Per Curious -> "To join our coop, you must run for election to the board one year out of every five, or else pay a $500 fee in lieu of your year of service"

That doesn't encourage participation, that requires it. I assume by joining the coop you mean buying into it. You'll lose buyers if board service is a condition of purchase, and not everyone has the time/interest to serve on a board. You also run the risk of getting board members who aren't qualified/capable and may manage things badly and do your coop great harm. That's always possible but moreso here.

And why make Shs pay $500 in lieu of board service? Help us run the coop or if you won't do it, pay us money - one has nothing to do with the other.

Forcing Shs to serve on the board won't foster cooperation or enthusiasm for the task. Shs will resent the demand, and those who don't want to will serve halfheartedly and not do a good job. It's also very unlikely you'd ever get your Shs to vote in an amendment to the by-laws that requires board service or paying a fee. I can't see that happening.

You want to encourage more Shs to run for the board? Get to know your Shs. Keep lines of communication with them open. Search out those with particular skills (accounting, mgmt, marketing) and tell them what an asset they'd be for the coop if they were on the board. Let Shs know that you want their ideas and welcome their participation in making your coop a stable, secure, desirable place to live for all.

Absolutely agree 100% with every single thing BP said. Wise words.

Perhaps in a small complex, compelling participation is useful or necessary.

But, in our coop we would rather not have 85% of the residents at shareholders.

Most have no view as to how to run a corporation and yes, the coop is a corporation, and not a social club wherein board members run on a popularity ticket.

Sorry to be so acrimonious, but most folks would destroy the good order of a well-run corporation.

Sounds like we're hearing just from the well-run corporations...how about the badly-run ones?

Think of jury duty, where such changes were made to get better-qualified jurors (it worked); cooperatives of all kinds (e.g. the Park Slope Food Coop) that require a modicum of labor in exchange for membership.

I'd be willing to reject new applicants I didn't think qualified to serve on our board.

Our board operates FAR beneath the level of any entity in my professional or social life. There must be a better way.

--Need more participation

"Sounds like we're hearing just from the well-run corporations...how about the badly-run ones?"

I was the first to respond and I wouldn't exactly consider our co-op to be run well. Our co-op is run much like a monarchy.

"Think of jury duty, where such changes were made to get better-qualified jurors (it worked) . . . "

That's a very interesting point and now you've got me thinking. In fact I've always considered board service to be quite similar to jury service: it's a duty AND a privilege. (Most people don't view jury duty as a privilege. What can I say? I do.) I'm curious about how that might work in practical terms. With jury duty there is quite an elaborate selection process in place, culminating in voir-dire, with an effort to construct a diverse and neutral pool; in a scenario where people are being elected, I'm not sure how that would work, exactly. Interesting, though.

"I'd be willing to reject new applicants I didn't think qualified to serve on our board."

This would require some fairly complicated legislative changes, would it not? At least, if you wanted to do it legally?

"Our board operates FAR beneath the level of any entity in my professional or social life."

Yep, so does ours.

Oops, it just occurred to me that in the system you propose, GM, people would not be elected since board service would be mandatory.

How would that work, practically speaking? One would need to come up with some sort of schedule. I think that your idea is probably a bit Utopian and would be difficult if not impossible to implement, but I'm very interested in hearing how you think it COULD work.

Implicit in your idea is the notion of term limits, which I'm extremely interested in pursuing. Another thing that might be considered is not requiring anyone who has lived in the co-op for one year or less to serve. That way people could get the lay of the land a bit before plunging into building governance. But, beyond that, how would the cohort be selected? and by whom?

I used to know of some companies that had that "use our garbage removal service, or you can't do business.." motto.

I dont think they are around anymore... (in the way ther were anyway!)

~AR

NYSERDA has great low interest loans. what do you need the $ for?

I would do a combination:

e.g. $80K from the line of credit, 80K from the shareholders, then look at your mortgage to see about mortgage refi/rollover/expansion terms for the rest. And/or try spreading it out with financing from the contractor or from the wealthier SHs.

But, before any of that, I'd get a second opinion. What's the out-of-the-blue knock down crucial $250K project you're sure can't wait?

