Click here for a memo regarding the Multifamily Better Buildings Challenge Incentive: Allowable Management Add-on Fees.
If your client or you are on the Board or a member of a cooperative that is supervised under HUD, please note the following:
Many management companies charge travel expenses to the site. If during the HUD audit the proper documentation is not set forth, the management company ends up reimbursing the site for those expenses. With this being said, it is very important that the management company establishes a “Travel Policy”. HUD auditors have found improper or excessive travel expenses, insufficient or lack of proper documentation or lack of a travel policy to control travel expenses. Management should have a travel policy to make sure that the expenses are legitimate and reasonable travel expenses. Part of the policy should include a detailed travel expense form for any employee who is authorized to travel. In the policy it should state; when is travel permitted; detailed on how to make travel arrangements; what expenses are permitted, which ones are not; use of company credit cards, cash and out-of pocket expenses and how to fill out the travel expense form.
Please pass this information on to those management companies that might be effected by this new HUD audit procedure.
The new Program Administration Office of HUD recently identified 25 policy priorities. These priorities are currently on the time cycle for completion. To read about these new policy priorities as well as a list of policy goals, PAO staff and subject matter experts, click here to view the HUD Multifamily Policy Priorities memo.
National Association of Housing Cooperative’s 2nd Progress Report – which highlights 2013 activities and accomplishments. We hope you enjoy taking a look back at last year’s Annual Conference and the many goals we achieved together to strengthen NAHC – America’s Home for Cooperative Housing.
In a story published by the New York Times, the owner of a one bedroom co-op unit, a professional pianist, decided to put her unit on the market for $300,000. The market was not good. As time went on, she lowered the asking price several times and was finally relieved to get an all-cash offer of $225,000, from a fellow musician no less. The contract was signed, moving plans were put into motion and then the co-op board rejected the buyer’s application. Officially, the board gave no reason for the rejection, but several board members acknowledged privately that the low selling price was the deciding factor. The reasoning goes: selling units at low prices is simply not good business.
For many years, the conventional wisdom, supported by case law, was that a co-op’s board’s rejection of a unit transfer based upon what the board perceived as an inadequate selling price was an unreasonable, and illegal, restraint on the alienation of property. Several more recent court decisions, however, reveal that that view may be evolving, allowing that such decisions are within a board’s business judgment.
In the case of Harris v. Seward Park Housing Corp., a buyer/applicant filed a breach-of-contract claim against the co-op board complaining of the board’s rejection of his contract on the basis that the price was inadequate. The court first noted that the contract itself stated that: “This sale is subject to the unconditional consent of the corporation.” The contract did not include any criteria by which the board was to assess the application of potential purchasers nor did it require the board to provide any reason for rejection. The court concluded that there could be no breach of contract under these circumstances. On appeal, the court similarly concluded that that there never was an enforceable agreement between the parties. The court went on, however, to conclude that the “cooperative had a legitimate business interest in procuring the highest possible price for the sale of its units.”
In another case, Matter of Hershkowitz v. White House Owner’s Corp., the administrator of an estate sought to force a co-op board to consent to a sales contract of the decedent’s co-op to a third party. The board acknowledged that its refusal was based on the contract being substantially below market value and the court noted that the proprietary lease regarding the unit placed no restrictions on the board in determining whether to accept or refuse a contract of sale. Ultimately, the court did not decide on the facts of the case, but decided that the issue of the co-op board’s refusal was a question to be determined under the business judgment rule. (The business judgment rule provides, essentially, that courts will exercise restraint in reviewing the decisions of businesses as long as they operate in good faith.)
Any co-op board contemplating acting to reject a sale on adequate selling price should consult with an attorney experienced in co-op law to evaluate this evolving area of the law.
The 53rd annual NAHC Conference was a smashing success this year! NAHC members from around the country met at the Grand Hyatt in Seattle from October 30th to November 2nd to hear educational presentations, present and witness prestigious awards, and to welcome new Officers and Board Members for the 2013-2014 year.
