I would review your Prop Lease and By-Laws for clarity. As a board member on a building that went co-op over 25 years ago, the sponsor still owns 60% of outstanding shares we visited this issue with our independent attorney – who pointed out that our documents would prohibit the sponsor from paying the flip tax. Until we can change this wording in our governing documents, the sponsor continues to function without being charged the flip tax, being required to adhere to alteration and sublet polices etc.
Even though under the law all shareholders must be treated equally, sponsors often have ‘special rights”. This applies to our situation. I suggest you read your governining documents and consult with an attorney. I hope this helps.
As far as the amount of flip tax – if your governing documents allow a flip tax or charge, look through the board minutes and resolutions to confirm what the correct amount should be. The managing agent should be able to confirm or advise further. The charge should be the same for all applicable shareholders – or there could be liability.

I agree with DavidG about the coop sponsor and flip tax. I've been on our board a long time, and as I understand it, the sponsor is usually and legally a Holder of Unsold Shares (complicated issue), and he doesn't have to pay coop fees such as a sublet fee or flip tax. If he sells one of his apts to someone who lives in the apt and doesn't fulfill the legal requirements that apply to "investors only" that person is then a shareholder and has to pay all coop fees and comply with all coop policies just like any other shareholder does.

I had the same thought myself ... but I quickly realized it wouldn't work.

The purpose of the flip tax was to tax the shareholders that bought a unit from the sponsor, usually at a discount price, then sold it at market price for a profit.

Over time, that tax has become a means for income.

A flip tax or increase must be voted in by a majority of shareholders ( 66% ) and amended to the property lease. Anything else would be illegal. I find it odd that your attorney would impose a 4.5 flip tax on sellers without an amendment to increase it.

It is the first, and most important, duty of every Shareholder, and especially those serving on the Board of Directors, to read and understand both of these documents thoroughly. (Kind of like a citizen with the Declaration of Independence and Constitution/Amendments.)

When did the original flip charge go into effect, by what process, and how was the amendment worded?
Can you account for all amendments since the PL was issued, and do any of them account for an increase?

Study the facts carefully, see if you have a case, before going further.

I feel for you, as an overworked president who has done other board members' work. What I have done, and what you can do, is to create shareholder committees. Identify work that should really be done by board members, and delegate it to committee members -- such as finance, for double checking that the management company has actually paid the coop's bills. From these committees, you can recruit the next board members. They will naturally get interested in building issues by being on the committee. If people do not even want to be on committees, identify how much it will cost to pay outside professionals to do this work, circulate a memo, and say that if they do not want their maintenance to go up then they will volunteer for these committees. Remind people that the coop does not run by itself. And do not let yourself be stuck doing all the work because everyone else refuses to do it. They have gotten away with this so far because they know you will do it. Scope out for them how much it will cost them to supply professionals to do the additional work that you are no longer willing or able to do, and I think you will get volunteers, both for committees and for being on the board. Good luck!

Anonymous - I appreciate your advice on how to get more help when my 4 fellow BMs leave the board in June and I'm the only BM left. Committees -no. Everyone has an excuse - busy with career, social life, family...not interested...don't know a thing about running a coop and don't want to. We couldn't get SHs to be on committees if we paid them!

A few times, someone propped the front door open for a move/delivery, etc. and didn't close it when done. I've watched our lobby on our security video. I can't tell you how many residents go in or out and don't even think about closing the door as a security measure. Our super keeps the bldg very clean, but if a rag was on the elevator floor, it could be there for weeks. No one would pick it up.

We happen to have a very communicative board, good mgmt, very few complaints from residents, but getting cooperation when it comes to helping out is like trying to climb a mountain backwards.

Also, we can't afford to pay outsiders to do work (other than legal, accounting, etc.) The kind of help we need is what BMs should be doing - liaison with mgmt, writng flyers/notices, SH relations. I can't even get a board sec'y to type board meeting minutes. The last one kept forgetting to do it. The current one writes them like editorials.

