Hello Frank, as President of my cooperative, we do not have a policy in place. When the security cameras were installed, we told our shareholders only management can view the security tapes if there is an incident. This protects the privacy of our shareholders who are just going about there day. The securitycamera footage is only used to view a thief or accident. We had objections and they appreicated the privacy.

We recently had security cameras installed which caught the super and his buddy verbally assaulting me. They were on their usual topic of how I belong in a mental institution. Since the MA witnissed the attack I turned to him and said "Now do you see that I mean?" His response was "You were not physically hurt, and no laws were broken because the constitution allowed for freedom of speech". I had reported this behavior in the past but the board and MA insisted that it was my "perception" and a "he said she said situation" and they needed to consider the supers side of the story. When I asked for a copy of the tape the board president told me I could not have it because I would use it to sue the co-op. He is 100% percent correct and if he had ever thought about giving me the same consideration he gave the super he would not hae this concern. The super and MA got the boot on March 31 and in the few weeks since the building nmhas undergone major changes. It is much cleaner and most of the junk that lined the asement hallway is gone. The best change is I can enter the basement without dreading another encounter. But I have hard feelings toward the board because of the shabby treatment
I received from them. I sent them a certified letter stating that I want the video preserved for my pending legal action. From what I have observed it is reasonable to assume they havealready destroyed it, which will not be a good reflection on them.

It sounds like the board took action based on your complaint and probably prior complaints about the super and MA. They did what was right so you really have no reason to take any further action. They should not release the security footage to you but they should also not destroy it.

it is important to know the time frame you are working with . Many e security systems have only a 3 day timeframe before it auto records over prior footage. Some use a motion detection system, and it is a longer time frame. Some are 5 days. They all are all automatically written over. unless the media is removed from the device. Also my experience with video tapes that i have shot for possible court use, is that the original tape has to be presented to the court, plus a chain of custody provided.. This is in the criminal court system, i am not sure of the civil requirements.. Find out exactly what they are before you need them, know the minimum time frame before it is recorded over. Make sure you subpoena the time frame and camera in question, and most important of all , realize many security cameras do not record AUDIO. In a case like that, it may be best to call the police and have them come and take the he said/she said , get a copy of the report from your precinct, so you have credible evidence, mention the camera to the police and they will ask the MA the overwrite time frame and may be to .take the recordings if a crime has been committed, ie an assault/battery,
otherwise you now know your time frame and can contact a lawyer or subpoena them yourself,

From a purely technical perspective, most surveillance systems in use today by co-ops and condos are DVR (Digital Video Recorders) and not VCR (Video Cassette Recorder). They record the video image(s) on one or more multi-gb hard disks. The only way to extract the image for external viewing is onto an optical disk (DVD) or USB drive. I'm not sure how "chain of custody" fits in here. With hard drives, depending on how many total gigabytes the DVR has, how many cameras are in use, the frame rate and image resolution for each camera, and if it is continuous record or event-driven, images can be stored for weeks or months before being over-written.

But in spite of all that, the very first thing MK should do if she/he is contemplating any legal action, is to contact an attorney. Going it alone is probably the worst think someone with MK's issues can do because they will invariably run afoul of the process for pre-trial discovery and either not get what they need, or disqualify themselves from receiving it in the first place.

From what you describe, you actually DO have a privacy policy: "We told our shareholders only management can view the security tapes if there is an incident. ... The securitycamera footage is only used to view a thief or accident."

I've been speaking with board and managers who say they don't have a policy -- but then when I ask who can see the footage and when, they rattle off conditions and safeguards. Policies ARE there -- de facto policies not written down. And de facto policies dangerous, being prone to misremembering, misinterpretation and on-the-fly changes since, not being written down, who can naysay your version of them? Boards leaving themselves open to claims of ambiguity, and of policy applied differently for different people, which can lead to lawsuits -- whereas a written policy you can show a court and show how you lived up to it.

Do you have a corrupt super or one with those tendencies? Then you have a real problem as videos can be misused.

Three issues here: First - I don't think you have the right to create two classes of shareholders by creating an artificial division between resident and non-resident shareholders. That would be the equivalent of creating two separate classes of stock, which I am sure wasn't done as part of your offering plan. Therefore, they are not two different classes of stock. If it is an issue it should be decided by voting at elections. Let people make their case for representation. Some of your best, most qualified, or willing shareholders might not be in residence. Second: the rewriting and creation of new Bylaws - all bylaws I have ever heard of require a 2/3 vote of all shares, and some even require a 2/3 vote count both on the shares and # of units participating, to achieve a change to the bylaws. I believe that the Board can only propose and write if they care to, though any shareholder in good standing can initiate the process, but not cause a change. A special meeting has to be called and held for the vote, for that specific pre-notified purpose, and the vote meeting needs to be held within 30 days of the meeting notice to all shareholders. The rationale by some Lawyers claiming the standard Corporation Board practice allows for the re-writing of Bylaws at will by the Board (and if the shareholders don't approve they can always vote it down later) is in direct conflict with the approved Bylaw revision process language by the Attorney General's office when approving the Offering plan. Why would there be a 2/3 Rule if it could be at Board will? I think it's specious reasoning, but I am not a Lawyer. There is a third issue that some Bylaws only actually require that the Board President has to be a shareholder and you can have non-shareholder members of the Board of Directors. Just to keep it interesting...

