How Transparent Should Boards Be Understanding What Information to Provide Owners and Shareholders

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Living in and running a co-op or condo can be stressful. And it's understandable that both the board of an association and those to whom it serves can find themselves overwhelmed, not only with vital information pertaining to their day-to-day, but also with which information boards must disclose to owners and shareholders, and which can better be withheld for the better of the association or corporation.

While a board is beholden to its fiduciary duty and various laws and statutes, and thus should be well aware of its obligations, the average resident may have no idea as to what documents they should be reviewing – and to what information they are entitled to or not.  

Know Your Rights

“A cooperative shareholder, historically, has a broad right to examine corporate documents,” explains Leni Morrison Cummins, an attorney with the firm Cozen O'Connor, which has an office in New York. “A shareholder has the right to examine all corporate books and records where the request is made 'in good faith, and for a proper purpose.' These documents include – but are not limited to, minutes of shareholder meetings, a list of shareholders, annual balance sheets, and profit and loss statements.”

Many of the rights addressed above stem from the Business Corporation Law, specifically section 624, as William D. McCracken, a partner with the Manhattan-based Ganfer & Shore, observes. But he warns that, should a shareholder request a list of other shareholders, “they must first submit an affidavit affirming that they are seeking it for the business of the corporation and that they have not tried to sell such a list within the previous five years.”

Co-ops that fail to ask for an affidavit can find themselves in hot water. “I recall one shareholder who asked their co-op's managing agent for a list of the co-op's shareholders,” says McCracken. “The managing agent turned it over to her without first asking for an affidavit of proper purpose. A few days later, every shareholder in the building received a solicitation from this woman stating that she was a newly-licensed real estate broker and asking them to let her help them sell her apartments. Suffice it to say, this resulted in many justified complaints from the residents to the board which could have been avoided had the law been properly enforced.”

The Condo Side

While condos are not corporations and are thus not as limited by law regarding a unit owner's right to information, Cummins observes that, in recent years, there has been an increasing trend toward treating condos more like co-ops.

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