Q&A: Payment of Legal Fees
A “Addressing the issue of the fired superintendent first, if the superintendent’s employment was “at-will,” and not subject to the terms of an employment or union contract, he should have been instructed to vacate and surrender possession of his apartment at or about the time of his termination,” says Andrew J. Wagner, Esq., an associate at the Manhattan-based law firm of Rosen Livingston & Cholst LLP. “A holdover proceeding should have then been commenced to recover legal possession of the apartment in Housing Court. It appears that this may have actually been done, and that the ex-superintendent is defending the holdover proceeding, which might explain the substantial amount of legal fees incurred by the co-op thus far.
“Regarding the obligation to pay maintenance increases, the shareholders are responsible for paying all maintenance increases and assessments, provided that said increases are implemented in accordance with the policies and procedures set forth in the co-op’s bylaws, and that proper notice is provided to the co-op’s shareholders. This is true whether or not the shareholders agree with the board’s decision, and even if the board has made poor choices that resulted in the need to implement maintenance increases. Boards of directors are protected by the “Business Judgment Rule,” which allows them to make decisions (including raising the maintenance), provided they are made in good faith. The fact that the decisions are poor, misguided, or even harmful to the co-op does not provide a legal basis to withhold maintenance.
“A refusal to pay the maintenance increases could expose the shareholder to a potential lawsuit for the payment of said charges. Incompetence would not be considered a legally recognizable defense in any such lawsuit. Only the failure to comply with procedures necessary to implement the increases would be a viable substantive defense.
“Having said that, the shareholders are not without a remedy. They can simply replace the board in a subsequent election, or even recall the existing board by calling a special election, provided the bylaws allow it, and a sufficient number of votes are obtained. A new board could then repeal the prior board’s resolution, and take appropriate action to address the substantive issues involved.”