersede shareholder votes. Wouldn’t obtaining proxies be the legal way to go?
Ned in Toronto, Canada
If a group of shareholders want to re-elect someone whose term has ended and the majority of them vote for this person, then I’m certain the person would get in regardless of the house rule or bylaws. On the other hand, if you can get the support of shareholders for a new board by canvassing, at the same time you canvass, ask for their proxies. I do not believe that there is a law against petitions.
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Some of the responses have been edited for clarity. Opinions expressed in Board Talk do not reflect the opinions of Habitat.