LEGAL TALK

Paula Chin: Welcome to Legal Talk, a conversation about governance issues that New York's co-op and condo boards are tackling today. I'm Paula Chin with Habitat, the New York City magazine for co-op and condo board directors. My guest today is Tracy Peterson, a partner at Braverman Greenspun, who's here to talk about shareholder and unit owner requests to boards for information and documents about fellow residents and to tell us what they are and are not entitled to. 

Tracy, I understand you've been involved in several disputes involving this. Can you tell us about what kind of things people are asking for and in what situations? 

Tracy Peterson: Sure. Hi Paula. It runs the gamut and we try to counsel our board clients to actually avoid a dispute. When a dispute arises, we always try to resolve it without having to get into litigation. Sometimes litigation unfortunately ensues. And there is some case law in New York about what it is that shareholders and unit owners are entitled to and what they're not entitled to and in what format. So when I say that we try to avoid a conflict, oftentimes when a board client receives a request from a shareholder or a unit owner, assuming that the request is in line with what the law provides a shareholder or unit owner is entitled to, we'll just go ahead and tell the client, give it to them.

And if you are concerned about distribution and certain information getting out and being out in the public or shared with others, you are well within your rights to require that the shareholder or unit owner sign a confidentiality agreement. And those are very simple agreements. And most of the time a shareholder or unit owner is very happy to sign a confidentiality agreement.

Paula Chin: Tracy, give us some real life scenarios. What are the kind of documents that people might ask for and what are the circumstances? 

Tracy Peterson: Sure. We get a lot of requests by unit owners and shareholders for the names and contact information of fellow shareholders and unit owners in the building, oftentimes surrounding an election period. Perhaps the requesting shareholder unit owner is interested in running for seat on the board. If that is the case, what we recommend to our board clients is that if the managing agent is going to be circulating any type of election related communications to all unit owners and shareholders on behalf of incumbents, then the managing agent should also be circulating such communications on behalf of the non-board member shareholder unit owner, who is looking to communicate with fellow neighbors in the building. Under the business corporation law which applies to co-ops definitively, shareholders are entitled to a list of shareholders. Courts have held that provision of the BCL applies equally to condominiums.

Things get a little gray and wonky when it comes to contact information. There certainly are shareholders and unit owners who prefer not to have their emails and addresses outside of the building, whatnot, be shared. So something that we've been doing more recently is advising boards that they can send out a communication to all owners in the building asking whether they whether the board has permission to share that information.

And if the answer is no, then the board won't share that information with someone who's requesting it. 

Paula Chin: You mentioned that this often comes up during elections. The people requesting information, what is it they want? 

Tracy Peterson: Sometimes it's as simple as wanting the ability to campaign in their own favor or maybe against certain incumbents that they don't like.

To be able to communicate with their neighbors and influence the outcome of the election. Sometimes it is outside of the context of an election, and the requester just wants the ability to communicate with his or her neighbors. In that latter instance, there isn't the option of saying, Hey, why don't you send me whatever it is you want to share with your neighbors in support of your candidacy at the upcoming election, and we'll distribute it just as we are the materials for the incumbent board members. And that's a situation where we then have to decide what information about the neighbors can be provided. 

Paula Chin: So this is most often say candidates for office who want to directly reach out to other residents to say, vote for me. 

Tracy Peterson: Yes. Often yes. 

Paula Chin: As opposed to, for example, couldn't a board say why don't you write up a bio and that we'll distribute that to everyone. Obviously that seems a better system than candidates pestering people and trying to sell themselves. 

Tracy Peterson: Certainly. So if what the current incumbent board is circulating on behalf of incumbent board members who are running for reelection. They certainly should extend that offer to non-board members who are looking for a seat in the upcoming election. No question. However, the board can't constrain what it is a shareholder or unit owner wants to communicate to his or her neighbors in connection with electioneering.

But it needs to afford those non-incumbents the same rights to communication as the incumbent board members are afforded. . 

Paula Chin: And are there other common situations? Say somebody is applying for alterations and the neighbor wants to see, a history of what they've done and whether it's going to impact them negatively? 

Tracy Peterson: Sure. Yeah. So there's a broad right of access to books and records of a cooperative or condominium apartment building. And so long as the requesting shareholder or unit owner can say that they are requesting such information in good faith, they're entitled to that information. Certainly they're not entitled to sensitive information such as, for example, the cost of a neighbor's alteration, bank records, social security numbers, all that kind of stuff. But broadly speaking, sure. If you are planning to do a renovation that you believe is akin to a renovation done by one of your neighbors, and you want to streamline the application and approval process by seeing what somebody else was able to have approved. Yes. 

Paula Chin: Okay. So it's for people say who want to do it and they wanna see what other people have done and what has been approved. 

I understand also sometimes this can involve trust applications, is that correct? 

