I am planning on addressing this on my blog here on Habitat (I'm Mr. Manager). I have two separate cases of bed bugs in different Cooperatives now and they are handling the situation differently. In speaking with a colleague last night about this, he attended a NYC Bed Bugs seminar and the way that they spun it was that the Shareholder and the Cooperative Corporation should be splitting it. I'll tell you how we are handling it.

Building 1: Having inspected roughly half of the units in the building, we have found that approximately 35% or so of the building was infected and needed to be exterminated. Even though this may be considered a Shareholder issue (you can take legal action for payment against the person who brought them into the building if you can prove it), this Board decided that they would cover the cost of the exterminations because they needed 100% of the infected apartments to be treated. They would not take the chance of having 1 Shareholder refusing service and then continuing the spread to new and previously infected apartments. This building will be doing an assessment back to the Shareholders to cover the out of pocket expense for the Cooperative. So in essence, the individual Shareholders are paying for it, although a slightly lower percentage than if only those who were infected paid.

Building 2: We received reports of 2 apartments out of 130 or so that were infected in the apst few weeks. The building felt that it was prudent to get an inspection done ASAP and to cover the cost for that inspection. In both buildings we have used a trained dog, which is the only sure way to ensure 100% accuracy for infestations. The infestations are only approximately 10-15% of the building and because of this low number, the Board has decided that they will initially cover the cost of the exterminations to ensure that all of the work is taken care of and they will be this back to the individual Shareholders who are treated, and will not do it through a building-wide assessment.

I would check with your attorney to see if either of these methods will work for your building. The important thing is to make sure that you contain the spread as quickly as possible. Shoot them first and ask questions later.

Hope that helps.

thank very much for the useful reply. but not how I heard it - the coop pays - it is in the lease- the lessor must be responsible for vermin . no grey area. no assessment - it is not a capitol improvement. sponsor-owned apartment = sponsor pays. if sponsor does not effectively treat the problem , then he pays for all effected apartments.

For one, this encouraged a coop - or a sponsor - not to be cheap and ti hire a high end extemrination company. you must have a very very bad situation if you have 35% of apt effected in a building. how is that possible??

you are right about the dog - it should also inspect laundry rooms, mailrooms and other public areas.

It's certainly never a good time to bring an assessment onto the Shareholders, no matter the state of the economy. I think that your answer depends on the amount in reserves that you currently have, the need for the work to be done (is it city or mortgage holder directed or is it a cosmetic facelift, etc.?) and also the time frame with which you have to work.

Does your building have a line of credit that it can tap into for work that needs to be done? This could ease the burden depending on the payoff schedule for the loan. Is this work that you can pass off as receiving a J-51 abatement so that you will see some of it again on the back end? Is it work that is needed to secure the safety of the residents?

I think that you'll have to make a choice of what work to do in the next 2 years as even if you contract for all of the work to be done, no contractor is going to wait two years to receive payment, which is the problem when you are depleting your reserves up front. If you have nothing left (and no line of credit to fall back on) your building is setting itself up for disaster in the case of an emergency down the line. Can you pass this along in a 6-month payout or so in order to ease the burden on the Shareholders and also get it in before heating season starts and the major bills begin piling in again?

It seems that there are too many variables in this equation to completely give you a good answer, but if you weigh all of the benefits to doing the work today versus putting some off and saving up with an assessment, the Board may come up with their answer.

I agree with Mark's suggestions - while you cannot ignore work that must be done, if the work is considered discretionary you may want to postpone until you have an opportunity to put a line of credit in place.

Depending on the size of your building, another option is to leverage the co-op real estate tax rebate. We have no mortgage but we have funded some very large projects over the past several years entirely through reserves that are funded by a flip tax. After many years of faithfully returning the rebate to the shareholders, we recently decided to assess back an equivalent amount to the rebate in the same month so as to minimize impact to the shareholders. This money will be directed to our reserves and will provide us with the funds that we need for the next several years.

My personal opinion is that if the work is a necessity, while tapping the line of credit is not optimal, it has to be done. However, it appears that you should also take a look at how to move your finances into a sustainable mode. I agree with Mark that there are many variables here to consider.

One thing I would recommend is taking a look at your finances not from the perspective of the individual shareholder but from the perspective of the corporation. If you take a look at the finances from the point of view of the individual shareholder, there will always be one shareholder (one special case) that limits what you can do in some way. However if you take a look at it from the perspective of the corporation, the best answer usually is more self evident. Yes, you might negatively impact a shareholder to whom emotional ties might otherwise prevent an action that is good for the whole corporation. This is life and can't be helped. In short, you can't run a successful corporation based on the lowest common element.

