Sad but true. From my very own personal experience haveing managed many properties the board member(s)appear to be the first one to break their own rules more often than not.

Example: "All dog walkers/owners must take their pets on the service car and out the service entrance except for board members who can use the front elevators and go out through the lobby." Could you also ask the staff to enforce the rules.

FN

Oh FN dont get me started on Board members braking rules.
I can go on for ever listing what goes on. Not all board members though. Just a few that feel privileged.
Its a shame that we just cant tell them the truth and what really is on our minds without knowing that to do so would mean looking for a new job.
Pg

First there must be a tone of fiduciary responsibility and ethical values which must be inculcated in the board’s activities day after day, decision after decision, meeting after meeting, etc.

Basically personal gain or good are checked at the door and the it is the good of corporation and the shareholders which is paramount.

In our case, when we found a board member had broken a rule and wanted to be grandfathered, we then found a replacement board member and asked that offending board member not stand for reelection. This was kept quiet, other board members were aware, but not made public. This action was taken even after the offending board member took corrective action.

In my view the board needs to behave in a proper manner at all times.

This is one reason in our coop the board of directors does not have access to any waiting lists for any cages, parking, etc. This simple expedient eliminates any chance of personal persuasion and also allows the board to face the shareholders and honestly respond: ”I don’t know who is on the list or in what position, nor can I influence the list, nor would I want to influence the list.”

Why don't your board contact the sponsor through your management to request that the seat on the board be given up for the explanation provided below: deadlock during decision-making. Alternatively, invite the sponsor to participate for the same reason.

Unfortunately, if the sponsor's number of shares if voted all for one member is able to retain the seat, then there is not much to be done except keep asking the sponsor to give up the seat.

In most cases, the sponsor may retain the seat to have access to financials. In many proprietary leases, boards cannot make an independent decision to assess or increase the maintenance if the sponsor still holds a certain percent of shares in the corporation. This is to protect the sponsor's own operating budgets from unforseen major incrases, specially when the sponsor may have a large number of apartments occupied with rent controlled, non-eviction tenants.

AdC

Why don't your board contact the sponsor through your management to request that the seat on the board be given up for the explanation provided below: deadlock during decision-making. Alternatively, invite the sponsor to participate for the same reason.

Unfortunately, if the sponsor's number of shares, if voted in one block for one individual, is able to retain the seat, then there is not much to be done except keep asking the sponsor to give up the seat.

In most cases, the sponsor may retain the seat to have access to financials. In many proprietary leases, boards cannot make an independent decision to assess or increase the maintenance if the sponsor still holds a certain percent of shares in the corporation. This is to protect the sponsor's own operating budgets from unforseen major incrases, specially when the sponsor may have a large number of apartments occupied with rent controlled, non-eviction tenants.

AdC

Why don't your board contact the sponsor through your management to request that the seat on the board be given up for the explanation provided below: deadlock during decision-making. Alternatively, invite the sponsor to participate for the same reason.

Unfortunately, if the sponsor's number of shares, if voted in one block for one individual, is able to retain the seat, then there is not much to be done except keep asking the sponsor to give up the seat.

In most cases, the sponsor may retain the seat to have access to financials. In many proprietary leases, boards cannot make an independent decision to assess or increase the maintenance if the sponsor still holds a certain percent of shares in the corporation. This is to protect the sponsor's own operating budgets from unforseen major incrases, especially when the sponsor may have a large number of apartments occupied with rent controlled, non-eviction tenants.

AdC

Thank you, AdC.

"if the sponsor's number of shares, if voted in one block for one individual, is able to retain the seat, then there is not much to be done except keep asking the sponsor to give up the seat"

So you're saying that apparently the sponsor is voting for himself at each election.

Hm. At each election the sponsor's name always appears on the ballot, and we (the shareholders) are told to vote for four additional officers. So the way it is always presented to us is that the sponsor's presence on the board is inevitable. We aren't given the option either to vote for him or not. He is just always there, an inevitability.

If there are five directors and the sponsor retains at least 20.01% of the shares, the sponsor's rep is automatically elected. And that's if all shares are voted, which (of course) they aren't.

Even if every single shareholder votes, there is a sixth person running against the sponsor's rep, and the sponsor's shares dip below that 20.01, you cannot hope to see the sponsor's rep defeated until the sponsor's shares dip to around 16.5%:

shareholders split 83.5% among 5 directors (16.7% each director)
sponsor's rep has 16.5%

Hope that sales are brisk.

