Michael, this is a lovely email, but it's 128 units and if the person has an accepted offer and contracts are out on the apartment, which is most probably a ploy, why would she vote to put all shareholders in extreme debt. Why would this board member vote for such a huge debt and then leave? What does that tell anyone?

It would have been a good idea to have a series of meetings over a few month period before deciding on a line of credit for a financially strapped corporation. Was there enough representation at the meetings? Were all issues addressed? Did the shareholder's have adequate information and an adequate timeframe in which to answer? A sale can be turned down for no reason at all so where is the violation of any fiduciary duty?

You mention that the majority of the board believes that the corporation is open up to liability issues. Was this said at a board meeting or a shareholder meeting? If it was a board meeting, then how and why would anyone know? Bantering at board meetings are commonplace. If the majority of the board leak this, it is they who are in violation. Board members should be allowed to express opinions without fear of others leaking this to shareholders.

You state that two past members held their seats, did these past members also inflict a huge debt on shareholders and then decide to leave? That's a question.

Morally, one who creates a huge debt especially on affordable housing, which seems to be most of the building, that's generally the case on mixed housing, (they generally have restricted income floors), should morally not create such debt or recuse oneself if one will not be there to assume such debt. On the affordability, during economic times this should be carefully looked into. If votes were taken were they the ones on the floors with the most shares? That would be unfair. That will always counteract the votes on the restricted floors with less shares.

To M.C.

How much is the LOC? We can better answer if we had this information.

I am not a lawyer, but from the nature of the issues and questions being raised, it sounds to me as if you need to speak with an attorney about all of this, to know where you stand and what your options are. One obstinate board member cannot block a sale (unless your bylaws require a unanimous vote), and Co-op boards are protected to an extent by the business judgment rule.

Though I'm not a lawyer, it's a fundamental principle of co-ops that shareholders have to be treated equally. A board absolutely cannot condition its approval of a sale on how a shareholder voted on a particular issue. I can't imagine such a decision would pass muster under the Business Judgment Rule, since it's a classic example of a bad-faith decision.

And what's this weirdness about sticking around to pay the debt? A shareholder has no such obligation, moral or otherwise. If the debt is large, then the value of the apartment will be reduced. The shareholder doesn't get off scot-free and the debt doesn't disappear. It's effectively figured into the sales price.

For future reference, please keep in mind that you were under no obligation to put this to a shareholder vote. The board has the power to arrange financing, so long as they don't breach their fiduciary duty. Transparency is great in general -- and you should certainly be 100% up-front with your shareholders -- but I'm wondering if this would have been less divisive if the board had presented the line of credit as a fait accompli.

Bottom line: consult your attorney right away.

A sale can be turned down for cause or no cause. Is this a line of credit or another mortgage. What type of building is it? Some say there are restricted income floors, does this building have anything to do with the City? Was it built under a program of sorts? If so, there is more to it than meets the eye. Was there funding involved, credits and such? It might not be a straight forward co-op. I don't know about the value of an apartment being reduced? There are many issues to this large debt.

The anonymous poster wrote, "A sale can be turned down for cause or no cause." You have to be EXTREMELY careful with that statement. There are reasons for which a sale can NOT be turned down. Not only would it be illegal to reject a sale for these reasons, but the board members could be held personally liable and subject to damages. On top of that, New York law prohibits the co-op's Directors and Officers insurance from covering punitive damages in these cases.

The best-known example, of course, is discrimination based on any of the 14 protected classes, including race, age, and whether or not a person has children. Refer to the well-known case of Broome v. Biondi, in which board president Biondi was hit with six-figure punitive damages and had to sell his apartment to pay for them.

Most cases along these lines involve claims of illegal discrimination against the prospective purchaser. But a shareholder has additional grounds for a lawsuit based on NY Business Corporation Law (BCL) -- especially Sec. 501(c), which requires that "each share shall be equal to every other share of the same class." So if you treat shares that were voted in favor of the line of credit as unsellable, you're in egregious violation of this law.

It's not going to help you to claim that the purchase application was rejected for no reason, or a made-up reason that doesn't hold water. If the court finds that your real reason was a different and illegal one, then the board has acted in bad faith and is not protected by the Business Judgment Rule. Just ask Mr. Biondi.

To reiterate: CONSULT YOUR ATTORNEY. You're going down a very dangerous path.

Hi - thanks!! - do you think it will result in savings - and can be connected if within about two blocks?

