What We Can Learn from a Bronx Co-op's Nightmarish Scenario
190-unit co-op on Wallace Avenue in The Bronx
Oct. 23, 2015 — Last week, we learned a little more about the Wallace Avenue co-op that faced the threat of being downgraded to a rental, after missing some pretty crucial red flags. Besides those red flags, a couple of professionals offered their insights on what other boards can learn from this nightmarish scenario.
"Don't take anything on faith," says Abbey Goldstein, a partner in the law firm of Goldstein & Greenlaw. "A lot of it depends on the language in the bylaws and the offering plan, what it says about the rights of the sponsor. Some plans don't limit the number of seats the sponsor can cast his votes for. If the sponsor holds half of the units in the building and is the managing agent in the building, you need to have heightened vigilance."
The co-op shareholders might also have turned to the attorney general's office for relief, says Arthur Weinstein, an attorney not connected with the case who is a vice president at the Council of New York Cooperatives & Condominiums. "If the sponsor controlled the board for more than five years, the AG [may have been] able to help. The sponsor may be ignoring his obligations under the plan to relinquish control. It depends on how the original offering plan was written, what the time periods are, and precisely how many shares the sponsor owns.
"All of these things are covered in the offering plan," continues Weinstein. "Unfortunately the sponsor-controlled board is not willing to act, and what will have to be done is that some members of the board, or even a group of tenant-shareholders, can either hire an attorney to help them, or could go to the attorney general's office and say, 'Here's our situation, will you help?' But seeing the sponsor's obligations under the plan would be helpful."
Weinstein adds that is possible to win a case like this without going to court. In a recent dispute that is similar to the one at Wallace Avenue, Weinstein reviewed the original offering plan documents, and then "wrote a couple of nasty letters to the original sponsor's attorney. When they ignored me, I then wrote to the attorney general's office saying. 'Here are my letters to the sponsor, here are my complaints, and I've had no response.' Eventually, the attorney general's office contacted the sponsor's attorney and in effect put pressure on the sponsor to come forward and honor his obligations. We subsequently worked out a settlement. And this was all short of legal action, which gets expensive. So there are things the individual can do."
Photo by Jennifer Wu