I talked to a few SHs last week who may consider running for the board. But they're all new to the bldg and new to the coop concept. None of them could be board president yet. I'd be on the board but I didn't want to be president again. There would be a long learning curve, but warm willing bodies would be better than any alternatives.

Any more ideas would be weelcome.

If people are willing and they have some semblance of corporate experience, It's all a matter of training. For the secretary with editorial type minutes, show him/her the style you expect to see minute and also instruct why it's better to be terse and without much detail rather than editorializing.

Finally, if you have to be a Pres. for one more year until the new blood get the gist of the position, then do it. Also, encourage members to attend courses provided by CNYC so that they know what it is expected of them. Finally, if the courses are too costly, then have prior board members provide the training.

AdC

If shareholders are in good standing and they wish to run, don't eliminate them because you think they are far from qualified. Sometimes, you need to accept the given and show that you have a representative Board.

As you well know, your attorney is a designated assistant secretary for the purpose of signing documents (i.e., stock certificates if he/she is the transfer agent and for purposes of legal actions). The attorney is not a Board member and should never be a board member, just as you will not have the manager as your board member.

AdC

yes, you can (and should) charge sublet owners a fee. Are you a co-op or condo? What's in your bylaws? Whatever is there, you can amend them.

Thanks bp ... we are a condo ... and people are allowed to rent their units. Currently we have 3 renters, plus one unsold unit rented by the Sponsor. We don;t want to discourage renting, just have those who are not living there pay a monthly fee which they can pass on to the renters or not.

I agree ... you should impose a sublet fee. Its usually calculated as a percentage of the yearly maintenance charge. Anywhere between 10 to 20%.

Note that the sponsor will be exempt ....

The business judgement rule would apply to this situation. As long as each shareholder is treated the same. You can't charge some a fee and others no fee. It would have to be any shareholder who rents his or her unit pays (x fee for administrative work)
You would only need to have the board put the rule into effect via the house rules.
BK

Have your Suoer get a C of F for a sprinkler and he can maintain it by keeping a log book of his monthly inspections and making sure the sprinkler valves are maintained in the open position plus keeping extra sprinkler heads on hand.

If your building is five years old, the 5-year Pressure Test should be coming up for renewal. This test is performed by a licensed plumber and the Fire Department is present to witness and pass/fail your system. There should be a card in the superintendents office with the date of the last test.

If I understand this correctly your property is subject to a monthly visable inspection which your super should carry out (he would require a certificate of fitness for this from the FDNY). There is a standard list of items that need to be checked. In addition the system is subject to a five year pressurized test which a licenced plumber would carry out on your behalf and file with the city. You can always check the FDNY web site or swing by your local fire house (with coffee and doughnuts)

Hope this helps Bob.

Thanks Bob. The problem is we don't have a super. We are a small condo (20 units) with back-office management (i.e. they do the billing). I think I'll take you up on the FDNY web site. I cant find anything that says we are required to do a monthly check. If it is required, maybe a Board member can do it the checklist. Thanks!

I still think you may need someone to inspect the equipment on a monthly basis that has an FDNY Certificate of Fitness. You can always e-mail me directly for additional information.

jawitmolh@aol.com

Charging fees for subletting in condos will substantially lower the value of the units. This is because people buy condos to avoid the fees and rules of co-ops.

Since a Condo has a Homeowners Association and collects a Homeowners fee, I presume, it would be according to how long the sublet is for and if it was approved by the Association?
If it was approved 10% of the yearly Homeowners Fee would be sufficient. That's what a Co-op does, 10%. You and the Association can set your own percentage, but it should be fair across the board for all.

It's not subletting when it's a condo.

By definition of law, it's renting. There's no proprietary lease, and the owner of a condo owns real estate.

Whether a condo association can legally forbid what by law is a single-family home from renting is questionable.

