Q: I live in a large cooperative in lower Manhattan with nine board members. One board member sold his apartment and moved to another state. The second member lives abroad with his family and is subletting his apartment, with plans to eventually return to the housing complex. Both currently serve as directors. I think their ability to work in the best interests of the co-op could very well be compromised. Is this legal? What can I do?
answer: Although the law does not specify that directors of a cooperative must be residents or even shareholders of the building, the cooperative’s governing documents may include such qualifications and requirements. there is.
Let’s start with the terms. Do they allow people who don’t live in the building to serve on the board? Do they require shareholders who sell their shares to give up their seats on the board?
The ordinance may be silent on these issues. But Leni Morrison Cummins, head of the condominium and cooperative practice at law firm Cozen O’Connor, said shareholders could force nonresident directors to resign if residency is required.
Your question raises a larger issue facing some co-ops. The question is: Is the board serving the interests of residents or the interests of investors? Over time, cooperatives began to allow shareholders to buy shares as investors, as well as to be based elsewhere or rent to sublessors. “Because of this, many co-ops have a split population, with one resident shareholder and one investor shareholder,” Cummins said.
He said resident shareholders typically want to invest to improve their daily lives and maintain restrictions on occupancy and subletting. Investor shareholders often prefer to keep costs down and relax restrictions on occupancy and subletting.
Shareholders can vote to institute occupancy requirements, but this can be difficult if there are many investors in the building. Andrew I. Burt, senior counsel at Kagan, Lubick, Lepper, Finkelstein & Gold, LLP, said, “If shareholders do not amend the articles of incorporation to limit board membership, there will be no significant difference between nonresident board members and We should strive to build strong relationships and share our concerns.”
And remember, your co-op is a democracy, so you can participate in the next election. “It can take some effort to campaign and gather proxies,” said William J. Geller, a lawyer at Braverman Greenspan. “But if a reader wants to change the orientation of a building, it can be a very effective way to get things done.”
If you would like to receive weekly email updates on residential real estate news, please sign up here.