Thanks for the info, Batch; very helpful.

Well, I guess the solution is to bring one more officer on board. So technically there will be six board members; but, since the sponsor never comes to board meetings, it will be as if there are five members and deadlocks can thus be avoided.

GK - Unless your sponsor controls enough shares of his own and/or by proxy to keep voting himself onto the board, or your by-laws give him the right to be on the Board, I see no reason why he has to be on the board.

You said his name is always on the ballot and you're told to vote for 4 BMs. Who creates the ballot? Who's "telling" you to vote for only 4 others? The sponsor, board, mgmt, coop attorney? Who chairs your annual meeting and oversees the election proceedings?

If your sponsor doesn't control enough shares or have the right to be a BM per your by-laws, get more Shs to run for the board and vote him out. If board votes on coop business keep ending in a tie, the sponsor doesn't vote and nothing gets done, that's unproductive. Talk to your mgmt company or attorney and get some straight answers as to why the sponsor is a permanent fixture on the ballot and why you don't have the option to vote him in or out. And get other Shs involved. If you want to get some action on this, you have to take some action.

BP, thank you, as usual, for your input.

The sponsor owns just under 20% of the shares at this point.

...or your by-laws give him the right to be on the Board...
I've looked again and I see nothing in the bylaws that explicitly gives the sponsor this right. There is one passage that confuses me, though:The president shall be a member of the board, but none of the other officers need be a member of the Board. . . . An officer who is employed by or affiliated with a holder of unsold shares need not be a shareholder.
BP said:You said his name is always on the ballot and you're told to vote for 4 BMs. Who creates the ballot? Who's 'telling' you to vote for only 4 others? The sponsor, board, mgmt, coop attorney? Who chairs your annual meeting and oversees the election proceedings?
It's amazing, isn't it, what people will accept when something is unfamiliar and they are told that that's simply the way things are done. In most aspects of my life, I question just about everything—but it has taken me five years to start peeling away the opaque layers of this co-op. At every annual shareholders' meeting I have attended, ballots are passed out by the managing agent. (In a thread from last spring I talked about how the managing agent "lost" my proxy at the most recent election.) Those who are running for the board are listed with a checkbox next to their names. The sponsor is also listed, but his name is in bold and there is no checkbox. At the first meeting the person next to me said: "Oh, yeah, there are five board members, but you can only vote for four; the sponsor is always assured a seat." And, you know, I thought that was weird and I didn't really get it but I got busy with the rest of my life and didn't think too much about it.

I would like to get some independent advice on this. The board VP and I were just talking today about how we should seek independent legal advice re: a fuel spill that occurred in the building in October. Residents called the managment company to complain of overwhelming fumes; the super perceived that a spill had occurred and notified the management company. But the management company waited a full week to report the spill to the DEC, lied about when the spill occurred (stating that it had occurred just minutes before they called the spill hotline) and cleanup was needlessly delayed. As you can imagine, we're not happy about this, and we feel that we need legal advice. But co-op counsel is employed by the management company. So the board VP and I are concerned that we won't be dealt with honestly. (By the way, I've always been bothered by the fact that the co-op accountant and co-op counsel are both employed by the management company and wonder if that's the norm. Is it the norm? Not to mention that the only board member counsel/accountant/managing agent have any contact with is our problematic BP. I think I'm finally making some inroads into persuading others that this situation needs to change and that there needs to be more transparency.)

Thanks again for your feedback. I am going to push hard for removing the sponsor from the ballot or at the very least making him run for the seat like everyone else.

Good luck with your aspirations.

In my experience, the sponsor will be with you on the board until the last rental unit sells.

First, about the sponsor. It doesn't matter how many apartments the sponsor owns. What matters is how many shares the sponsor holds. Your building has 5 seats on the board, so the sponsor needs only 20% of shares to elect him-/herself to the board. When the sponsor holds less, you may be able to run five residents and the sponsor; if the 5 residents get the votes, they win. (Ask your attorney for details -- prop leases vary on how votes are counted in contested elections.)

