Habitat Staff in Co-op/Condo Buyers
March 24, 2011 — One in a series of easy Q&A guides to co-op / condo buying, selling and owning.
Co-op shareholders frequently hit a wall when you try to monitor the co-op board's decision-making -- especially when it comes to accessing the minutes of the board's monthly meetings. Potential apartment-buyers get to review them, so why not you? Robert Tierman, a longtime co-op and condo attorney and a partner at Litwin & Tierman, here explains what you rights are -- and aren't -- when it comes to seeing the minutes
Q. Do I have a right to see board-meeting minutes?
A. With one major qualification, neither the law nor the co-op's governing documents require the co-op to allow a shareholder to review the minutes of board meetings. That exception comes if you're a party to a litigation involving your co-op. In that case, you may be entitled to review co-op documents, including the minutes, provided they are "material and necessary" to the litigation.
Q. But the co-op is a corporation and I'm a shareholder. Why don't I have the right to see the board-meeting minutes?
A. Co-ops, in New York, are governed by the Business Corporation Law. BCL 624(a) requires corporations to keep meeting minutes. BCL 624(b) requires corporations to allow shareholders to review two categories of corporate documents: "minutes of the proceedings of its shareholders and record [i.e., list] of shareholders..."
Notice the language: The law mandates review only of minutes of shareholders' meetings — generally speaking, the year's annual meeting for election of directors.
Q. So we do have blanket permission to see the annual-meeting minutes?
A. Not quite. The BCL also provides that shareholder review of shareholder-meeting minutes and shareholder lists must be "for any purpose reasonably related to a person's interest as a shareholder" and that a request for even those limited documents may be denied if a shareholder refuses to furnish "an affidavit that such inspection is not desired for a purpose which is in the interest of a business or object other than the business of the corporation ..."
Q. But the board decides how to use the money I pay in monthly maintenance. Don't I have any right to review the board's financial dealings?
A. You do. The co-op's proprietary lease usually provides the following or similar language: that the co-op "shall keep full and correct books of account, and the same shall be open during all reasonable hours to inspection by the [shareholder] or a representative of the [shareholder]."
Q. Does it hurt to ask to see the minutes? If a board's got nothing to hide, I don't see why it would.
A. You can try. The first approach for a shareholder seeking review of co-op minutes and other documents is usually an oral request to the property manager. Typically, the owner tries and fails once or twice before getting any sort of response. In the interim, the property manager presumably sought guidance from the co-op president or other board liaison, who, if harboring any reservations, recommended consulting with the board's attorney. The more controversial the apartment owner making the request, or the more immersed the board currently is in controversial matters, the more likely the co-op counsel is consulted at an early stage.
Q. What's the next step?
A. Submit a request in writing, which most well-counseled boards will require. This tends to be a move on the board's part to deliberately slow down the process. So, for example, you might want to review the minutes in order to mount a campaign to run for a board seat. But by the time your oral request is first made, ignored and made again, and then written request is made, sent to the lawyer and the board and responded to, many weeks may pass and an election may have occurred and there may be a new board (so you may have to start the process again).
Q. So I'll give myself plenty of time. What should the written request contain?
A. It should establish what documents you're seeking. First, as you now know, there are limited categories of documents that a co-op is required to allow a shareholder to review. Your letter permits the co-op to determine whether it has the right to deny the request in whole or in part. Second, you must have a legitimate corporate purpose, as opposed to personal one, in seeking review of at least some of the documents for which review is permitted.
Q. Is it always so difficult to get transparency?
A. No. The good news is, not all boards are like this. Some allow shareholders to review minutes and other documents. Some even post or circulate them, and invite owners to attend board meetings. They can do this by keeping their minutes minimal, and to go into "executive session" when discussing private matters. They might also redact personally identifying words or phrases, in order to preserve residents' privacy. If you ever get on a board yourself, keep this option in mind.
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