Attorney Stuart Saft rewrote portions of our by-laws to do some of what you're proposing, so he obviously believes that a residency requirement is legal. Here's how Stuart rewrote the relevant section of our by-laws: "Each Director of the Corporation shall be a shareholder or the spouse of a shareholder. Directors shall be residents of the apartment building owned by the Corporation."

You'll need to check your own by-laws for the amendment procedure. Ours are based on a commonly used template from the early 1980s that allows the board to amend the by-laws without a shareholder vote. Yours may be different.

Note that this is very different from attempting to rescind the *voting* rights of non-resident shareholders. That would be illegal under NY Business Corporation Law (BCL). But serving on the board is not the same. Among other things, there's no legal requirement that board members be shareholders, as countless sponsor appointees can tell you. Conversely, being a shareholder does not convey any legal right to run for (or serve on) the board.

I agree with Carl's assessment of having the requirement that the co-op must be the shareholder's primary residence does not go against any city or state laws or regulations. This requirement is the same as shareholders of any corporation requiring that individuals who sit on the board of the corporation own a certain level of equity (shares of stock, options, etc) in the corporation. This is done to "align" the interests of the board members with the rest of the shareholders.

In the case of a cooperative residence corporation, the equity being required is physical residence. Sponsors and investors may not have the same affinity for the co-op community and its needs as full-time residents. The full-time residency requirement encourages better alignment between the board members and the community at large.

The two classes of shareholders mentioned by dsi1 have to do with voting rights based on any share class differentiation. This differentiation is clearly not permitted.

Thanks to Steve, Carl, and DSI for your input.

May I ask about the second proposed amendment making a resident shareholder ineligible for the board if his/her unit is for sale?

Steve's point about physical residence being required to "align" the interests of the board member with the rest of the shareholders seems to be satisfied in this case as long as the building is still the shareholder's primary residence.

Or, would a legal point of view be that the expectation of becoming a non-shareholder at some point in the future throws the wanna-be board candidate out of "alignment" with the rest of the shareholders thereby justifying that shareholder's ineligibility for the board?

That reasoning, though, seems to be a bit of a slippery slope since 1) putting a unit up for sale does not imply any certainty that it will sell, and 2) many shareholders - including many that currently sit on many coop boards - can reasonably be believed to have an expectation of someday selling.

Finally, it just occurred to us here to ask what definition of resident is being used. Must the shareholder's apartment be his/her primary resident for the shareholder to be considered a resident? What about the case of a shareholder whose primary residence is somewhere else, but who resides in the coop apartment - and is the only person to ever reside in the apartment - when convenient for business?

Any thoughts?

Thanks in advance.

Steve's point about aligning the interests of board members with the best interests of the corporation (co-op or otherwise) is well stated. This may well be a motivating factor in the laws allowing restrictive criteria to be set for board membership. But Steve isn't saying that alignment of interests is a requirement. Just the contrary; pretty much every co-op's original by-laws were written to allow the sponsor to elect non-shareholder puppet members to the board. These people will vote Yes to anything the sponsor proposes, regardless of whether it's good for the co-op.

I'm not a lawyer, but it seems likely that the Business Judgment Rule would be the guiding factor here. Unless you choose criteria in bad faith or in a way that clearly doesn't further the purposes of the co-op, you would seem to be on firm ground. For example, if the guy in 47A insults your Abraham Lincoln costume at the building's Halloween party, and you then pass a requirement that no one in Apt. 47A may serve on the board, that's bad faith and is unlikely to survive a legal challenge.

You should consult your co-op's attorney before making any changes to your by-laws, especially if you have any doubts about whether the criteria you're choosing for board membership are legal.

On the second proposed amendment, what if the apartment is in Contract already and the shareholder just waiting for closing date?