As for the number on the board, it sounds to me as though you have a perfect reason for adjusting the number. As long as you explain to shareholders why you're making the change -- and do it politely (no reason to annoy the sponsor) -- they shouldn't have a problem. After all, it will increase THEIR voice on the board.

in our coop, the sponsor has a right to elect on person every year (unsually himself) and last year - the board president used all the sponsor proxies to vote himself and his own slate in to prevent a new comer from being elected. (the newcomer was actually a very decent person) - so what can we do about that?

In other words, is the term of office 2 years in which the sponsor is elected for two years, then the votes are used to elect another member? or

Is this a matter of double counting?

Who acts as the supervisor of the elections? The independent accountant and counsel or someone else...?

AdC

Every year without doubt this subject comes up. To be or not to be, that is the question, the bottom line is that any cap or pre buying scenario involves speculation. As in any speculative market there is risk. You are either the hero or the donkey when you sign for this agreement. I have been both donkey and hero, let me tell you first hand last years hero says nothing to this years donkey, so much for short memories.

Here is a new slant on this dilema, contact you local oil suppliers and ask for a rate keyed to the barge reseller index, your supplier will offer a percentage above this FIXED and POSTED rate (on the Journal of Commerce)number, you can use this as an effective tool to obtain price quotes on your fuel oil

It's all a ball game. The good thing about locking prices is that you will know what your budget will be during the heating months or during the time your contract lasts. However, it's hard to lock the prices much in advance because of the market volatility.

Just read and follow the forcast provided by EIA to have a better idea of what is an uncertain world, then roll the dice and make a decision. You may be lucky or you may not be as lucky, but at least you made a decision on best available knowledge for your shareholders if it goes the wrong way:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

Also, the new york mercantile exchange is a good page to check for current and past prices. I believe the webside is

http://www.nymex.com

Good luck with your decision!

AdC

Info taken from the site...

Barcoding, Inc.'s Package Track Solution combines everything you need to start automating your company's package delivery system.
The off-the-shelf software package joins a Microsoft Access database on the PC, and a Pocket PC-based handheld terminal with an integrated barcode scanner using imager technology. The software will allow you to scan in packages as they are received using the existing barcodes, assign packages to the recipient, collect a signature upon delivery, and generate daily reports.

Features:
Generate reports for internal package tracking
Record time and date stamp for receipt and delivery
Capture electronic signatures
Automatically email final receipts upon delivery

Benefits:
Reduce time from mailroom to recipient
Reduce time spent looking for lost packages
Increase efficiency in the mailroom.

http://www.barcoding.com/tracking-software/barcode_package_tracking.shtml

~AR

here is a link to a scanner that we use. We found it great and works with all us mail, fed ex, ups etc.
Pgrech

http://www.product-catalog.com/preview_item.cfm?BAToken=printheads&item=658893

The answer depends on whose roommates they are.

If they're the roommates of shareholders, it's fairly easy because the shareholder is generally responsible for the conduct of his/her guests while on co-op property. So no matter who in Apt. 7-B is playing loud music/leaving trash out/loitering, the shareholder takes the blame. You can admonish or fine the shareholder for his/her guests' misbehavior.

If they're the roommates of the sponsor, it's much more difficult. Even assuming you have a cooperative sponsor, people in rent-regulated apartments are in a protected class. Talk to your sponsor's contact person and explain the situation. Suggest a letter from the sponsor (i.e. from the renter's landlord) that explains that there have been complaints about such & such behavior by a guest of the renter. The letter would explain that the renter is responsible for guests' behavior. Conclude by pointing out that the next time there's a verified complaint, the renter will be fined $XX. Then follow through.

You can draft this letter for the sponsor.

If the sponsor isn't cooperative, ask your lawyer. Also, talk to the lieutenant in charge of your precinct's community policing program. The police can work as a non-threatening deterrent. Ask them to send an officer over one day to explain security to all residents. That way you'll meet the the local police, and you'll be able to get them on your side. They can't solve everything, but their presence alone may cut back on some bad behavior.

Good luck.

I guess I wasn't clear enough- we are a co-op with NO sponsors, all owners. The reaseon I mentioned rent control at all was to just example the dishonesty that one "roommate" of a shareholder engages in - holding onto a rent controlled apartment elsewhere while living with a shareholder here.What right does our co-op have to know who is living with our shareholders in this building in terms of security/identification. SOme of these live-ins seem less than desirable types who would not pass co-op Board review but are in nevertheless.

