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Rifting off the string below...
What ever happened to last year's effort to get a coop/shareholder bill of rights? Any chance of reviving this effort?
What do people think is most crucial to include? I can think of:
--The right to privacy in one's home
--The right to review financial records of the corporation in which one owns shares
--The right to oust owners found guilty of malfeasance.
--Better laws needed
Steve,
You are right -- it does.
So, then, how to enforce them?
...assuming, per an earlier poster, that the DA & AG won't get involved in individual cases falling beneath 100K or so?
Distressed,
We need to clarify one of your points. When you say "oust an owner guilty of malfeasance," do you mean to refer to a board member, or to a shareholder who isn't on the board?
I'll assume you're referring to a board member.
I don't have first-hand experience with removing a board member. What I know is that most proprietary leases have a procedure to remove an elected director. Generally it takes a super-majority of shares (such as two-thirds), so check your p.l.) Find out who can make the motion because you want to make sure a non-director can do so. If that's the case, you need to get organized.
First, talk to your neighbors. Find out if they support you. Without their support, you won't get a vote.
Ask your neighbors to start talking to their friends in the building. You need to tally potential votes in your favor (remembering that you have to count shares, not individuals).
Basically, what you're doing is making sure that if you hold a special meeting to remove a director that you won't fail miserably, wasting everyone's time (including yours). Once you and your supporters feel you have enough votes, approach a lawyer. Removing a director must be done according to the p.l. and corporate law or else it may be invalid. You may have to hire a lawyer to get it done, unless you have an ally on the board who will allow you to charge the work to the co-op.
Once you have the lawyer's backing (to make sure you're following your co-op's rules, as well as to get some advice on how to proceed), you and your supporters can call a shareholders' meeting. That's where you will make your case and call for a vote. If you've done well, the shareholdes will consent to a vote. If you've done really well, you'll get enough votes to oust the person you target.
However, realize that the board will know what you're doing early in the process. You must be prepared to face opposition because you're accusing someone of a white-collar crime (I assume). These are highly charged issues with lots of emotion!
An alternative is to vote the person off the board at the next annual election. Run for office yourself, or find someone who's interested. If your building generally runs a slate, you should consider running an alternate slate, and get their names out a couple of months before the meeting so they can campaign door-to-door.
Which way you go depends on how much turmoil you can stomach.
Once you're on the board you can conduct forensic accounting to discover how much money is missing and, perhaps, where it went. Then you can file a civil suit against the alleged thief. According to earlier posts, civil suits are preferable to criminal suits (by the DA or AG) because buyers don't like to invest in a co-op involved in a criminal investigation.
I hope that's helpful. Others on the site may have better advice than I, so keep your ears open.
Also, search Habitat's artical archive. The magazine does a good job of explaining this stuff, and they have a legal column too, which may have dealth with this very topic in the last several years.
Good luck.
Thank you, Steve. Yes, civil seems the way to go. Promises to be expensive for us all.
If I survive this, you won't catch me investing in a coop again. Clearly the legal protections are ridiculously inadequate against what appears (from my years of involvement in coop issues) to be widespread malfeasance and fraud, often at too low a level to interest authorities, yet very upsetting & inappropriate in one's "own" home.
If coops are to hold their (increasingly trailing)value against condos & houses, coop owners should demand the state create better legal protections -- and, failing that, make it easier to turn coops into condos.
Coops are a failed structure, in my opinion. The proof? No one dares create any more of them.
--still distressed
Hi, Distressed,
The civil way is usually the best way to go unless you have dangerous problems.
On your other point, that co-ops are a dicey investment, I agree only partly. Like any corporation, investing in a business with others in control is never a guaranteed win-win. Just look at Enron as the worst of the worst examples, and there are plenty of other examples of corporate mischief across all sorts of businesses. Co-ops are just one example.
Why do co-op values tend to be lower than condo values? In NYC, at least, when you buy a condo you (typically) pay off your portion of the corporation's mortgage; when all the apartments are owned, there is no underlying mortgage which increases the value. In a co-op, you're typically buying only your apartment; the corporation pays the mortgage out of your maintenance fee. With an underlying mortgage, the apartment is not worth as much.
Lots of other variables, of course, but the most basic is the amount of equity in the property.
All that said, there are good co-ops out there, with honest board members. The problem is that it's nearly impossible to find out which is which until it's too late.
All good points, Steve.
We could surely use a more transparent system for coop purchase. When I think back to mine, there's no way I would've been able to discover what was going on here. In fact, it took some years on the board, and digging t to find out.
I am still thinking of a sort of independent rating system. The residents of coops that failed or got low marks would feel suddenly inspired to help the place improve. AdC is right in a sense that it takes active -- and perhaps he/she lives in a coop of smart, involved, civic-minded people -- but what's happening here is that people seem to be surreptiously fleeing. Not how I want it to work.
Distressed
I did not expect to respond to another of this types of messages; however, your comments provoke some thoughts:
"Coops are a failed structure, in my opinion. The proof? No one dares create any more of them."
First, I agree with you; yet, they are a MIRACLE since they still continue to exist in spite of the turmoil of the late 80's and early 90's AND in spite of the "fallen human nature" seem to reside in such multiresidential forms of ownership. Consequently, co-ops are not are not failed structures. The fact that they don't work in your case or my case, does not mean that they should be banned from the face of this earth. Otherwise, we may also call for the doom of democracy as such.
I believe the great problem is the Admissions Committee and the form it screens and selects residents. Perhaps too similar to each member after the financial test has been passed.
Thus, I propose hiring an INDEPENDENT PSYCHOLOGIST to administer a "COMPTENCE TEST" for potential shareholders. What are the traits expected after your PL has been modified to demand that shareholders are appointed without being able to refuse the appointment:
1. 100% Honesty and ethical behavior on the part of each shareholder.
2. Second component:
a. 15% of shareholders must show STRONG LEADERSHIP.
b. 40% Must be followers. These will push the agenda of the leaders.
c. 30% Highly detailed individuals. These will scrutinize the leaders and followers.
d. 15% HIghly empathetic individuals. These will advocate for indidivual rights of shareholders.
Once you have the ideal mix of shareholders, you may start having good boards that will do and take care of their fiduciary responsibilities.
Sorry to inject some fun, but I can only believe that the whole thing starts with ME and those whom I think are worthy to be called MY NEIGHBORS.
AdC
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Dear Anonymous,
Such a law wouldn't hurt, but would it really help? After all, you have those rights already.
It sounds as though what you need is a stronger proprietary lease. I'm willing to bet that yours already requires that:
* Certified financial statements be made available annually;
* Shareholders may be stripped of their right to live in their apartments (a corporation doesn't have the power to "oust" a shareholder -- you can't just take back someone's shares, whether they're in GE or your co-op -- but by preventing him from living in his apartment, you've essentially eliminated the point of holding the shares);
* Apartments may not be entered without a shareholder's permission except in emergency.
If your proprietary lease does not contain these rights, start talking to your neighbors. Convince them how important the rights are. If they agree, then call a shareholder meeting (you have the right to do so if a certain percentage of shareholders or shares calls for the meeting -- check your p.l. for the figure). At the meeting explain why the rights should be added to the p.l. and ask the shareholders to vote in favor of them.
That way you get what you want and you avoid Albany!
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