I can't imagine a law that prohibits a shareholder from selling his shares just because the other shareholders elected him to the board. Big business would cease to function if that were the case -- corporations are governed by the same rules, whether the corporation is Citibank or your co-op.

It sounds like your coop's problem, in part, is in failing to ask candidates if they plan to sell during their term -- not that people wouldn't lie, and not that plans don't change -- and in part failing to find candidates to run against those you oppose.

At the next annual neeting, make a big deal out of board members' pet projects (but remember that what looks like a pet project to you may be an overdue improvement to others). Say that you want board members to resign when they sell.

These are ethical issues, not legal ones.

Better yet, run for the board yourself and show them what you mean by setting standards.

I believe the only legal requirement is that a board member be 18. And prohibiting a board member from selling during his/her term could be considered restraint of trade.

Check with your attorney.

In the meantime, try to recruit board candidates who have no personal agenda; make sure that all new board members understand the concept of fiduciary responsibility; create an ethics standard for board members; if all else fails, RUN FOR THE BOARD.

We have no provisions in our lease or by-laws requiring resignation if a sitting board member puts his or her apartment up for sale; however, I agree that such an action could easily result in a conflict of interest.

At the very least, a sitting board member that is selling must recuse themselves from any vote related to a purchase application or from any change in policy that could help or hinder their sale. Whether it can be required legally, I don't know - check with your attorney - ethically, a selling board member should step down.

Thanks for the response. From speaking to different folks it's apparent that having a by-law created stating that if any board member lists his/her apt. he/she must resign from the BOD is not out of line, and is actually a good idea. We're pursuing it.

In our ByLaws, only an owner can be on the Board. The moment a Board member sells -- he/she resignes. But as long as they are owners, they can be on the Board.

This is a very good ByLaw in that, years ago, we had problems with B/M's putting people on the Board who were not even owners. They actually put the President of our MangCompany on the Board.

AliceT

Hi
I hope that in Big business there is a little more ethical behavior than we amateurs who live in my particular building. Our BOD president actually failed to act on the recent quorum vote to raise maintenance until she was forced to direct it so. Why? Because she is 70 years old and the increase priced her out of our building. She's one of the people now selling, in fact. Living in this area is expensive, we all know, but we have a fiduciary duty to create an operating budget that can pay our bills. Some people just can't afford to live here and it's a very tough situation, especially for the elderly.

That's a good idea to ask them if they plan on selling but in the end, where will it get us if it's not enforceable?
The pet projects will already be done by the annual meeting...and damage done.
Agreed, it's ethical but another reader just wrote that they have changed their by-laws...of course, that doesn't mean pet projects don't happen and THEN they sell....but at least they won't be on the admittance committee when the magic moment arrives.
BTW I served for about 5 years. I think it's very important for people to serve. :-)

By the way, I think you may have misunderstood. "I can't imagine a law that prohibits a shareholder from selling his shares just because the other shareholders elected him to the board. " I'm not saying that if someone is on the BOD they should be prevented from selling shares, I'm saying that when they list their apt. they should be made to resign from the BOD.

There was no provision in our prospectus regarding this subject so the Board voted to put this in the by-laws....If a Board member LISTS their unit for sale, they must resign from the Board. Now there is no personal agenda and they can't interview buyers. Just in case you are wondering...if they take the unit off the market, NO - they cannot come back to the board automatically. They must submit to the Board all over again.

Hi past pres,
That's very helpful to know. I have seen that it could lead to conflict of interest when someone calling the shots wants to sell thier apt.
I'm going to rally the troups and see if shareholders will get on board for the amendment. It will have to come from the shareholders- the BOD will never go for it at this time- 3 or the 7 have their apts. on the market.
THANK YOU! Off I go to start some trouble. ;-)

Try sending a letter to the shareholder at the building and see if they put a change of address card in with the post office. Sometimes they forget they did this and this shows that they are not living in the apartment.

they are an officer of the board and they do receive mail

Anonymous - Maybe I misunderstood. You said a Sh is passing off sublets as roommates and you can't prove he isn't living in his apt - but he gets mail AND is a board officer. Is that right? It seems odd that you don't know if a board member lives in his apt or not. Before I comment, please clarify. Thanks.

we learned about this early in year because subleaser created problem in the building and when BM was asked they denied it they stated it was someone that was living with them. reason we asked was because the buildings finance are poor and we have had problems with subleasing and we are a low income building. this is not only for us but for the BM future as well.

