Understanding Rights and Recourse for Shareholders
The news of co-op shareholders and condo unit-owners facing assessments atop their monthly charges has instilled a deep sense of dread, particularly as boards grapple with financing costly retrofits to comply with Local Law 97's carbon emissions regulations.
In Riverdale, when a co-op board announced a daunting $500,000 assessment to cover necessary repairs and new city mandates, one shareholder raised concerns about the lack of transparency in determining this figure. Investigation revealed that while the proprietary lease and bylaws didn't explicitly grant the board authority to impose assessments, they did empower the board to set maintenance payments and cash requirements.
But can shareholders or unit-owners contest such assessments? According to the Ask Real Estate column in The New York Times, courts afford co-op and condo boards significant financial management authority under the business judgment rule. Joseph Colbert, a real estate lawyer, asserts that even without specific mention of "assessments" in governing documents, boards retain the right to raise funds for building maintenance and compliance, provided they act in good faith.
Colbert emphasizes that courts prioritize the board's authority and the purpose of the charge over terminology. However, if a board acts in bad faith or engages in self-serving behavior, it forfeits the protections of the business judgment rule.
Encouraging open dialogue between shareholders and the board is preferred over costly legal conflicts, advises Debra Guzov, a real estate lawyer. Guzov suggests starting by requesting minutes from the board meeting where the assessment was discussed to understand the rationale behind the decision and how the amount was calculated.
If clarity is lacking, shareholders can request specifics on fund allocation from the managing agent and inquire about relevant contracts, although access may vary based on bylaws.
In essence, if the assessment was levied in good faith, dissatisfied shareholders may have limited recourse. It's a reminder to settle the dues and maintain cooperative relations within the community.