Although there is such a thing as a Roommate law, the NYS Rent Laws as well as the PL states that after 30 days lessees or shareholders must inform the landlord or the co-oop about residents overstaying the 30 day period.

Your apartment may enact a "meet-and-greet" meeting with two board members or admissions committee members to go over the rules and meet the individual.

If the lessee or shareholder moves out the builidng, then the occupant may need to move out; otherwise, you may have a sublet that may be in violation or not with the co-op's policy.

AdC

doors slamming? smoke? you have got to be kidding. if you dont like people and their everyday noises and smells - the move to a remote place. thses seem like very small problems. do you have anuy idea what a problem tenants is relaly like? and, yes, the roommate law fortunately superseeds any coop laws or rules (thank you god)...

You never want to state how you voted on anything to anyone, it will usually come back and bite you later on somehow.

Perhaps there is a lack of proper communication between management/the Board and the shareholders.

When a resolution is made (lets say... raising maitenance 12%) and you must tell this to the shareholders, it is not your job. let management send a memo to all SH stating that

[actual letter i sent]

After careful consideration and review of the many rising operating expenses; such as Fuel (35%), insurance (9%), electric 15%), real estate taxes (11+%), supplies, labor, etc… it has been determined to raise maintenance in the amount of 12½%, beginning January 1, 2008.
Kindly understand that this increase is purely to permit us to operate at par with the rising operating expenses of the building.
Please do not hesitate to contact me should you have any questions concerning the aforesaid matter.

this type of memorandum takes the blame and eyes off the BP. all other communication should be the same.

hope that helps some..
~AR

Not sure if you are Alex P Keaton from Family Ties? Quies simply, you each have a vote when it comes to decision making but the result is a board decision,(3,5,7,9) not Bob, Mary, and Jane were in favor and Pat and Sam opposed. If you are going to inform shareholders how you voted you might as well post it on a bulletin board and a target on your back.

FN.

I agree with the others -- the decisions the board makes are the board's. As we say in our board meetings, it's fine to disagree among ourselves, but once a decision is made, everyone on board defends and upholds it.

Let me add that although the managing agent can help answer questions about unpopular moves (such as raising the maintenance fee), any board member must be prepared to answer those questions as well. If he or she can't, you, as board president, should ask them to refer the questioner to you.

Making unpopular decisions is never easy. When I'm asked, I explain why we need to raise money (so we don't have to borrow money to pay operating bills), and that we, the board, pay the maintenance fee just like everyone else. You can also ask the complainer for suggestions on how to save money so the next increase will be less -- that is, make the complainer responsible for finding a solution.

We send a letter to the shareholders about three weeks before the fall “open board of directors meeting” describing the “planned” increases and the rationale. All board members sign the letter. This “budget approval” open board of directors meeting is typically conducted in November.

By this, I mean that twice a year, we take a room in a nearby public building and invite all shareholders to view (not participate) in the open board of directors meeting. This part of the evening takes about ten minutes. Note shareholder opinions are not solicited during the open board of directors meeting. Shareholders not permitted to ask questions or make statements during the open board of directors meeting. Then, we conduct a Q&A session for all shareholders. This Q&A session usually lasts about sixty to ninety minutes.

Because we have previously reviewed the amounts and all the details at a board of directors workshop; hence all details are finalized (no votes are taken for the record at the workshop, though all board members can voice opinions, and we come to any compromises, as necessary), at the open board of directors meeting, shareholders see all the board members vote affirmative.

= = = = = = = =

In May we have our annual open board of directors meeting wherein new board members are elected (following publication of candidates and solicitation of proxies). Any items to be voted during the open board of directors meeting are previously discussed in a workshop, without votes, and thus any motions are always unanimously voted.

Note as with the fall meeting, shareholder opinions are not solicited during the open board of directors meeting. Again shareholders not permitted to ask questions or make statements during the open board of directors meeting. Following the close of the May open board of directors meeting, which usually requires fifteen minutes, we then have a Q&A session that usually lasts about ninety to minutes.

We recruit like minded board members. But do note, we have a history of longevity among board members. Further, we have a common purpose (kindly see my other postings herein these forums) and all board members check their personal demands at the door.

Yes, there was a discussion thread about two weeks ago regarding soliciting votes. We usually recruit friends of the board of directors and they in turn go door to door to solicit proxies for the preferred slate.

