The current interpretation seems to be, according to our Insurance Company inspection report, our Management Company and comments by a DOB inspector: is that all thru the window units need to be supported by a bracket that carries the full weight of the AC unit and is attached to the window frame, independently of the AC unit itself, such that if someone opens the window the unit cannot fall out and down. Depending on the size of the AC unit these brackets can run from $30-75.00 plus installation. They have to be installed properly. There is no rule that says it has to be by a licensed Contractor, only that it is understood that you and the Coop are liable if it fails due to inadequacy of type/size/manufacture or a failure to install properly. It took 8 months for people to comply and we had to send the super around to yank the last 8 units that shareholders were ignoring. We charged for the removal, and will charge for the brackets and re-installation this spring. The penalty for failure due to fines and real liability is huge. It is not just the front of the building on the street. It is all units in all windows as they can fall and whack an employee, a contract worker, neighbor or playing child. Everyone accesses yards, passageways, and service entrances at some point. If it's on their head, it's on your head...! (we also had to make everyone take the flowerpots etc. off of the fire escapes as well. Insurance Co. and the Fire Department will nail you for that, big time.

The current interpretation seems to be, according to our Insurance Company inspection report, our Management Company and comments by a DOB inspector: is that all thru the window units need to be supported by a bracket that carries the full weight of the AC unit and is attached to the window frame, independently of the AC unit itself, such that if someone opens the window the unit cannot fall out and down. Depending on the size of the AC unit these brackets can run from $30-75.00 plus installation. They have to be installed properly. There is no rule that says it has to be by a licensed Contractor, only that it is understood that you and the Coop are liable if it fails due to inadequacy of type/size/manufacture or a failure to install properly. It took 8 months for people to comply and we had to send the super around to yank the last 8 units that shareholders were ignoring. We charged for the removal, and will charge for the brackets and re-installation this spring. The penalty for failure due to fines and real liability is huge. It is not just the front of the building on the street. It is all units in all windows as they can fall and whack an employee, a contract worker, neighbor or playing child. Everyone accesses yards, passageways, and service entrances at some point. If it's on their head, it's on your head...! (we also had to make everyone take the flowerpots etc. off of the fire escapes as well. Insurance Co. and the Fire Department will nail you for that, big time.

I cannot emphasize enough how important it is that every through-the-window A/C unit be supported by a properly sized and installed bracket. At just about the time we started a project in my building to bring every unit into compliance there was a story in the news about an A/C unit that fell out of a window and into the play area of day-care center no more than 5 minutes after the children went back inside. We sent a copy of that article to every shareholder who balked, and we now have 100% compliance. We billed back the cost of each bracket and installation to the shareholder.

It is better if staff is not allowed to do this. The coop can be liable for millions.
The individual apartment owner will not be liable unless they pay him.
However the coop will also probably be liable.
If he drops it on his foot - the coop is liable.
Hire an insured person.
If you have a casement sleeve unit - you can do it yourself if the case has the proper safety bar attached.

Francis - As a starting point, read your co-op's bylaws and amendments, but there are most likely laws and regulations that govern this as well. The right of a shareholder to vote in a co-op corporation election or other shareholder ballot measure is a very serious legal matter and exclusion needs to be done under very careful and strict legal supervision. Instead of asking for informal opinions about this ("the advice is worth what you pay for it"), talk to your board's attorney. If you believe you are the excluded party, you need to formally engage an attorney (yes, it will cost you) on your behalf. As you noted in your original post there are many differing opinions about this. If you choose to pursue the matter, hire a lawyer to guide you through the nuances.

You can review my firm, Excel Bradshaw Management Group (www.ebmg.com). Our largest concentration of clients is in the Brooklyn area.

On the assumption that you are zoned residential that means your shareholder tenants should not be using their spaces commercially. In my coop we have House Rules that allow home offices for the shareholder and his family and quite frankly we are a little loosey goosey about what would constitute foot traffic and so we don't really address it. If the foot traffic were for piano lesson students and these lessons disrupted the piano teacher's neighbors, we would prohibit it.

So I don't think it's nonsense. And I doubt your lease explicitly addresses any use of your space other than as residential.

There is a building security issue when there are a lot of non-shareholders going in and out of the building. This is not so much that the people who are let in by the shareholder are a concern, but "tailgating" behind the invited guests is a major way un-invited "guest" gain entrance. Especially if your building does not have a doorperson.

Other factors to consider: Wear and tear on the lobby, elevator, and other common elements, and the liability issue if a music student slips and falls in a common area on her/his way to a lesson.

steve - sounds like you need to love in to a building that does not allow relatives or any visitores at all. wait - even better - one that does not allow inhabitants ! That way there is no "wear and tear." anyhow you miss the point- the point is that the lease gives your the right to have an occupation with foot traffic no matter what any fuss budget on the board says. of course, not excessive traffic - but you may have some.

Very odd postings from you. I am not clear why you are so confused
OK let me explain again: 1) Refer to the 'Use of Premises" section of your lease. Most lease allow for home occupations permitted by local zoning laws.
2) Then check your local zoning laws.
Got it?

Lee - Here's another odd one for 'ya. After going on and on about inalienable rights bestowed by some magical section in your ("and most") proprietary leases, you have now twice tried to pivot this discussion around to what is in *my* proprietary lease. Clearly you won't (or can't) stand behind your blustering, which is a shame. I was really hoping to learn something new, instead of dealing with specious claims and an unsolicited tutorial in creative lease reading and comprehension. I'd still like to see the part of your lease where it permits what you say it does.

Did your board shut down you down and that's why you're upset? What kind of business are you trying to run?