Work Notice
Monday, July 16, 2012 to Saturday, July 21, 2012
West End Avenue between West 93rd and 94th Street
Monday-Friday, 9 am – 4 pm
Saturday, 8 am – 4 pm
Con Edison plans to install new gas facilities on the east side of West End Avenue between 93rd and 94th Street starting as early as Monday, July 16. This phase of the project is expected to be completed by October.
A second phase of the project is being planned to install new gas main between West End and Columbus Avenue. We will provide more details as soon as they are available.
Con Edison is working with building owners and the City of New York to convert large buildings that are currently burning #4 and #6 fuel oil to natural gas. This will reduce emissions and improve air quality. We apologize for any inconvenience associated with this construction project.
PLEASE NOTE SCHEDULES ARE SUBJECT TO CHANGE

I'm surprised you don't see the information on ACRIS. If the shareholder refinanced in 2004, you should see one document of type "INITIAL COOP UCC1" (new mortgage) and another of type "UCC3 TERMINATION" (payoff of the old mortgage at closing). This is true even if the new mortgage has since been paid off.

Don't try to look this up by shareholder name, which can be tricky. Instead, go to the DOB website -- http://a810-bisweb.nyc.gov/bisweb/bispi00.jsp -- look up your building by address, and note the Tax Block and Tax Lot. (I'm assuming you know your borough!) Then go back to ACRIS and do a search by Parcel Identifier. This will show you all the transactions for your building. Choose Max Rows of 99 from the dropdown, then keep clicking "next" until you get back to 2004. The refinance documents should be right there.

Have you already tried to work out a payment plan with the shareholder? If the shareholder is three months or more in arrears, and friendly methods have failed, your attorney should immediately deliver a formal default notice and start legal proceedings to cancel the lease and shares for nonpayment of maintenance.

Thanks for your input. I did find paperwork on ACRIS that dated back to the beginning of the co-op. All of the information found regarding this shareholder were dead ends. Washington Mutual is the last bank he had a mortgage with. Our attorneys have said that the paperwork filed was not done properly and certain numbers were missing. I saw what he was meant when i referenced older mortgages by those who have long since moved.

Not having a copy of the recognition agreement should not be part of the equation. It does not convey any special privileges on the Co-op. It's purpose is to recognize special rights that the mortgage lender has in situations such as this.

I would suggest that you find out who the current mortgage holder is and contact them immediately. They will want to maintain the value of the apartment, which a foreclosure will decrease. One clause in most recognition agreements is that the Co-op will accept maintenance payments from the lending institution as if they were from the mortgagee. If you can inform the delinquent shareholder's mortgage holder of the situation, they may decide to pay the back maintenance, at which point your issues are resolved.

I'm on the board of my Co-op. We've found that communications is the key to building a consensus when something like this needs to be done. My suggestions for how to approach this (and remember, Your Mileage Will Vary!) are:
1) Have a long conversation with the Co-op's attorney so you know exactly what the Co-op's legal requirements are to remedy the defects. More important, discuss what your vulnerabilities are to affected shareholder actions, like lawsuits and individual shareholer referrals to City governmental organizations.
2) You have an engineer's report. Good! Publish it to all your shareholders. Add a cover letter if there is any spin you want as part of the publication.
3) The entirety of what needs to be done requires everyone's buy-in. I would schedule a special shareholder meeting. Have your attorney and a rep from the engineering company present at the meeting to make small presentations and to field questions. Have discussions with them beforehand so they know what you are trying to accomplish at the meeting and what your goals are. They will probably offer their own suggestions. It is important that the board and your experts present a unified message and direction to the shareholders. Publish an agenda well before the meeting (a month or more) with the topics you intend to cover. Solicit shareholder suggestions for other topics, but stick to building maintenance and repair issues for this meeting. Make sure your attorney and engineer know what any other shareholder topics are so they can be prepared. Find out ahead of time from your attorney if a shareholder proposes a vote and it is seconded, how binding such a vote is on the actions of your board. I don't think it is, but best to find out.
4) Have the meeting, and plan for a *long* one. If it goes as planned (fingers crossed), the shareholders will come away with a sense that they are all in this together, even though only some units are affected. They may even be less aggravated about paying what will be an onerous assessment.
5) Have post-meeting discussions with your attorney and engineer to get an idea of what you need to do next, based on the discussions at the meeting.
6) Keep the lines of communications wide open with your shareholders, especially about financial matters. The more they know (and there should be very little about this that you should keep proprietary), the easier it will be to get what cooperation you can from your community.

This is definitely *not* a definitive list, but general suggestions which may provide some direction. Make sure your board knows about and is involved with all aspects of this project. Don't keep it to yourself.

Long term, I think you need to evaluate how much your monthly maintenance is and how much is in your reserve fund. Work with your accountant on this. It sounds like the board has known for a long time that these repairs will be needed, but monthly maintenance has not been increased enough to cover the projected costs. Your shareholders have gotten used to low-ball maintenance, and it is not going to be easy to re-introduce reality. But if they can be made to see that pain now will prevent much greater pain in the future (much more invasive repairs and/or shareholder lawsuits), you'll be a good part of the way there.

