New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

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BOARD OPERATIONS

HOW CO-OP/CONDO BOARDS OPERATE

Co-op / Condo Ombudsman Bill Making Its Way through State Senate

Bill Morris in Board Operations

That office would seek to educate co-op  / condo dwellers and professionals about their legal rights and responsibilities. It would also monitor board elections; mediate disputes; and conduct public hearings. The ombudsman could subpoena witnesses and question them under oath, and could also require any books or papers relevant to any dispute. The salaried position would be appointed by the state attorney general. The money for that and related office expenses would come from an annual $6 fee charged to every co-op and condo unit in the state.

Factbox 

Read the proposed

bill: S7958

"This office addresses a lot of housing issues," explains Katie Kincaid, Krueger's spokesperson. "Something that comes up a lot is that residents of co-ops and condos have questions and concerns when they feel they're not being treated fairly by their board. Right now there's nobody checking co-op and condo boards. The only course of action is legal action, which can be very costly for individuals, boards, and, ultimately, all shareholders and unit-owners."

Disputes such as the one shareholder Dianne Stromfeld had when she ran for the co-op board of the sprawling 1,844-unit North Shore Towers, located at the point where Glen Oaks, Queens, abuts Nassau County. She lost by a whisker — 806 shares out of a total of 5 million that were cast. Despite the thin margin of defeat, she says the board refused to do a recount.

If we had an ombudsman,

shareholders could have

shown him what they

uncovered, and he could

protect them.

"So I went to court to get the ballots so I could pay to have a forensic accountant look at them," says Stromfeld, a real-estate broker.  "By the time the judge ruled in my favor, it was time for a new election."

In 2008 and again in 2009, Stromfeld ran for the board and lost, fair and square, but the bitter experience from 2007 stuck with her. The board had paid $86,000 to the law firm Jaspan Schlesinger to deal with Stromfeld's lawsuit, while her legal bills, paid out of her own pocket and by sympathetic shareholders, came to about $5,000.

"The board said it was my fault that they had to spend that money," she notes. "The real question was: Why did the board approve $86,000 for an attorney? If we had an ombudsman, a group of shareholders could have shown him what they have been able to uncover, and he could protect them."

But as Warren Schreiber sees it, paying an ombudsman is not the way to resolve such disputes. A retired transit authority employee who is board president at the 200-unit Bay Terrace Co-op Section 1, in Bayside, Queens, he disapproves of any new bureaucracy in what he calls New York's "dysfunctional state government," and believes any ombudsman position would be "a patronage job" and thus inherently bad.

Mechanisms are already in place

to resolve shareholder disputes

without an ombudsman.

"I've read this bill," he says, "and based on my experience as a board president — and from speaking to other board presidents – I know there are going to be problems on a number of fronts. One is cost," he predicts. "That $6 fee won't last. And if we have a shareholder who decides to go the arbitration route, the ombudsman can demand our presence and our documents at a hearing. I'm not going to go to that hearing without my  counsel. He's going to charge the co-op for that — and that's going to get charged back to the shareholders."

His misgivings don't stop there. "Another problem with the bill," Schreiber continues, "is that the ombudsman's office would have the right to monitor board elections, if as few as 15 percent of the shareholders want them to. I hope nobody is naive enough to think that having a monitor present won't affect the outcome of that election. There will be a perception," he believes, "that if there's a monitor present, there must be something wrong." Schreiber suggests that, "If people are unhappy" with their co-op / condo board, "they can vote out the board or run for the board themselves."

Bay Terrace's attorney, Geoffrey Mazel, a partner at Hankin & Mazel, agrees. "The system isn't perfect," he says, "but if you're ready to do some real work, and it's hard work, you can effectuate change. Besides, all the mechanisms are in place to resolve shareholder disputes without having to go to an ombudsman. … You can contact your board or your managing agent and ask to be heard."

Mazel, like Schreiber, sees a "third-party government agency" as unnecessary and wasteful. "I don't think it would be good for the co-op community," Mazel says. "To me, it's a can of worms."

 

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