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Q&A: Maintenance Increases in a Pandemic

Q. Given the freezes put on evictions and collections during the COVID-19 pandemic, is it legal for a board to give a maintenance increase right now? 

                                                —Wondering

A. “While there is a cornucopia of governmental orders and directives involving the relationship between cooperatives and their shareholders, none of them would prohibit a cooperative board of directors from implementing a maintenance increase at this time,” says Dean M. Roberts, Esq., attorney with the Manhattan office of Norris McLaughlin, P.A., with additional offices in Bridgewater, New Jersey, and Allentown, Pennsylvania. “As a general rule, boards have wide discretion on their business decisions—as evidenced by the Business Judgment Rule, which severely limits judicial review of board decisions. Given that cooperatives by their very nature cannot make a profit, any increase would clearly be justified to cover either increased expenses or, if the money is placed into the reserve funds, for expected capital improvements. The only possible limitation that comes to mind is if the cooperative has entered into a forbearance agreement with its primary lender and an increase might be subject to the lender’s review and approval; however, even if approval was required, it is highly unlikely that a lender would have an objection to higher maintenance.”

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