New York's Cooperative and Condominium Community
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How a self-dealing board met its match.
How Carrie Feng and her “insurgents” took back their building from a corrupt board.
When Carrie Feng moved into the Newport cooperative in Flushing, Queens, in 2004, she thought she had found the perfect home. For Feng, who had been renting in the area for several years after immigrating from China, the location was ideal. The six-story, 211-unit building at 4265 Kissena Boulevard was close to a subway station. That made for an easy commute when Feng, who worked for an import-export firm, had to meet clients in Manhattan. And both the Newport and the neighborhood felt like home.
“The population at the building was more than half Asian, mostly Chinese,” Feng says. “There was an Asian supermarket where I could buy groceries. I felt very comfortable.” But after Feng attended her first annual shareholders’ meeting, her comfort began to dissolve. The gathering was contentious, with angry residents complaining that they were not being treated fairly and that costs were too high. Even more disturbing, they accused the board president of self-dealing by hiring family members.“Basically, they thought the building was being run in the best interests of the board and not the shareholders,” says Abbey Goldstein, a partner at Goldstein & Greenlaw and the co-op’s current attorney. “There was a lack of transparency and communication as well as a language barrier, and people felt disrespected and shut out. They believed there was a corruption they couldn’t necessarily articulate.”
As it turned out, there apparently had been a long history of mismanagement at the Newport. But as Feng and her fellow shareholders discovered, getting a co-op or condo board to comply with bylaws and respond to grievances can be an almost impossible task, no matter how many discussions are held or petitions filed. Sometimes, residents need to take drastic measures. That’s exactly what happened at the Newport, where, thanks to Feng’s tireless efforts, shareholders not only ousted the long-entrenched board, management company, accountant, and attorney, but brought the co-op’s finances back from the brink as well.
“When a board is irresponsible and resists change, shareholders have to rally together and be really persistent,” says Goldstein. “Carrie and the residents at the Newport did both, to great success.”
Trouble at the Top
According to Feng, the problems stemmed from brazen nepotism by the board president, who had held the job since the building went co-op in 1984. She hired her husband to become a doorman. She hired a relative who was not with the management company to be the building manager. She hired her son, who was 18, to maintain the pool. The behavior of the superintendent was equally troubling: he charged immigrant residents for minor repairs like plumbing and also demanded a $2,500 fee to allow a new shareholder to renovate his apartment.
Costs were spiraling out of control. Between 2004 and 2010, maintenance increases totaled 45 percent – nearly 8 percent a year – causing what Feng calls “shareholder shock.” The final straw came in 2011, when the board announced a $250,000 project to repair what it claimed was a damaged stone wall around the building’s entrance, then replace it with marble. But a shareholder pulled the PW3 Cost Affidavit, which co-op and condo boards must file with the Department of Buildings before a work permit can be issued, and discovered the actual estimate submitted by the board was for $68,000.
After Feng had an architect inspect the wall – he deemed it structurally sound – she got half of the shareholders to sign a petition to stop the project. The board ignored them and hired contractors to begin the job.
The Battle Joined
“After that, we realized nobody could help us,” Feng says. “We had to change things ourselves.” So she and five other volunteers began holding meetings in the Newport’s community room, trying to enlist enough residents – that is, more than 50 percent – to vote out the board at the next annual shareholders’ meeting. Remarkably, after six months of pushing, the dissidents did not get much support. Feng wasn’t surprised. “Part of that is because, in Asian culture, you’re not supposed to complain,” she explains. But Feng persevered and, by 2012, she had collected $5,000 from a number of shareholders to hire a lawyer. “Carrie and her group – I called them the insurgents – asked me to meet with the board to set up an election,” Goldstein says. “They did not have any faith it would be run fairly, and I can’t say I blamed them.” It took months for the board to consent, and even then it delayed setting a date and giving Goldstein an updated shareholder list.
In the meantime, instead of waiting for the board to provide one, the attorney prepared a proxy form so that Feng’s group could start soliciting votes door to door. “More than half of the Newport’s residents don’t speak English, so they were glad to be relieved of the burden of filling out ballots, and to give the responsibility to shareholders they trusted,” Goldstein says, adding that the board continued to stonewall by demanding that the proxies be notarized. “We were concerned they would disallow them, throw out ballots, or not allow us to see them,” he says. “We went into the election paranoid, which was healthy. We wanted to make sure there were no hanging chads.”
The ballots were counted by the Newport’s property manager, and the co-op’s attorney announced the results: the old, seven-member board was voted out by an overwhelming margin. “There was a lot of shouting and aspersions cast,” says Goldstein. “Astonishingly, one member of the ousted board immediately started legal proceedings against the co-op to set aside the results, which was ludicrous.” A request for a preliminary injunction filed in Queens County Supreme Court was denied, and the case was finally dismissed outright in April. But it ended up costing shareholders $30,000 to defend the action.
Getting Out of Jail
A more immediate problem was the Newport’s dismal finances. The new board found that despite hefty hikes in maintenance, the co-op was barely covering operating costs. Not only was there no reserve fund, the co-op had borrowed money to fund capital improvements and had an outstanding credit balance of $585,000. “When I saw that I said, ‘I’ve had enough, I give up,’” recalls Feng, who had recently started her own clothing manufacturing company. She relented the next year when shareholders pressed her to run for treasurer – Feng has a bachelor’s degree in economics – and she became president in 2014.
Under her leadership, the co-op hired a new management company, John B. Lovett & Associates. “Carrie disclosed her concerns that the super was not behaving ethically, and made it clear our mandate was getting him replaced,” says Ken Lovett, the management company’s president. “We started with discussions and pointed out to him how he was violating his contract, hoping we could rehabilitate him. When that didn’t work, we wrote him up twice, suspended him, and finally fired him. He contested it, and we gave him a small payout after a protracted negotiation.”
The Newport also brought in a new accountant, James Pai, who specializes in co-ops and condos and speaks both Mandarin and Cantonese. “The board members emphasized they were looking to cut costs, including what they would pay me,” Pai says. “I agreed to a lower fee because they promised to do a lot of the nitty-gritty work on their end, like income and expense analysis and balancing the books, so the job would require less of my time.”
The co-op had soon put its house in order. The board refinanced the mortgage, from $4 million at 5.9 percent interest to $5 million at 3.8 percent, using the additional money to pay off the debt and fund capital improvements, including an oil-to-gas conversion that saved the Newport more than $250,000 in fuel bills last winter.
By finding new and cheaper vendors, the co-op has amassed a $700,000 reserve fund without raising maintenance, as well as a $300,000 cash flow for smaller projects like updating security cameras and installing new washers and dryers in the laundry room. As a result, market values have almost doubled, with a 1,000-square-foot apartment now selling for $340,000 compared to $180,000 four years ago. “[The co-op] has emerged from chaos and political warfare and become a well-run building,” Goldstein says. “Shareholder meetings are actually informational, there are always interpreters, and the board listens to recommendations and different opinions.”
“That’s the way it’s supposed to be,” says Feng. “Before, we felt like we were living in jail. People are much happier because the building belongs to them.”
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