Ex Treasurer

We had a basic roof survey done. The conclusion: it won't need replacement for at least 5 years. We can refinance our coop mortgage in 2012, but we have an "on paper" program for the money we'd need in 5 years if the refinancing goes sour or we need more money by then for something else.

We now having problems in top floor apts. We hired another firm to do a more in-depth survey. It seems we have damage below the roof substrate that can be "fixed" for 1-2 years, but no longer, and the roof will be at the end of its life. We of course want to replace the roof in 1-2 years at most before we get into major difficulty.

We spoke to our mortgage bank and the pre-payment penalty to refinance now rather than wait until 2012 is enormous, and would not decrease, so that's not an option.

Anyone have experience with a NYSERDA low-interest loan for roof replacement that could have energy-saving benefits?

if you get them to do an "energy audit" and they mention you need insulation and you then do it - they will pay for most of your energy audit. PLUS help you pay for it. call them.

NYSERDA's a viable option, but slow slow slow, and demanding. Worth looking into. We did, but didn't use it in the end (we refinanced the mortgage to re do our roof -- conveniently, it was coming due, and we lowered our rate)

Also, I seriously doubt you will need all the cash in 1-2 years. By the time you create specs, take bids & start the actual work, it could be 3-4 years b/f you need to complete payment. There's also the j-51 city rebate, later.

Increase your line of credit immediately. We raised ours to $1m - it's effectively a second mortgage, though it's to be used only in emergencies (like yours).

Figure the cost of $250K over a 3-5 year period (including the interest on the LOC), and that's the amount to assess.

Senate link showed as an error, so here is the Bill in it's entirety.




Legislative Information



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STATUS:
S2386  LEIBELL             
General Business Law
TITLE....Establishes a residential cooperative and condominium owner's bill of rights



02/05/07
REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT

SUMMARY:

LEIBELL
Add S352-eeeee, Gen Bus L; amd S339-v, RP L
Enacts a bill of rights for owners of residential cooperative or condominium units to provide fair and equitable treatment of all shareholders or unit owners; directs the attorney general to promulgate a handbook summary of the rights of shareholders and unit owners vis-a-vis cooperative corporations and condominium associations and the procedures and processes available to shareholders and unit owners to enforce such rights.

BILL TEXT:

STATE OF NEW YORK
________________________________________________________________________

2386

2007-2008 Regular Sessions

IN SENATE

February 5, 2007
___________

Introduced by Sen. LEIBELL -- read twice and ordered printed, and when
printed to be committed to the Committee on Housing, Construction and
Community Development

AN ACT to amend the general business law and the real property law, in
relation to enactment of a residential cooperative and condominium
owner's bill of rights

The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:

1 Section 1. The general business law is amended by adding a new section
2 352-eeeee to read as follows:
3 § 352-eeeee. Residential cooperative and condominium owner's bill of
4 rights. The organizational and operating documents of every residential
5 cooperative housing corporation and every residential condominium asso-
6 ciation established or operating pursuant to the laws of the state shall
7 guarantee the following to each shareholder or unit owner:
8 1. That (a) all applications in connection with matters which require
9 approval of the board of directors or board of managers and (b) all
10 requests for determinations by the board of directors or board of manag-
11 ers including but not limited to requests for the resolution of disputes
12 between or among shareholders or unit owners, disputes between share-
13 holders and the cooperative corporation or between unit owners and the
14 condominium association such as disputes concerning responsibility for
15 repairs shall be processed in a reasonably expeditious manner on a non-
16 discriminatory basis pursuant to uniform procedures and timetables
17 adopted in writing and any such approval shall not be unreasonably with-
18 held. The board's decision shall be in writing and shall set forth the
19 reasons therefor, except that no reason shall be required when approval
20 is granted. A board's refusal to allow a shareholder or unit owner to
21 sublet an apartment pursuant to a uniform policy which is reasonably
22 designed to prohibit or limit subletting shall not be deemed to be an
23 unreasonable withholding of consent pursuant to this subdivision. The

EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07025-01-7

S. 2386 2

1 foregoing provisions of this subdivision shall not prohibit the enforce-
2 ment of uniform reasonable policies related to the health, safety and
3 welfare of the residents and the safe and prudent operation of the prem-
4 ises.
5 2. That elections for members of the board of directors or the board
6 of managers be held by secret ballot, unless waived by a unanimous vote
7 of the shareholders present in person or by proxy at the election meet-
8 ing, or in the case of an uncontested election. A tally of the votes
9 received by each candidate in an election for the board of managers or
10 board of directors shall be posted within one day following the avail-
11 ability of such information in a prominent place accessible to all
12 tenants in each building comprising the cooperative or condominium.
13 3. That the board of directors or board of managers act in a timely
14 fashion to fill any vacancies which occur on such boards.
15 4. That any member of a board of directors or board of managers who is
16 elected while a shareholder or unit owner in the cooperative corporation
17 or condominium association, who sells his or her apartment or the shares
18 allocated thereto, and who, subsequent to such sale shall no longer be a
19 shareholder or unit owner in such corporation or association, shall
20 resign from such board no later than the closing date of such sale.
21 5. That complete and accurate financial statements and any other
22 statements ordinarily provided to shareholders or unit owners be
23 provided in a timely fashion pursuant to established timetables at least
24 once annually. For the purposes of this subdivision "financial state-
25 ments" shall include the balance sheets and statements of income and
26 expense for each of the three most current fiscal years. Attached to
27 said financial statements shall be a statement which discloses (a) any
28 known interest, direct or indirect, beneficial or otherwise, which any
29 director, association member, officer, employee, agent, shareholder or
30 condominium owner or relative of any such person has in any supplier of
31 services or material to said cooperative or condominium and (b) any
32 consideration, financial or otherwise, which said director, association
33 member, officer, employee, agent, shareholder or condominium owner or
34 relative of any such person has received or is receiving from such
35 supplier.
36 6. That the following documents be made available for inspection or
37 copying by shareholders or unit owners at reasonable times on no more
38 than ten days written notice to the board of directors or board of
39 managers:
40 (a) approved minutes of board of directors or board of managers meet-
41 ings, provided that such boards shall have fifteen days from the dates
42 of the meetings at which the minutes are approved to prepare such
43 minutes;
44 (b) agreements and bills for goods and services. All such agreements
45 and bills shall fully describe the goods provided or services performed
46 and apportion the total cost for specific goods or services;
47 (c) banking account and financial investment statements;
48 (d) vendor lists and competitive bidding submissions;
49 (e) reports of accountants, consultants and experts retained or hired
50 to perform services for or on behalf of the corporation or association
51 including financial statements as defined in subdivision five of this
52 section provided, however, that such reports may be withheld where the
53 report concerns or may concern litigation, where the report was prepared
54 in connection with the litigation and where a majority of the members of
55 the board have voted to withhold such information. Where the matter
56 concerns alleged conflict of interest or malfeasance involving board

S. 2386 3

1 members the report may be withheld only upon a vote of the majority of
2 disinterested board members. If all board members are interested parties
3 the report may not be withheld; and
4 (f) reports by municipal and/or county inspectors concerning compli-
5 ance with health, building and housing codes and regulations.
6 7. That in addition to any other notice required by the cooperative
7 corporation's or condominium association's organizational or operating
8 documents, notice of all board and shareholder or unit owner meetings be
9 posted in a prominent place accessible to all shareholders and unit
10 owners in each building comprising the cooperative or condominium.
11 8. That the board of directors or board of managers shall not impose
12 special assessments, or enter into contracts for extraordinary expenses
13 beyond customary operating or maintenance costs, without approval by a
14 vote of the shareholders or unit owners. A vote of the shareholders or
15 unit owners may be waived by the board in the case of (a) an emergency
16 evidenced by an approved resolution of the board, (b) a required refi-
17 nancing of an existing mortgage or (c) where shareholders or unit owners
18 have been notified of the proposed action in writing within a reasonable
19 period of time prior to the proposed date of implementation of the
20 action and where such notice provides that the board may waive a vote
21 unless at least a certain percent of the shareholders or unit owners
22 demand in writing that the action be put to a vote. Such percentage may
23 not exceed fifty percent.
24 § 2. Subdivision 1 of section 339-v of the real property law is
25 amended by adding a new paragraph (k) to read as follows:
26 (k) That a member of the board of managers who is elected to fill a
27 vacancy, unless elected by a general vote of the unit owners, shall hold
28 office until the next meeting of unit owners at which the election of a
29 member or members of the board of managers is in the regular order of
30 business, and until his or her successor has been elected and qualified.
31 § 3. Within 6 months of the effective date of this act the attorney
32 general shall promulgate a handbook summarizing the rights of sharehold-
33 ers and unit owners vis-a-vis cooperative corporations and condominium
34 associations and the procedures and processes available to shareholders
35 and unit owners to enforce such rights.
36 § 4. This act shall take effect immediately; provided, however, that
37 as to residential cooperative housing corporations and residential
38 condominium associations existing and operating as such on the effective
39 date of this act the boards of directors of such corporations and the
40 boards of managers of such associations shall within 1 year of the
41 effective date of this act take all steps necessary to amend the appro-
42 priate organizational and operating documents of such corporations or
43 associations to implement the provisions of this act.