NAHC attendees were able to hear several presentations on various housing cooperative topics.
One of the major presentations at the conference was a talk on Multifamily FHA Financing, which was presented by Dan Sullivan. Sullivan discussed the basics of FHA financing and then went further by describing management issues that one should consider when financing.
The keynote speaker of the conference was Teresa Young, an Organizational Development Specialist, who spoke about “Leadership from the Bottom Up.” Young’s presentation looked at the nature of leadership and how out-of-the-box leadership practices can benefit the cooperative as a whole.
Two of our firm’s attorneys were lecturers at the conference. Attorneys April Knoch and Creighton Gallup co-taught two courses while out in Seattle. On Thursday, they assisted Ralph Marcus and Greg Carlson on a required course for those seeking Registered Certified Managers status. The presentation provided numerous tips for site managers to assure they fulfill their legal obligation to the cooperative and to avoid pitfalls that increase chances for liability.
Creighton and April had their own presentation on Friday titled “Corporate Governance: Legal and Legislative Issues.” The class was standing room only (literally), filled to brim with both Board Members and managers alike, who attended to hear Creighton and April’s thoughts on making effective Cooperative policy. The two attorneys discussed a variety of issues and hot topics that cooperatives encounter on a daily basis. Topics ranged from governance hierarchies, drafting and amending cooperative governing documents, embezzlement and fraud, effective interactions with their cooperative attorney, medical marijuana, and policies regarding aggressive breeds of pets, among others. The large number of attendees, coupled with the interactive presentation and anecdotes, made the event highly energetic and informative for those in attendance.
The awards ceremony was another major highlight of the conference. NAHC individuals and whole cooperatives were recognized and awarded for their service to and the advancement of the housing cooperative community.
Winners included: David L. Thompson for the Jerry Voorhis Memorial Award; Rosie White for the Cooperative Distinguished Service Award; Belleville Cooperative Apartments for the Cooperative Star Award; Alexandra Wilson, Agency for Co-Operative Housing of Canada, for the Development & Presentation Award; and Mary Alex Blanton and Anne Fedorchak, National Cooperative Band, for the President’s Award.
Attendees also welcomed the new 2013-2014 NAHC Officers and Board Members. They include Chairman Ralph Marcus, President Gregory Carlson, Executive Vice President Fred Gibbs, Secretary Anne Hill, and Treasurer Linda Brockway. The new Board Members were Donna Marie Curvin, Blaine Honeycutt, and Hugh Jeffers.
Our own Managing Shareholder Randall Pentiuk was appointed as a MAHC Representative and was reelected to the Executive Committee, a move that reflects his tireless work and commitment to the advancement of housing cooperatives everywhere.
NAHC is excited about its new leaders and anticipates another great year of advancing the knowledge, practices, and advancement of housing cooperatives.
Seattle was an excellent venue for the conference and hopefully one that can be revisited soon. The 53rd Annual Conference was an amazing experience, and NAHC would like to thank all those who made the success possible.
We now turn our attention to the MAHC Conference in May 2014 where we will visit New Orleans and enjoy another round of stimulating and cutting edge classes. Hope to see you there!
One of the big problems we run into with Housing Cooperatives is that this form of home ownership is such a big mystery. Consequently, financial institutions miss a large business opportunity to provide loans to people interested in buying Cooperative units, or those already living in Cooperatives that want to finance improvements or draw some of their equity out. Most banks and even credit unions (which is surprising since they are based upon cooperative principles themselves) do not have a clue that they can safely make secure loans to such borrowers, using the share itself as collateral, coupled with an agreement between it and the Cooperative that recognizes the loan to the member and provides remedies upon a default by the member,neither with the loan or the carrying charge payments.
There are a few exceptions. Down in Atlanta, Housing Cooperatives are working among themselves to make share loans on a limited basis. There is also one major lender in the field that makes share loans, but our experience thus far is that this bank is seriously deficient when it comes to servicing the loans, causing a terrible amount of frustration, not to mention legal problems, for those Cooperatives that have the misfortune of being saddled with this institution that does not respond to routine requests associated with these loan transactions.