What I usually do is hire a PI.
He sets up cameras if he needs, monitoring, or gets the info from his own sources but 99% of the time it pays for itself.
I have a very similar situation right now in one of my buildings.

Best
~AR

thank you sounds good

We provide our clients with an accrual based report. We also have a cash top-sheet so that they can see their cash positions on the date of the report, but not too many companies are also doing the accrual based reports.

We normally give out the prior month's financial report on the 20th of the following month as we do need time to assemble the bank statements and cancelled checks, etc.

Anyone at all?

You've described what should call for a straight forward procedure involving an architect and expediter. No cookie cutter answer on what costs/fees you'll have, but you'll have them; architect, expediter and NYC DOB. Try Building Brothers Inc. an expediting firm and speak to Sam Pruyn (347) 448-8070. Sam can walk you through what's involved. www.BuildingBrothers.com

Kindest Regards,

Thomas

FL: We have a SH who combined 2 apts in 1990 as you did. About 5 years ago she considered selling. I asked our coop attorney what was involved. He said a new C of O wasn't needed any more but the fees and other costs to certify combining her apts wouldn't be cheap and there would be big tax issues. She never did sell so this didn't come up again.

There is a Directive 14. It replaces the need to revise a C of O. It was established years ago when a lot of construction was taking place and there weren't enough city inspectors to deal with it. That's all I know about it.

You didn't say you want to sell your apts, but if you do, make sure you get an engineer or architect who knows what he's doing and how to file with the Dept of Buildings, and talk to a good attorney about tax and other financial issues.

Sorry I don't have more info or can't be of more help on this. Just thought I'd mention the little I do know about it.

I knew the generous souls on Board Talk would have information! THANKS!

Why is he working an extra day, are you short on staff? What is he doing, painting, cleaning, etc.

You don't give them a reason why the Board denied their application, so why reconsider with conditions?.

Correct. However, when advised of their denial, instead of moving on, they respond with what if we did thid or that-rather that accept the decision and look for another unit. I don't understand why when the building is solid-yet there are better buildings out there.

We have had several such cases that I can recall. If they ask for reconsideration, without disclosing the reason for the rejection in the first place, we give them a few days to provide any further information they wish us to consider. If that further information is satisfactory to the board then we have reconsidered, otherwise we replied with a second denial letter, again making no comments and giving no reason.

Board Prez - As a board prez myself, I know that reasons for rejection aren't disclosed, but I think it's a waste of everyone's time to tell a buyer who wants to be reconsidered to submit any further info he wants. What if rejection was based on finances and he just submits more personal references? Or what if it was based on 4 factors and more info only satisfies 1 or 2 of them?

Unless you simply say, for example, you want 6 mos maintenance in escrow you can't tell a buyer you want better numbers. His finances are what they are. If you reject him again, he'd know it was because of finances. The same would be true if you asked for more info regarding any specific aspect of a buyer's application package.

Just asking for "any" further info is also confusing to the buyer. He doesn't know why you rejected him, so he doesn't know what you want or what to give you. Rejection is sometimes not very clear cut anyway and more info won't necessarily change that.

If a board has questions or key info isn't in an application package, a buyer should be informed of that before a decision about him is made. Otherwise, IMO, a package should stand on its own as submitted.

The original applicant was rejected for undisclosed reasons. However, the buyer REALLY wants the apt dispite our rejection. We did not ask for or require additional info, etc do to the d/i levels-realizing that there was nothing else that the applicant could offer to satisfy the requirements. The question is do we not acknowledge the reconsider request no matter what they offer or give in to the request which may occur everytime a rejection is made. There are many coop units out there, why don't they move on and find another?