But do also take note that we are without any debt, having retired the original mortgage without refinancing. We raise maintenance EVERY year by 2.5% to 4%. We slowly year by year raised our capital assessment which initially garnered $20,000 so that now we are bringing $900,000 to our yearly capital reserve fund. Yes, there was a jump from $450,000 to $900,000 when we retired the debt and its payments, and moved the debt retirement amount of maintenance from the maintenance income stream to the capital improvement stream.

And we have a mega-million line of credit which as I noted elsewhere is used for intra year payments in anticipation of capital reserve income.

= = = = = = =

How did we do it?

Single minded focus of a board of directors recruited by the board of directors with total dedication to fiduciary responsibility.

= = = = = = =

Oh, we are self managed, and our staff is all long term thus avoiding the churn of management companies and managing agents even if the same firm is retained.

= = = = = = =

"...Any items to be voted during the open board of directors meeting are previously discussed in a workshop, without votes, and thus any motions are always unanimously voted...."

Can you explain to everyone what a "workshop" is, as to clarify your process?

This is a great process / protocol and I think we all cab benifit by understanding it more, thanks.

~AR

As a way of introduction, we are self managed. In our decision process, we have periodic workshops. Attendance at the workshop is composed of the board of directors, the building manager (employee, almost always attends), the superintendent (employee, usually attends), our in-house attorney (most often), our outside attorney (occasionally), guest invitees, e.g.: a resident with a particular skill, a tax specialist, a banker, etc.

The frequency of workshops is about one a month or one every six weeks. The duration is typicallyractor 60 to 90 minutes.

At recent workshop meetings, we discussed such items as:
• The underlying rationale for the 2008 maintenance increase and the 2008 assessment; and how we would explain it to the residents.
• The final agenda and format for the annual “open” board of directors meeting.
• The status of arrears in general (we hardly have any), and the status of one shareholders.
• The purchase of a billy-goat to clean our sidewalks.
• The need for some additional furniture in our lobby.
• The status of our outside security firm’s performance.
• The final steps in our acquisition of a larger credit line.
• The Christmas holiday luncheon for our staff of employees and contractors and vendors.
• Shareholders (a married couple) who purchased, who did not move into the apartment but in turn allowed their daughter to occupy the apartment, e.g.: illegal sublet.
• Discussion of capital improvements completed this year and those planned for next year.
• A suggested elevator cab improvement.
• Any pending legislation that might affect The Twin Rivers (Hightstown, NJ) case.
• The status of our pool services company and its contract.
• Letters to the board and the proper response.
• Planned meetings (one-on-one, really two on one) with shareholders.
• Results of requests for proposals and thence selection of a vendor.
• Results of engineering studies.
• Superintendents report on the status of the mechanical plant.
• Discussion of other property conditions.

Quite frankly, our property is in an excellent financial and management position, e.g.: no mortgage, a large capital reserve fund, extremely minimal arrears, board longevity, formal reporting of our financials monthly, weekly management reports from the building manager (including all letters from shareholders), mechanical plant in excellent condition, building in excellent condition, etc.

Thus, we do not have a need for very frequent multi hour board meetings with much anguish and weeping to discuss what will be paid, what will held, where we have issues, etc. As we have a building manager as an employee, most issues are resolved before they come to any board member. In some cases, the building manager will consult with a board member when making a decision, e.g.: switching vendors, responding to a shareholder who is a pest, etc. Kindly note, not all board members need to be consulted. The board member responsible for the landscape committee is somewhat autonomous. Likewise, the board member responsible for the security committee operates somewhat autonomously. The board member responsible for capital improvements operates somewhat autonomously. In point of fact once the outside engineer approves an invoice submitted by the vendor, the responsible board member approves the invoice and allows the building manager to issue a check in the next cycle. Kindly do not opine that we do not seek competitive bids, we do.

Note that we have two payment cycles each month for invoices. All that arrive by the 25th of the prior month are paid by the fifth of the current month. Special payments are issued during the last week of the month. All our vendors are aware of the policy and conform to our requirements for invoice submission.

Thus the fall (year end) open board of directors meeting to which all shareholders are invited by letter covers a narrow range of voting topics, e.g.: approval of the budget for the next year, approval of the maintenance changes (it increases every year in the range of 2.5a% to 4.5%) and assessment (we have an assessment every year), authorization for the board to enter into contracts that might be required per the budget and the capital improvement plan, and approval of the plan to accumulate capital reserves.