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Q. Our co-op has a new house rule barring shareholders who have home-based businesses from having clients or customers come to their apartments. This is in direct conflict with the lease, which states that we may have any home occupation permissible under local zoning laws. How can we persuade the co-op board to rescind this rule? And if we can’t, what can the board do if we violate it?

A. If a new rule materially alters a shareholder’s rights and obligations, it may not be enforceable, because, it can be argued, it is an impermissible change to the terms of the contract between the co-op and the resident, according to Matthew J. Zangwill, a Manhattan real estate lawyer.

A co-op’s proprietary lease is the principal document that sets forth the dos and don’ts of daily living in a co-op, and the house rules are usually part of the proprietary lease. The lease, which is a contract between the co-op and the tenant/shareholder, usually gives the board of directors the power to adopt new house rules without the consent of the shareholders, Mr. Zangwill said. But a new rule would not be enforceable if it changed the terms of the contract.

KLee, all the NYTimes Q&A is saying is that the board cannot pass and enforce a new house rule if it conflicts with the lease. That's been a settled point for ages and is not news. Changes to the lease require approval by a super-majority of shareholders.

The interesting part is the question-asker's claim that their lease explicitly allows home occupations. That would be quite an unusual provision, if actually present. I see above that you believe your own lease also has such a provision - could you please post the language from your lease that states this?

Our own lease is based on the same template as many co-op conversions from the early 1980s. There is no mention of home occupations or zoning, and the language in Paragraph 14 ("Use of Premises") explicitly rules out any use except as a private dwelling: "The Lessee shall not, without the prior written consent of the Lessor on such conditions as Lessor may prescribe, occupy or use the apartment or permit the same or any part thereof to be occupied or used for any purpose other than as a private dwelling ..."

FYI - here's what out PL says in paragraph 14. Use of Premises

"The Lessee shall not, without the written consent of the Lessor on such conditions as Lessor may prescribe, occupy or use the apartment or permit the same or any part thereof to be occupied or used for any purpose other than (i) any home occupation use permitted under, and subject to compliance with, applicable zoning law, building code or other rules and regulations of governmental authorities having jurisdiction and (ii) as a private dwelling for the Lessee and Lessee's spouse, their children, grandchildren, parents, grandparents, brothers and sisters and domestic employees, and in no event shall more than one married couple occupy the apartment without the written consent of the Lessor."

Hope this helps.

Thanks for posting Paragraph 14 from your lease. It's quite different from the "Use of Premises" paragraph in our own lease, which was based on a common template from the early 1980s (possibly the same one used by Steve Rosenstein's co-op, to judge from the discussion above). You should check with an attorney to be sure, but it certainly appears that your board could not prohibit home occupations via a house rule with that language in your lease.

For comparison, here is our Paragraph 14 in its entirety:

"14. Use of Premises: The Lessee shall not, without the prior written consent of the Lessor on such conditions as Lessor may prescribe, occupy or use the apartment or permit the same or any part thereof to be occupied or used for any purpose other than as a private dwelling of the Lessee and Lessee's spouse, their children, grandchildren, parents, grandparents, brothers and sisters and domestic employees, and in no event shall more than one married couple occupy the apartment without the prior written consent of the Lessor. In addition to the foregoing, the apartment may be occupied from time to time by guests of the Lessee for a period of time not exceeding one month, unless a longer period is approved prior thereto in writing by the Lessor, but no guests may occupy the apartment unless one or more of the permitted adult residents are then in occupancy or unless consented to in writing prior thereto by the Lessor."

steve - sounds like you need to love in to a building that does not allow relatives or any visitores at all. wait - even better - one that does not allow inhabitants ! That way there is no "wear and tear." anyhow you miss the point- the point is that the lease gives your the right to have an occupation with foot traffic no matter what any fuss budget on the board says. of course, not excessive traffic - but you may have some.

K Lee - Could I ask you to please cut-and-paste the sections from your proprietary lease which gives you the right to have an occupation in your unit that allows foot traffic? Thanks!

Steve - Actually, can you check your lease. What does it say in this clause? Can you tell us please?Naturally, it does not use the term "foot traffic" but it does tell you what occupations you may have -it will probably mention 'zoning' - You may not make disturbing noise or odors or use an area over 25% of the footage. Obviously, you cannot have tons of traffic. But you are certinaly allowed some. You can even have an employee. If your lease cites zoning laws - then there is no grey area. and what of nannies, housekeepers and dog -walkers - they are not 'foot traffic'?

I did check my PL, and I couldn't find anything near what you described. This is why I asked to see what it said in your's.

can you tell us what yrs does say?

Like I said, I could not find anything resembling what you described in your previous post regarding "Most co-op leases allow you to have occupations alowed by zoning. In NYC, this includes professional offices (shrink, artist studios, etc) as well as conducting music lessons for a single pupil at a time." Nor could I find anything that says, "the point is that the lease gives your the right to have an occupation with foot traffic no matter what any fuss budget on the board says." My PL must be deficient on both counts because I found nothing I can copy into this thread.

So please, K Lee, share with us the wording in *your* lease regarding occupations with foot traffic, or regarding anything having to do with allowable occupations, excepting, of course, provisions for "domestic employees", which most PL's *do* allow.

The point is to do your own research. Most co-op leases allow you to have occupations alowed by zoning. In NYC, this includes professional offices (shrink, artist studios, etc) as well as conducting music lessons for a single pupil at a time. Thanks god for this - it allows musicians and teachers and artists etc. to exist. It is a great thing - you can do home office deductions, etc. If it disrupt the neighbors, you can always take sound-proofing measures . Anyhow if your board tells you otherwise - check the lease.