Sometimes a buyer loves a specific apt, it's in the area he wants, it's close to family or work, etc. Some buyers have a hard time with rejection when they want an apt badly enough. Some people also have a problem with rejection, period. Or some may not be able to see their situation the way a board does.

We've had buyers and brokers call repeatedly (a couple times to the point of harassment) wanting to know reasons for rejection. It can be difficult especially if the seller wants to sell quickly or he's friendly with any board members. We just say we are not at liberty to discuss it and make it clear that it was a full-board decision. In fact, we stress to all owners that our board always acts as a team and no decisions are made by a board member independently of the others. This usually convinces a buyer to move on, at least it has for us, if they see they're up against the full board, not just trying to change the mind of 1 or 2 board members.

The only time we may think twice about a buyer is if he's acceptable in all other ways but his finances are borderline. In that case, we may ask for 6 months or 1 year maintenance in escrow. Btw, our policies also don't permit a buyer with a guarantor or parents or other relatives to buy an apt for an "adult child". To help avoid future problems for our coop, we expect all buyer packages and buyers to stand on their own.

Hear, hear! Board Prez makes eminent common sense.

If the applications are being processed correctly, a rejection for financial reasons will come before the board or admissions committee ever meets the applicant. Therefore even though the words are left unsaid, the reasons for rejection will usually be obvious.

By giving a borderline application an opportunity to "provide additional information", you are not disclosing the reason but you are giving them an opportunity to offer escrow funds or submit additional financial information that for any reason may have been missing from the original application.

I agree that applications should stand on their own and in most cases, rejected applicants will move on. However offering to accept any additional information softens the blow and makes it clear that unless they have something substantial to provide, such as a significant change in their financial circumstances, there is no point in pursuing the application.

What kind of conditions are they suggesting?

Are they offering to place 1-2 years of maintenance in escrow, for example?

If so, seems as though they're anxious to become residents of your building. I believe some co-ops set conditions such as that if an application looks good but there's concern over affordability.

I would say the decision is final. The worst thing that any co-op can do is accept individuals who may not be in position to pay a maintenance increase or an assessment if they were to take place. You do not want to have neighbors who are in chronic delinquency. You do not wish to take shareholders to legal all the time or have them "cry" they cannot afford anymore bare necessities or that they need to make decisions on essential services to survive and live in the co-op.

My take is always the same: If the picture does not look good or borderline promising to request an escrow, then WHY BOTHER?

I always feel that the Admission Committee may be making them a favor by rejecting them. Not the sweetest thing to do, but the best for the co-op and for them in the long run. The Admissions Committees of co-ops act in a financial evaluator capacity (not advisors), and this is the most important fiduciary responsibility that the Admissions Committee exercises.

AdC

I'm thinking that this could be looked at slightly differently.

Everyone is looking for a home who's looking at co-ops. They're not looking for a rental, they're looking for something they can call their own.

Given the existing financial picture for home sales in the US, as well as the current employment picture, I'd say that potential Shareholders who are aware of their financial picture, willing to meet pre-conditions such as annual maintenance in escrow (and here, the Board has flexibility; it can require up to 5 years, for example, if any doubt exists on stability), and are still persistent and open to negotiation over terms (proof of liability insurance non-negotiable, as always)... may just be the kind of people you WANT in your building.

Co-ops are different than condos for a reason - their founding philosophy is vastly different. And that says - or should say - something about the "feel" of the building, and between its residents. I understand, and am all for, fiduciary responsibility first, second, and third - but let's not lose sight of the fact that the building as a whole is home to everyone in it. I think anyone would agree they'd much rather have residents who are interested in the building, interesting in its welfare, and interested in raising a family there, than having an empty apartment or one that's been on the market so long it makes the building look bad.

Another viewpoint heard from.

