—Upset on the Upper East Side
“Sometimes the tax is reflected in the original governing documents (the bylaws and proprietary lease) when the co-op is created by the sponsor, and reflected in the sponsor’s offering plan. More often, they are adopted after the plan is created. In that case, both the bylaws and the proprietary lease must be amended to reflect the corporation’s right to impose it. Such amendments must be approved by a vote of the requisite number of shares described in each of those documents (often two thirds, sometimes three quarters of all shares entitled to vote), either by a vote at a properly called meeting at which a quorum is present after prior timely written notice to all shareholders, or by the shareholders’ unanimous written consent.
“Many cooperative corporation bylaws also require bylaw amendments to be approved by the Board of Directors, again, either by a vote at a properly called meeting at which a quorum is present after prior timely written notice to all directors, or by the directors’ unanimous written consent. It is unclear from the inquirer’s description whether all of the corporate formalities were complied with in this case. I suggest that he or she consult with an attorney to review the documentation provided by the cooperative as well as the relevant governing documents to determine if this flip tax was properly enacted, and if not, to help the inquirer figure out the best course of action under the circumstances.”