We had to take legal action against a Shareholder using his apt as an office -- the Coop won.
For years he had worked out of his home, with a part time assistant and no traffic -- but he expanded to three employees, clients and constant deliveries/messengers -- all overwhelming the staff AND, the ONE - staff operated elevator.
The floor landing was used as their Telephone booth -- strangers were hanging around on the landing and the lobby became a meeting room.

Safety and Insurance became issues. We began to have other request for client based businesses.

The bottom line is that we do not have the staff or extra elevator to handle all the traffic. The employees came to work when the owner was away. Insurance and Safety became serious concerns.
The Safety, legal exposure and quality of life -- came first.
VP

I read that with jaw dropping. To give over all responsibility to an accountant would absolutely be reneging on your fiduciary responsibilities and, frankly, allowing an entity with no shareholding risk to be the only one "in the know", opening possibilities for who knows what kind of dealings. There is a big difference between a co-op and a condo. Sounds like you need a condo, where it is real estate property vs communal shares. If you do not trust your neighbors you have no one to blame but yourself for not being upfront about these concerns. And if info is getting out, it is coming from the board and not those who are not already privy to that info.

Hi Sid, I'm sorry you and your building had to go through this, and I hope no one was injured, or worse. My building had a similar experience in the mid 1990's, and although I was not a resident at the time, I've heard stories and understand the difficulties you are going through.

To answer your question, let me throw these out. You may have already taken some of these actions.
* Get your board attorney involved. She/he should be your primary source of information and guidance as to your rights and responsibilities regarding the habitability of your building.
* Contact your building's insurer. They should have the resources to help you get your building back into a habitable state. They should be able to provide you with funds (within the limits of your coverage) to help you pay for repairs, and will work with your attorney to recover expenses not covered from the neighboring building's insurer.
* Have your shaeholders contact their insurance carriers for whatever help is available under their individual policies.
* You may need to engage an environmental engineer to survey the problems your shareholders are complaining about and provide you with a remediation plan. That will be your roadmap to recovery, and will also answer the questions your shareholders are asking about what the board is doing.

The best of luck to you in your recovery,
--- Steve

Sorry about or the typo errors. It's early morning and I've got to get off the work. I did want to add this shareholder has always been difficult. And, serviced on the board once for a brief time. They got things paid for in their apartments that normally are billed directly to shareholder. No one wanted to confront this person because they know lies always follow. Some feel better to grease the squeaky wheel then to confront.

Oh my! I've got to proof read.... Again, my apologies. They don't "pay" me enough to do this job!

Your managing agent isn't doing his or her job. The board has set policy and fees -- it's up to the managing agent to handle the day-to-day operation of those policies and fees.

If the board is deciding to single this individual out for preferential treatment, then any subsequent shareholder can refuse to pay the fee. Your fellow board members are putting the co-op at fiduciary risk.

Thanks JB for sharing your thoughts. Our managing agent did invoice. Repeat offender sents discourteous emails and ranting calls to both management agent, super and board. It always comes down to he said , she said. These shareholders are in the process of selling their unit so they are being a little more civil but still make their point. They are contesting the hours the super has submitted. I believe we must stand behind our super.

This sort of thing has happened in the past and my views have gotten out. Shareholders now see me as "out to get them". It's been a rough go. I can't pin point the leak. Plus, I had served on the board at the time this shareholder served for one year. In the year they got all their self serving policies. My views were clear in board meetings.

It's very hard serving on a board and having strong views and values. Many times confidentiality goes out the window and personal attacks take over.

One or two bad apples really do spoil the cart. Also, there is a difference between board disscussions being held in confidence, personal lives protected and board members acting in professional manner following PL, by laws and house rules as their guide. Not personal preferences.

Your board needs to put some time in and prepare some documents.
House rules should be distributed with a purchase/application package, with a sign off sheet for all signing/titled parties, to be returned with the application, acknowledging receipt and understanding of the rules. No sign off, no application review. An additional document needs to be prepared regarding moving in/out. We collect a $1000 deposit from a seller within 10 days of an approved sale application, and the same $1000 from the buyer at closing, to offset any potential damage to the building during moving. Refunded to both after move is completed. We also have a carpeting rule, move in/out refund occurs after apartment is inspected by a board member or super for compliance. Include info about the elevator staffing in the document, have both the moving party and the employee sign off with the starting time and completing time. Document can also be handed out with application package with a sign off, so everyone knows up-front. Post documents in a public bulletin board in the lobby or other common area, no excuse that 'I can't find it'. Video cameras with recording in the elevator, lobby, hallways, etc. are invaluable. Recordings can be checked to see when and who is going in or out or using the elevator. As the judge says, 'ignorance of the law is no excuse'.

My board oresident does the exct same thing at annual meetingd, Stating that he has never seen the rule against children playing on the terrace. He has lived here for over 30 years and raised two boys and knew about the rules, but since the shareholder was complaining about another board members kids, creating an atmosphere that would guarantee a lost of sale if a prospective buyer was in the apartment,
Basically he was just continuing the boards self dealing.
Now , along with my tape recorder and videocamera, i will have to bring the house rules on a posterboard. The shareholder who had complained informed me she is no longer attending annual meeting due to the verbal bulling that he had pweformed. It was quite a lot more than what i mentioned, and saud rule highlighted.

As far as fee's in house rules, i would check with attorneys, I was under the impression that all fees, such as flip taxes, have to be in the proprietary lease or by-laws. The fact that the co-op billed the shareholder for co-op property makes the whole thing look suspicious As a shareholder i would request to see all the moving bills the co-op had issued from day one.

The discourteous shareholders are trying to sell? Fantastic! All you have to do is refuse to give them letters that their maintenance is paid up until they pay the fees they are "disputing". They will threaten up and down, but at the end of the day if paying off the fees means they can close, they will pay. Maintenance Paid letters are required by just about every bank and purchasers attorney, so you have a very strong hand in this.

