Corporate—Co-ops are a corporation. Co-ops have bylaws that specify how the co-op is to be run. The bylaws state that the shareholders elect a board of directors, specify how many directors are to be elected and state that there must be an annual meeting of shareholders. Your co-op should have such a document. The board of directors manages the corporation’s affairs, including building condition. The board of directors is usually authorized to elect the officers. If not, the shareholders are authorized to elect the officers. The bylaws also provide for special meetings of shareholders. One approach might be to organize the other shareholders, demand that an annual meeting be scheduled or call a special meeting for the express purpose of electing a new board of directors and discussing building maintenance issues. The shareholders would then elect a new board of directors who would elect new officers. This approach would enable you to elect a new president with your views.
Building Standards—the board of directors of a co-op is given wide discretion by the law on how it runs the building. This is known as the business judgment rule. The courts do not want to be involved in managing a building or second guessing the board of directors. This means that the president could contend that the board of directors is governing the co-op and maintaining the building in accordance with the discretion granted by the business judgment rule. On the other hand, there are certain minimum housing standards required by the Multiple Dwelling Law and the Housing Maintenance Code of New York City. There is also a concept under the New York Real Property Law known as the warranty of habitability.
“Co-ops are considered the same as rental buildings for purposes of the warranty of habitability. The shareholder has a proprietary lease or equivalent occupancy agreement for a subsidized project. A tenant can stop paying the rent if the landlord, here the board of directors or the president, does not properly maintain the building. If the co-op started a non-payment proceeding against the tenant-shareholder in housing court, the tenant-shareholder could defend by alleging a breach of the warranty of habitability. The court would then order an inspection by HPD. If the inspection showed that repairs were needed in the building or the tenant-shareholder’s apartment, the court could do one or more of the following: order the landlord to make repairs; abate the rent by stating that the tenant is entitled to a rent reduction of 10 percent or more of the monthly rent; or order emergency repairs. The court will order repair of the intercom or installation of a new lock on the front door of the building. Typically these proceedings are settled by court ordered stipulation with the tenant agreeing to pay the back rent according to a schedule and the landlord agreeing to make repairs set forth in the stipulation. Money for repairs is often a major concern. If the building has no reserve fund, the money has to be raised by assessment or maintenance increase. HDFC co-ops are often co-ops where the city sells the apartments to the shareholders at a bargain price. Money is a real issue in these buildings.
HP Proceeding—another alternative, that can also be done in connection with non-payment of rent, is to start a tenant HP Proceeding in housing court. There is a clerk known as the HP clerk who will give the tenant the forms necessary to start the proceeding. The petition will state the repairs that are needed. The court will order an inspection and attorneys on the New York City HPD Code Enforcement staff will represent the tenant in court at no charge. The HPD attorney will secure an order directing the landlord to make specified repairs that are needed according to the inspection.