How to Stage a Coup Over Secretive Co-op Board Practices

A co-op in central Queens is ripe for a coup. Shareholders are not invited to monthly board meetings, only to the annual meeting. The board has refused to share minutes of its monthly meetings, telling shareholders to travel to the managing agent’s office in Nassau County to read them. The managing agent won’t reveal the date of the next annual meeting. How can shareholders force the board to hold an election? And what can shareholders do if the board refuses to turn over control to new board members?

A board’s refusal to communicate, hold elections, or provide access to records could be an indication that it is not acting in the best interests of shareholders, Debra J. Guzov, founder and partner of her eponymous law firm, tells the Ask Real Estate column in The New York Times. Shareholders' best course of action is to educate themselves on the building’s rules and organize their neighbors to elect new leadership.

Read the corporation's governing documents — the bylaws, proprietary lease and house rules — to make sure the board is acting legally and to find notice provisions for the annual meeting. If these documents are silent or incomplete, refer to Section 602 of the New York Business Corporation Law, which has requirements for the timing and conduct of meetings.

From there, prepare for the annual meeting. The directors might be elected annually, or there might be staggered elections, meaning a fraction of the board is up every year, says William Geller, counsel at the law firm Braverman Greenspun. If the board fails to hold an annual meeting and election, shareholders with at least 10% of the shares have a right to call a special meeting to elect directors.

Determine a slate of candidates and build support for a change in leadership. If new board members are elected and the incumbents do not transfer power, shareholders can hire a lawyer to seek either emergency injunctive relief or an Article 78 proceeding under Civil Practice Law and Rules. Be aware that Article 78 proceedings have a four-month statute of limitations from when a request is denied.

While this Queens co-op board's behavior does indeed seem suspicious, it may not be illegal, depending on the rules set out in the co-op’s bylaws. For instance, most co-op boards are not required to open their meetings, with the exception of the annual meeting, to shareholders. And, Geller adds, telling shareholders to travel to Nassau County to read the minutes “is a bit antiquated but permissible."

Bottom line: when mounting a coup in a co-op, shareholders need to follow what's in the governing documents — the bylaws, proprietary lease and house rules.