HABITAT
East Midtown Plaza Window Replacement
The six-building East Midtown Plaza co-op has been afloat in Manhattan's Kips Bay neighborhood, along Second Avenue between 23rd and 25th Streets, since 1968. It's one of the venerable Mitchell-Lama co-ops, one of the 269 affordable-housing co-op and rental buildings built under the 1955 Limited-Profit Housing Companies Act, nicknamed after its sponsors, New York State Senator MacNeil Mitchell and Assemblyman Alfred Lama. There are a lot fewer now, since many of them have since gone private.
In 2004 and again in 2006, New York City Housing Development Corporation (HDC) inspected East Midtown Plaza and determined that the windows in the buildings were "beyond the end of their useful lives" and "strongly" recommended "total replacement." Jerry Fox, president of the co-op board, told the court in the recently decided Cannings v East Midtown Plaza Hous. Co., Inc. that the cooperative "set about engaging a vendor to perform the work and obtaining the appropriate financing." Since HPD holds the underlying mortgage for co-op and oversees the process, together withU.S. Department of Housing and Urban Development (HUD), the co-op got HPD's approval to use the vendor Skyline Windows to do the complex-wide window replacement.
To pay for this capital improvement, the board held a special meeting on July 21, 2010, in which a majority of shareholders — 308 to 154 — approved a $5 million loan from Amalgamated Bank, which would be repaid via a five-year assessment of $30.75 per share. HPD approved the loan and assessment, and in an Dec. 21, 2010 letter, HUD as well signed off on that as well.
Canning Row
Before the vote had even been taken, however, shareholder James Canning, of apartment 22C in the complex's 400 Second Avenue building, filed suit to stop the window replacement until the co-op and the courts first cleared a few things up. In his April 26, 2010, lawsuit, he claimed that the board of East Midtown Plaza "violated statutes, by-laws and [the] Certificate of Incorporation," and demanded that the board explore all "possible means of financing." He also wanted the court to remove the board — and additionally, sought to overturn an eviction order stemming from his refusal to provide access to his apartment to inspect and measure the windows. (That last was settled in August 2010 with his allowing the board in and allowing the eventual replacement of his windows.)
Canning specifically objected to the board's decision to finance the window replacement project with a loan and an assessment, and believed the windows could have been "replaced for free," by securing a $6 million grant from HDC. This, he claimed, put the board "in default" of the Certificate of Incorporation, the by-laws, the New York State Business Corporation Law and the Rules of the City of New York (RCNY), and was "forcing" him to comply with its "unauthorized program." He said that the law 28 RCNY § 3-1(d)(4) required the board to provide the "most economical operation of the development."
Complicating matters was a far more contentious issue than how to pay for new windows. Since the mid-2000s, the East Midtown Plaza board has been pursuing privatization. Mitchell-Lama co-ops were designed so that, for example, shareholder Jeanne Poindexter bought a balconied, two-bedroom apartment there in 1974 for just $4,300. The catch is, should she leave — and many New Yorkers don't, making their Mitchell-Lama apartments their lifelong homes — she could only sell it for the same relative price. In her case, her equity in 2011 was roughly $18,000. The whole idea is to keep the city affordable to working-class, middle-class people, and prospective buyers have to meet specific economic requirements.
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