Page 5 - CooperatorNews NY November 2021

COOPERATORNEWS.COM COOPERATORNEWS — NOVEMBER 2021 5 QUESTIONS & ANSWERS Legal Q A& Sponsor Hold on Board Q I have been a shareholder for close to 20 years in a building that went co-op in the late 80s and whose bylaws and governance are still dictated in most part by the origi- nal offering plan/proprietary lease that was standard issue at the time. During my time here an ongoing concern of resident shareholders has been the fairly static ratio of sponsor units vs. individu- ally owned units. That ratio has hovered around the 50/50 mark, with non-spon- sor shareholders holding a slight edge in overall shares. The board theoretically is comprised of seven seats with the sponsor holding three in abstention. However, of the four non-sponsor seats, one has been held for decades by an ‘original’ shareholder- owner who happens to have a long-term relationship with the sponsor (i.e., this individual has been the primary rental agent for the sponsor’s units). This board member also acts as the sponsor’s proxy at election time, ultimately responsible for a disproportionate number of vot- ing shares, which has been a big reason for this person’s continued tenure on the board and their influence over who else gets elected. (We stagger two-year terms.) Over the years, other shareholders have questioned the legality and/or eth- ics of all this and wonder if this situation constitutes ‘sponsor control of the board.’ Also questioned is whether the sponsor’s votes at election time are even allowed to be used to determine non-sponsor direc- tors (when their three seats are never vot- ed upon). Is this appropriate? The legacy co-op documents do state that ‘the hold- ers of unsold shares are entitled to vote at all elections,’ but also states the spon- sor cannot have control of the board after five years. Please advise just what voting power the sponsor should have at elec- tion time, and whether they still have un- due influence on the composition of our board as described above. Lastly, there is also the question as to when does the sponsor relinquish one of their director positions as the owner ratio increases? —Baffled in Brooklyn A “The sponsor’s authority in the management of a co-op is a function of the offering plan and governing documents, since it is a contractual (and fiduciary) relation- ship with the residential owners,” says Christopher Tumulty, partner at law firm Tarter Krinsky & Drogin LLP, with offices in New York City and Princeton, New Jer- sey. “In addition, the courts and the at- torney general have imposed obligations on a sponsor to sell off enough units and transfer control of the building to the res- idential board so as to create a viable co- op. Generally, sponsors have the obliga- tion to sell apartments unless specifically limited in the plan. Based on the ques- tion, the five-year control period in the governing documents has expired and the sponsor still holds approximately 50% of the units. This may run afoul of the spon- sor’s obligations. In addition, depending on the governing documents, the failure to turn over the three sponsor-held board seats may also be problematic and/or the resident shareholders may have recourse. I would advise the resident shareholders to retain counsel to review their rights based on the governing documents.” Waiting for Abatement Q Since 2003, I have been a resi- dent/owner of a condo in River- dale. Last year, I became aware of the building’s eligibility for the NYC condo tax abatement program. No other owners in the building knew anything of the program. Most owners (including the board) assumed the only applicable pro- gram was the STAR exemption. However, this year and with the help of DOF and elected officials, the build- ing manager promised to file timely—she did not. My taxes are slightly more than $5,000 a year, so I am overpaying about $1,400 a year in real estate taxes. Whose is liable? Please let me know if the board and the management company are both liable for failing to file for my building’s real estate tax abatement. —Overpaying A Slava Hazin, partner at New York City law firm Warshaw Burstein, says, “It is the responsibility of the manag- ing agent and the board of managers of your condo to apply for the NYC co-op and condo real estate tax abatement pro- gram, which provides an abatement of up to 17.5% to eligible owners. The manag- ing agent should have previously applied for this abatement, and its failure to do so, especially after the building manager advised you she will file it, makes the managing agent, as well as the condo, li- At FirstService Residential, we know that condo and co-op board members face a number of challenges. We’ve curated a library of resources to help. From managing capital improvements to preparing an effective budget to complying with New York City’s myriad of local laws and energy regulations, the FirstService Residential Resource Library has the support you need. Click here or scan the QR code. www.fsresidential.com/new-york LetsTalk.NY@fsresidential.com 212.324.9944 New York’s Property Management Leader Making a Difference. Every Day. continued on page 18