Good luck!

Thanks for the advise. It was very helpful. We have a meeting planned where the management, lawyer, and engineer will be present.
As you mentioned in the last paragraph, a big problem is that the previous boards have not prepared for these repairs. Unfortunately, in the past, unit owners were told that it "would be nice to run the condo in an optimal manner but we just cant afford to do so". Now that these problems are causing damage to the interior of the units we no longer can ignore them. Its tough to convince owners who are not used to such maintenance and having only 1 assessment in 14 years that we all have to pitch in to fix our problems.

Having the meeting with all your key players is a very good start. I bet some novel ideas come out of it.

Trying to convince your shareholders that they are facing major maintenance increases and assessments will be a horrendous task. If your shareholders do not grasp the beneficial value of doing what they need to now, you will probably have to use legal and regulatory liability as the stick to get them to cooperate. I think it would be best if your attorney delivers the bad news, so you are not the messenger who gets killed. :-)

Do you know if there are any shareholders who are more vocal or more entrenched than most? You might try to approach them personally before the meeting so they are not as disruptive as they could be. Once you have all the facts and figures and liabilities, go over it with them. Try to get them to be at least neutral if you can't get their support. Things will go smoother, especially if they feel you are reaching out to them in earnest.

Above all else, keep your cool. Emotions will run very high. No matter what is said and what you are called, you and the board are the voice of authority, and you have to be perceived at all times as being capable to lead the co-op out of this morass. Never take what is said personally, even if you know it is intended to be. Take plenty of Valium before meeting with your shareholders.

Once again, good luck with what you need to accomplish.

Was this building built by the city? A HPD project? It seems that numerous buildings built over the past 14 years have these kind of construction issues. Has the sponsor been notified? Has the city been notified and buildings dept. and consumer affairs, attorney generals office? It seems the same bad contractors/builders continue to get contracts and they leave a trail of bad construction problems all around the boros.

This has been quite well covered, just a couple of extra points:
1). you need to hold an initial, and probably a follow-up Town Hall Mtg specifically on this issue to address it properly.
2). You need the Engineer to present the Engineering report, but do it after the Coop Lawyer delivers an obligation and legal responsibility talk.
3). Request that your Engineer as part of his study, to prepare (at no additional cost) a 'downside' report on the cost of deferring or not doing this work. and calendar it. As in the increase of damage and related cost over time as they refuse to move forward.
4). Prepare an upside plan as to how yo will fund and schedule the repair program and any others so the property is made whole and the shareholders are financially protected.
5). If you are not doing so already, then when you plan next year's budget build in an additional fixed % that gets swept off the top of the monthly maintenance collections/operating fund and put directly into the reserves for capital projects. untouchable.
6). if you are not doing that already for Real Estate Taxes and Insurance they should go into segregated savings accounts for quarterly payouts as well, otherwise they look like available capital instead of earmarked capital and get spent.

No this was not built by the city or an HPD project. The sponsor was not notified. Should they be? They have no dealings with the condo in years. Not sure they are even based out of this country anymore.

You might consider a second opinion from a different engineer. Certainly, the projected project cost is rather significant. Another opinion might suggest other courses of action. What did the engineer find that all the contractors didn't?

Jeff Perlman @ BrightPower in NYC is one of the best. Google him and his company prior to contacting them. I would start with them as they are a small firm with extensive experience in the multifamily sector.

if he has homeowners insurance he should file a claim with them, let them make their paper trail. If he doesn't, this is an omen to get it, since the downstairs can dump it on the insurance and let them take action. plus it will not be the end or this mild/slow in the future. owner should put it in writing,certified mail with date of first notice of leak and to whom, even if verbal . Myself i would call it self dealing and no due diligence, no fiduciary responsibility to building by the whole board and self dealinf since they refuse t act as they would a share-owner. Name them and management company,cc the elected representatives including the state AG . we have to keep a paper trail on them, since they have IMOP defaulted on the contract, by refusing to uphold the BCL, if you have time go to your county supreme court and start a case , another paper trail,
I am not sure how it works with small claims court, ir it starts out as damages under the small claims amount , but continues onto larger than small claims , whether you screwed yourself.
Best Bet get insurance now, probably has illlegal wet over dry, or washer done improper ,same with dishwasher.
bottom line we need to get AG to do their job or lmake a lot of noise n the process and let every prospective buyer know that the Ag refuses to enforce the BCL, Maybe a couple good attoenys will pop up that will take the AG to court for IMO fraud.
i am looking for media investigative journalism for my mess in yonkers, i am tired of spending my life trying to write letters, If someone knowledgeable asked me questions , i would be able to give the answers and within a weeks time produce the paperwork , most likely a google docs cloud type medium,

see above

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efy - I think Fred is trying to get his problem resolved without starting World War III. I agree with having Fred contact his insurance company and keeping good documentation for all his communications about this. He should also contact his personal attorney for guidance. I really think, though, that a lot of the rest you proposed is overkill at this point.

