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I purchased a 1 bedroom in a coop 6 years ago.My lawyer did not inform me of the fact that the original owner took off with the money in the 80's and the coop went chapter 11. We have approx 350 apartments in 4 buildings of which there are ONLY 80 owner occupied apartments,the rest are owned mainly by the sponsor and others for investment. There are 2 MEMBERS on the board from the MANAGEMENT company,they have promised to sell up to at least 10 apartments a year,of which doesn't happen. When someone moves out they rent. Case in point an older women renter passed away a couple of years ago who lived above me,there have already rented the apt. twice and not sold. We have one of the most expensive real-estate lawyers in Manhattan and without a good reserve fund.
Whenever I have gone to board meetings and suggest ways of getting money into the coop i.e. a flip tax,or charging investors to pay a monthly fee for renting he always shoots me down saying we will never get everyone to vote. I Also have a board who makes decisions,never sending out any information to the owners of what their intentions are. I came home last weekend only to find a letter from the management company that we are being accessed for 1year to convert our heating system from oil to gas,which will cost $345,000 with no explanation of how they came to that price,but that I now have to pay approx.
$100 a month for the next year in addition to my maintenance.
I tried as well to refinance last year and was turned down not because of my 823 credit score,but because we don't have enough owner occupied apartments.
I am new to all of this and want to know if this is unusual or a normal occurrence in coops. Is the lawyer and management on the board working for me or each other ,why do we retain such an expensive lawyer,why do they not put anything on the market? Any answers would be helpful.
You have a lot of issues here. The chapter 11 info should have been in the building financial statements, board minutes and the annual amendments to the offering plan/prospectus. Ditto for the % of ownership and the investor information.
The board is supposed to be elected by the shareholders at an annual meeting. Is there an annual meeting held each year?
The lack of sales is a frequent issue, we have 64% ownership in my building. The prospectus generally suggests that all units will be sold, but there is usually no timeframe and the NYS attorney general and our corrupt state legislature have continually failed to take any action to apply a reasonable time limit to full coop conversion to individual ownership. Landlords have clout and use their influence. Enough said.
The boiler conversion issue may be the result of a new law regarding pollution. #6 and #4 oils are polluters, and buildings still using them need to switch to gas or #2 oil. Whether the conversion price is good or not, I can't say. Hopefully, the board did due diligence and got a few competing bids, or else the board is not doing their job. Sponsor and investors also have to pay assessments.
Small banks will not do refi's or mortgages since the FannieMae fiasco 5 or 6 years ago. FannieMae will not purchase mortgages where ownership is under 75%. Some of the larger banks are doing mortgages, Chase, Wells Fargo, to name a few.
Rentals benefit the investors/sponsor since the rents generally exceed the maintenance by a good margin. Since the investors/sponsor don't live in the buildings, they don't care who your neighbors are, they are making money on their investment.
Owners have access to the board meeting minutes by law. Request them in writing via certified mail from the management company. If they won't provide you with printed copies, ask if you can read them in their office.
If you are not receiving annual financial statements or annual amendments to the prospectus, if there is no annual meeting, if they won't provide you access to the minutes, report the coop board to the NYS Attorney General.
Get your fellow owners interested in the goings on. The more people looking over the board's shoulders, the more chance of some change.
Run for the board.
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This is somewhat extreme, but I have heard of similar situations. How many people on your board? When are their terms up? Obviously they are not hearing your suggestions. The only way change will happen is if you and others unseat them. Of the 80 shareholder-occupied apartments I bet you can find a few people to run with you as a slate. If you campaign aggressively (and depending on the # of sponsor board seats) you may then gain a majority on the board. It will be be tricky given the # of 'investor' apartments; you will need to obtain contact information for these absentee shareholders and campaign aggressively for their votes as well.
If you win, even harder work awaits you. Depending on your proprietary lease you can impose strict sublet rules, possibly giving those shareholders who sublet a time frame to end their leases (just don't put this in the campaign literature going out to investor shareholders!). There are several articles in the Habitat archive which can provide guidance, just use the search term 'sublet.'
As a board you can also hire a new management company and a better and less expensive attorney (who can also help with the sponsor issues).
Good luck!
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