Hi there's no free lunch:

Since the coop's attorney freely engaged in communicating with a shareholder without disclosing any potential fee associated then the shareholder is not responsible. Too, there are no provisions in the governing documents and at the last shareholders meeting an amendment was shot down to cover such activity. The coop's attorney was responsible in declaring that he does not represent shareholders and needs to get board approval to engage in corresponding with a shareholder. None of this was done so it is a matter strictly between the attorney and the board to work out compensation.

Read: Recovering legal fees, by Bruce Cholst, Esq. The Cooperator. "Another limitation set forth in the typical proprietary lease clause regarding collection of attorney's fees is that it does not allow the recovery of any attorney fees prior to the commencement of a formal action or proceeding. Thus any pre-action analysis, correspondence, etc would not be recoverable."

So you see the shareholder has no liability for legal fees especially when the attorney made it clear to the NYSBA that he billed the coop and not the shareholder.

Any additional thoughts on this?

GU

Hi, GU,

I stand by my previous response.

The exception to Bruce Cholst's point is this. There is no "action" taking place in the original commenter's note. Instead, the shareholder was, evidently, trying to get an alternate point across.

After all, if no individual shareholder is responsible for the fees associated with getting legal advice, then what's to stop all shareholders from doing so?

And remember that the individual shareholder, even if she isn't charged for the entire fee, will in fact end up paying for the legal fee: her maintenance check will go toward paying the bill, as will every other shareholder's maintenance.

The question is really this: does every shareholder chip in to pay for one person's legal bill, or does the individual? If I lived in the building, and if I hadn't agreed to let my neighbor ring up legal bills, I certainly wouldn't want to have to pay for them. Would you, GU?

Hi:
What's to stop shareholders from contacting the coop's attorney? Plain and simple: the attorney! From the start the attorney should disclose any cost associated with engaging in communication or simply not respond. Period.

In this instance, the Board might also fault the attorney for not contacting the Board immediately for instructions. He/she is responsible to the Board, and is hired/contracted with by the Board, not its individual Shareholders.

I'd advise the Board president/managing agent to try to work out a compromise with the attorney.

Of course -- the attorney should disclose fees, but maybe the attorney a) assumes that people who are sophisticated enough to buy real estate/invest in a co-op in NYC are also sophisticated enough to know that there's no such thing as a free lunch, and b) is motivated not to explain the free-lunch cliche because he has mortgage payments just like you and me. I mean, if there's a shareholder in this day & age who believes attorneys work for free, well, maybe this is the tough-love way to learn.

It's like I said before. If my co-op has a go-to electrician, and I call that electrician to re-wire my apartment, who should pay the bill? And if the electrician just assumes I know that I have to pay it and so doesn't explain it in advance, does that mean my neighbors should pay the bill instead?

I would say no, and I think my neighbors would too.

How ridiculous making assumptions on behalf of an attorney, totally speculative! And, if anyone employs an electrician an estimate on potential work is done.

Hi, George,

Allow me to point out that not all electricians in New York have the scruples you suggest, although I certainly wish each did. As I mentioned, the case of the electrician was meant as a figurative comparison. Estimate or not, would you want to pay your neighbor's electrical bill?

I don't want to get into a shouting match with you, George, so let me conclude this discussion by referring to my original reply to your question.

The fundamental obligation of any board is its fiduciary responsibility to its shareholders. Any board that charges the expenses that one shareholder racks up to all of its shareholders is treating all the others unfairly.

In the state of New York corporations are required by law to treat all shareholders equally. If your board allows one shareholder to charge her bill to her neighbors, the board must charge all individuals' expenses to all shareholders. If the board allows exceptions, it risks violating the law.

The attorney charged the coop, period!