Q&A: Shareholder Input on Maintenance Projects

Q I am a shareholder in a four building, 68 unit co-op. Two years ago, shareholders voted down a board proposal to replace the building’s 23-year-old windows. Recently, the board has decided to go ahead with the project which will commence in 2013, calling it a "major capital improvement project." A year ago the board pushed through another "capital improvement" replacing our elevators, machinery, and cabs without any shareholder input to cost or design. Is it legal for the board to veto shareholder decisions or not ask for input? Do we as shareholders have any right to overturn these decisions?

—Concerned About Capital Improvements

A “For a definitive answer, one would have to check the proprietary lease, bylaws and certificate of incorporation (“corporate documents”),” according to Steven Troup, a partner in the Manhattan-based law firm of Tarter Krinsky & Drogin, LLP. “However, I would be surprised if the corporate documents did not grant sole authority to the board of directors to make these decisions. This is the general scheme laid out in the Business Corporation Law under which the vast majority of New York housing cooperatives are formed and by which they are governed.

“However, a board would be well advised to keep the shareholders fully advised on issues such as these, and hold at least one informational meeting where shareholders may ask questions, make comments, etc. However, shareholder input is not binding on the board on these issues. So, yes, a board may give little or no credence to shareholder input. Absent a contrary provision in the corporate documents, the shareholders have no right to overturn these decisions.”

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Comments

  • The above question underlines the frustration of members of a co-op board who act in a responsible, thoughtful manner and then have shareholders misrepresent the facts. I believe that "Concerned About Capital Projects" is referring to a complex that I live in and she has not reported the facts. There was never a formal "vote" about a window project. Nothing was "pushed through" concerning an elevator project. The board held an informational meeting to keep all shareholders apprised of their plans about replacing the elevators and at that point shareholders were able to make comments and suggestions about the project. The board voted unanimously to proceed with the project after that meeting.