We are working on changing this. At Pentiuk, Couvreur & Kobiljak, we are engaged in discussions with area credit unions to expose them to the opportunity. In addition, NAHC has formed a committee, and I have been appointed to serve on it. Our committee is laying plans for a pilot project to try a share loan program in the Detroit market. Finally, I have had preliminary discussions with some clients on starting a credit union comprised of Housing Cooperatives that will provide all types of financing for the needs of the Cooperatives and their members.
I believe that the time has come to fill this void in the financial realm. One way or another, it appears that share loans will soon become a common tool. Stay tuned for more.
Randall A. Pentiuk, Esq.
This year, the National Association of Housing Cooperatives (NAHC) will hold its annual conference in Seattle, Washington during the last week of October. As a NAHC Board member, I can tell you that a lot of effort has been put into making this a great conference.
I have been asked to teach two classes. One will be for “RCM” candidates. This is NAHC’s special training for Cooperative Managers, leading up to the issuance of the Registered Cooperative Manager designation. The topic I have been asked to present is the liability of Managers, and will take place on Thursday, October 31. I will focus my comments on ways that managers can avoid or limit their exposure to lawsuits. Like last year, I will be joined by Greg Carlson and Ralph Marcus, both of whom are top notch Management Professionals who serve on the RCM Board of Governors. It promises to be a lively, entertaining and educational event. Unfortunately, it is restricted to RCM candidates only.
The other class is on Cooperative governance and I will teach it on Friday, November 1 . We will cover a wide range of relevant issues relating to how Boards can better govern their Cooperatives, and I will share my top twelve suggestions on ways to improve how your Cooperative works. Our goal in this class is to have each participant walk away with at least one great idea that is worth the cost of the conference. As always, it will be interactive, so attendees will have the chance to get their questions answered.
Boards need and deserve training opportunities such as this. Directors will be better able to serve their Cooperatives when they are given the chance to educate themselves and network with others to learn what are the best practices of Housing Cooperatives throughout the country. I look forward to seeing you there.
Randall A. Pentiuk, Esq.
April Knoch of Pentiuk, Couvreur & Kobiljak, P.C. has been selected to the 2013 Michigan Super Lawyers Rising Stars list. Each year, no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor.
Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.
The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law. For more information about Super Lawyers, visit SuperLawyers.com. For more information about April Knoch and Pentiuk, Couvreur & Kobiljak, P.C., visit http://www.pck-law.com.
Las Vegas’ Planet Hollywood Hotel and Casino hosted the 50th anniversary conference of the Midwest Association of Housing Cooperative (MAHC) this past June. What was originally the Michigan Association, our organization has evolved to the Midwest, but in name only: we enjoy members from across the nation.
Known for providing exceptional educational opportunities, this year’s conference was widely regarded as better than ever. Blaine Honeycutt and I presented our Parliamentary Procedure class again. Blaine serves on the MAHC Board with me, and is President of his Board at Georgetown Cooperative. He and I are both involved with the National Associations of Parliamentarians, and enjoy doing this lively, interactive class together each year.
Joining me again this year, my partner Creighton Gallup and I taught our Cooperative Law class. We focused our attention on recent trends in Cooperatives throughout the country. Among the topics we covered were handling medical marijuana cases, accommodations of disabilities, prevention, detection and dealing with embezzlement of Cooperative monies, and costly errors caused by Management engaging in the unauthorized practice of law. Participants have asked that the class be expanded to a full day to allow for more material to be presented, and I have committed to write my fourth primer on Cooperative Law to meet the demands for additional training. Creighton and I also agreed to providing on-site training for Boards, as well as holding regional one-day classes.
If you missed this year’s MAHC conference, make sure you plan ahead and save up for the 2014 conference. Details of that will be coming soon.
Randall A. Pentiuk, Esq.