FINANCING AN OUSTER

Ousting an entrenched co-op or condo board is rarely an easy or pretty process. And like so many other things in New York real estate, it almost always costs money.

"The first thing you have to do," says attorney Theresa Racht, "is organize and contact like-minded shareholders. The main thing you're going to need is a lawyer and possibly an engineer. The board is going to fight you, so you need a lawyer to make sure that whatever methods you're using to get sympathetic people on the board are in keeping with the bylaws. You should create a treasure chest, collect money and establish a bank account so you can pay professionals and any other costs, like printing costs for a newsletter."

After organizing, members of the opposition must take on assorted tasks, such as reading the bylaws, the offering plan and proprietary lease, and poring over financial statements and minutes of past board meetings, available to all shareholders. The sponsor's voting rights should be examined as well.

The goal is to document a record of serious failures and bad decisions by the board. It is not to report sins of bad taste in a renovation, such as a hideous lobby. The evidence should then be presented to all shareholders, either at the regularly scheduled annual meeting or at a special session demanded by at least 25 percent of all shareholders. (The minimum requirement is just 10 percent if no meeting has been held in more than a year.)

"Your ultimate goal is to elect enough of your people to control the board," Racht says. "But you have to have realistic expectations. Your first effort might fail, but don't give up. I know of one board that needed four elections before they broke through. And getting even one seat can be an important start because it gives your faction access to all the corporation's records. That'll tell you where the bodies are buried."

After the revolution, the new board needs to set priorities and, in most cases, should commission a forensic accounting to make sure that all financial records are in order. Do not assume that your professionals were in bed with the former board, Racht advises. She adds that you should expect a maintenance increase the first year. And she warns, "Don't make promises you can't keep. And don't make the same mistakes the entrenched board made."

— Bill Morris