As a consequence entering into contacts during the next year becomes a procedural formality that does not require full board of director’s ratification as we have preapproved the authority of the board to enter into contracts. But do note, the bid, the proposals from the vendors and the selection of the vendor is discussed in the workshop.

500 units @ $1000 avg/mo = $500,000/mo, $6 million/year.
45 units @1000 avg/mo = $45,000/mo, $540,000/year.

Which one of these co-ops can afford huge capital projects and to pay off their mortgage early?

Tired of hearing about it.

Geez

Let me clarify when I assert that our shareholders pay about $1,000~ a month for maintenance (average); studio through three bedroom. (In reality we are closer to $1,100, and this cost includes the parking fee of $60 a month for one car.) This cost also includes all taxes, all heating and all air conditioning. We have a central heating and cooling plants. Thus, residents do not have PTAC units within their apartments that in turn are operated by the residents and funded by the residents directly.

In our building, there is a continuous loop of chilled or heated water that is routed through the under window units in the residents apartments. The residents operate the "fans only" in these units to their desired heating or cooling level.

Thus, the costs above are inclusive of heating and cooling but exclusive of the residents monthly electrical bill for lighting, appliances, PC's TV's and heating/cooling fan operation. For example, a typical three bedroom unit will see a monthly electrical bill of $55 to $80, depending upon season.

I believe that shareholders should know how board members vote, in prior years our board unfortunately has had almost all members voting the same - this does not imply individual thinking - especially in matters of assessments and raises - which we have had since 2001 and over 50% in 3 years - the cause of this which your coop might not have is ignorance, non caring and corruption. Our supply and repair costs are massive and then we do not have the supplies and the repairs have to be done again because they were not done correctly, we have in our coop massive waste, misuse and disappearance of funds and when certain board members vote against the increases and assessments because they are aware of these problems I believe these votes should be made public so that at election time the shareholders can make an educated vote

J,I disagree with you. If the individuals on the board cannot make a deision (vote) on their own and everyone has to agree maybe it is time for others to step forward.So what if six agree and one person disagrees when a vote is taken.

Fat Nickie

Sorry to bear unhappy news, but...

Unfortunately, the Board was probably advised correctly.
We would all like to see the funds advance to the Coop, but no judge would award it. After spending good money, the SH will be ordered to remedy the illegal sublet within a specified amount of time. You lost more money chasing justice. It is truly unfortunate, but this is the way it works.

Let it be a lesson the board and management to keep a closer and clearer eye on every apartment. The super plays an important role in notifying management of anyone who moves furniture, or changes in mail or faces. Management should look at things such as the postmarks on the payments when they arrive (a check postmarked from Florida for 2 consecutive months is your flag), there are many more red flags to look for, but that is the managers’ job.

~AR

pls to check your facts..

This is the way it is (unfortunately based on several 1st hand experiemnces); however, if I am proven to be in err anywhere, please tell me how and where.
I am open, and quick to accept correction (we'd like to hear your experiences too - that's why we're here!)

~AR

stop hideing, no anons please anon.

Bob

the shareholder is caught after 2 years. does she have to pay backfees? (she already had 2 yrs of subletting prior - and should the board grant yet a third year after catching her? (house rules only 1 with exception for 2 and 3 - but she already technically has done 4).

AS I said before... I just lost a similar court case. the SH did not have to pay back fees.

It is up to the Board to approve or not.. but have a good reason to disaprove. (watch dor discrinminatory decisions that might come back at you later)
if they were paying and did not bother anyone, you probably are obligated to approve again if it is within your HR guidelines.

AR

the HRs say that one year must be allowed with second at approval and third at special approval/ discretion. so it seems they did not have to allow this third year esp after having caught the sharholder abusing the situation and lying to them.

how come we cant get fees? what did court day? thanks again.

In some instances Goidel says that the board may give the tenant the opportunity to "legalize" the sublet. They may elect to have the shareholder pay the back fees and let the tenant remain. However, Goidel believes this is a bad policy. It provides shareholders with no incentive to comply with the boards rules. "If you get caught (illegally subletting)," he says, "this person has to go."

from 'the cooperator.."