SPONSORS MEMO:
NEW YORK STATE SENATE
INTRODUCER'S MEMORANDUM IN SUPPORT
submitted in accordance with Senate Rule VI. Sec 1
 
BILL NUMBER: S2386

SPONSOR: LEIBELL             
 
TITLE OF BILL:
An act to amend the general business law and the real property law, in
relation to enactment of a residential cooperative and condominium
owner's bill of rights

 
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to clarify the rights and responsibilities
of shareholders and boards of directors of cooperative corporations,
unit owners and boards of managers of condominium associations.

 
SUMMARY OF SPECIFIC PROVISIONS:
This bill would add a new section 352-eeeee to the general business law,
to require the board association of cooperatives and condominiums to:

1. Process requests for action in an expeditious, non-discriminatory
fashion, according to uniform written procedures;

2. Hold elections by secret ballot and post election results;

3. Fill vacancies in a timely fashion;

4. Provide for the resignation of members of the board if the person is
selling their interest in the corporation or association;

5. Provide financial statements to all owners in a timely fashion, on at
least an annual basis; such statement must include information on
member's financial interest in any company providing goods or services
to the corporation or association;

6. Make various documents available to all owners for inspection;

7. Post notice of meetings at least ten days prior to the meeting;

8. Notify, and in some cases seek approval from, owners before imposing
special assessments or entering into contracts for extraordinary
expenses; and

9. Provide owners with written procedures for requesting timely determi-
nation by the board or association of disputes.

Additionally, the bill would also amend section 339-v of the real prop-
erty law to require that board members chosen to fill vacancies must
stand for election at the next meeting of unit owners where elections
are scheduled.

This bill would also amend the unconsolidated laws to require the Attor-
ney General and the Department of Law, within six months of the effec-
tive date of this act, to issue a handbook describing rights of owners
vis-a-vis their board or association.

 
JUSTIFICATION:
Boards of directors of cooperative corporations and boards of managers
of condominium associations exercise broad authority over the rights and
financial interests of individual property owners.


Presently these boards and associations possess are given broad legal
discretion under the law.

This bill would establish a number of important due process rights for
individual property owners in dealing with their board or association
and also create general standards for the conduct of business by these
boards or associations.

While most boards and associations perform admirably in managing their
buildings' affairs, there have been reports of abuses. Complaints have
been received from property owners who feel that they have been dealt
with in an arbitrary and capricious manner by the board or association.
The protection incorporated in this bill would help to ensure that prop-
erty owners are dealt with fairly and have access to important informa-
tion regarding the management of the buildings which constitute their
homes.

 
PRIOR LEGISLATIVE HISTORY:
2006 - 4766 - Referred to the Rules Committee

 
FISCAL IMPLICATIONS:
Minimal cost to Attorney General and the Department of Law for printing
and distributing handbook.

 
EFFECTIVE DATE:
This act would take effect immediately, and existing boards would have
one year to come into compliance.