An interesting conversation, from reading everyone's comments the presumption seems to be that if you are no longer resident, or not resident you can't possibly have interests as 'aligned' as a resident shareholder does. There is nothing to support that proposition qualitatively nor can that be objectively proven. Therefore residency becomes the overriding criteria for alignment and capability, and not one's actual capability, objectivity, and the interest to protect and ensure the viability of one's investment let alone give up a considerable amount of time to contribute to the common good of the enterprise, not withstanding. Secondly, the spouse of a shareholder, therefore not being a shareholder, is viewed by their residency to be inherently more aligned than a shareholder who is a true stakeholder in the corporate property. Third the assumption is that a non-resident shareholder is either s sponsor's puppet or an investor/owner and disallows for other scenarios including retirement, various life script scenario changes, and income generation from subleasing etc.
I think this all strays from the real need and purpose of the Board which is to manage and administer the property in a skilled, fair and intelligent, forward looking manner. We have to manage it's assets and it's staff and Management Company, along with the professional services it has contracted for such as a Manager, auditors, investments, Lawyers, and Certiorari Attorneys etc. Aside from knowing if the elevator is out today, or someone's pup had an accident in the hallway yesterday, you are looking for real interest, skills and balance - not easy to find in the workplace let alone your Coop, and, trying to find Board members who don't have an agenda is difficult enough.
The fact that Mr. Saft re-wrote a Bylaw the way he did says to me that he was doing work-for-hire according to the whims of his Board who obviously had an agenda and sought to exclude someone, or some group from being on, or gaining control of a Board in opposition to those who caused it to be written. He wrote it in a manner such that he hoped would make it through a court challenge if someone decided to fight it. You can't make assumptions about his opinion or beliefs, only his skill in carrying out his assignment. You do not know from this if he disagreed with the Board or not.
I think open election Q&A Board meetings, if it is a large building with many units then maybe a bio and 'why I am running' paper released 2 weeks before annual elections for those interested in running should have sufficient exposure to enable the shareholders to choose who they best felt represented their interests. If the problem is a sponsor who owns too many shares, then there are other, bigger issues to contend with.
Personally, I think a Coop should be inclusive and not exclusive when it comes to Boards. It takes a few years for a newbie, if they have the capabilities and interest to learn how, to be a good Board member, and learn to think from the POV of the Coop first, even if it is not what their personal choice might be - not so easy. The absolute rarest and hardest thing to find when looking for new Board members is a reasonably intelligent, mature adult, with common sense, the ability to hear what is really being said, a sense of fair play, and the awareness that you can't really hear with your mouth open. Done properly it is a truly humbling service proposition that you can be proud of, understanding that your authority is on loan from the shareholders and not something you should be wielding. The kind of shareholder issues that land on the table at times can be truly stunning. The ability to deal, have a bit of compassion and empathy, and to say no, because it is the right thing, or yes because it is the appropriate thing is often tough. I think you need to look at the intent of all of this exclusionary 'stuff', the implied assumptions, and to me, the fallacy of the underlying proposition. I think that some Boards/people make too many rules. You need to make only those rules necessary to manage situations, not start writing rules to control people. All shareholders should be equally entitled.
If it is an issue with absentee investor owners then stop selling to investor/owners or make the subletting clause allowable only after 3-5 years of residency. Having to eat 3-5 years of NYC maintenance charges before you can sublease should have a chilling affect on non-resident purchasers. Don't penalize your neighbors, it builds resentment and causes muttering cliques to form. keep it all as transparent as possible, a simple newsletter after every Board meeting should suffice - this is what we worked on, this is what's coming up to deal with, this is what we decided-because...etc.
This desire to exclude non-residents is also dealable if you have a rule about missing X# of Board meetings get's you removed. You can have a resident Board member who is out of town too much due to business, or retirement to the south etc. that they miss half the years meetings, what use is that to a hard working Board? So, a non-resident who can always be there, or a resident who can't, which one helps the building? Your first priority should be good people who are willing to work hard to make it a financially stable, good place to live, and are fair-minded.
I hardly see most of my neighbors, it's no different living there or not for that matter. If there are building issues the Manager or Super will call or send an email to alert you. As a Board member, 99% of what occurs in the building we are informed of, as opposed to experience because we live there. Decision-making on taxes, finance, DOB filings, Local Law 11 work, bills, a new laundry room, elevators, uniforms, raises, vetting contracts - what does any of this really have to do with living there, as opposed to the experience of living and the need to make sound decisions?
Sorry for the long speech!

Just one follow-up comment --

dsi1 wrote:
>The fact that Mr. Saft re-wrote a Bylaw the way he did says to me
>that he was doing work-for-hire according to the whims of his Board
>who obviously had an agenda and sought to exclude someone [...]

No, that's simply not true. Exactly the opposite is the case: Stuart Saft recommended that we have him review our by-laws and proprietary lease to get his advice on whether anything should be changed. He prepared a 22-page memo (!) that was chock full of suggestions, and then he edited our by-laws to conform to that memo. The restrictions on board membership were entirely his idea; we liked them and voted to adopt them, following his wording exactly.

