Q. What do you do when the president of the board, property manager, and super are all one family? I tried waking up the shareholders with memos and flyers about the conflict of interest to no avail. Our beautiful Garden of Eden has become ridden with drugs and more renters than actual shareholders residing here. A real estate owner who doesn’t live here but serves on the board has been selling and renting out apartments. The parking list is a big secret and not seen by shareholders to see if seniority is followed, which it isn’t; [and] is handled by the property manager. The management company are held harmless to their contract due to the conflict of interest to protect them. But what about us? Who's got our backs when it comes to following laws, policy and procedures?
A. “For purpose of this response I am assuming that the reader lives in a cooperative and has indicated now that there are more renters than actual shareholders residing in the building,” says attorney Peter Livingston of the New York firm of Anderson Kill. “This presents a very serious problem for all shareholders since at some point in time presumably this cooperative will be required to either refinance its underlying mortgage or to secure one to do capital improvements. Banks are very reluctant to make loans to cooperatives when the ration of owners to renters is less than a minimum of 50 percent. This should be enough of a reason to wake up those shareholders who to date have been ignoring your requests. In addition shareholders who might want to refinance their co-op loans or sell their apartment may have a difficult time finding a bank to do the transaction.
“Under the circumstances, you might try to get together a small group of shareholders to spread the word and possibly have a meeting or series of meetings in the apartments of those individuals who are interested in the welfare of your building to see whether you can muster support for an election to either replace or recall the current president of the board and others who apparently are not doing a very good job.
“In terms of a parking list this is the type of document that you as a shareholder are entitled to see particularly if you believe that the list not being followed. You should make a written demand to the management company and provide them with an affidavit that you are asking to inspect the lease for non-commercial reasons. If they fail to comply your recourse would be to go to court. Once you have the list, you will be in a position to see whether or not the list is being followed according to seniority. If the property manager is not doing it correctly, then this is all the more reason why they should be terminated regardless of whether or not they have a hold harmless clause in their contract.
“In this instance the shareholders have a vested stake in seeing that their investment in their homes is not undermined by a property manager not doing their job and the shareholders only have themselves to blame unless they unit to rally against the way the board is functioning.”