Do this. it will work. The coop will then force him to allow access. do N±OT delay.

write letter to board saying owner has no right to withhold access under the prop lease and you demand this get fixed at once. In the interim you feel you have a situation that allows you to abate a portion of your maintenance. You intend to exercise the abatement clause of your prop lease in say ten or fifteen days from the date of the letter if the source of the water damage is not fixed.

I would *strongly* advise you to contact the DOB directly, or engage an engineering firm who can give you a professional, legal answer. If you rely on the information you receive in this forum, your answer will be worth what you paid for it.

thanks, I will

I am not a lawyer, and it sounds like these are questions you should really be asking an attorney who specializes in Co-op and Condo law. Questions like overcrowding and open BBQ fires are not only legal issues but safety issues as well. You should pose all your questions to an attorney and be guided by her/his answer. This is not being power crazy, it is being prudent.

Good luck.

the fire department should be able to give you a definive answer on bbg. i know you wish to have a congenial atnmosphere, but fire codes are anothjer mater. the FD should inform you what to do, probably a copy of the nyc law and the fines from the city , and if you see a dangerous condition, anyone should call the FD. They will write the icket or fines not the condo or coop

Here is a link with info on occupancy - http://nycrgb.org/html/resources/hmc/sub3/art4.html
If a violation gets written, I believe it's generally against the registered property owner, ie: the coop, not the shareholder. I would suggest that you have a real estate attorney review the situations and advise you of a course of action. Any violation will have to be dealt with by the coop, and if you decide to revoke the unit owners proprietary leases, it runs into money quickly - lost maintenance, attorney fees, bad will. It could take many months or even years to collect from a lease revocation, ultimately most likely from the resale of the apartment.

This is really a board to board decision. Some Boards require that two signatures from the Board be present on the invoices and then the checks after approval, some boards give the manager the latitude to approve and sign for checks. Sometimes this can be for monthly fixed expenses (mortgage, utilities, management fee, etc.) or it can be anything under $1,000 (for example).

If the rest of the Board doesn't agree with you, I think that you should be requesting an up to date monthly copy of the paid bills on an ongoing monthly basis. If they don't allow you, as a Board member, to view the paid bills and expenses, then I think that you have a problem.

As a board treasure, I agree with what Mark described. I want to add that as a minimum you should be receiving a monthly report from your managing agent showing all account (operating, capital reserve, sinking funds, etc) monthly opening and closing balances, a breakdown by budget category and item of income and expenses, a reconciliation of your operating checking account, shareholder maintenance payment, and shareholder arrears broken down by who is delinquent and how many months they are late. In addition, you should receive copies (either from your managing agent or directly from the financial institutions) of *every* account owned by the Co-op, especially the ones I listed above. Something else which is very helpful is a photocopy of every invoice received and paid by your managing agent along with a copy of the check voucher used to pay the invoice.

Now for the fun part. Read each of these documents *carefully*, month after month. Your treasurer should be doing this. If he isn't, get a new treasurer. The only way to prevent fraud and embezzlement and other nasty surprises is to review the paper trail. If you (or your treasurer) is *not* getting all of this paperwork on a monthly basis, raise the red flags. Either get documents (as far back as possible) or get a new managing agent.

An example: Our former super had his parking paid for by the Co-op because he used his vehicle for Co-op business. When he retired, the automatic monthly payments were supposed to end because the new super did not own a car. It was only by reviewing the monthly report line by line that I was able to determine that the payments continued for four months after retirement (in spite of my notifying the managing agent all four months that the payments needed to end) because no-one told the managing agent's accounts payable department not to honor the invoices they were receiving. It took a face-to-face with the managing agent's CFO to get this accomplished, but it saved us $1500. I believe it was an honest mistake because they had personnel changeover during this period, but it is still shareholder money saved.

I know this is a bit old,but whatever method they state is the procedure, I would ask for the written documentation of the procedure and also how this procedure was implemented . I have a managing agent and BOD prez that everything that comes out of their mouth is a falsehood. Since the board never performs due diligence and actually reads the proprietary lease paragraph in question , the problems just continue to grow.

Unfortunately, this is a common problem. The coop that I live in has the same issues of dishonesty among some of the BOD's and the Managing Agent.

Can anyone recommend a good Managing Agent?