Not quite sure we understand your question with regard to voting?? Repairs and repair status has nothing to do with voting.. Please explain.

With regard to a valve and whose expense... this is probably (in my opinion) covering up for a larger problem of improper heat distribution. That issue should be addressed before spending money on Band-Aids and excess fuel.

~AR

Let me try to clarify: It happens that several Board members currently have heating deficiencies in their apartments. The one Board member who does not--he had too much heat and the prior board, of which his wife was a member, bought him a danfoss valve to reduce the heat in his unit, and two of the other Board members at that time bought themselves new radiators to replcae original baseboard. By the way, their lack of legal heat was never verified.

Now the Valve guy who is on the current Board wants the Board members still without legal temps when the weather goes below freezing, is hemming and hawing about it not being ethical for the needy to vote for their own upgrade to their heating units. He wants them to rescuse themselves from the vote, get multiiple bids, be verified by a third pary as to temperature (who is a non-partial 3rd party anyway?) all the thinks the prior Board, of which his wife was a member, did not do. It appears very hypocritcal especially coming from someone who possibly benefitted in a way that he shouldn't have in the first place.

Just trying to see if any of his points are valid or usual practice.

Thanks.

Are you on the Board?

There are mechanical engineers who can look at this system for you and document deficienceis and problem areas.
This will not only assist in making neccessary adjustments to the system, but in showing that most of your concerns are valid and that some of these individual changes in the system may have effected the system as a whole, in a negative way.

~AR

I too am a little confused regarding your post but here goes. As regards repairs etc it should make no difference as to whether you are the "Coop President" or whether you moved in last month. Either the Coop is responsible for the repair or it is not check in your properiority lease.

FN.

Nickie, I believe the tenant is requesting a "special valve" because they are getting too much heat? Any way I agree with you it makes no difference who you are. But on the other hand, if the valve is a different valve that the building uses, then the tenant should pay.

Mike Mac

When you say common space... is it?
coop or condo?

co-op

Sounds like what Ted is saying holds true for you also...
The cooperative "common" space, unlike a condo, belongs to the corporation, not the shareholder or unit owner. Therefore the space allotted for bikes, cars, storage, etc... does not have to be divided in any equitable fashion (as long as it is not biased).
so if the building space only allows for 58% of the SH to have bike space and they are saving the other space for some other future use, unfortunately for the other 42%, they have to wait for a space.

~AR

While I cannot answer your query directly, I can provide some anecdotal thoughts.

In our co-op there are but 250 storage bins with 500 units, so we allocate storage bins/cages to the next unit on the waiting list (one per unit) upon departure of a shareholder.

We have 500 units and there are 700 parking spaces. But with two and three car families, we restrict parking to only residents of the building. Thus a family member who is not a resident cannot park in an assigned space, and all are assigned. We do permit overnight parking by a visitor to a resident in the resident’s assigned space as a temporary expedient.

We have a bicycle room. As we restrict residents from transporting their bicycles via the elevators, we ensure that all can be accommodated. Non residents (visitors or family members) may not employ the bicycle room.

So the bicycle room rules depend on the building’s rules as well.

Every building is unique in its goals, resources and its conduits to reach those goals. These should always be predetermined by management and the Board.
The answers will vary depending on the aforesaid state of your building.
If there are no goals, that’s worse!

Anyway... I have come up with a general rule of thumb for most of my buildings. It costs about $500 per unit, per year for capital expenditures. What that means is that if I have a 100 unit building, every 5 years I will have to undertake a $250K capital project.. be-it roofing, pointing, interior work, etc... This is not to be confused with the regular maintenance and operating repairs.

Now, knowing this, I have several choices... finance, budget and pay from capital reserves, take from existing reserves, assess... and so on. The answer for me is always simple. Why pay interest if you do not have to? it is a waste of SH money. What I do is take my per unit figure and put it into the budget and place that mostly into a special capital account, only to be used for these purposes. If it is a building where i did not have the opportunity to do this, then the amount currently in reserves must be analyzed in conjunction with the making of a well designed 5 year capital plan.

You also want to look at when your existing mortgage terminates, interest, the cost of the funds, time value of the money, etc... If you are financing, you want to have the P&I to be paid from your newly established capital account until you can roll it into your mortgage, or pay it off. But do not do this unless you are making provision for the annual capital average expense going forward; because, you will only be adding debt and never paying down.