Well,now we know what Mr. Saft did, but are lacking any real info as to why he would recommend the total disenfranchisement of a class of owners, who certainly lacked any awareness or imagined that this possibility was in the offing, when contemplating their purchase. As to the 'on the ground' make up of the shareholder mix, and therefore the real issues this Coop, or Rob's was/is facing, or what has motivated this movement amongst some of Rob's Board members, we are left only with the reportage of the attitudes and the proposed fix. As to Mr. Saft: We do not know why he has proposed such a rewrite of the by-laws of that Coop. Is there a particular circumstance in that building that precipitated such a rewrite of that rule? Or is it his personal prejudice? For general principles of balanced function and capability, along with an inclusive sense of enfranchisement I find such rulings, lacking any info to the contrary, to be deficient in this matter for the previously stated reasons. There is no empirical or logical, or even common sense evidence to support such a position lacking some particular overriding circumstance. There are, I am sure, all manner of localized examples, if a particular Coop has a compound issue situation of Sponsor patsies, or multiple investor owners where their Sponsor has sold blocks of apartments to investors, then in that kind of individual scenario radical, excisement of electoral protocols might be in order. However, lacking any before-the-fact info for this discussion, to extrapolate a normal mix scenario of shareholders, a small percentage of non-resident owners, some sponsor holdovers someone really has to show cause for revamping the elections to an exclusionary basis that doesn't smack of intentional disenfranchisement. Since there are a variety of possible solutions to cope with particular scenarios a blanket disenfranchisement of a class of owners who are just as entitled to representation as any other shareholder is questionable practice. Particularly troublesome is the implied presumption of malignant self-interest on the part of the non-resident Board member(s) but a magnanimous and expansive attribution of bon homie judgement attributed to the resident shareholders. So my one question is to Carl is was it the Board that voted to change the Bylaws, or a 2/3 majority of the shares that were voted to approve the change in the Bylaws?
From my experience after 24 years serving on Boards in various capacities I can assure you this is not the defacto case. It comes down to the agenda, intent and capacity of the individual Board member, which means you have to vote wisely. I suspect that those buildings that have sponsors who sold off blocks of units to investors, Sponsors who hold blocks of units, are sometimes against anything that will serve to raise the maintenance, or buildings that allowed sales to a large number of non-resident foreign investors who only come into town a few times a year and like to loan out their units, which should be against the rules. Lacking any info that lays claim to any of these scenarios, a normal Coop mix should not proceed in this direction. It smacks of a control issue and not a governance issue.
If you and your shareholders have tweaked your Bylaws to prevent as much as possible: pied a terres, hidden Investors, college kids, and loaners, have let your real estate agents know that you are really only interested in resident shareholders, you might stand a chance of minimizing some of these scenarios. Ultimately, when all is said and done, and you go through the purchase application, vet everything etc., and you are ready for the interview, what you are really doing, is shopping for good neighbors. Good luck!

Well,now we know what Mr. Saft did, but are lacking any real info as to why he would recommend the total disenfranchisement of a class of owners, who certainly lacked any awareness or imagined that this possibility was in the offing, when contemplating their purchase. As to the 'on the ground' make up of the shareholder mix, and therefore the real issues this Coop, or Rob's was/is facing, or what has motivated this movement amongst some of Rob's Board members, we are left only with the reportage of the attitudes and the proposed fix. As to Mr. Saft: We do not know why he has proposed such a rewrite of the by-laws of that Coop. Is there a particular circumstance in that building that precipitated such a rewrite of that rule? Or is it his personal prejudice? For general principles of balanced function and capability, along with an inclusive sense of enfranchisement I find such rulings, lacking any info to the contrary, to be deficient in this matter for the previously stated reasons. There is no empirical or logical, or even common sense evidence to support such a position lacking some particular overriding circumstance. There are, I am sure, all manner of localized examples, if a particular Coop has a compound issue situation of Sponsor patsies, or multiple investor owners where their Sponsor has sold blocks of apartments to investors, then in that kind of individual scenario radical, excisement of electoral protocols might be in order. However, lacking any before-the-fact info for this discussion, to extrapolate a normal mix scenario of shareholders, a small percentage of non-resident owners, some sponsor holdovers someone really has to show cause for revamping the elections to an exclusionary basis that doesn't smack of intentional disenfranchisement. Since there are a variety of possible solutions to cope with particular scenarios a blanket disenfranchisement of a class of owners who are just as entitled to representation as any other shareholder is questionable practice. Particularly troublesome is the implied presumption of malignant self-interest on the part of the non-resident Board member(s) but a magnanimous and expansive attribution of bon homie judgement attributed to the resident shareholders. So my one question is to Carl is was it the Board that voted to change the Bylaws, or a 2/3 majority of the shares that were voted to approve the change in the Bylaws?
From my experience after 24 years serving on Boards in various capacities I can assure you this is not the defacto case. It comes down to the agenda, intent and capacity of the individual Board member, which means you have to vote wisely. I suspect that those buildings that have sponsors who sold off blocks of units to investors, Sponsors who hold blocks of units, are sometimes against anything that will serve to raise the maintenance, or buildings that allowed sales to a large number of non-resident foreign investors who only come into town a few times a year and like to loan out their units, which should be against the rules. Lacking any info that lays claim to any of these scenarios, a normal Coop mix should not proceed in this direction. It smacks of a control issue and not a governance issue.
If you and your shareholders have tweaked your Bylaws to prevent as much as possible: pied a terres, hidden Investors, college kids, and loaners, have let your real estate agents know that you are really only interested in resident shareholders, you might stand a chance of minimizing some of these scenarios. Ultimately, when all is said and done, and you go through the purchase application, vet everything etc., and you are ready for the interview, what you are really doing, is shopping for good neighbors. Good luck!