The PL may say that you can rent (sublet) units, but it is up to the board to look after the wellbeing of the co-op; consequently, the sublet policy is redacted to protect the interests of the shareholders. If Steve says that 70% of occupied units is seen as a good measure for providing financing to a potential buyer, then a good board shall make the sublet policy in such a way to ensure than no more than 30% of the units are rented at one time. If your co-op is less than the "magic" number prescribed by the policy and 2-year is the total number of years that you can rent under the policy, speak "hardship" if there is one OR the reasons why you may want to exceed the 2-year.

Again, "ASK AND YOU MAY RECEIVE". In other words, if you do not try, you may not get an exception if one can be given under specific circumstances.

AdC

Yes, Paule,

It's legal. In fact, it's for the good of the co-op.

Banks have the legal right to deny a mortgage to someone who wants to buy into a co-op when the proportion of owner-occupied apartments falls below a certain amount (often 70%). Protecting future shareholders (as well as current shareholders who would have a hard time selling if their buyers couldn't get a mortgage) is one of the primary jobs of the board.

Another reason to limit sublets is to maintain the feeling of the building as that of a primary home instead of a hotel or dorm, with strangers moving in and out. As lovely as subletters may be, they don't have the same long-term interests of the building at heart as owners.

And speaking of long-term interests, the New York State law that creates housing corporations (i.e. co-ops) establishes them for the long-term interests of those who own and live in the building. Subletters are not in that category.

Paule - I agree with Steve that subletting for 2 yrs after which time a Sh must sell or occupy an apt is in a coop's best interests. Our by-laws allow subletting indefinitely. To help offset this without going thru the hassle of trying to amend the by-laws, we enacted a policy that all SHs must be a resident for 2 yrs before they're permitted to sublet. We also enacted a policy stating that 80% of all apts must be owner-occupied at any point in time. We allow sublets for only 6 mos or 1 yr at a time and our sublet fee for all new and renewing tenants is equal to 2 mos maintenance.

“We also enacted a policy stating that 80% of all apts must be owner-occupied at any point in time. ”

BP, I am interested to know how that policy is worded. Our co-op is currently considering revising our policy and I’m wondering how to phrase such a provision. For example, say someone wants to sublet but that 80% owner-occupancy baseline has already been reached. Do you have language stating that the SH who has been subletting his or her apartment the longest must end that subtenancy?

GK, our policy says: "No less than 80% of all units must be occupied or in "non-use" by shareholders of record at all points in time. "Non-used" units are any that shareholders keep vacant and unoccupied. No more than the other 20% of units may be sublet as long as the 80% term stated above is maintained. Any exception requires absolute need confirmed by verifiable documentation from a shareholder. Any exception also requires case-by-case evaluation and unanimous approval by the Board of Directors, and in compliance with any terms as the Board may deem appropriate in each case."

GK, we've never hit the 80/20 point yet but we came close a few times. We left the policy so that if a shareholder wants to sublet and we've hit the 80/20 point, the board has a right to decide if we allow one more sublet and on what basis (for how long and per what other terms we set, if any).

We don't want to make the shareholder who's sublet the longest stop so someone else can sublet. Now especially, sublet rent may be a critical necessity for some people. We'd rather evaluate a case as it comes up if we ever get to the 80/20 point - but not start making exceptions for everyone, otherwise the policy loses all its meaning and effect. Each coop board can determine what its sublet policy should be, as they see the needs of their building and shareholders. The by-laws and proprietary lease of course should always be checked first before establishing any new/revised policies.

Thank you so much, BP.

I can’t imagine that our building would ever hit the 80/20 point.

The “non-use” part of your policy surprises me. Here, we would much rather see a unit occupied than unoccupied. (Mind you, our building is fairly small.) In our experience, vacant units are not a good thing.

GK, we prefer that units are occupied too, but we have one vacant for 9 years and one for 16 years. Every year, our prop mgr sends a letter to the SHs to ask what their plans are for the units. One SH never replies. The other SH says she can't decide whether to sell or sublet and she'll do something soon but meanwhile she never does. We also have a few SHs who only live here part-time (usually half the year and the other half in a sunny clime) so their units are empty for months.