Your corporation simply needs more cash. It can either come from a maintenance increase (my favorite), assessments (my least favorite) or adjustments of debt/mortgage balances. You might want to consider a mid year increase.

Finally, the forum could offer more advice if you share your most recent audited financial statements.

We needed to do some work. Rather than an assessment, we arranged a Line of Credit with National Cooperative Bank.
You ought to look into it.

Wouldn't we have to raise maintenance to pay back a line of credit? Or is the tax deduction benefit so great that it would somewhat offset? thanks for any advice, of course I will also check with our accountant.

Sometimes it can depend on the terms of your first mortgage. Perhaps you'd be able to only pay off interest on the line in the near future (which is minimal) and you'll be able to refinance your first mortgage while rolling both loans into the refinance. It really depends on the situation.

I manage a building in Forest Hills that is roughly 40% sponsor owned and the remaining 60% consists of Shareholders and sublets. They also have a waiting list for the garage that is pretty lengthy, so when this came up in discussion with the Board of Directors, the decision was made to amend the availability and wait list of parking spots to Shareholders who live there only and no longer to tenants (of Shareholders of of the Sponsor). Of course, those tenants who already had spots in the garage were grandfathered in, and any rent stabilized tenants were keeping their spots as well.

The Board can amend the waiting list rules as part of the House Rules to include only primary residence residents access to the garage. You can also include in this that all renters of the garage show proof of a NYS drivers license, insurance, registration, etc.

If they are living out of state and have another license this will be easy, although it sounds as though that even though they are there most of the time, they will be able to show "proof" that this is still their primary residence. Although my options are pretty sound, I would suggest a quick call to your building's attorney just to make sure that you're not disregarding the Offering Plan or bylaws of the Cooperative.

If you need any more info, please shoot me an e-mail!

Thank you, Mark, for all of your good suggestions. The board thought we had everything covered in our parking rules, but once in a while new circumstances arise and we have to amend them. The trick is to amend them before it happens.

As you say, the establishment of proof of her primary residence might be difficult in case she still has her NYS material. Checking with our attorney to make sure we're "legal" is a good idea. I'll keep you posted.

My sister owns a coop in Queens NY and is handicapped. She has been denied a handicapped parking spot as she has another residence in Florida and has Florida plates. Most of her time is spent in NY Is this legal?

I would have to argue that regardless of where a shareholder is domiciled, a parking spot can add considerable value to a Co-op or Condo unit, so every shareholder must be treated equally as long as they are in good standing (maintenance paid on time and no infractions of the lease or house rules). If the snowbird fulfills these requirements, then she/he is entitled to acquire the spot when their time comes.

This being said, I also feel that if a shareholder does not physically occupy a garage parking spot for a defined period of time without good cause, that the board be given the power to allow the next person on the list to use the spot until the owner either decides to use it for themselves or gives it up. This would be considered a courtesy to the person being allowed to use the spot in the absence of the owner, so no rights are being conferred or revoked. The board would have to work out the details of the arrangement, but it maintains the value of the existing owner while providing a benefit to the person actually making use of the spot.

Hi, Harvey,

Try re-posting your original comment, this time with a subject (and name, if you like). Most readers are probably passing over your post because they assume it's empty.

I saw your post the first time and didn't respond because your analysis, thoughtful as it as, answers a question that's different from the one that was first asked.

The original poster was wanted to know about maintenance fees comparisons. Your answer was about a building's financial health. Related, of course, but different.

DBO,

I have a few questions for you regarding your post. The first is whether or not the current Sponsor holds a majority on the Board of Directors or if per the Offering Plan, majority was given up 5 or so years after the initial offering. Since it is a 1983 conversion, I'll assume that the Board is Shareholder controlled.

If the Shareholders hold the majority, then the Sponsor would be held to your decisions, whether or not you decide to go on with an assessment. If the Sponsor still holds a majority and the Sponsor refuses to do anything but use the reserve funds, you can always in the future draw upon the line of credit for any emergencies that come up. That's a worst-case scenario.

I don't think that in this market you'll have an issue with the Sponsor selling out. Prices are not in their favor right now and they'll probably hold onto their position for the foreseeable future.

Since you have been given the directive from the insurance/mortgage and city to do the work that has been noted, you have an obligation to do it and will need to resolve a way to get it funded. It seems as though the Sponsor won't have a choice as long as they don't currently have a majority of the Board.

Please let me know if you have any other questions.

Thank You for your comments, yes currently the owners have the majority of voting 3 vs 2 sponser reps with a total of 5 memebers.

DBO, I'm afraid my reply to your question on required work and your sponsor would be very long. Maybe I can write an abridged version after we hear what some posters have to say.