Either way you are increasing maintenance for this. A separate 5 year capital assessment may be the best way since it separates the funds for accounting and in the minds of residents... it makes operating increases easier.
As long as you do not run your reserve dangerously low (and you will have a good gauge of this because you will have done a 5 year plan), you are OK. A separate line of credit (not being used) may be prudent just to have and hold in case of emergency and until the increase/assessment pays it back. If you are well planned, there is no harm, or less attractiveness to banks with the temporary lower reserve. Some uneducated buyers may frown on a low reserve until the plan is explained to them.

So, in short, only use the credit if there is a plan in place to pay back and simultaneously get financially ahead.

Hope that helps?

~AR

This is great, thanks so much. What is unique about our building situation is there is a perception that using our credit line and paying minimum amount of interest due monthly --couple of hundred bucks-- is in lieu of ever paying back at all. Becuase these are short term owners-3 years is the average. We hava a 20 year old elevator and roof and there is no projected budget that includes these things. It's a small building and the transients just want to pass the debt on to the next owners. The minority of us are looking to own for a 10 year time frame. So how does the fiduciary duty of the Corporation impact this failure to plan responsibly for major capital repairs? The answer we get from flippers is to use the credit line and don't worry because the mortgage is small--$150,000 $ and the value of the building a few million?

That is just what it is.. perception and illusion. in the end, you are paying more than you should.

Unfortunately, the transient mentality is all too common. everyone is looking for short term satisfaction (this is why we have the highest personal debt rate also). It is not prudent. However, if the corporation believes they are acting within the best interest of the shareholders, there is no illegitimacy in their duty.

You need to run for the board, or show where they are wrong via an accountant or professional letter, as to make them accountable to their fiduciary duty.

With a mtge of 150K, I would suggest to make a plan for debt elimination and capital all in one. Have your managing agent assist, or do this for you.
One of my buildings are in a similar situation (only 14 units) and we owe 148K and have some repairs, but the plan will allow us to be free of debt in 6 years, while performing capital improvements at the same time.

~AR

AR, I am on the Board, sadly, I don't have a lot to work with. What you are suggesting is what I believe in too. Are you a managing agent in the NYC area?

Yes, I am...

Feel free to email me directly if you would like off line assistance.

~AR

Thanks for all this information. How may someone contact you?

One must separate maintenance income from capital income (assessments), else the IRS will treat all as maintenance.

But, if there is a clear delineation of capital income (assessments, e.g.: accrued over ten months and kept in a separate account), then the shareholder upon the sale of a unit, can take the original price of the coop and add to that number the sum of all capital assessments as well as any self initiated capital improvements to generate an updated cost basis for tax purposes, e.g.: sale price (less expenses) – cost basis = tax burden (if any).

Great point..

We have a yearly assessment (collected over ten months) to ensure that for IRS purposes the income is truly segmented from ordinary (maintenance income). Our assessment (forty-five year old building that needs more capital improvements each year) garners about $900,000 each year.

Our expenses, given a building of our size, are always substantial, e.g.; $500,000 for roof replacement next year, $1,000,000 for our elevator overhaul and upgrade a few years ago, $400,000 a year for window replacement as we are changing 15% to 20% or our windows per year.

We have a multi-million dollar line of credit.

We use the line of credit only in anticipation of the assessment income and then pay down the line of credit each year. Thus, by definition, the line of credit is not for long term borrowing.

Elsewhere herein these forum postings, I and other have discussed capital improvements, capital reserves, assessments, etc. Suggest a search as there may be ideas that your facility can adopt.

And, we have eliminated our original mortgage of $7,000,000 incurred at the time of conversion without ever refinancing the principal or taking on a second mortgage. In the same period of time we have expended $15,000,000 for capital improvements.

The current $900,000 in assessments is because we did not lower charges when we retired the mortgage. We moved the mortgage amount (about $450,000) from maintenance income to assessment (for IRS tracking purposes) and maintained our original assessment amount of $450,000. The combination of the two streams (now one assessment) produces $900,000 a year.

Net net. the shareholders are paying the same amount as they did when the mortgage existed, save the yearly maintenance increases that we all face.

Our long term capital improvement plan, as required by the AICPA, shows that over the next fifteen or so years we have another $15,000,000 to expend.