Tracy Peterson: Trust applications. So that gets a little more sensitive because that involves a lot of personal information individuals may not want shared. And then all the documents have to be reviewed for sensitivity, and we have to determine what it is that can be shared. 

Paula Chin: Now, what's the actual circumstance that someone would -- I guess I'm not quite understanding who is requesting what regarding trust applications.

Tracy Peterson: Sure. So it's becoming more and more popular that owners are either wanting to own there apartments or their stock and lease in the name of a trust or an LLC. And some buildings allow it, some don't. Those that do often require certain documents that have , for example, an occupancy agreement, that makes clear who can occupy.

Because when it's not an individual that's owning you have to be clear about who's living in the unit. That you get a personal guarantee 'cause there's no individual behind the ownership. And those sorts of materials. And then sometimes, shareholders or unit owners may be of the belief mistaken or otherwise, that other requests to transfer or own in the name of a trust are being approved where there isn't, believing that it's an apples to apples comparison when it may be apples to oranges or even apples to roast beef. 

Paula Chin: Okay. So it's a similar situation, somebody wanting to do alterations, somebody wanting to change their ownership to a trust. They wanna know what other people have done to compare and make sure that they're being treated the same.

Is that right? 

Tracy Peterson: It is. And it, and I will say, Paula it's not very typical that we get requests to see other people's trust documents. It's not that. I would say if it's outside of the election contest, it's usually an owner who believes, again, rightly or wrongly, that there are some sort of financial shenanigans going on, or that he or she is being treated disparately than our other owners, and sometimes the requesting owner will have a very tailored request to see very specific materials, and we'll be able to say that he or she is asking to see them in good faith for a specific purpose. And other times it's gonna be a fishing expedition, saying I would like to see all cooperative books and records. And for example, in a shareholder context, several years ago I was involved defending a cooperative that was a respondent in an article 78 proceeding, brought by a shareholder who was demanding to see all co-op books and records.

And while I said earlier that a shareholder's and a unit owner's rights to see such documents is pretty broad, in this instance because the shareholder could not demonstrate that he had asked for specific books and records and could identify not even individual documents, but at least individual categories, and that he was doing so in good faith for purpose related to the cooperative, his request was denied.

He had to go back to the drawing board and figure out what it is he really wanted to see and be able to find a way to come up with a solid, reasonable basis to say that he was asking for it in good faith. 

Paula Chin: What do you find is the most common misstep that boards might make, or, that they don't understand what their rights are versus their requesting party?

And how has that gotten them into trouble? 

Tracy Peterson: I would say that there is rather frequently a knee jerk reaction that, oh, you're not entitled to this, you can't have this. And then, we'll often be surprised when we say actually they are entitled to that. So yeah you do have to give it to them and you can offer to have them come to the managing agent's office to review. You can offer to send a hard copy or an electronic copy, and to the extent you have concerns about confidentiality, confidentiality agreement, is your friend here. 

Paula Chin: Typically , when you say you wanna prevent it going to litigation, is it because the person requesting the information gets a no, and therefore might sue the board? Is that the general situation? 

Tracy Peterson: Yes, for sure. 

Paula Chin: What can boards do, proactively, instead of making a mistake and having counsel come in and say yes or no? Is there a document or rule that they can look at to see what the general situation is and what they can and can't deny? 

Tracy Peterson: Wow. That's a good question. I think so long as boards understand that the general default is that the shareholders and owners have broad right of access and also understand that a confidentiality agreement may be used to protect any information that may be sensitive and to plan in advance for requests for unit owner or shareholder names and contact information by, at least once a year, polling owners and saying, okay, we're gonna get updated names and contact information and please indicate whether you will allow us to share this information in the event we are requested by some of your neighbors. 

Paula Chin: So it seems that perhaps the best approach is when boards are asked by someone that they don't jump into saying no, but consult with you or their counsel to find out what is allowed.

 Because obviously, even if they come back and say yes, by saying no right away, I imagine can automatically lead to a sort of adversarial relationship. Is that right? 

Tracy Peterson: It can. Most of the time it gets resolved, but sometimes it doesn't, and it does devolve into a litigation posture.

Paula Chin: Okay. So your takeaway would be, to understand what people are entitled to. And at the same time to understand that if and when they say yes, that confidentiality is key and getting that agreement is sort of their safety net. 

Tracy Peterson: Yes. And the only other thing that I would add is just to remember the good faith component, and that when a board justifiably believes that the request may not be made in good faith to confer with counsel to confirm that there is. Based on that they can withhold the documents and not provide them to the requester. 

Paula Chin: So the good faith on this part of the person making their request, but also of course for boards that maybe say no that also be made in good faith and according to the BCL and running your business correctly.

Tracy Peterson: Yes, you're absolutely right. Yes. 

Paula Chin: Okay. Tracy, this has been, I think, really informative on a subject that I think isn't discussed a lot, so thank you so much for joining us. 

Tracy Peterson: It was my pleasure. Thank you, Paula.