Wow, that's a surprisingly aggressive response to an issue that's not particularly contentious, in my experience. As noted earlier, eligibility for board membership isn't even legally tied to being a shareholder - many boards have non-shareholders as directors. But I can think of at least three clear advantages to limiting the board to shareholders residing in the building:

(1) No puppet members can voted in by the sponsor to form an insurmountable voting block. This is a problem that has plagued co-ops ever since their inception.

(2) I don't believe that any of our non-resident shareholders (two investors and a trustee among them) have ever attended an annual meeting. What are the chances of getting any of them to show up regularly for *monthly* board meetings?

(3) A great many issues that boards deal with are specific to the building at hand and are not just general management problems. Why would you want someone who last set foot in your building in 1997 to be making decisions about the decor of your lobby, the paint in your hallways, the operation of your laundry room, or shareholder-specific issues concerning people who are just random strangers to them?

As it happens, we haven't had a non-resident (shareholder or otherwise) who wanted to run for the board since the 1980s. We adopted the changes that Stuart Saft suggested because we thought they were a good idea, not because they addressed any specific problem we were having. The changes were approved unanimously by the board and distributed to all shareholders, including a redline version that highlighted all the changes. We never received even the slightest complaint about any of the changes.

As a side note, we didn't adopt everything that Stuart suggested. For example, he proposed that we require written notice in advance of the annual meeting from anyone who wanted to run for the board. That's fine for limiting chaos at the annual meeting of a large co-op, but we're a fairly small building (33 units) and we wanted to continuing allowing nominations from the floor. So that's what we did.

Many coops no longer have sponsor units.
Some Boards need to deal with more than paint color.
There is a dearth of applicants for this underappreciated position.
Better to look hard for highly qualified rather than reasons for excluding it.
Those that can offer the most don't necessarily volunteer.

Ano, aside from your comment that "Some Boards need to deal with more than paint color" (which is obviously true of every board on earth), there's a simple answer to the points you raise. If you're having trouble getting people to run for the board, and non-shareholders or non-residents are clamoring to serve, then modify your by-laws (if necessary) to allow them to run. Or allow non-residents but require that they be shareholders, if you like that better. In that case, you'll need to delete the standard sponsor-inserted line that appears in most co-op's original by-laws: "It shall not be necessary for a director of this Corporation to be a shareholder."

Thank you Ano, Carl I certainly didn't mean to offend you. I am sorry of my response seemed aggressive, I think it tries to separate and elucidate the governing issues, and to distinguish between the possible scenarios that can precipitate such actions, along with alternative solutions to what, seems to me the blatant disenfranchisement of a class of owners. The situation is self resolving in that the few shareholders you are excluding obviously have no interest, their lack of attendance reveals their lack of interest to participate; yet you hold up their lack of attendance as a rationale for exclusion.

So, in response to your 3 reasons:
1). I believe there are relatively few mature Coops that still have Sponsor puppet issues such, that impact and control the majority voting process, this can be resolved thru legal channels. If the Sponsor holds a majority of shares in a mature Coop then that is a huge problem for many reasons beyond governance, and it is then obvious that the resident tenant committee at the time of conversion did not succeed in, or failed to raise and negotiate a change in the black book Bylaws regarding a distinctly phased transfer of Board authority over a specified period of time. It has been a problem for some Coops, but not most Coops. This really shouldn't be part of this discussion;
2).So... that's 3 shareholders out of 33? If someone hasn't set foot in the building since 1997, I doubt they would run, or be elected to the Board. Their obvious lack of interest obviates the supposition of interest and involvement. If you have a rule that you cannot miss more that 3 meetings in a year, or two consecutively it should clear up that scenario. What if they live around the corner? They could be in and out of the building daily?
3). All of the issues you state go to the heart of the market viability of their investment, which they have a right to assure themselves of. Decor of the lobby has to do with taste but has a big impact on sales as well. I know of a Board that spent $200K, self-approved, on hideous carpeting and granite lobby tile, all wrong, with no master plan devisement by a qualified designer etc. So everyone is stuck with their awful taste. They never put up display Boards for shareholders to see choices let alone voice an opinion. If the non-resident is a very interested shareholder and happens to be a good prospect, how do you fail to benefit?
Not everyone who runs for a Board, should be on a Board. There are those who should be on a Board and need coaxing to agree. If you read Habitat long enough, you will see a steady stream of horror stories and corruption, incompetence or both, small and large. Should suffice to keep one alert and humble at the same time. I wouldn't exclude anyone based on their residency. I would hope you are able to form a Board out of the most skilled, reasonable and qualified shareholders, which includes being available and present as needed, in order to perform the job appropriately.

dsi1, thanks for your thoughtful response, which is well-argued. You're right that the issue is simply not an immediate problem for us, since our non-resident shareholders have never expressed the slightest interest in running for the board. On the other hand, we try to be an exceptionally responsive board in a small building, and we've found that personal contact with day-to-day life in the building is a big plus in guiding our decision making.