In my Co-op (111 units, 85% owner occupied and 10 corporation owned renters being phased out), we tend to encourage first time home buyers. We allow 10% down. We look more at home ownership costs as a percent of income. This also allows for unit transfers even in a down market. Our finances are in great shape therefore we don't need to assess for capital improvements. Therefore we don't necessarily need the extra financial cushion other than the emergency assessment coverage on home owners' policies which we require. We only have two units in legal for back payment for maintenance: one is a chronic un-occupied unit for a person who formerly needed city occupancy and the other involves a reverse mortgage. My opinion is while protecting the remaining shareholders – don’t also be a roadblock either.

I agree with all that you have stated. However, when you have an application in which your debt to income ratio is high, income is low and savings is similarly low for the current d/i, I would recommend that these individuals wait a year or two before taking a plunge OR look for a unit of lesser value that would satisfy their aspirations. Sometimes elimination or reduction of debt is better than looking for greater trouble.

I do not consider equity a problem: 0%, 10% 20% or 100% is not an issue if the mix is affordable to the individual at the end of the transaction. I had the experience of asking an escrow to a potential buyer who was giving 20% down. The person had a high d/i ratio,a good salary, no savings to speak of, and a high mortage+maintenance payment to make at the end of the transaction in spite of the 20% equity. The person was very upset with the escrow request and stated that 20% was sufficient to impress the Admission Committee. My response was as follows: ÿou could have given 10%, retain more cash in your savings for contingency or emergency and would have probably avoided the escrow.

Again, the mix and financial picture at end of the transaction is as important as the snap shot prior to purchase when dealing with these situations.

AdC

Condo evictions are much more difficult than co-op evictions since there is no lease. You won't have the Pullman / Davis / Lapidus cases to help you. Not that co-op evictions are trivial or commonplace; they are drastic measures that should only be considered when repeated good-faith attempts to resolve the problem have failed.

You mainly hear about condo evictions for nonpayment of common charges -- where the owners have typically defaulted on their mortgage as well and end up losing the apartment -- or in the case of someone who is *subleasing* a condo, in which case there is a lease and standard protections like the warranty of habitability apply.

You'll need to get a lawyer's opinion, of course, but I would guess that you'll probably need to treat your nuisance neighbor like the guy next door, not the guy upstairs. You can't kick him out of his house, but you can take legal action to make him stop his harmful activities and to compensate you for damages already suffered.

I don't think it is lwise to do that or legal but check with your buildings lawyer.

I can’t imagine that this would be legal. Let us know what your co-op counsel tells you; your managing agent might also be able to advise you.

Personally, I have neither the time nor the desire to start paying home visits to prospective buyers. The purpose of the buy packet is to give board officers a good idea of whether or not the applicants would be able to fulfill their financial obligation to the co-op. The purpose of an interview is to ask additional questions and, frankly, get a sense of what people are like. What are you looking for beyond that?

I know of someone who was subjected to home visits before being allowed to buy a coop on the Lower East Side. This happened some time ago, and it may have been some kind of tax-sheltered or subsidized coop.

I can't imagine that that would be legal! Please check with your co-op's attorney before giving it further consideration. (not the management company).

It's good you asked.

I remember seeing something called Bird-B-Gone or something like in Habitat's New Products section.

I have spoken with extrminators about this ese systems. The trick is that the sound wave needs to be adjusted frequently so that the birds do not get used to the same sound. Also, different birds may not respond to the same wave length, just like humans have diffent ways to perceive sounds. So, you may discourage some while others will remain.

AdC

I work for a very large pension fund at a large NYC insurer. I am also a president of a Co-op Board. Our investing approach is dynamic. From a risk perspective, our Board prefers to have little or no risk to principal. I like the Vanguard long term treasury funds (VUSUX) when interest rates are falling and Vanguard Short Term Treasury Funds (VSGDX) and bank CD's when interest rates are likely to rise. Also, if you have over $100k invested in a fund, you can get their Admiral Shares which have a lower imbedded cost. Switching to the long term vanguard fund last year allowed us to earn $80k or so in interest/dividends/realized & unrealized gains last year on a base of about $600k - which was very good for the type of year that it was. Our earnings are much less this year however we were able to turn the unrealized gains from last year into realized gains this year.