No, we don't want to forbid it ... just have them pay slightly more for common charges.

Could call it an absent owner fee ; )

Those fees should NOT be paid by the corporation. We collect the fee for document review (contracts and recognition agreements) as part of our application package with the check payable to our law firm. This simple step ensures that the law firm gets paid and that we are not stuck with the bill.

So if the Corp was billed for the lawyers' review of two sales packages two years ago, is it too late to send the atty fees on to the sellers if we know where they live?

Our Corp only charges $250 for the managing agent to assemble the package and board review. Since the legal fees can vary, it makes sense to just bill the seller at closing, right?

Thanks.

Normally your attorneys would not be representing the seller AND the corporation in the same transaction; however if that was the case, it is up to the attorney to collect those fees at the closing.

Legal fees for reviewing purchase application documents on behalf of the corporation are the responsibility of the buyer, not the seller. They are typically very cookie cutter and therefore should not vary - your attorney should provide you with a fee schedule that your property manager can collect as part of the application package. Because those fees are the responsibility of the buyer, it is not too late to pass those charges on to those shareholders.

Who lives in his apartment? In our building we are getting rid of the long-term subletters. If he is subletting, in our building, he is no longe a member of the Coop, but the owner of a rental property... Dont you have sublet rules. Check your bylaws,,, prop lease,,, and most important, start and S/H email list, and expose him..
VP

turns out that one board member never has lived in the building, even though he has posted his address as the buildings for the last 10 years, his adult children moved into the two apartments he bought. i am sure he never paid the sub-leasing charges.
Now he moved the ownership to the apartments into the children name, so they are the shareholders, however he is still o the board and was reelected, since no one knows what is going on.
the president of the co-op no longer lives here, his adult sons do. which is against the proprietary lease, but not according to the bod and managing agent.
i think about 50% of the building is now non owner occupied, adult children were the first and only people that moved in. Parents buying as an investment, moving their children in, all against par 14 of the proprietary lease.

we have sublet rules, but the managing agent abd board president state that it s ok for the children of the shareholder to live in the apartment without the shareholder.
this is not true, not with out prop lease.
many of the apartments have only been occupied by the children, the shareowner never lived in the apartment, they are really sub-letters that do not pay sublet fees

The bylaws should stipulate the qualifications for an individual to be a board member. Some bylaws explicitly aver that one must be a shareholder in good standing. Yes broad definition, but there is much case law surrounding the stipulation.

Further, one's co-op attorney should be able to explain the bylaws attendant to one's qualifications to be a Board member.

So I am hard pressed to understand the predicament.

I know our management company has a secretary present and she takes down every word by short-hand. No recording devices are used.

Annual minutes are supposed to be a summary of the events that occurred, not a word by word accounting, so I see no issue with it not being recorded and just the fine points hit within the minutes. You may (depending on the actual cooperation of the manager / board) be able to request a draft of the minutes soon after when it will be fresh in your mind.

what happens when you dispute the minutes or believe important items and questions were left out? we had a $27k zero drop budget error. Yet the BOD president refuses to state when it was discovered. I not think the other BOD were notified, including the treasure. The president is a control freak.
HE also tried to skip the part of the anauul meeting, part #2 where the reading of last years minutes are accepted/waived etc. I brought up the missing portion at the end of the meeting at the question portion. It wasnt a mistake, it is his manipulation. HE knows how to run a meeting better then most people, we were in the same union.
He doesn't want the BOD members contact info posted anywhere. If i write the BOD, i have to send it to the manging agent , who sends it to the president, who will sit on it for months, and bring it up at the next meeting, months away.
This managing agent does not use shorthand.
i am seeing the annual meeting minutes bagain used as a way to criticize the shareholders that are asking questions.
a bully pulpit/
if there is no recording there is no way to see what really happened.
our president will verbally bully anyone that asks questions that he doesn't want to answer. such as financial and conflict of interest. I have serious issues with the managing company owner. being on the chair of the bank that we just re-mortgaged from, the board president is an investor, yet i am sure he didn't recluse himself. i asked if any other BOD members were investors in the bank that this mortgage came from, that never made it to the minutes, and i never got an answer.

