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Our co-op board hasn't held a shareholders meeting or an election in three years. What are our next steps?
If your board is actively preventing meetings or hasn’t called one in more than 13 months, shareholders with 10 percent of the shares can get together and demand an annual meeting to be called to elect directors. If the co-op does not call a meeting, the shareholders themselves can call a special meeting of shareholders where the sole purpose will be to elect a new co-op board.
“Your apartment is very often the most valuable investment that you have, and if the co-op is not being handled like a business or the people on the board are not being honest, and not doing what’s in the best interest of the corporation, sometimes you have to take over,” says Steve Wagner, a real estate attorney, and partner at Wagner Berkow & Brandt.
Applying legal leverage
In a situation like this, alarmed shareholders will join together to hire an attorney to advise them on the process of calling a special meeting, and ultimately help ensure that an election, when held, is fair.
You and your neighbors will need to understand and follow the written requirements and specific timetable of how and when notices should be delivered for the special meeting. For example, the meeting needs to be set for between 60 and 90 days from the date of the written demand, and if the board doesn’t call the meeting within five days of the notice, any shareholder can sign the demand and call the meeting.
Wagner regularly walks shareholders through this process, making sure they comply with the co-op bylaws and business corporation laws that govern co-ops in New York.
“Sometimes, just having a lawyer in place can be enough to get things corrected,” he says.
Ensuring a fair election
Getting a shareholders meeting doesn’t necessarily mean there’s going to be a shake-up of the board. “The shareholders who are demanding the meeting need to organize so that when the meeting is actually held, the election is fair and they will prevail,” says Wagner.
That can be challenging because voting forms, or proxies, are often sent out to all the shareholders and Wagner says “there’s no rule that prevents the board from collecting proxies and using them to vote for incumbent board members. If the board refuses to call a meeting and is intent on retaining control of the board, proxy fraud may be a significant risk.”
If you suspect proxy fraud, you and your attorney should make that challenge known right away in writing. You will need to state your concerns and to demand to look at the ballots, proxies, sign-in sheets and other documents contained in the co-ops files to ensure signatures all match. (For more information on this, we have an article on how to find out if your co-op board election results are fraudulent and what to do about it).
The court of last resort
“It’s more efficient to win an election than try to throw someone off the board,” says Wagner, but in some circumstances, court action is the only way to remove certain members of an unscrupulous, dishonest board.
“The budgets of many New York City co-op and condo buildings are in the multimillion dollars. Think of the board members as people running a multimillion-dollar real estate business, and the value of your apartment is going to depend on the proper administration and running of that building,” he says.
New York City real estate attorney Steven Wagner is a founding partner of Wagner Berkow Brandt, with more than 30 years of experience representing numerous co-ops, condos, and individual owners and shareholders.To submit a question for this column, click here. To ask about a legal consultation, send an email or call 646-791-2083.
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