In a broader sense, the board needs to stand together on this, especially when it comes to your staff. If it is only a small minority who are causing trouble, they can bluster all they want but at the end of the day the board is in control. If you sense that a large minority or possibly a majority of shareholders are dissatisfied, they you need to find out what is behind the dissatisfaction and takes steps to get it cleared up. If you don't, a new board may be put in place after the next annual meeting.

Hello Frank, as President of my cooperative, we do not have a policy in place. When the security cameras were installed, we told our shareholders only management can view the security tapes if there is an incident. This protects the privacy of our shareholders who are just going about there day. The securitycamera footage is only used to view a thief or accident. We had objections and they appreicated the privacy.

We recently had security cameras installed which caught the super and his buddy verbally assaulting me. They were on their usual topic of how I belong in a mental institution. Since the MA witnissed the attack I turned to him and said "Now do you see that I mean?" His response was "You were not physically hurt, and no laws were broken because the constitution allowed for freedom of speech". I had reported this behavior in the past but the board and MA insisted that it was my "perception" and a "he said she said situation" and they needed to consider the supers side of the story. When I asked for a copy of the tape the board president told me I could not have it because I would use it to sue the co-op. He is 100% percent correct and if he had ever thought about giving me the same consideration he gave the super he would not hae this concern. The super and MA got the boot on March 31 and in the few weeks since the building nmhas undergone major changes. It is much cleaner and most of the junk that lined the asement hallway is gone. The best change is I can enter the basement without dreading another encounter. But I have hard feelings toward the board because of the shabby treatment
I received from them. I sent them a certified letter stating that I want the video preserved for my pending legal action. From what I have observed it is reasonable to assume they havealready destroyed it, which will not be a good reflection on them.

It sounds like the board took action based on your complaint and probably prior complaints about the super and MA. They did what was right so you really have no reason to take any further action. They should not release the security footage to you but they should also not destroy it.

it is important to know the time frame you are working with . Many e security systems have only a 3 day timeframe before it auto records over prior footage. Some use a motion detection system, and it is a longer time frame. Some are 5 days. They all are all automatically written over. unless the media is removed from the device. Also my experience with video tapes that i have shot for possible court use, is that the original tape has to be presented to the court, plus a chain of custody provided.. This is in the criminal court system, i am not sure of the civil requirements.. Find out exactly what they are before you need them, know the minimum time frame before it is recorded over. Make sure you subpoena the time frame and camera in question, and most important of all , realize many security cameras do not record AUDIO. In a case like that, it may be best to call the police and have them come and take the he said/she said , get a copy of the report from your precinct, so you have credible evidence, mention the camera to the police and they will ask the MA the overwrite time frame and may be to .take the recordings if a crime has been committed, ie an assault/battery,
otherwise you now know your time frame and can contact a lawyer or subpoena them yourself,

From a purely technical perspective, most surveillance systems in use today by co-ops and condos are DVR (Digital Video Recorders) and not VCR (Video Cassette Recorder). They record the video image(s) on one or more multi-gb hard disks. The only way to extract the image for external viewing is onto an optical disk (DVD) or USB drive. I'm not sure how "chain of custody" fits in here. With hard drives, depending on how many total gigabytes the DVR has, how many cameras are in use, the frame rate and image resolution for each camera, and if it is continuous record or event-driven, images can be stored for weeks or months before being over-written.

But in spite of all that, the very first thing MK should do if she/he is contemplating any legal action, is to contact an attorney. Going it alone is probably the worst think someone with MK's issues can do because they will invariably run afoul of the process for pre-trial discovery and either not get what they need, or disqualify themselves from receiving it in the first place.

From what you describe, you actually DO have a privacy policy: "We told our shareholders only management can view the security tapes if there is an incident. ... The securitycamera footage is only used to view a thief or accident."

I've been speaking with board and managers who say they don't have a policy -- but then when I ask who can see the footage and when, they rattle off conditions and safeguards. Policies ARE there -- de facto policies not written down. And de facto policies dangerous, being prone to misremembering, misinterpretation and on-the-fly changes since, not being written down, who can naysay your version of them? Boards leaving themselves open to claims of ambiguity, and of policy applied differently for different people, which can lead to lawsuits -- whereas a written policy you can show a court and show how you lived up to it.

Do you have a corrupt super or one with those tendencies? Then you have a real problem as videos can be misused.

Three issues here: First - I don't think you have the right to create two classes of shareholders by creating an artificial division between resident and non-resident shareholders. That would be the equivalent of creating two separate classes of stock, which I am sure wasn't done as part of your offering plan. Therefore, they are not two different classes of stock. If it is an issue it should be decided by voting at elections. Let people make their case for representation. Some of your best, most qualified, or willing shareholders might not be in residence. Second: the rewriting and creation of new Bylaws - all bylaws I have ever heard of require a 2/3 vote of all shares, and some even require a 2/3 vote count both on the shares and # of units participating, to achieve a change to the bylaws. I believe that the Board can only propose and write if they care to, though any shareholder in good standing can initiate the process, but not cause a change. A special meeting has to be called and held for the vote, for that specific pre-notified purpose, and the vote meeting needs to be held within 30 days of the meeting notice to all shareholders. The rationale by some Lawyers claiming the standard Corporation Board practice allows for the re-writing of Bylaws at will by the Board (and if the shareholders don't approve they can always vote it down later) is in direct conflict with the approved Bylaw revision process language by the Attorney General's office when approving the Offering plan. Why would there be a 2/3 Rule if it could be at Board will? I think it's specious reasoning, but I am not a Lawyer. There is a third issue that some Bylaws only actually require that the Board President has to be a shareholder and you can have non-shareholder members of the Board of Directors. Just to keep it interesting...

