Q&A: Not the Management We Want

Q. We have a board made up of five members. All five members agreed that switching to new building management was warranted. Research was conducted for seven management companies. Two were selected, and one out of the two was voted on by a majority of three.

This company voted on has a long list of issues: building violations, no experience with buildings of our type, two members, no e-payment, they are not bonded, not a part of the NYS Real Estate Board.

The shareholders have spoken to the board and requested that the board seek out additional management companies. All five board members agreed to table and review their decisions and to look at other management companies.

However, two days later, three board members were non-responsive to the request of the shareholders by selecting the management company we do not want to manage our co-op. They also went in contract without notifying the president of the board and shareholders. The shareholders are pleading with the three board members to not sign this contract. But to no avail.

What can we do?

 —Feeling Ignored

A. Says Eric Goidel, a senior partner at the New York law firm of Borah, Goldstein, Altschuler: “A cooperative apartment corporation operates by a board of directors and the corporation will be bound by decisions made by a majority of board members at a meeting at which a quorum is present. So from the vignette it appears that there was proper board action.

“While the shareholders can petition the board to reverse its decision, the shareholders cannot compel the board to do so.

“If the board ignores the wishes of the shareholders, the shareholders have the option of either (i) waiting until the next annual meeting and electing new board members more aligned with the shareholders, or (ii) if the bylaws so allow, asking that a special meeting be called to remove one or more directors. This typically requires that a certain percentage of shareholders petition for the meeting. The vote required to remove a board member varies dependent upon whether there is straight voting or cumulative voting for the election of directors.

“However, one must also take a close look at the signed management agreement to see whether it is terminable as of right or only for cause (and if for cause, what constitutes cause and whether there is an opportunity to cure). Absent such provisions, it is quite possible that the apartment corporation might be stuck with the agreement for the balance of its term.”     

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