Page 7 - CooperatorNews New York September 2021

COOPERATORNEWS.COM
COOPERATORNEWS —
SEPTEMBER 2021
7
QUESTIONS & ANSWERS
Legal
Q
A&
Categorizing the Capital for Capital
Improvements
Q
I have a question as a sharehold-
er. Our Mitchell-Lama develop-
ment in NYC is taking a needed
bank loan to cover major repairs. Th ere was
no shareholders meeting or voting on this
capital improvement. Th e board has not yet
decided on how to treat this loan for the
shareholders’ carrying charges—by a rent
increase or a loan.
Th e IRS said to me that if it’s treated as a
loan, I cannot take it as a deduction on my
taxes because the building is doing major
repairs in shared areas and not the share-
holders’ apartments. I’m concerned about
what this will do to shareholders on social
security and fi xed incomes.
—Afraid of Rising Costs
A
“Under the governing provi-
sions of the Private Housing
Finance Law and the rules
and regulations of the New York State Di-
vision of Homes and Community Renewal
(HCR or DHCR), any increases in mainte-
nance [in a Mitchell-Lama cooperative] are
subject to a review and approval process that
requires shareholder input, but does not
require shareholder voting,” says Dean M.
Roberts, Esq., attorney with the New York
offi ce of law fi rm Norris McLaughlin. “Th e
proposed cooperative budget is submitted
to HCR and then, based on their analysis,
a maintenance increase is recommended as
determined by HCR and then, aft er a meet-
ing with shareholders, the proposed budget
is reviewed and approved by HCR.
“It is highly likely that the lender who
provided the loan to the co-op will condi-
tion the loan on some type of maintenance
increase to refl ect the added borrowing
costs, and in turn these increased costs
would be part of the co-op’s budget submit-
ted to HCR.
“As for the question regarding there not
being a meeting regarding the capital im-
provement or how it was fi nanced, there is
no legal requirement for a shareholder re-
view or vote on these issues; the board of di-
rectors as the elected representatives of the
shareholders is empowered to make these
decisions, usually under the Business Cor-
poration Law as well as the bylaws.
“I believe the questioner is correct that
the loan will not be a deductible expense—it
will be repaid by shareholder maintenance
which is not a deductible expense. As for
the added burden to shareholders on fi xed
incomes, there are a number of programs
especially for senior citizens such as SCRIE
[Senior Citizen Rent Increase Exemption]
and other programs that would protect
them from these increases.”
A Rogue President
Q
We recently had to vote to re-
move our board president from
his position, because he was tak-
ing small amounts of funds on a regular
basis. He said it was all ‘petty cash reim-
bursements,’ but he never told the board
or treasurer about many of them. Our new
treasurer happened to notice these as he was
going through papers.
Th e problem is that this man is still on the
board, running around to shareholders and
telling them that he was thrown off without
reason. We have many papers to prove this
is not true. He is getting the residents very
agitated, having them believe that the new
board members are going to destroy the co-
op. He is also calling the management com-
pany as oft en as eight times a day, complain-
ing to them that he was overthrown without
cause.
My questions are:
He is lying to shareholders and harass-
ing them and members of the management
company. His behavior is very erratic. How
can we remove him from the board?
Th is man has said that nobody but the
treasurer is entitled to know what the presi-
dent uses petty cash for. Is this true? (Th e
treasurer only knew about a very small por-
tion of these expenses.)
Th e shareholders are looking for expla-
nations as to what’s going on. Are we al-
lowed to show them copies of the petty cash
so that they can know the truth? We don’t
want to get sued, but we want the residents
to know what’s been going on before our an-
nual elections in the fall.
A
Attorney Qing Angie Lin of
Lasser Law Group in New
York City answers:
“1. Generally, there are two diff erent stan-
dards to consider when trying to remove an
offi cer from the board of directors in a co-
operative, such as the president: (1) removal
of the individual person as an offi cer; and
(2) removal of the individual as a member
of the board of directors. If a cooperative’s
certifi cate of incorporation or its bylaws are
silent on these issues, then the default rules
pursuant to NY Business Corporation Law
(BCL) are as follows: (1) an offi cer may be
removed by a vote of the board of directors
with or without cause; and (2) a director
may be removed by a vote of the sharehold-
ers for cause. Language in most cooperative
continued on page 7 continued on page 7
“FirstService Residential has been our
managing agent for decades. Whether
finance, day-to-day problems or getting
through a big capital project, the team
shows up with great ideas and solutions.
Our property manager’s leadership, coupled
with the rest of our FirstService Residential
team, makes our staff and our board
function better. The email I just received
from FirstService Energy double assured
me that being under the big FirstService
Residential umbrella is the only way to go. I
sent it out to everyone on the board telling
them the same.”
>> Stephanie G., Board President
200+ unit cooperative
Upper East Side
www.fsresidential.com/new-york
LetsTalk.NY@fsresidential.com
212.324.9944
New York’s Property
Management Leader
Making a Difference.
Every Day.
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