Attorney Stuart Saft rewrote portions of our by-laws to do some of what you're proposing, so he obviously believes that a residency requirement is legal. Here's how Stuart rewrote the relevant section of our by-laws: "Each Director of the Corporation shall be a shareholder or the spouse of a shareholder. Directors shall be residents of the apartment building owned by the Corporation."

You'll need to check your own by-laws for the amendment procedure. Ours are based on a commonly used template from the early 1980s that allows the board to amend the by-laws without a shareholder vote. Yours may be different.

Note that this is very different from attempting to rescind the *voting* rights of non-resident shareholders. That would be illegal under NY Business Corporation Law (BCL). But serving on the board is not the same. Among other things, there's no legal requirement that board members be shareholders, as countless sponsor appointees can tell you. Conversely, being a shareholder does not convey any legal right to run for (or serve on) the board.

I agree with Carl's assessment of having the requirement that the co-op must be the shareholder's primary residence does not go against any city or state laws or regulations. This requirement is the same as shareholders of any corporation requiring that individuals who sit on the board of the corporation own a certain level of equity (shares of stock, options, etc) in the corporation. This is done to "align" the interests of the board members with the rest of the shareholders.

In the case of a cooperative residence corporation, the equity being required is physical residence. Sponsors and investors may not have the same affinity for the co-op community and its needs as full-time residents. The full-time residency requirement encourages better alignment between the board members and the community at large.

The two classes of shareholders mentioned by dsi1 have to do with voting rights based on any share class differentiation. This differentiation is clearly not permitted.

Thanks to Steve, Carl, and DSI for your input.

May I ask about the second proposed amendment making a resident shareholder ineligible for the board if his/her unit is for sale?

Steve's point about physical residence being required to "align" the interests of the board member with the rest of the shareholders seems to be satisfied in this case as long as the building is still the shareholder's primary residence.

Or, would a legal point of view be that the expectation of becoming a non-shareholder at some point in the future throws the wanna-be board candidate out of "alignment" with the rest of the shareholders thereby justifying that shareholder's ineligibility for the board?

That reasoning, though, seems to be a bit of a slippery slope since 1) putting a unit up for sale does not imply any certainty that it will sell, and 2) many shareholders - including many that currently sit on many coop boards - can reasonably be believed to have an expectation of someday selling.

Finally, it just occurred to us here to ask what definition of resident is being used. Must the shareholder's apartment be his/her primary resident for the shareholder to be considered a resident? What about the case of a shareholder whose primary residence is somewhere else, but who resides in the coop apartment - and is the only person to ever reside in the apartment - when convenient for business?

Any thoughts?

Thanks in advance.

Steve's point about aligning the interests of board members with the best interests of the corporation (co-op or otherwise) is well stated. This may well be a motivating factor in the laws allowing restrictive criteria to be set for board membership. But Steve isn't saying that alignment of interests is a requirement. Just the contrary; pretty much every co-op's original by-laws were written to allow the sponsor to elect non-shareholder puppet members to the board. These people will vote Yes to anything the sponsor proposes, regardless of whether it's good for the co-op.

I'm not a lawyer, but it seems likely that the Business Judgment Rule would be the guiding factor here. Unless you choose criteria in bad faith or in a way that clearly doesn't further the purposes of the co-op, you would seem to be on firm ground. For example, if the guy in 47A insults your Abraham Lincoln costume at the building's Halloween party, and you then pass a requirement that no one in Apt. 47A may serve on the board, that's bad faith and is unlikely to survive a legal challenge.

You should consult your co-op's attorney before making any changes to your by-laws, especially if you have any doubts about whether the criteria you're choosing for board membership are legal.

On the second proposed amendment, what if the apartment is in Contract already and the shareholder just waiting for closing date?

