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We have a board that has been in place for a very long time and rarely has elections. They gave a really terrible management company a 10 year contract-10 years! The rarely follow through on maintenance and owners have had to take them to court to recover damages from improper maintenance. I'm very worried about the state of my investment here. Is there any way to make them have elections or do what they are supposed to do?
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The law (NY) says we must have annual elections, our by-laws says we must have annual elections, but we do not. Shareholders can kick and scream but in our co-op the board has the mentality of, "take us to court--if you can afford it and can survive the mental and emotional strains, and if you do not win and cannot get rid of us, we've make your life miserable" is enough to knock out any opposition. Unless it's a shareholders' class action law suit (which might be the next option in my co-op) nothing will happen. And in a co-op like mine where shareholders have been beaten back and bullied for so long the will to fight disappears leaving the pile of mess for all the "tomorrows" until bankruptcy come knocking on everyone's door. Knock! Knock!
In regards to the Minutes, with our current corrupt board, they write what they want and revise the text accordingly to their advantage. In NY, Minutes are prima facie evidence but what good is that when such evidence could be manipulated at will by the board for the board.
There is no law that specifically deals with co-operatives; in NY it's the BCL (Business Corporation Law) which does not fit the co-op's scenario; we do not produce products, goods, or services to make profits like a regular business corporation. Our income comes from the flip taxes fees and capital contribution from sales of apartments. Our co-op has a annual revenue stream of over $10m/yr; we have to sell a lot of apartments annually to make a profit or operate in the black. I've been seeing red shortly after we converted to a co-op. No, profit--we have been operating in the red, living off loans and going down hill. KNOCK! KNOCK!
The laws are weak (non-existing really for co-ops in NY), government assistant is nil, suing is an expensive unrealistic option, shareholders are too lazy and sometimes down right too stupid to care to engage in proper action, those that do care are in it for themselves, and the very few that are out for the common good, like me, are in it alone. (Now and then I get some help but at the slightest confrontation with the board they "cluck" away but expect you to keep taking the punches on their behalf!) Once I sell my co-op I will NEVER buy another co-op or a condo.
I completely agree with your overall sentiment that this is a ridiculously underegulated area. As for minutes, consider yourself lucky you can see them - even that is not required, and commonly witheld by boards:
http://www.habitatmag.com/Publication-Content/Co-op-Condo-Buyers/2011/2011-February/FAQ-Check-What-Are-Co-op-Owners-Rights-to-See-Board-Meeting-Minutes
It makes no sense to me that in NY, you need a license to give manicures, but there is no oversight whatsoever of boards or managing agents, despite the huge number of coop owners, and financial / quality of life impact when things are poorly managed.
I'm curious about what ever happened to this idea:
http://condocoopowners.org/
http://condocoopowners.org/forum-video/
http://www.brickunderground.com/blog/2010/08/coming_soon_to_a_co_opcondo_near_you_transparency_fair_play_and_accountability
http://www.brickunderground.com/blog/2011/01/dissent_brews_in_queens_over_tonights_forum_for_co_op_and_condo_owenrs
The main problem here does seem to be that shareholders haven't made the effort to lobby properly, so boards and management do whatever they like, safe in the knowledge that they won't be held to account.
Although there is much in the way of complaining and horror stories from shareholders on boards like this, streeteasy, etc,
I'm sure it would be far more effective if shareholders would cough up some membership fees to an organization to represent their interests, doing things like providing a decent website / publication, holding meetings, organizing the odd class-action lawsuit for egregious
cases, embarrasing the worst-of-the-worst boards / management organizations, etc. Ideally this might grow into some professionally run outfit (thing AAA, Consumer Reports, NRA), but failing that even some meetup group, informal monthly meeting, subreddit, etc might be a start.
I know this is a loathsome option, but it may be your last resort. An attorney will at least let you know what your options are, so you can evaluate if and how you want to proceed. Right now you are living under the FUD (Fear, Uncertainty, Doubt) being flung at you by the board. A good attorney should be able to work things from different angles without resorting to litigation. They may also back down very quickly if they perceive you are so fed up you're willing to resort to litigation remedies.
Remember that a board has a fiduciary obligation to run the corporation in a fair and reasonable manner and to put the interests of the co-op above their own, especially when it come to finances. If there is financial hanky-panky going on, the government *will* get involved and an attorney will be your best asset in dealing with the gov.
Talk to an attorney. It may be the best money you spend on this, and you may discover things are not as bleak as they seem.
Good luck,
--- Steve
This will be in the Corporation by-laws, which contains rules regarding the board's meetings, Annual meeting, special meetings, notice of meetings, etc.
If the board has been in for a long time, you probably know better than I do that they have their own system of meetings and handling business and will probably not look forward to another annual shareholders meeting. It's also the case that the presence of a well-established board will not inspire many shareholders to attend an annual meeting, causing a lack of quorum should they get one set-up.
Has the board been sending out notices announcing the annual meeting? There should be a legal affidavit certifying that eligible shareholders were mailed notices and given information on where and when to attend. If that has not been done, the board is clearly neglecting its duties.
If the notices were sent out, and not enough shareholders came in to establish a quorum, nothing that occurs at the meeting can be considered binding - depending on the bylaws, the board may have to have the meeting again in 2 or 3 months. If there is no quorum, often the board has the authority to hold their own elections and will vote themselves back in without shareholder input until next year. Bylaws allow for a special election to be called in many co-ops if shareholders representing 10% demand it, but it's probably easier for dissatisfied shareholders to communicate with the board directly or motivate people to attend the next one rather than go down that route.
There are plenty of Coops that have issues with their Board of Directors. Even though the building may hold Annual Shareholder's Meetings, there usually aren't enough shareholder's in the building that are concerned enough to get involved and make changes. We needed to hire an independent lawyer (the coop's lawyer do not assists shareholders, they work for the B.O.D.) because we also hadn't had a quorum for over 10 years. In fact, none of the shareholder's really understood how the election process actually worked. Ironically, the year we hired the lawyer, we had a true election with a new shareholder getting on the B.O.D. I highly recommend that you understand the total process and start informing other shareholder's in your coop. Then, if you truly want to make a difference, go door to door in your coop building and get as many proxies signed and run for the board!
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I would pull out your copy of the prospectus and proprietary lease and read through them. Usually, the board has a fiduciary duty to follow the rules of the corporation, and a complaint can be made to the state attorney general's office, (or some other authority depending on the state you reside in), for failure to hold an annual meeting and/or elections. Are you receiving copies of the annual financial statements? You generally also have the right to review the minutes of board meetings, although you may have to read them at the management company's office. Encourage others to make complaints as well. If an election does present itself, run for the board!
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