Our building is nice but not a luxury property. But we have 8-10 SHs out of 60 who pay their bills but don't seem to care if their unit is vacant all or part of the time. We put "non-use" in our sublet policy to include these empty units in our total count of units.

I manage a Cooperative in Park Slope that has a rule similar to this. They limit the apartments to 7 at a time to be sublet. When someone wants to sublet their apartment who is not currently, the Shareholder with the longest sub-tenancy is told that they have until the end of the current lease to sublease and then they must cease.

Good to know. Thanks.

Go to your insurance agent with the problem on hand. YOurs is an "AFTER THE FACT" problem that requires active intervention from insurnace and legal counsel.

Finding out what is additional insureds should have been clarified when the alteration policy was redacted. Now, is time to PROTECT and use the means in place so that the "additional insured" clause be enforced if shareholders are to claim from the CONTRACTOR'S insurance or the co-op is to do it on behalf of all the damages that were caused by the contractor.

AdC

Hi, Jay,

I think what it generally means is that the additionally insured party (in this case, the co-op) is protected against damage caused by the insuree (in this case, the contractor), and has the right to collect financial reimbursement from him.

It doesn't mean that the co-op pays for the contractor's damages.

AdC is correct that the aggrieved shareholders need to contact their own insurance company to help settle this. In short, if the contractor caused the damage, the contractor must pay to repair it. The shareholders of the damaged apartment should not have to pay (although they may have to foot the bill until they are reimbursed).

(P.S. Remind that shareholder what would happen to his/her maintenance if the co-op had to pay for every bit of damage caused by a contractor but not covered by the contractor's insurance. His/her maintenance fee would go up significantly every year just to cover the plumber's, electrician's, painter's, floor sander's inadequate insurance!)

It is my understanding that the co op or condo is named as additional insured. Our building also insists on the apartment that the work is being done to (or moving in or out of) is also named as additionally insured. This seems to work.
Pg

Eddie,

Are you referring to the corporation's mortgage on the building, or an individual shareholder's mortgage on his/her apartment?

Your question is better served through a process of DUE DILIGENCE involving a CPA versed in Co-op accounting and a counsel that is also well-versed on trusts as a form of ownership to a multifamily property.

Obviously, different forms of ownerships have advantages and disadvantages. Taxes are not just the only consideration to examine. I think ability to obtain financing for capital programs is a main consideration: a co-op has different financial recourses than condos to provide structural preservation, but what about trusts? Would banks extend the same financing to trusts as to co-ops and condos? Also, the structure of a trust and a co-op will have to be investigated by way as to how ownership into the trust is to be transferred.

Re your question:

"2) Are there really and tax advantages to not paying off the mortgage? - the apt has increased in value 8 times over what we paid for it - maybe the interest is now so low it makes sense to just pay it off?"


My educated guess would be:

You have time to make an appropriate DUE DILIGENCE STUDY, identify appropriate CPA and Attorney to ensure that your decision is the correct one for the current shareholders and those who will buy in the future into the new form of ownership. Rather than rushing into an UNKNOWN the study should satify the current shareholders whose decision will be needed for the conversion of ownership.

Some considerations:

1 A benefits analysis should provide the foundation to sell the idea to shareholders as (1) they will lose the benefit of deducting the underlying mortgage as small as it may be (2) they may have to be assessed to immediately gain a higher value to the unit (3) reserves to improve the property may have to be used to retire the debt and convert to new ownership.

2. An engineering study should be made of your property to know your future capital program and with this determine reserves that the new ownership form should assume.


AdC

never have I seen such a confusing reply.

If he were to tell me that, I would accept it! So, thank you for your comments. Perhaps is that you are too elemental.

AdC

dc - please bring back your old self

ADC is merely pointing out that
DUE DILIGENCE
is part of being a responsible board member

-- does anyone truly believe that
simply posting a question
on this forum
is a true substitute?

The point is simple: the nature of the question raised goes beyond anyone's advice. As you well mention, don't expect an answer for this question through this forum.

The question is by far too complex and it involves many aspects that a board must consider.

