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My friend Nancy is VP on a coop board on Long Island. She called tonight for advice. I didn't know what to tell her.
Her coop has 40 apts. The sponsor still owns 10. His father and 2 male cousins own apts and were elected to the board last yr. The coop has 5-yr board terms, God only knows why. These 3 sponsor relatives constitute a board majority. They hired a super soon after they were elected: no experience, lazy, bad attitude, won't help residents, does zip in the bldg. They don't do anything about the super and won't OK any upgrades or work beyond emergency repairs for the bldg. Nancy says she thinks they didn't just find him. She thinks they knew him and he's a "plant".
Nancy said the sponsor doesn't let the same people sublet for more than 1 year and they're all very undesirable and irresponsible - almost seems like he gets them on purpose. She also said the 5th BM (Frank) who really cares about the bldg as she does told her the sponsor's father (a BM, and 82!) let it slip to Frank last week that the sponsor wants to run his ownership share into the ground and default on everything bec he has BIG trouble with the IRS and wants to wangle into a position where he can declare bankruptcy.
Nancy said no one likes the sponsor and could care less about him, but he owns 25% of the apts and what he's doing and what his relatives are doing (or rather, not doing) as BMs is affecting the entire coop. It isn't high-end, but it is very nice (40 yrs old) with large apts, community room for meetings, garage, and big, landscaped backyard that's used for parties, BBQs, etc. in a good neighborhood.
OK - any ideas on what Nancy and the other BM Frank can do to prevent the sponsor from turning their coop into the black hole of Calcutta? Nancy and I know each other since grade school muh-muh-muh yrs ago and she's not the type to exaggerate or overreact, so I tend to think she's giving me a pretty fair picture of the situation.
I've dealt with a lot of coop issues in my time, but this is a new one on me.
Thanks, AdC. I must say I don't think much of the SHs in that bldg either for voting in 3 sponsor-related people. I didn't ask my friend but I THINK the regular SHs didn't know those 3 were related to the sponsor. He sold them their apts so he didn't have to tell the former full board or anybody in the coop anything about them.
Sounds like a very big cans of worms to me. If I was faced with that (and I may tell my friend this), I'd seriously consider selling and living elsewhere. I'll pass along your comments to her. Thanks.
Realize that with the sponsors 25% of the total votes, and his relatives, collectively, he controls about 32-35% of the total voting power in the building.
This means that if as little as 30%, or 12 apartments don’t show up at the meeting, or provide a proxy at a shareholder/annual meeting, then the sponsor wins almost by default.
so, it may not be that other shareholders are actually voting for him... You (your friend) needs to acquire enough votes to overcome the sponsors percentage. this is the only way you will beat him.
~AR
AR, that's a good thought. It occurred to me this morning bec Nancy said the sponsor owns 10 of 40 apts - 25%. That's why I asked her how many shares that represents. In my reply to RLM, I said she just told me it's 20-22% of total shares. You're right. She has to get almost all the rest to support her. Seems her coop's other SHs are getting worked up about how things are going, so if she/Frank start now to rally them, they could get the support they need. She's got a lot of work ahead. After listening to her problems, it makes my coop sound like Utopia.
It's an arduous task, but worthwhile, especially if the sponsor presence is diminishing or dwarfing the value of the building.
Good luck!
~AR
HOW TO GET RID OF A BOARD MEMBER and plan the battle accordingly.
The proxy war starts by knowing your shareholders and convincing them of what is happening. Thus, such a battle can be bitter.
Thus, the exit plan is there: sell and go some place else.
AdC
That's quite a story, and I been a'thinkin' on it a spell..... so I have some questions.
1. What does her PL say about amending the PL? What % is needed?
2. What does it say about the % needed to call a special Shareholders Meeting?
3. Does it hold any recourse for recall of Board Members?
4. Is this a union building?
Depending on the answers to the above, if Nancy and her friends can call a special Sh. meeting for the purpose of amending the PL, and successfully gather votes needed to amend it, they could employ a number of tactics:
- add two members to the Board;
- require that all Board meetings be taped and transcribed;
- require the super to pass certain competency tests (if not union);
- have direct Sh. election of president, sec'y, treasurer;
- require a Managing Agent to supervise the super directly (you didn't say whether Nancy's co-op has one or not; if they do, what the heck is the MA doing? and if they don't, they should hire one as soon as they're in control of the Board.
Those are my first reactions. Hope they're helpful; I'll keep thinkin' on it.
Thanks for your thinking on this. I called my friend Nancy first thing today to get answers to your questions.
- Her PL can be amended with a 66-2/3% SH vote
- To call a special mtg: 25% of all outstanding shares
- Recalling a BM requires a 66-2/3% SH vote
- It's a non-union bldg
The bldg had a MA but the 3 sponsor-related BMs fired them last year and hired a company without looking at others - probably a friend of the sponsor, Nancy thinks.
Nancy says regular SHs complain about the useless super. They can't reach the MA - they get voice mail, and no one calls them back. The only BMs they can reach are Nancy and Frank. The 3 sponsor BMs won't take their calls or talk to them about coop biz - they're told to call the MA if they have a problem, which does no good.
RLM, I gave Nancy your good ideas this morning. I think her best bet is getting SHs to sign a petition for a special mtg to recall the 3 sponsor BMs and bring in 3 regular SHs. Luckily, Frank is board secretary. From my experience I know a request for a special mtg has to go to the secretary and if enough shares petition for it, he can schedule it and they can hold it no matter what the 3 sponsor BMs say.
RLM, I didn't know what to tell Nancy, but I'm getting more ideas and she was very "up" this morning when I told her your thoughts, and her wheels are turning now too.
BTW, I asked her how many shares the sponsor has. She can't recall the exact number, but she remembers that his 10 apts + the 3 BM apts are about 20-22% of all shares. So if they can rally enough regular SHs, they could effectively get a 66-2/3% vote on most anything.
I said in my previous post that this coop has 5-yr board terms. The 3 sponsor BMs began their 2nd yr this past May. I didn't know until this morning, but Nancy/Frank are in their 5th yr and they have to step down in May '08. If 2 SHs are elected who aren't as knowledgreable or concerned as they are, things will get much worse I'm sure.
Thanks again, RLM. You've been a great help. If you happen to think of anything else, let me know.
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You have painted a Practice Case for those who exchange ideas.
Well tell your friend to read the by-laws and specifically, the area, HOW TO GET RID OF A BOARD MEMBER and plan the battle accordingly. Go for the HEAD and forget about the rest! Once you take possession of the HEAD you can start organizing.
GET RID of one of the SPONSORS, elect a caring, individual shareholder and NOW she has a majority of individual shareholders to sponsors. BINGO!!!
Regarding your posting, I shall say the following:
The shareholders of that place may DESERVE the sponsor:
1. They are 75% individual shareholder owned and yet they still vote for sponsors and people related or friendly to a bad sponsor. GOOD DEAL!!!
2. They are subleasing in a 25% rental and 40 unit bldg. Well, not too smart either. I would like to find out how many sublets are currently present.
Finally, sell if she is so caring and go to another unit if she's not willing to put the fight for "THE IMPOSSIBLE DREAM".
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