Tools for Taking Control from the Sponsor

Gone to seed. When the sponsor of a co-op or condo doubles as the managing agent, boards have to stay vigilant because the sponsor doesn’t always act in the best interests of shareholders or unit-owners. We took over a 124-unit co-op in Bay Ridge that was still being run by the sponsor and its management company, even though 90% of the apartments were sold. This was a 100-year-old building that needed a new boiler, facade and roof repairs and more, but the co-op had minimal reserves and couldn’t pay for capital improvements. The sponsor had practically run the building into the ground,

Money management. After the board, which was getting nonstop complaints from shareholders, brought us in, we advised that it refinance the mortgage at a low interest rate — this was before rates went up — and take out an additional $500,000 for capital repairs. We also explained that the board could assess shareholders the full amount of their property-tax abatement and take it back to offset real estate taxes, which put $85,000 into the operating fund. The co-op is now fiscally healthy. 

By the numbers. Boards need to closely monitor how their buildings are being run. In this case, the board directors also needed to read the bylaws; if they had, they would have known that the sponsor had to turn over control after 50% of the units had been sold. And you can’t wait to do repairs. If this board had waited any longer, it would not have been able to refinance the mortgage and bring in the capital that was so badly needed.