Divorce and the Board: Divorcing Co-op Owners, Rooftop Barbecues and Costly Assessments
By: Michael Kolomatsky
August 2nd, 2014
Q. Our co-op board recently announced the implementation of a significant assessment to raise $3 million over the next three years for current and future capital projects. It amounts to about 48 cents per share payable monthly, which will likely represent a significant financial burden to most shareholders. Shareholders do not know the details of these capital projects, their costs or why the board needs to raise $3 million. Is there anything we can do to stop this assessment from being implemented? Hartsdale, New York
A. “Many times an outcry will stop the board from doing this,” said Adam Leitman Bailey, a real estate lawyer.
Pleading for information might be your best bet; if you took the matter to court, a judge would likely side with the board, since boards are protected by the business judgment rule, which shields boards from legal action as long as they are trying to act in the best interest of shareholders.
You might have one useful tool at your disposal: If the co-op’s corporate documents restrict borrowing limits without a shareholder vote, then the shareholders could potentially stop the assessment, assuming the board has not already signed a mortgage with a bank.
If none of your actions make you feel better about signing those hefty assessment checks, then you and the other shareholders might consider electing a board that will better respect your financial wishes going forward.