I think your argument works better for condos than for co-ops. With condos, you have many more sublets, with owners who are basically landlords in many cases. Such owners have a general interest in enhancing the value of their properties to ensure that they can continue to rent out their units profitably. But non-resident shareholders in co-ops are typically investors (or the sponsor) who own rent-regulated apartments and want to pay as little as possible while waiting to take possession of the apartment. There may also be non-resident shareholders who are subletting for a year or two and wouldn't be around to serve on the board, anyway.

Certainly there are complete idiots and jerks on boards who shouldn't be there. The number of bad and illegal board decisions that you hear about is frightening. Conversely, some people who would be good board members need some coaxing to join. (I was in that category myself, a number of years ago.) If we had a shortage of "skilled, reasonable and qualified" people in our building, then we might be willing to broaden the candidate pool to include non-residents and even non-shareholders, as our by-laws used to allow. But the "hands-on" approach has worked well for us and we would greatly prefer an in-house board that has to live with the consequences of its decisions every day.

Carl, your solution may be fine for your "small" coop now with its current residents and Board. It would be wrong to generalize from that to other CIRAs or your coop at another time.

Boards (and similarly "Management") have a way of stagnating, either passively or actively, much as do other "governing" bodies. If things seem fine, others may not challenge incumbents, while things may be changing for the worse and going unnoticed. A Board that wants to stay in place ( a common election promise, "I have time now") has the power of the proxy, access to tools of information in the building, and its own "organization" on its side. Opposition may be at a considerable disadvantage.

Many CIRAs like many other organizations run fine. But when problems arise simply allowing for non-residents in the Bylaws may not be enough. It is short-sighted to assume that only those who both own shares and sleep in the building daily are qualified. Indeed, public corporations gain value from outside directors and one might presume that if eyes were opened, coops and other CIRAs would recognize the potential cost of tight restrictions on Board membership (possibly potentially even greater in a coop with a small number of units).

Hi Steve and Carl,

The discussion that ensued from my original post has been interesting and informative, however, I think some of the specifics of the OP may have gotten lost in the shuffle. (Not a complaint, though, as it has been a helpful exchange for me and, I'm sure, many others.)

If you look again at Carl's first reply, please note that although Steve paraphrases Carl as referring to "the shareholder's primary residence," Carl actually writes, "Here's how Stuart rewrote the relevant section of our by-laws: `Each Director of the Corporation shall be a shareholder or the spouse of a shareholder. Directors shall be residents of the apartment building owned by the Corporation.' " What I'm trying to point out is that the by-laws specifically refer to "residents" not shareholders who occupy their unit as their primary residence.

To Carl: How do you, as a board member intepret the by-law drafted by your attorney and, presumably approved by you as a board member? Does residence mean primary residence? Or, does residing in the unit - and being the only person to reside in the unit - when it is necessary for business - satisfy your board as to qualifying the shareholder as a resident?

To Steve: While DSI makes a compelling case for why prohibiting shareholders from running for the board based on residency is probably not the wisest policy for coops where the sponsor no longer has a presence, we are still hoping for an insight into the legality of doing so in the case of a shareholder who uses the unit as a pied a terre. Or, perhaps from a legal standpoint there is no distinction to be made between between "residence" and "primary residence"?

Again, thanks very much for your time and your thoughts.

The process of shareholders changing a Board member should be detailed in the Corporation's Bylaws which may not require identification of misconduct. NY BCL and those Bylaws often do not provide a reasonable way to obtain evidence of misconduct as much of a Board's action and those of its members are kept secret or out of plain view. Criminal actions of Boards or their members would be handled separately by appropriate legal authorities.

Our building only enforces the rule and does an inspection if the downstairs neighbor complains about the noise. We have many apartments that don't come close to 80% and as long as people walk in soft soled shoes and don't have young kids, or the downstairs neighbor is hard of hearing it's normally OK.

I'll put in my usual recommendation for Matthew Adam Properties. We've been with them for seven years and they're great.

Allarea is probably the worst managing agent in NYC.

Can't possibly be worse than Maxwell-Kates.

can’t be worse than J&C Lamb

Someone praised Greenthal. We have had them for 12 years and they are awful. The on site manager is a bully and talks down to residents. He will lock his office door and no one is permitted to enter. If you see him on the premises he will not talk to you and he does what he wants, not what the board dictates. At this point, Greenthal runs the whole show and residents have little if anything to say. Much of this is the result of a board who allowed the decision making to go to the management company, however, they are still bullies and rude to those of us who pay their salaries.

Dianne Stromfeld:
This sounds just like MKI (Maxwell Kates), how awful. Agree with helene all MA are corrupt, not there to save you money and they all think they run the building. It's too bad most shareholders are so manipulated and don't realize they control not the MA. Starting to believe more and more in Ombudsman. There has to be a way to control these MA's that don't really care except for their annual paycheck and kickbacks. I know there was proposed legislation by Senator Krueger on this issue. This issue should be pressed to see where it stands to help shareholders and diminish the so called power of the MA's.

