Call for More Regulation of New York City Co-ops

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State Attorney General Eric Schneiderman. The AG's office currently has a role in approving coop conversions, but some want to give it expanded authority to police how coops are run.

Photo by: NYAG

State Attorney General Eric Schneiderman. The AG's office currently has a role in approving coop conversions, but some want to give it expanded authority to police how coops are run.

A group of shareholders from the Nostrand Gardens Cooperative in Sheepshead Bay were unhappy with the way their building was being run. So, according to one resident, they collected signatures from 63 percent of the building’s shareholders requesting that the coop board step down and a new election be held.

The board initially responded by holding a meeting 22 blocks from the building.

With the help of a local politician, the shareholders were able to get the board to move the meeting to a more convenient location, but then the board began disputing the legitimacy of the signatures the shareholders had collected, submitting 14 affidavits from shareholders saying they did not know what they were signing.

These affidavits were signed by a local notary, Dmitry Rubalsky. In a subsequent deposition, Rubalsky said he did not notarize any of the submitted affidavits.

“This is a fraud. I never signed and notarized any of these affidavits. My signature was forged,” he said in his testimony. “I do not know how my notary stamp was obtained.”

The coop board and shareholders continue to dispute the legitimacy of the notarized affidavits. Meanwhile the coop has still not held a board election. (City Limits requested but did not receive comment from the board.)

For many New York City residents, coops are an affordable housing option. Buying into a coop can offer more stability than renting an apartment, and in most parts of the city, coops are less than half the price of condominiums. According to Alex Litvak, leader of the Cooperative Community Organization (CCO), a group that fights for the rights of shareholders, more than one million New Yorkers live in coops.

Coop shareholders are represented by a coop board, which manages the building. When an apartment is converted into a coop, any residents who choose not to buy their apartments will have their shares purchased by the building’s sponsor—the person or company that facilitates a building’s transition from rental to coop status.

While allowing those shares to be held by the sponsor prevents renters from being evicted, critics say it also gives the sponsor disproportionate control of a building that is supposed to be resident-led.

“This was very well intentioned, it was meant to help renters who didn’t want to buy, but a part of the result is that it lodged a lot of control with the sponsoring entity,” says Mary Ann Rothman, executive director of the Council of New York Cooperatives and Condominiums, a coop and condo advocacy group.

If the sponsor holds more than fifty percent of the building’s shares, then they can take control of the coop board.

The Attorney General’s office requires that sponsors give up control of the board after they have sold off enough shares to give them less than fifty percent, or five years have passed since the coop was established. But the CCO claims that in many coops, sponsors are not selling their shares and remain in control of the board for longer than five years.

A question of representation

Assemblywoman Helene Weinstein, a Brooklyn Democrat who chairs the Assembly Judiciary Committee, is the politician who intervened in the election at Nostrand Gardens. She says sponsor control is at the heart of many concerns in coops in her district: “Up until now, most of the problems have been where the sponsor still retains a lot of the units and retained control of the board and the management company.”

Rothman notes that sponsors do not always cause problems for coops. Many share the same interests as their coops shareholders. “Sponsors are not always villains, and shouldn’t necessarily be considered the enemy,” she says.

However, in some cases, a sponsor may remain in control of the coop even after they leave the board. Yury Bekker, a shareholder in a Brooklyn coop, believes the sponsor of his building is controlling the current members of the board. He says he suspects the sponsor of rigging the board elections.

“When there are elections for the board, [the sponsor] puts the property manager, his employee, in control of the election, and he is the one who counts the votes,” Bekker says. “He sells someone his apartment for a lower price than market, and then he puts this person on the board.”

Bekker and several other shareholders sent a letter to the sponsor requesting a review of the election process. They were told there was no substantial evidence to prove that any elections had been rigged.

Shareholders are often advised to try to elect a new coop board if they are having problems. This can prove to be a challenge, as the shareholders of Nostrand Gardens discovered.

Due to the difficulty of voting down a sponsor-controlled coop board, sponsors can act against coop bylaws without fear of losing their power, according to the CCO.

Gregory Greenberg, a shareholder in an Ocean Parkway coop, has seen his board under the control of the sponsor for the last 21 years. Within his first year at this coop, Greenberg had his maintenance fee more than double. After eight years, he began receiving bills for assessments. According to Greenberg, the coop would not explain the need for these assessments. Greenberg says he requested documents from his coop board explaining these financial issues, but never received anything.