But I have a few questions for you. If you went coop in '83, how can your sponsor own 55% of apts? Didn't he have to sell a higher percentage of them to get approval for coop status? And why does he still own so many after 26 years? I assume that means 55% of your apts are still rentals and only 45% represent shareholders. (??) Just wondering.

I have been in the building two years and have asked myself the same question. The building went co-op in 83, yet the sponsor still owns and rents 55% of the apartments in the building. IN fact more worrisome - they have been sitting with about 6 apartments empty for more than a year - 3 of them with monthly charges of more than 1K...
I have seen no effort to attempt to sell them, let alone a serious push.
We continue to increase the pressure slowly, and I think an assessment will be good medicine for them, as we will be able to use at least the current abatement and just pay a small amount, the sponsor will need to pay up out of pocket... It’s an odd situation which will end one day I hope, but as a new board member, I don’t want to be stuck with a shell or patched up building that will reduce our value over the long run, or raise our maintenance to a level that is not sustainable...
Thanks for your ideas/feedback, much appreciated.

Hi,

We have 111 units with 11 rentals left (which we own) and sell when they become available. We also have almost 3/4 of a million in reserves. When we had an engineering study done, we realized that out reserve level is not enough and we are looking to add to it. A reserve fund can give a board a false sense of security. We are looking at a Capital Funds Replenishment Fee (like a transfer tax) of 2-3 % off of gross however that means a super-majority for us which may not be obtainable for you.

I agree that 'doing it right' with the repairs is the best way to go and will be cheaper in the long run. My suggestion is to use the current reserve funds since you have them and then either phase in additional maintenance increases (putting the excess in reserves) or a lower annual assessment over three years to replenish the fund. Conceivably, you will need more in the end than just the 'mortgage reserve' as new repair needs will become evident.

Also, the tax credits of which you speak may lag the actual expenditure so that you may have to pay 100% for the repairs before you see the cash flow from any tax credits. Also, if you are seeking J-51 credits, all violations must be cured before the city approves the credit.

In my opinion, when the mortgage comes up, I would suggest buying out the sponsor. This puts your destiny into you own hands.

Finally, I would like to see you move towards sustainable finances. An engineering study of needed replacements within the next 5 years (incase the city/insurance company list is not comprehensive) and then establishing a 5-10 financial plan off of that for funding would be a start (for example: 5-year plan cash needs times two and a ten year plan to pay for it).

You might want to read your PL and By-Laws to determine if you use cumulative voting. If so, you might need a supermajority to vote out the board members. If that's the case, it will be a very difficult to do, since they would need to get only 20.1% of the votes to remain on the board.

As for counting votes and proxy forms, you should have your co-op's accountant attend and act as one of the ballot counters (your attorney could be the other).

Thanks for the info. Shareholders are aware that the bylaws state that elections use cumalative voting. Hopefully several current board members will understand that majority of the shareholders would like to see a new board. It is interesting because the sponsor currently holds 20.1% of the shares in our coop. As per the PL and BL a meeting needs 50% of the shareholders present in person or via proxy and for the board members to be removed shareholders need 51% to agree. Hopefully the board members will be removed or they will resign. If nothing changes the board will see that sharholders want a change. It is quite unfortunate because if the board communicated and respected the shareholders this would never need to take place. When the board and property manager do not disclose information and engage in unprofessional behavior consistently then shareholders need to take action and be proactive.

First thing is to get rid of both of them! Get a mid size management company and lay down the guidelines you want them to follow. Then start interviewing Supertintendents.

Yeah, me.

Board President 3 years, during which I oversaw whole-roof replacement, DVR security system installation, fitness room creation and installation, storage (both cage and bike racks) installation, sewer system replacement; hired two Supers (first left only for much better opportunity); initiated facade repair and window replacement projects; initiated and completed other improvements too numerous to list now.

When I first came into office, the building had suffered several recent years of in-fighting, rumors, lawsuits, complaints, "shadow" boards, etc. I initiated and saw succeed a conscious plan to get building residents and staff feeling like the building was their home and their neighbors, friends. I come from a small town originally; I prefer openness, honesty, candor, and good manners, both in myself and others - and find that how people are treated is how they'll treat you.

My relationship with both supers and managing agent were, and are, excellent; I've worked with both for-profit and nonprofit boards, with excellent results. I would be happy to talk with you about your problems and share suggestions based on my observations, experience and problem-solving ability. If I can help, I will.

Write me offline.

Bee Dub,,,
The name of the best Mananger/Consulant is: The Board of Directors.

The Manangement and Super work for you, and you own the Business. Take the montly statements, review them, and work with other Board Mem to make a scheduel for the Staff.

On reviewing our Finacials we have saved $$$$. Dont allow the Mang to make decisions for the Board. Have every check, payment etc approved by the Board..
And, corrospond (even the Super) by Email. There is noting like transparacy and and Email trail to keep things on the up and up.