An interesting conversation, from reading everyone's comments the presumption seems to be that if you are no longer resident, or not resident you can't possibly have interests as 'aligned' as a resident shareholder does. There is nothing to support that proposition qualitatively nor can that be objectively proven. Therefore residency becomes the overriding criteria for alignment and capability, and not one's actual capability, objectivity, and the interest to protect and ensure the viability of one's investment let alone give up a considerable amount of time to contribute to the common good of the enterprise, not withstanding. Secondly, the spouse of a shareholder, therefore not being a shareholder, is viewed by their residency to be inherently more aligned than a shareholder who is a true stakeholder in the corporate property. Third the assumption is that a non-resident shareholder is either s sponsor's puppet or an investor/owner and disallows for other scenarios including retirement, various life script scenario changes, and income generation from subleasing etc.
I think this all strays from the real need and purpose of the Board which is to manage and administer the property in a skilled, fair and intelligent, forward looking manner. We have to manage it's assets and it's staff and Management Company, along with the professional services it has contracted for such as a Manager, auditors, investments, Lawyers, and Certiorari Attorneys etc. Aside from knowing if the elevator is out today, or someone's pup had an accident in the hallway yesterday, you are looking for real interest, skills and balance - not easy to find in the workplace let alone your Coop, and, trying to find Board members who don't have an agenda is difficult enough.
The fact that Mr. Saft re-wrote a Bylaw the way he did says to me that he was doing work-for-hire according to the whims of his Board who obviously had an agenda and sought to exclude someone, or some group from being on, or gaining control of a Board in opposition to those who caused it to be written. He wrote it in a manner such that he hoped would make it through a court challenge if someone decided to fight it. You can't make assumptions about his opinion or beliefs, only his skill in carrying out his assignment. You do not know from this if he disagreed with the Board or not.
I think open election Q&A Board meetings, if it is a large building with many units then maybe a bio and 'why I am running' paper released 2 weeks before annual elections for those interested in running should have sufficient exposure to enable the shareholders to choose who they best felt represented their interests. If the problem is a sponsor who owns too many shares, then there are other, bigger issues to contend with.
Personally, I think a Coop should be inclusive and not exclusive when it comes to Boards. It takes a few years for a newbie, if they have the capabilities and interest to learn how, to be a good Board member, and learn to think from the POV of the Coop first, even if it is not what their personal choice might be - not so easy. The absolute rarest and hardest thing to find when looking for new Board members is a reasonably intelligent, mature adult, with common sense, the ability to hear what is really being said, a sense of fair play, and the awareness that you can't really hear with your mouth open. Done properly it is a truly humbling service proposition that you can be proud of, understanding that your authority is on loan from the shareholders and not something you should be wielding. The kind of shareholder issues that land on the table at times can be truly stunning. The ability to deal, have a bit of compassion and empathy, and to say no, because it is the right thing, or yes because it is the appropriate thing is often tough. I think you need to look at the intent of all of this exclusionary 'stuff', the implied assumptions, and to me, the fallacy of the underlying proposition. I think that some Boards/people make too many rules. You need to make only those rules necessary to manage situations, not start writing rules to control people. All shareholders should be equally entitled.
If it is an issue with absentee investor owners then stop selling to investor/owners or make the subletting clause allowable only after 3-5 years of residency. Having to eat 3-5 years of NYC maintenance charges before you can sublease should have a chilling affect on non-resident purchasers. Don't penalize your neighbors, it builds resentment and causes muttering cliques to form. keep it all as transparent as possible, a simple newsletter after every Board meeting should suffice - this is what we worked on, this is what's coming up to deal with, this is what we decided-because...etc.
This desire to exclude non-residents is also dealable if you have a rule about missing X# of Board meetings get's you removed. You can have a resident Board member who is out of town too much due to business, or retirement to the south etc. that they miss half the years meetings, what use is that to a hard working Board? So, a non-resident who can always be there, or a resident who can't, which one helps the building? Your first priority should be good people who are willing to work hard to make it a financially stable, good place to live, and are fair-minded.
I hardly see most of my neighbors, it's no different living there or not for that matter. If there are building issues the Manager or Super will call or send an email to alert you. As a Board member, 99% of what occurs in the building we are informed of, as opposed to experience because we live there. Decision-making on taxes, finance, DOB filings, Local Law 11 work, bills, a new laundry room, elevators, uniforms, raises, vetting contracts - what does any of this really have to do with living there, as opposed to the experience of living and the need to make sound decisions?
Sorry for the long speech!

Just one follow-up comment --

dsi1 wrote:
>The fact that Mr. Saft re-wrote a Bylaw the way he did says to me
>that he was doing work-for-hire according to the whims of his Board
>who obviously had an agenda and sought to exclude someone [...]

No, that's simply not true. Exactly the opposite is the case: Stuart Saft recommended that we have him review our by-laws and proprietary lease to get his advice on whether anything should be changed. He prepared a 22-page memo (!) that was chock full of suggestions, and then he edited our by-laws to conform to that memo. The restrictions on board membership were entirely his idea; we liked them and voted to adopt them, following his wording exactly.

Well,now we know what Mr. Saft did, but are lacking any real info as to why he would recommend the total disenfranchisement of a class of owners, who certainly lacked any awareness or imagined that this possibility was in the offing, when contemplating their purchase. As to the 'on the ground' make up of the shareholder mix, and therefore the real issues this Coop, or Rob's was/is facing, or what has motivated this movement amongst some of Rob's Board members, we are left only with the reportage of the attitudes and the proposed fix. As to Mr. Saft: We do not know why he has proposed such a rewrite of the by-laws of that Coop. Is there a particular circumstance in that building that precipitated such a rewrite of that rule? Or is it his personal prejudice? For general principles of balanced function and capability, along with an inclusive sense of enfranchisement I find such rulings, lacking any info to the contrary, to be deficient in this matter for the previously stated reasons. There is no empirical or logical, or even common sense evidence to support such a position lacking some particular overriding circumstance. There are, I am sure, all manner of localized examples, if a particular Coop has a compound issue situation of Sponsor patsies, or multiple investor owners where their Sponsor has sold blocks of apartments to investors, then in that kind of individual scenario radical, excisement of electoral protocols might be in order. However, lacking any before-the-fact info for this discussion, to extrapolate a normal mix scenario of shareholders, a small percentage of non-resident owners, some sponsor holdovers someone really has to show cause for revamping the elections to an exclusionary basis that doesn't smack of intentional disenfranchisement. Since there are a variety of possible solutions to cope with particular scenarios a blanket disenfranchisement of a class of owners who are just as entitled to representation as any other shareholder is questionable practice. Particularly troublesome is the implied presumption of malignant self-interest on the part of the non-resident Board member(s) but a magnanimous and expansive attribution of bon homie judgement attributed to the resident shareholders. So my one question is to Carl is was it the Board that voted to change the Bylaws, or a 2/3 majority of the shares that were voted to approve the change in the Bylaws?
From my experience after 24 years serving on Boards in various capacities I can assure you this is not the defacto case. It comes down to the agenda, intent and capacity of the individual Board member, which means you have to vote wisely. I suspect that those buildings that have sponsors who sold off blocks of units to investors, Sponsors who hold blocks of units, are sometimes against anything that will serve to raise the maintenance, or buildings that allowed sales to a large number of non-resident foreign investors who only come into town a few times a year and like to loan out their units, which should be against the rules. Lacking any info that lays claim to any of these scenarios, a normal Coop mix should not proceed in this direction. It smacks of a control issue and not a governance issue.
If you and your shareholders have tweaked your Bylaws to prevent as much as possible: pied a terres, hidden Investors, college kids, and loaners, have let your real estate agents know that you are really only interested in resident shareholders, you might stand a chance of minimizing some of these scenarios. Ultimately, when all is said and done, and you go through the purchase application, vet everything etc., and you are ready for the interview, what you are really doing, is shopping for good neighbors. Good luck!