“According to my bylaw for my particular building… [The coop board] must send every shareholder the financial reports, financial statements and the breakdown of what the money was spent for that year,” Greenberg says. “They said to me ‘Send us a request,’ and I did. Nobody responded; they did not send me anything.”

According to the Alliance of Condo and Coop Owners, an organization that tries to solve problems between coop boards and shareholders, coop boards themselves often have limited access to documents. Alliance president Larry Simms said some board members are unable to get documents from the building’s management company.

“A sitting board member [is supposed to have] virtually limitless access to information and records of the corporation, and yet I keep hearing from board members for whom that is not the case,” Simms said. “These are board members who are told information is privileged, who cannot get board meeting minutes, [and] who are told distribution is prohibited.”

Redress unclear

One problem for coop shareholders is that it is unclear who has the authority to enforce coop bylaws. When a coop is established, the attorney general’s office must approve an offering plan for the building, which establishes what rights the shareholders and sponsors have.

But after this initial approval, Weinstein says, the attorney general’s office does very little to enforce coop bylaws, although many shareholders look there for help.

“We think that the attorney general’s office has the authority to regulate coops and take actions, but the reality is that it’s very difficult to have anything take place,” Weinstein says. “They have the requirement of five years in the plan, but they don’t really have the authority to enforce it.”

Currently, cases regarding maintenance fees will be heard by the New York City Housing Court. These cases typically involve a coop board taking a shareholder to court for unpaid maintenance bills. Rosa Nazar was taken to housing court by her coop when she fell behind on her maintenance by $2,400. Nazar was able to collect money from welfare to pay off her debt to the board. According to Nazar, however, the board refused her payment and announced that she would be evicted. After going to the appellate court in Manhattan, Nazar was able to get a housing judge to stop her eviction and force the board to accept her payment.

Several months later, the board took Nazar back to housing court for $50,000 in unpaid legal fees. Nazar continues to fight these charges.

“[The members of the coop board] are like bullies and are not planning to stop until they get my apartment,” Nazar says. “They’ve destroyed my family emotionally and financially.”

If a shareholder decides to take legal action against her coop board, she must do so in state Supreme Court. Cases against board members are not under the jurisdiction of Housing Court because coops are considered corporations.

Taking a case to the state Supreme Court usually has high costs. “Just to register the case is $405, plus you have to bring a lawyer, and lawyers charge on average $400 an hour,” Litvak says. “Let’s say hypothetically your apartment is $200,000. For how many months do you think you could stay in court before your apartment is gone?”

City Council candidate Shelley Keeling took the board of her Riverdale coop to the state Supreme Court in 2011. Keeling had been charged $12,000 in late fees, which, according to her, exceeded the maximum late fees established in her proprietary lease.

Keeling won her case and requested that the board repay all shareholders who had been overcharged. According to Keeling, despite her Supreme Court victory, the board maintains that she owes more than $20,000 in late fees.

“[The coop board] kept up the same illegal compounding interest rate all the way up to the point where they said, ‘OK, we owe you $13,000,’ then they said ‘You owe us $24,000 now,’ ” Keeling says. “They were annoyed with me being the whistleblower, so they’re punishing me.”

The Assembly is currently considering several bills addressing issues with coops. The Cooperative and Condominium Ombudsman Act, sponsored by Manhattan Assemblyman Herman Farrell, would create a specialized department within the attorney general’s office for solving coop and condo issues. Another bill, sponsored by Bronx Assemblyman Jeffery Dinowitz, would amend the Civil Court Act to create a special housing part within the New York City civil court for coops and condos.

Both of these bills have been considered and redrafted multiple times, but so far neither bill has been voted on. While groups like the CCO continue to lobby for these bills, Keeling says they may not help shareholders any time soon.

“There have been 19 pieces of legislation, but not one of them has come to the floor. So what good are they really?” Keeling says.

However, the Alliance of Condo and Coop Owners sees the Ombudsman Act as a solution for many problems with coops and condos—one that spares everyone the chore of going to court.

“[The Ombudsman Act] would put in place an efficient and effective mechanism for enforcing the laws we now have,” Simms says. Under the law, he adds, “without going to court, we can get practical enforcement of the rules.”