You are obviously angry... Minutes will not do much for you. It is important to ask the right questions in front of your audience in a dispassionate manner. Anger does not get you far at a meeting. So, try to calm down and try to win skeptics by putting the seed on other shareholders' minds. Try to run for the Board or support those who are expecting a better board.

your right.
i am pretty peeved off. Way too much side dealing going on and zero due diligence the board members. plus a board and managing company that has turned the co-op into a rental.

Michael Simons Interiors. He is absolutely brill.I will come back tomorrow with the contact info.

Robert Cane Architect PLLC - 212-769-9605
He did 2 of my buildings... very good (REAP Construction did the work on one and Larry Biddall on the other - both excellent)
Hali Weiss Design & AIA - cell:917-318-5511 - very very good - She is Higher end and good at managing the project as well.
Young Huh - Interior Design 212-595-3767 ... Working with her on a project now... nice designer, very efficient.

Best
~AR

How so? You do not mention how they were overbilled or underbilled. Please provide more explanations.

AdC

Apparently accountant has discovered the under and overbilling as shareholders were not paying the correct $ amount per share amount. This property has been a coop for over 40 years

If the dollar amount was incorrect, then all should be over, or under billed.. not a combination of each.
Everyone pays the same amount per share for maintenance.
If there is a combination of each, then the only way I can figure it to be is a misallocation of shares which indicates much bigger challenges than just maintenance payments being incorrect.
Maybe the accountant is in error?


~AR

I suggest you look for a new accountant and a new managing company.

Your situation is not the only one in co-ops. I don't know what is the difference--pennies or a couple of dollars per year or hundreds or thousands of dollars per year?

Sometimes, these situations happen when management companies apply an increase by way of maintenance paid per unit, i.e., 3% over a dollar amount in maintenance may result in variances. If you were to carry it over several years, the disparities may grow. Is this your case?

Many times one has to be practical and forget who paid less or who paid more and how long they resided, etc. I would cut bait and be done. What is the variance from the lowest paid to highest paid? Establish a new rate per share and have everyone pay the same amount going forward.

AdC

Board has no idea as to how over and underpayment of maintence occured. It seems that shareholders were charged different amounts per shares which went on for many, many years no one knows. Our new accountant, discovered the error. Now board has been advised to ignore, or back bill and credit shareholders for a period of 5 years as allowed by law. Reimbursement and credits range from $5.00 to $48. Therefore some have underpayment of over $2800. Some are speaking of legal recourse for these monies.

If this were my co-op, I'd hire an outside accountant to determine exactly what happened and when - determine what the over- and under-payments are - then have the board meet with Shareholders to discuss the situation, and to offer a solution of a 25-50% resolution: those who have credit would get 25-50% of that due, and those who owe would pay 25-50%. I'd also offer payment plans for amounts owed over $1000. Try to figure out what makes sense for the co-op as a whole financially, but also have some compassion for shareholders, who might be suddenly faced with an obligation that seems unfair, especially if they've been paying maintenance as billed - on time, and in full - each month.

The important thing is for everyone, including the board, to try to be reasonable at all times. There is no advantage in pointing fingers, getting the co-op entangled in expensive legal affairs, getting everyone in the building riled up, or other actions that would split your co-op like a too-ripe grape.... that will take years and a unified effort to heal (I know).

BTW - I think the board should also think seriously about 1) a new accountant; 2) a new managing agent.

Our new accountant was the person who discovered this issue. Board is considering accessing all to pay those who are due a credit. Thus all shareholders including those who are due a credit will be assessed to pay themselves. This does not seem quite fair.

That doesn't seem to be an equitable solution for anyone....