Well,now we know what Mr. Saft did, but are lacking any real info as to why he would recommend the total disenfranchisement of a class of owners, who certainly lacked any awareness or imagined that this possibility was in the offing, when contemplating their purchase. As to the 'on the ground' make up of the shareholder mix, and therefore the real issues this Coop, or Rob's was/is facing, or what has motivated this movement amongst some of Rob's Board members, we are left only with the reportage of the attitudes and the proposed fix. As to Mr. Saft: We do not know why he has proposed such a rewrite of the by-laws of that Coop. Is there a particular circumstance in that building that precipitated such a rewrite of that rule? Or is it his personal prejudice? For general principles of balanced function and capability, along with an inclusive sense of enfranchisement I find such rulings, lacking any info to the contrary, to be deficient in this matter for the previously stated reasons. There is no empirical or logical, or even common sense evidence to support such a position lacking some particular overriding circumstance. There are, I am sure, all manner of localized examples, if a particular Coop has a compound issue situation of Sponsor patsies, or multiple investor owners where their Sponsor has sold blocks of apartments to investors, then in that kind of individual scenario radical, excisement of electoral protocols might be in order. However, lacking any before-the-fact info for this discussion, to extrapolate a normal mix scenario of shareholders, a small percentage of non-resident owners, some sponsor holdovers someone really has to show cause for revamping the elections to an exclusionary basis that doesn't smack of intentional disenfranchisement. Since there are a variety of possible solutions to cope with particular scenarios a blanket disenfranchisement of a class of owners who are just as entitled to representation as any other shareholder is questionable practice. Particularly troublesome is the implied presumption of malignant self-interest on the part of the non-resident Board member(s) but a magnanimous and expansive attribution of bon homie judgement attributed to the resident shareholders. So my one question is to Carl is was it the Board that voted to change the Bylaws, or a 2/3 majority of the shares that were voted to approve the change in the Bylaws?
From my experience after 24 years serving on Boards in various capacities I can assure you this is not the defacto case. It comes down to the agenda, intent and capacity of the individual Board member, which means you have to vote wisely. I suspect that those buildings that have sponsors who sold off blocks of units to investors, Sponsors who hold blocks of units, are sometimes against anything that will serve to raise the maintenance, or buildings that allowed sales to a large number of non-resident foreign investors who only come into town a few times a year and like to loan out their units, which should be against the rules. Lacking any info that lays claim to any of these scenarios, a normal Coop mix should not proceed in this direction. It smacks of a control issue and not a governance issue.
If you and your shareholders have tweaked your Bylaws to prevent as much as possible: pied a terres, hidden Investors, college kids, and loaners, have let your real estate agents know that you are really only interested in resident shareholders, you might stand a chance of minimizing some of these scenarios. Ultimately, when all is said and done, and you go through the purchase application, vet everything etc., and you are ready for the interview, what you are really doing, is shopping for good neighbors. Good luck!

Wow, that's a surprisingly aggressive response to an issue that's not particularly contentious, in my experience. As noted earlier, eligibility for board membership isn't even legally tied to being a shareholder - many boards have non-shareholders as directors. But I can think of at least three clear advantages to limiting the board to shareholders residing in the building:

(1) No puppet members can voted in by the sponsor to form an insurmountable voting block. This is a problem that has plagued co-ops ever since their inception.

(2) I don't believe that any of our non-resident shareholders (two investors and a trustee among them) have ever attended an annual meeting. What are the chances of getting any of them to show up regularly for *monthly* board meetings?

(3) A great many issues that boards deal with are specific to the building at hand and are not just general management problems. Why would you want someone who last set foot in your building in 1997 to be making decisions about the decor of your lobby, the paint in your hallways, the operation of your laundry room, or shareholder-specific issues concerning people who are just random strangers to them?

As it happens, we haven't had a non-resident (shareholder or otherwise) who wanted to run for the board since the 1980s. We adopted the changes that Stuart Saft suggested because we thought they were a good idea, not because they addressed any specific problem we were having. The changes were approved unanimously by the board and distributed to all shareholders, including a redline version that highlighted all the changes. We never received even the slightest complaint about any of the changes.

As a side note, we didn't adopt everything that Stuart suggested. For example, he proposed that we require written notice in advance of the annual meeting from anyone who wanted to run for the board. That's fine for limiting chaos at the annual meeting of a large co-op, but we're a fairly small building (33 units) and we wanted to continuing allowing nominations from the floor. So that's what we did.

Many coops no longer have sponsor units.
Some Boards need to deal with more than paint color.
There is a dearth of applicants for this underappreciated position.
Better to look hard for highly qualified rather than reasons for excluding it.
Those that can offer the most don't necessarily volunteer.

Ano, aside from your comment that "Some Boards need to deal with more than paint color" (which is obviously true of every board on earth), there's a simple answer to the points you raise. If you're having trouble getting people to run for the board, and non-shareholders or non-residents are clamoring to serve, then modify your by-laws (if necessary) to allow them to run. Or allow non-residents but require that they be shareholders, if you like that better. In that case, you'll need to delete the standard sponsor-inserted line that appears in most co-op's original by-laws: "It shall not be necessary for a director of this Corporation to be a shareholder."