Good Luck...VP

Bee Dub, I may be able to help you. If you have been reading any of my Blog entries on Habitat, you will have a pretty good idea of my approach. I have been the president of a self-managed 400+ unit co-op with a $5 million budget for the past five years. We have been successful at least in part because of my communications with shareholders and management, as well as my ability to filter the truth and reach compromise. I have also experienced some of the same conflict as you describe and the situation is now much improved without taking the drastic steps of removing people from their jobs.

I write here anonymously; however if you are interested in talking, let me know how to reach you.

Best of luck.

Bee Dub: It's your mgr's job to manage daily operations, oversee the super's activity and make sure things get done. It's your super's job to take direction from your mgr and tell him what he needs or reasons why he can't do certain things (e.g., too much work, don't have the right materials, isn't experienced or needs a pro to do a specific job).

Before you hire a consultant to find where problems lie, try it yourselves. He'll need time to look at all areas of operations, and that could cost a lot of money.

If your mgr and super blame each other that little gets done, ask yourselves questions and do some investigating. A few suggestions:

- Are your mgr and super open and at ease when your Board talks to them, or do they just complain or seem to be evasive?

- How satisfied are you with your mgr's performance in areas that don't involve the super? For example - dealing with owners, overseeing condo expenditures, making sure important letters/notices are sent to owners or posted in a timely manner, how easy it is to reach him and how promptly he replies to calls or e-mails from board members?

- How satisfied are you with your super's performance in the work he does do? Is he qualified? Is his work shoddy? Does he reply promptly to owners' requests for service? Do owners find him cooperative and like him? Is there much time when things could be done but aren't? Do you know where he is during his working hours and what he's doing?

- You might consider a questionnaire to give owners with a "poor to excellent" check-off scale for rating all areas of management and staff performance. People all have their own issues and ideas of what's important, but probably no one can give you a better gauge of what is or isn't being done, or how well things are done, than the people who deal with your mgr and super on a regular basis.

- Have each of your board members write a list of specific areas that they feel aren't being attended to properly, or at all. Then compare notes and see where you all have the same issues or complaints.

I don't know any consultants you can hire to investigate this matter but, as I said, it will likely take a lot of time and money. An objective "outside" opinion can be a good thing, but it could also be way off base and wasteful in the end. I'd still suggest that you try to determine where the "fault" lies internally first through those closest to the situation - your board and your owners.

I feel for you -- there is no excuse for harassment or derogation. From the board, it's uncivil and immature. But from the managing agent, it's grossly unprofessional.

Are the harassing board members the two who stand to be removed? Might that end that part of the problem? Or are the others behaving like babies as well?

Unless the board members are actively doing and not just saying things, it might be possible to take the "sticks and stones" high road. As for the managing agent, I would send copies of any harassing or insulting e-mails to the board and to the person's boss at the management company, and ask whether -- issues with you aside -- this is appropriate behavior for a professional, and whether the company tolerates this type of thing. If you get an unprofessional response, I would post it here and elsewhere with the company name -- e-mails are not considered confidential correspondence, and what's true is true.

Thanks for the reply. Hopefully there is good turn out at the special meeting and the two board members will be removed. The harassing comments and insults that I recieved from the managing agent were from the owner and chief opperating officer. I will gladly post these comments from JAL Diversified Management Company based in Brooklyn. They manage buildings in throughout NY. Once again please do not use JAL Diversified. For example, Maintance due on June 1 but shareholders recieved bill May 28th. Make any sense, but when shareholders contact the board they are ignored and nothing is done.

In our 505 unit co-op, we deliver the statements under the door to every resident, save those who ask that it be mailed to another address, e.g.: snowbirds.

The statements are distributed on the last week day of the month and are due on the 1st of the next month with a grace period to the 10th.

Yes, due on the 1st, but 10 day period allowed for payment.

We have few, if any late payers, e.g.: beyond ten days.

I will never condone board members or managing agents that treat shareholders with disrespect. However it works both ways and I expect respect in return. Not knowing what the conflict is about or type types of comments that some board members and the managing agent have made, I can't help but feel that we are missing the other side of the story. Why does the rest of the board tolerate unprofessional behavior? I have on occasion been on the receiving end in conflicts with shareholders (it's part of the job) but I do my best to be an effective communicator so our disagreements have never reached the point that yours has reached.

The fact that you were able to get 25% of the shareholders to support such a special meeting tells me that there is certainly something wrong with their behavior, their ability to communicate to the shareholders, or both.

As to your maintenance bills, there is nothing wrong with you receiving the bills 3 days prior to the end of the month. Your bill should not come as a surprise - you know you will get it every month, you should know the amount, and every building I know has a grace period, usually 10 days.