Therefore, a TRUE DUE DILIGENCE work with compentent people, board involvement and ultimately shareholders will be necessary.

Thank you for addressing Sally's posture who it seems attained a B.S. decree in DIVINITY as a posting judge.

AdC

Dear Anonymous,

Such a law wouldn't hurt, but would it really help? After all, you have those rights already.

It sounds as though what you need is a stronger proprietary lease. I'm willing to bet that yours already requires that:

* Certified financial statements be made available annually;

* Shareholders may be stripped of their right to live in their apartments (a corporation doesn't have the power to "oust" a shareholder -- you can't just take back someone's shares, whether they're in GE or your co-op -- but by preventing him from living in his apartment, you've essentially eliminated the point of holding the shares);

* Apartments may not be entered without a shareholder's permission except in emergency.

If your proprietary lease does not contain these rights, start talking to your neighbors. Convince them how important the rights are. If they agree, then call a shareholder meeting (you have the right to do so if a certain percentage of shareholders or shares calls for the meeting -- check your p.l. for the figure). At the meeting explain why the rights should be added to the p.l. and ask the shareholders to vote in favor of them.

That way you get what you want and you avoid Albany!

Steve,

You are right -- it does.

So, then, how to enforce them?

...assuming, per an earlier poster, that the DA & AG won't get involved in individual cases falling beneath 100K or so?

Distressed,

We need to clarify one of your points. When you say "oust an owner guilty of malfeasance," do you mean to refer to a board member, or to a shareholder who isn't on the board?

I'll assume you're referring to a board member.

I don't have first-hand experience with removing a board member. What I know is that most proprietary leases have a procedure to remove an elected director. Generally it takes a super-majority of shares (such as two-thirds), so check your p.l.) Find out who can make the motion because you want to make sure a non-director can do so. If that's the case, you need to get organized.

First, talk to your neighbors. Find out if they support you. Without their support, you won't get a vote.

Ask your neighbors to start talking to their friends in the building. You need to tally potential votes in your favor (remembering that you have to count shares, not individuals).

Basically, what you're doing is making sure that if you hold a special meeting to remove a director that you won't fail miserably, wasting everyone's time (including yours). Once you and your supporters feel you have enough votes, approach a lawyer. Removing a director must be done according to the p.l. and corporate law or else it may be invalid. You may have to hire a lawyer to get it done, unless you have an ally on the board who will allow you to charge the work to the co-op.

Once you have the lawyer's backing (to make sure you're following your co-op's rules, as well as to get some advice on how to proceed), you and your supporters can call a shareholders' meeting. That's where you will make your case and call for a vote. If you've done well, the shareholdes will consent to a vote. If you've done really well, you'll get enough votes to oust the person you target.

However, realize that the board will know what you're doing early in the process. You must be prepared to face opposition because you're accusing someone of a white-collar crime (I assume). These are highly charged issues with lots of emotion!

An alternative is to vote the person off the board at the next annual election. Run for office yourself, or find someone who's interested. If your building generally runs a slate, you should consider running an alternate slate, and get their names out a couple of months before the meeting so they can campaign door-to-door.

Which way you go depends on how much turmoil you can stomach.

Once you're on the board you can conduct forensic accounting to discover how much money is missing and, perhaps, where it went. Then you can file a civil suit against the alleged thief. According to earlier posts, civil suits are preferable to criminal suits (by the DA or AG) because buyers don't like to invest in a co-op involved in a criminal investigation.

I hope that's helpful. Others on the site may have better advice than I, so keep your ears open.

Also, search Habitat's artical archive. The magazine does a good job of explaining this stuff, and they have a legal column too, which may have dealth with this very topic in the last several years.

Good luck.

Thank you, Steve. Yes, civil seems the way to go. Promises to be expensive for us all.

If I survive this, you won't catch me investing in a coop again. Clearly the legal protections are ridiculously inadequate against what appears (from my years of involvement in coop issues) to be widespread malfeasance and fraud, often at too low a level to interest authorities, yet very upsetting & inappropriate in one's "own" home.