I am so glad you see the value in an ombudsman for co ops/condos. Please contact your state senator and assemblyman by writing letters backing the bill. If you and your neighbors begin a letter writing campaign, we can get a foothold on passing this bill. We need shareholder support to the electeds.
Thanks again

I second Dianne Stromfeld email of 5.17.13 regarding letter writing campaign urging passage of Senator Kreiger’s bill to have an ombudsman who co-op/condo shareholders can turn to in order to control the outrageous abuse of managing agents/corrupt or clueless boards. If you care, please contact your state senators and assemblymen telling them to pass Senator Kreiger’s ombudsman bill.

What is the status of this legislation? Which state senators are for it and which against it? And how do we find out what's in the legislation? Thanks.

for info about sen.kreiger’s bill the best bet is to call her office. the last i heard is that it was hard to get it by the upstate republicans but there have been a lot of changes since the last election. also the allegations of wrong-doing may interfere with the movement of bills.
the real estate industry campaigns against bills that help shareholders so we need to get active.

There is a very good Habitat article on the pros and cons of the proposed Ombudsman Legislation here: http://www.habitatmag.com/Publication-Content/2010/2010-December/Featured-Articles/Ombudsman-Bill#.Uc2h3qyAbTo.

Totally agree with Maria M. Nothing can be worse than Maxwell-Kates. The worst people around, building beware.

I definitely agree that All Area is probably the worst management company - when they managed us they did not pay total Withholding taxes for over 6 months - the IRS charged us over $50,000 but 7% interest; they did not pay Union Benefits bills, etc - that cost us $200,000 and probably interest costs of 125-150% - They did not pay worker's compensation, they paid RE taxes very late and of course all the repair work that was done, their vendor charged 100% more, and the work was either not done or done very poorply that it had to be redone - this during years when we had 25% assessments and increases - of course where were certain board members who were in charge of these things and of course our accountant didn't tell us that these bills were not paid - great trio

I am not sure who wrote the libelous message in my name regarding Orsid Realty and Neil Davidowitz and alleged kickbacks but it is completely untrue. Orsid is a solid management company who I have worked with for many years. There is no money changing hands and certainly no kickbacks.

My 118 unit coop has been managed by Greenthal Management for 3 years and we've been happy with the agent and their back office support.

Does anyone have experience with New Bedford? My coop is switching right now and the Yelp comments, from 2011, are awful. Thank you.

Hi Frank,

While I agree with you, maybe the clause is facilitating the sale. I would inquire further as to the reasons.

I wouldn't necessarily hang your hat on a 3 month deal. Maybe just collect the 3 months of sublet fees as a condition of the sale; and have the seller pay 3 months of maintenance at the time of sale for the buyer.

My suggestion is to facilitate the sale without causing unnecessary roadblocks.

Good luck!

We had a similar circumstance and voted not to allow it based on the fact that our propriety lease does not allow a new purchaser to sublet an apartment until one year after purchasing it.

It is quite normal in a residential real estate transaction for a party to stay for a period of time in a sold residence to allow for the necessary sale and purchase closings. The coop is dealing with a known entity, the seller, and a vetted entity, the buyer. Calous limited interpretations of arbitrary rules should not be allowed to interfere with helping neighbors at no cost to the coop with the transaction and the transition of their place of residence.

When does interpretation of the rules, out of fairness to all shareholders, become callous? This not a house sale where it is a common situation to allow the seller to stay. We have to live by a different set of rules that do not exist in other types of real estate transactions. All this was debated and the Board agreed not to allow the situation per our rules. The seller found another buyer and everyone is happy.

When neither the interpretation nor the rules further the common interests. Whether a single family home owned as real property or a cooperative apartment unit "owned" effectively by shares in the corporation, the financial "closing" transaction and occupancy of a place to live is the same. In facts, coops have argued that the same set of laws need apply to them, that the transactions of sahres be treated for legal/tax purposes as residential property sales and the corporation be taxed as residential real estate.

Fortunately the current robust market in NY and elsewhere provided the seller with a successful outcome now and the corporation can feel comfortable in sitting back. But really, we now know that such markets are not always the case; not even now as many areas of the country have yet to recover from the housing downturn.

Now's the time to look at the rules to update them to better serve allt hose to whome they apply. What did your rule really protect in this case; what might have been the cost?

The board needs to
be clear about how to deal with such cases so as not to seem either arbitrary or showing favoritism(or lack thereof). It sounds like clear communication is needed- always a good thing. How does this benefit or harm the co-op- that is the real question. Especially in a small co-op there may be more opportunity to tailor a situation rather than rely on the "one size fits all" sort of PL often promoted by legal counsel. Everyone can benefit or be harmed equally if not careful.

Hi MTD - I would have the purchaser ask their closing attorney about this, and quickly. From my non-legal perspective, I would have the purchasers prepare the form in advance with all of the primary resident information filled in. Immediately after the closing I would have them fill in the date of the closing and send it to the Dept of Finance via certified, return receipt requested.

I am sure there will be many such exceptions to the primary residency that will have to be dealt with by the DOF. The purchaser's attorney is the best source of authorative information.

