Q&A: When a Board Refuses to Make a Shareholder List Available

Q. We are shareholders and residents in a co-op in Westchester. The building provides underground parking for a fee. These cars are handled by a contracted valet parking service, who are careless to say the least. For a small increase in cost, the building will assign self-parking/dedicated spaces – if, and when, available. There is a waiting list for these spaces. The board refuses to make this list available to shareholders. They will, however, inform the shareholders of how many people are ahead of them on the list.

When I asked months ago where I was on the waiting list, I was told that there were five people ahead of me. Recently, I checked in again and was told that there were now six people ahead of me. This doesn’t make sense as I am getting further from the top of the list. This is when I submitted a written request for a copy of the list. The board is obviously not “transparent.”

What begs the question as to why this list is not made available is that: the previous president of the board has a dedicated space; the current president of the board has two dedicated spaces (he was grandfathered in for this extra space); and two former board members have a dedicated space, each. (The board consists of only seven members). The bylaws allow shareholders access to financial records maintained by the managing agent but are silent as to access to something like this list.

Any ideas as to what the best course of action is? I was told that if I was not happy with the garage situation, then I did not have to park there. Well, this response is disingenuous as there is no 24-hour street parking in existence.

                           —Irritated in Westchester

A. “The New York Business Corporation Law governs the operations of most co-ops in the State of New York and in particular Section 624(a) requires corporations to keep accurate and complete books and records,” says attorney Peter Livingston of the New York City-based law firm of Anderson Kill P.C. “While the statute does not specifically address the issue of a shareholder list for garage space, I see no reason why this shareholder should not be given access to inspect the list. It appears that he may have been taken off the list or someone may have been put in ahead of him since at one time it was indicated that there were five owners ahead of him and now there are six.

“The shareholder should at a minimum give notice in writing five days in advance of when he wants to examine the records to the management company. In addition, it would be a good idea for the shareholder to submit an affidavit stating that the inspection is not for any purpose other than one which is in the corporation’s interest and that the shareholder has not tried to sell any shareholder’s list in the past five years. Pursuant to statutory law, an inspection can be denied upon the failure to furnish the corporation with the affidavit.

“In addition to the rights that shareholders have under the New York Business Corporation Law, the common law rights to examine corporation records is broader than the rights guaranteed by statute. Indeed, the statutory right is not exclusive and courts have held that a shareholder has a right to inspect corporate records as long as the inspection is made in good faith and for a valid purpose.

“A valid purpose to inspect corporate records is one that is reasonably related to the shareholder’s interest and includes many different areas including investigating misconduct or gathering information to assist with legitimate litigation. Conversely, if an improper purpose was set forth, then the corporation would have the right to withhold the information. However, based upon the facts as presented, I do not see where a corporation would have a right to rely upon a finding of an improper purpose to prevent this shareholder from examining the records.

“In light of evolving case law giving rights to owners to have access to corporate records, it would probably not be in the best interest of this corporation to resist. The burden of proving an owner’s lack of good faith and proper purpose for a requested inspection falls on the corporation. Courts in the State of New York tend to favor shareholders seeking to examine records and case law is clearly trending in that direction.”

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3 Comments

  • Do the president have the right to sign a contract with a management agent, when the shareholders do not agree? How many signatures supposed to be signed on a contract?
  • What can be done when amanagement of a co op makes it a rule for employees to be untruthful to shareholders particularly when it comes to maintaining the building and no one on duty to to maintain services
  • Being able to get a shareholders list is a right guaranteed in your governing documents. The only reason why you would be denied it is because the board is trying to not allow people to be able to communicate with each other. It could only be for nefarious reasons as to why the board would want to do that. Our new co-op board was trying to go in that direction. Recent sales were kept under the radar as much as possible. After the 1st such sale “Management” stop sending group e-mails, so that the recipients would not notice any new contacts. I, being board of director savvy, instead of asking the board directly for the current shareholder’s list, I went straight to the property records website to obtain the current names to the shareholder’s list. Once the gig was up, the board of directors began sending group e-mails again that included the new recipients. Nice, right?