If coops are to hold their (increasingly trailing)value against condos & houses, coop owners should demand the state create better legal protections -- and, failing that, make it easier to turn coops into condos.

Coops are a failed structure, in my opinion. The proof? No one dares create any more of them.

--still distressed

Hi, Distressed,

The civil way is usually the best way to go unless you have dangerous problems.

On your other point, that co-ops are a dicey investment, I agree only partly. Like any corporation, investing in a business with others in control is never a guaranteed win-win. Just look at Enron as the worst of the worst examples, and there are plenty of other examples of corporate mischief across all sorts of businesses. Co-ops are just one example.

Why do co-op values tend to be lower than condo values? In NYC, at least, when you buy a condo you (typically) pay off your portion of the corporation's mortgage; when all the apartments are owned, there is no underlying mortgage which increases the value. In a co-op, you're typically buying only your apartment; the corporation pays the mortgage out of your maintenance fee. With an underlying mortgage, the apartment is not worth as much.

Lots of other variables, of course, but the most basic is the amount of equity in the property.

All that said, there are good co-ops out there, with honest board members. The problem is that it's nearly impossible to find out which is which until it's too late.

All good points, Steve.

We could surely use a more transparent system for coop purchase. When I think back to mine, there's no way I would've been able to discover what was going on here. In fact, it took some years on the board, and digging t to find out.

I am still thinking of a sort of independent rating system. The residents of coops that failed or got low marks would feel suddenly inspired to help the place improve. AdC is right in a sense that it takes active -- and perhaps he/she lives in a coop of smart, involved, civic-minded people -- but what's happening here is that people seem to be surreptiously fleeing. Not how I want it to work.

Distressed

I did not expect to respond to another of this types of messages; however, your comments provoke some thoughts:

"Coops are a failed structure, in my opinion. The proof? No one dares create any more of them."

First, I agree with you; yet, they are a MIRACLE since they still continue to exist in spite of the turmoil of the late 80's and early 90's AND in spite of the "fallen human nature" seem to reside in such multiresidential forms of ownership. Consequently, co-ops are not are not failed structures. The fact that they don't work in your case or my case, does not mean that they should be banned from the face of this earth. Otherwise, we may also call for the doom of democracy as such.

I believe the great problem is the Admissions Committee and the form it screens and selects residents. Perhaps too similar to each member after the financial test has been passed.

Thus, I propose hiring an INDEPENDENT PSYCHOLOGIST to administer a "COMPTENCE TEST" for potential shareholders. What are the traits expected after your PL has been modified to demand that shareholders are appointed without being able to refuse the appointment:

1. 100% Honesty and ethical behavior on the part of each shareholder.

2. Second component:

a. 15% of shareholders must show STRONG LEADERSHIP.
b. 40% Must be followers. These will push the agenda of the leaders.
c. 30% Highly detailed individuals. These will scrutinize the leaders and followers.
d. 15% HIghly empathetic individuals. These will advocate for indidivual rights of shareholders.

Once you have the ideal mix of shareholders, you may start having good boards that will do and take care of their fiduciary responsibilities.

Sorry to inject some fun, but I can only believe that the whole thing starts with ME and those whom I think are worthy to be called MY NEIGHBORS.

AdC

It sounds like you're looking for "backup of sewers and drains" and not flood insurance. Talk to your broker about this.
If you need flood insurance, you can get it the national flood insurance program.

Thanks, Gerry. But what about backup caused by a flood in the streets from a giant storm? The concern is if street sewers quickly fill-up, the waters may get into our 2 street-level elevators.

Sorry for the delay in responding. I hadn't noticed your question.
Again, you really have to check with your agent as to what your insurer offers to cover the situation but I don't think Flood Insurance is necessarily the sole answer.
Here's the way FEMA describes "flood". "A general and temporary condition of parial or complete inundation of two or more acres of normally dry land area of two or more properties from
Overflow of inland or tidal waters;
Unusual and rapid accumulationor runoff of surface
waters from any source."
They go on to say that "damages caused by a sewer backup are covered if the backup is a direct result of flooding. However, if the backup is caused by some other problem the damages are not covered."
Note, FEMA's definition and private insurer's are not necessarily the same.