Thank you Ano, Carl I certainly didn't mean to offend you. I am sorry of my response seemed aggressive, I think it tries to separate and elucidate the governing issues, and to distinguish between the possible scenarios that can precipitate such actions, along with alternative solutions to what, seems to me the blatant disenfranchisement of a class of owners. The situation is self resolving in that the few shareholders you are excluding obviously have no interest, their lack of attendance reveals their lack of interest to participate; yet you hold up their lack of attendance as a rationale for exclusion.

So, in response to your 3 reasons:
1). I believe there are relatively few mature Coops that still have Sponsor puppet issues such, that impact and control the majority voting process, this can be resolved thru legal channels. If the Sponsor holds a majority of shares in a mature Coop then that is a huge problem for many reasons beyond governance, and it is then obvious that the resident tenant committee at the time of conversion did not succeed in, or failed to raise and negotiate a change in the black book Bylaws regarding a distinctly phased transfer of Board authority over a specified period of time. It has been a problem for some Coops, but not most Coops. This really shouldn't be part of this discussion;
2).So... that's 3 shareholders out of 33? If someone hasn't set foot in the building since 1997, I doubt they would run, or be elected to the Board. Their obvious lack of interest obviates the supposition of interest and involvement. If you have a rule that you cannot miss more that 3 meetings in a year, or two consecutively it should clear up that scenario. What if they live around the corner? They could be in and out of the building daily?
3). All of the issues you state go to the heart of the market viability of their investment, which they have a right to assure themselves of. Decor of the lobby has to do with taste but has a big impact on sales as well. I know of a Board that spent $200K, self-approved, on hideous carpeting and granite lobby tile, all wrong, with no master plan devisement by a qualified designer etc. So everyone is stuck with their awful taste. They never put up display Boards for shareholders to see choices let alone voice an opinion. If the non-resident is a very interested shareholder and happens to be a good prospect, how do you fail to benefit?
Not everyone who runs for a Board, should be on a Board. There are those who should be on a Board and need coaxing to agree. If you read Habitat long enough, you will see a steady stream of horror stories and corruption, incompetence or both, small and large. Should suffice to keep one alert and humble at the same time. I wouldn't exclude anyone based on their residency. I would hope you are able to form a Board out of the most skilled, reasonable and qualified shareholders, which includes being available and present as needed, in order to perform the job appropriately.

dsi1, thanks for your thoughtful response, which is well-argued. You're right that the issue is simply not an immediate problem for us, since our non-resident shareholders have never expressed the slightest interest in running for the board. On the other hand, we try to be an exceptionally responsive board in a small building, and we've found that personal contact with day-to-day life in the building is a big plus in guiding our decision making.

I think your argument works better for condos than for co-ops. With condos, you have many more sublets, with owners who are basically landlords in many cases. Such owners have a general interest in enhancing the value of their properties to ensure that they can continue to rent out their units profitably. But non-resident shareholders in co-ops are typically investors (or the sponsor) who own rent-regulated apartments and want to pay as little as possible while waiting to take possession of the apartment. There may also be non-resident shareholders who are subletting for a year or two and wouldn't be around to serve on the board, anyway.

Certainly there are complete idiots and jerks on boards who shouldn't be there. The number of bad and illegal board decisions that you hear about is frightening. Conversely, some people who would be good board members need some coaxing to join. (I was in that category myself, a number of years ago.) If we had a shortage of "skilled, reasonable and qualified" people in our building, then we might be willing to broaden the candidate pool to include non-residents and even non-shareholders, as our by-laws used to allow. But the "hands-on" approach has worked well for us and we would greatly prefer an in-house board that has to live with the consequences of its decisions every day.

Carl, your solution may be fine for your "small" coop now with its current residents and Board. It would be wrong to generalize from that to other CIRAs or your coop at another time.

Boards (and similarly "Management") have a way of stagnating, either passively or actively, much as do other "governing" bodies. If things seem fine, others may not challenge incumbents, while things may be changing for the worse and going unnoticed. A Board that wants to stay in place ( a common election promise, "I have time now") has the power of the proxy, access to tools of information in the building, and its own "organization" on its side. Opposition may be at a considerable disadvantage.

Many CIRAs like many other organizations run fine. But when problems arise simply allowing for non-residents in the Bylaws may not be enough. It is short-sighted to assume that only those who both own shares and sleep in the building daily are qualified. Indeed, public corporations gain value from outside directors and one might presume that if eyes were opened, coops and other CIRAs would recognize the potential cost of tight restrictions on Board membership (possibly potentially even greater in a coop with a small number of units).

Hi Steve and Carl,

The discussion that ensued from my original post has been interesting and informative, however, I think some of the specifics of the OP may have gotten lost in the shuffle. (Not a complaint, though, as it has been a helpful exchange for me and, I'm sure, many others.)

If you look again at Carl's first reply, please note that although Steve paraphrases Carl as referring to "the shareholder's primary residence," Carl actually writes, "Here's how Stuart rewrote the relevant section of our by-laws: `Each Director of the Corporation shall be a shareholder or the spouse of a shareholder. Directors shall be residents of the apartment building owned by the Corporation.' " What I'm trying to point out is that the by-laws specifically refer to "residents" not shareholders who occupy their unit as their primary residence.

To Carl: How do you, as a board member intepret the by-law drafted by your attorney and, presumably approved by you as a board member? Does residence mean primary residence? Or, does residing in the unit - and being the only person to reside in the unit - when it is necessary for business - satisfy your board as to qualifying the shareholder as a resident?

To Steve: While DSI makes a compelling case for why prohibiting shareholders from running for the board based on residency is probably not the wisest policy for coops where the sponsor no longer has a presence, we are still hoping for an insight into the legality of doing so in the case of a shareholder who uses the unit as a pied a terre. Or, perhaps from a legal standpoint there is no distinction to be made between between "residence" and "primary residence"?

Again, thanks very much for your time and your thoughts.