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Q&A: Improper Power Grab Threatens Co-op

By Rachel Sigmund McGinley


Q. I live in a Housing Development Fund Corporation (HDFC) building in the Bronx. My building has no meetings or elections, and shareholders are not informed of our financial status at all. The treasurer’s son has taken complete control and has taken advantage of the elderly shareholders by making himself a site manager/shareholder without authorization or notification. The son also has personal issues with me because I am the only person among five shareholders in the 10-unit building who speaks up. The other shareholders are elderly and afraid to say anything; those who receive Section 8 fear that the son will report them for having relatives living with them and that their supplement will be revoked.

The son is aware that I cannot find my shares certificate and has now sent me a letter stating that I must have a meeting because the corporation is unclear if I’m a shareholder or a tenant. I find this insulting and an example of his personal harassment towards me. His mother, the treasurer, served on the board with me years ago; she’s well aware that I’m a shareholder. The current secretary is the one who issued me my certificate—I have a written letter from her confirming this. So why is he asking me to show him proof? I need help and advice as to how I should proceed with this. Am I obligated to show him anything?

We’re stuck because we can’t afford an expensive lawyer. I have written to HPD, the Attorney General, the Mayor’s Office, etc., and no one has helped. We’re living in our building as if he’s the landlord and we’re the tenants. On top of that, we’re going to lose our building due to unpaid taxes, and we can’t even help ourselves. Please help us or direct me to someone that can.

A. “The treasurer’s son is controlling the co-op’s funds and holding himself out as the ‘property manager’ without proper authorization,” says attorney Rachel Sigmund of the New York City firm of Adam Leitman Bailey, P.C. “Both the treasurer and her son are subject to potential criminal charges for misappropriation of co-op funds if either of them are dipping into the co-op’s funds to pay the son for his ‘services’ as the purported ‘property manager.’ The reader should refer the matter to the district attorney’s office for investigation.

“In addition, the reader is entitled by statute to review the co-op’s books and records (BCL § 624[b]) and to receive, upon written request, an ‘annual balance sheet and profit and loss statement for the preceding fiscal year’ (BCL § 624[e]). Co-ops are also required by statute to maintain a record of the names and addresses of all shareholders, the number and class of shares held by each, and the dates when each shareholder became the owner of record thereof (BCL § 624[a]). Thus, a review of the co-op’s records should reveal the reader’s shareholder status. Regardless, the treasurer’s son has no authority to question anyone’s status in the co-op, as he is not even a shareholder, let alone a legitimate officer, director, and/or agent of the co-op. The reader should ignore correspondence received from such individual.

“Many co-op bylaws permit shareholders owning at least 25 percent of the co-op’s outstanding shares to petition the board to call a special shareholders’ meeting. In a co-op with only five shareholders, two shareholders may be enough to satisfy the 25 percent requirement. If so, they should petition the board in accordance with the co-op’s bylaws to call a special shareholders’ meeting to elect a new board. Prior to the meeting, the reader should confirm with neighbors who will be running to replace the sitting board members’ seats. A quorum in accordance with the bylaws is necessary to proceed with the election, and thus proxies should be gathered in advance to ensure the desired candidates are elected.

“The top priorities of the new board should be hiring an independent accountant to conduct an audit of the co-op’s records and accounts and paying off any unpaid property taxes to avoid a tax lien filing against the property.”

Original Q&A

Adam Leitman Bailey, P.C.

NEW YORK REAL ESTATE ATTORNEYS