Hi,

In my co-op, we give the STAR and Co-op abatement credits back to the shareholders. We also do not assess the credits. We had difficulties with assessing the credits as we were not treating all shareholders equally. In our case, shareholders receiving the credit and shareholders not receiving the credit were assessed unequally. We thought that this unintentionally created two classes of shareholders so we stopped this practice.

Not assessing the credit creates come cash flow issues during the heating season by collecting the least over the most expensive time of the year. We solved this by having $60k in working capital in the operating account by the end of the year to carry us through the ‘lean months’.

Management credits the shareholder bills when the information is received by the City. Some years, that is before January (so these amounts are credited over six months). This year, it is later. Also this year, the City sent a preliminary list pending verification of shareholder primary addresses.

Due to the way the City is verifying primary residence for shareholders, our management is splitting when the STAR Credit and the Co-op abatements are being recorded on the shareholder bills.

For us, the STAR credit is beginning in April and spread over three months (April, May and June).

Also for us, the Co-op abatement is being withheld until the City sends the final list to management. We are anticipating a onetime credit in June. It would be difficult to give the preliminary amount back only to be forced to retake the funds away from the shareholder. It is also less work on the management staff to do it only once.

I hope this helps and good luck!

Thank you for the answer.
I have not received any STAR credit for the last year yet? Is that normal?

Hi,

No - but the timing delay could be the fault of the NYS and NYC, not your co-op or co-op's management company.

I would suggest a neutral inquiry to your management company to see what is up is in order.

Steve

Unfortunately my coop assessed the coop/condo and star, for most of the years it was given, then for a few years my coop assessed all of the abatements including the Senior Housing and Veterans, etc which of course only a few people receive and is definitely unequal to practically all the shareholders;, but our board does not understand that - However you cannot just withhold the coop/condo because of the City's investigation all the other abatements besides the Coop/Condo, (and will now apply to residency) apply only to Owner/Occupied apartments and must be applied for stating that you reside in the apartment

I would question wether a coop can assess the shareholders based on what they got back in the abatement. I would think that legally, a coop needs to treat each shareholder equally, and can only have an assessment based on a per share basis, or for the actual cost of a repair or modernization project. For example, a coop can charge each shareholder the cost of upgrading windows, where a corner one BR apartment might pay more than a middle one BR apartment because it had more windows. Taking back more from a shareholder that gets a larger abatement because they are a senior or disabled may not be legal.

You definitely cannot assess shaeholders on what they get back- actually you cannot by law assess an abatement - ONLY OFFSET IT - however a lot of coop boards just see an amount that they decide they can get - without using it for any definite purpose - just taking the money because it is there - Of course I would say that these are bad boards, not serving their shareholders, but unfortunately how many are there

Stephanie - I have to disagree with your characterization of boards as being "bad" because they vote for an assessment which approximates the R/E tax and STAR abatements. I think most boards use the abasement/assessment transaction as a "painless" way of keeping monthly maintenance lower.

Most well-managed co-ops strive for a break-even budget where income is equal to or slightly greater than expenses. Without the assessment, monthly maintenance would have to be higher every month by the proportional assessment amount. The position these boards take is that it is better to keep maintenance lower each month than to have shareholders pay a higher amount and have only one month (when the abatements are distributed) with little or no maintenance payment. The assessment goes into either the operating or capital reserve accounts, both of which have very definite "real" purposes.

As has been stated here before, board members are also shareholders, and anything which affects maintenance levels affects them as well. It is definitely not a capricious decision.

If you are stuffing the money into the operating budget, you are not managing your building well. The assessment should be used for capitol projects only.

MTD - Real Estate taxes are budgeted and paid for out of the operating account, not the capital reserve. Boards have a choice of setting their monthly maintenance to X to cover the full amount of annual R/E tax due and not voting an assessment, or they can set it to X minus 1/12th of the average abatement and then approve an assessment to cover the decrease in revenue. The net result to the shareholders is negligible over the course of 12 months. It's been my experience that almost all shareholders would rather pay less maintenance per month than reap a windfall over a short one or two month period.

But I am curious. Why do you believe the scheme I described is indicative of a badly managed building, and why do you feel that an assessment to offset the real estate tax abatement should only be used for capital projects and not factored into the operating budget?

We started to assess shareholders for the approximate amount of the real estate tax rebate (NOT STAR) when increasing the energy budget was not covering the escalating costs. We have continued to have an "operating assessment" each year that coincides with the rebate. It is a painless (for most) way to get the funds for unplanned expenditures (a major plumbing repair?) and planned (decor) that improve the building and keep us form having to raise maintenance.

Hi Steve,

I need some verification on the Enhanced Star distribution.

It is my understanding that the E-Star runs from July 2013 through December 2014.

Our co-op is going to start distributing the Basic/Enhanced credits in February.

The shareholders who are entitled to the Enhanced Star were told they would receive a rebate for the 7 months they did not receive the Enhanced Star.
Now they are told they will only receive the amount of the E-Star from January through December and not receive the increase retroactive for the 7 months they were entitled to starting in July 2013.

Is this ethical?