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A friend asked me this and I don't know the answer. His coop started a 2-year assessment in June. All SHs paid through October. The board just sent all SHs a memo saying they're suspending the assessment for 6 months, or maybe longer. In January, maintenance goes up and the NYC R.E. abatement/assessment starts again. The board thinks, with the current economic situation, some SHs may lose their jobs or otherwise not be able to pay all the charges in the relative near term.
A group of SHs want the money they've paid on the assessment so far returned to them now. My friend is one of them. He says they don't know if the assessment will be resumed in 6 months, they don't want the money they've paid for it used for other things, and they'd rather have the money back in their pockets for now when they may well need it.
Should the coop return the assessment money to the SHs? Are they legally obligated in any way to return it? Appreciate any replies.
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Folks,
As always it depends on the corporation’s by-laws. Yes, most allow the collection of assessments for capital improvements and for capital reserves. Some by-laws mandate that a capital reserve fund be maintained. It is also good fiduciary practice to have a capital reserve fund as well as a regular reserve fund. Does the co-op have any “reserve” funds or does the corporation live hand to mouth?
Our 500 unit co-op typically has a capital reserve fund hovering near $1,000,000 (which fluctuates dramatically during the year as we have an AICPA mandated twenty-year capital asset evaluation program and plan of funding capital improvements each and every year, e.g.; elevators, generator, windows, roof, driveways, boilers, parking garage decks, recreation deck, swimming pool, tennis courts, fire detection system, computers, roof fans, etc.) and a working capital reserve fund near $500,000.
Yes, we assess each and every year, and even the assessment does not fluctuate. It increases slightly each year. It is collected during ten of twelve months each year to meet IRS regulations regarding separation of ordinary income and capital assessment income.
So my vote is that corporation gets to hold the funds if the by-laws mandate the collection and maintenance of the reserve fund.
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