By: April E. Knoch

  1. Make sure virtual meetings are legally permissible in your State. Sometimes it may require a Bylaw amendment, and/or written policy to maintain the integrity of the meeting and voting process. According to Robert’s Rules of Order Newly Revised, 11th edition, virtual meetings must be authorized in your bylaws. For local governments, if you State has laws permitting you to meet remotely or if your Governor has issued an Executive Order permitting remote meetings, that will supercede Robert’s Rules.
  2. Choose a platform for your virtual meeting and a platform for your virtual/electronic balloting and schedule a test drive for the Board. Once those platforms are tested out by the Board, it is time to test drive the virtual meeting platform with the membership. Each platform is a little different and has its own nuances so once you select one, invest your energy in familiarizing yourself with that platform.
  3. A fundamental requirement for virtual meetings is to make sure everyone can hear and be heard.
  4. Give adequate notice of your meeting and clear instructions on how to log in to the virtual meeting and, if using a separate electronic balloting platform, direct them to that platform’s website and/or provide clear instructions on how to use the balloting platform.
  5. Prepare a “smart” agenda. Add times to your agenda items. For example, if you scheduled voting to take place on a virtual platform from 6:30 to 6:45 that means that you need to be finished will all agenda items that are ahead of the voting time before 6:30. Once 6:30 rolls around, the voting commences. At 6:45 p.m., voting closes and the tally is made through your selected voting platform. Then you can move on to the next agenda item.
  6. Dress appropriately and comfortably and check your lighting. Test out your microphone and camera, at least 15 minutes in advance and make sure everything is updated well in advance of your scheduled meeting. Minimize background noise.
  7. You must have a designated “Chair” who maintains control. That means that if the President is being assisted with a virtual meeting then he/she will need a co-host to assist with keeping the meeting on track and ensure participants do not become unruly (i.e., he/she will makes sure all participants are muted except for the participant who is currently recognized).
  8. No one may speak a second time until everyone who wishes to do so has spoken once. When someone wants to make a comment they must raise their hand and be called upon by the Chair. The Chair, with the assistance of his/her co-host will be able to go around the room to ensure that everyone who wanted to speak has spoken in that round of comments before a person is called on again to speak.
  9. As the Chair, do not allow inappropriate remarks or interruptions.
  10. Don’t assume a decision of the members. You can use viva voce by calling out for ayes and nays. If you hear no nays and/or the ayes clearly have it, you can call the motion carried. Alternatively, you can have the participants use the “raise hand” function and have the co-host assist you with counting the hands in favor and those against.
  11. Always use the cloud recording feature available for virtual meetings. This will assist the Secretary with transcribing meeting minutes.

April Knoch is an Associate Attorney with Pentiuk, Couvreur & Kobiljak, P.C. and the Supervising Attorney for all cooperative document review, research and drafting. She is involved in the many varied aspects of representing housing cooperatives including cooperative governance issues, attending and chairing Board and Member meetings, researching legal issues and drafting legal opinions and representation of housing cooperatives in civil litigation. She is a regular instructor for both the MAHC and NAHC Annual Conferences and she serves on the NAHC Member Services Committee.

Members elected to serve on the Board of Directors hold special and unique positions as fiduciaries to the housing cooperative corporation. A Director holds a position of trust, fiduciary and good faith to the housing cooperative to which he or she serves. While members elected or appointed to serve as a Director may not always be the savvy corporate type, it is important for Cooperative’s to establish certain policies, sometimes best contained in an Agreement, for each Director that will spell out that Director’s responsibilities and duties pertaining to ethical corporate conduct and the handling of sensitive, confidential information.

Sometimes, a Cooperative will find itself in a situation asking, “did the Director’s action or conduct serve in the Cooperative’s best interest?” Or sometimes a Cooperative may be asking, “is the Director benefiting from a given transaction between the Cooperative and a contractor/vendor/third party?” Adopting policies or agreements that spell out the Directors’ duties and responsibilities are useful tools to prevent the Cooperative from having to deal with unsightly legal issues between its Directors, membership or third parties. While these agreements alone will not by themselves prevent situations where a Director may act in a unfair manner, or in a way that is not in the best interest of the Cooperative, they do serve as helpful reminders for each Director as to their duties and responsibilities. Directors should be aware of these duties at all times, and the considerations and practices they require should be inherent in all action taken by the Board.

A Director owes three main duties and responsibilities to the corporation upon which he/she serves. These duties are generally categorized as:

  • Duty of Good Faith.
  • Duty of Care.
  • Duty of Loyalty.

When adopting policies and agreements that encompass these duties, it is easy for them to become verbose and robust. Scholarly articles, journals and cases have dissected each duty. However, a good policy or agreement will hit the key notes, reminding each Director of their obligations. Policies and Agreements can include language, that each Director agrees:

  • to perform his/her duties as a director in the best interests of the Cooperative, in good faith, with due care, and with devotion and loyalty to the Cooperative.
  • to regularly attend Board and Committee meetings unless absence is excused.
  • to keep up to date on issues pertaining to the Cooperative and its membership.
  • to conduct him/herself with professional competence, fairness, impartiality, efficiency, and effectiveness.
  • to refrain from acting upon the influence of any conflicting interest when participating in Cooperative Board meetings, deliberations, voting or decision making, and to refrain from using his/her service on this Board for personal advantage or for the advantage of his/her family, friends, associates or business partners.
  • to deal fairly with Cooperative members, suppliers, contractors, and employees, and avoid taking unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair dealing practice.
  • to avoid and to disclose any potential or real conflicts of interest and to refrain from taking official Board action in any such matters where a potential or real conflict exists.
  • to maintain the confidentiality of all Cooperative Confidential Information and refrain from discussing confidential matters with persons not on the Board of Directors.
  • to continue to maintain qualifications to serve as a Director of the corporation.

Code of Conduct and Confidentiality Agreements that include these core concepts of a Director’s duties and responsibilities, will both assist incoming Board Members in understanding their position and responsibilities in serving on the cooperative housing corporation’s Board, but also reinforce these concepts for already existing Board Members and Directors. Moreover, if a Cooperative adopts a policy or agreement for each Director on serving on the Board, they may provide for certain penalties such as censure, removal from the Board or committees, removal of membership, or legal proceedings.

In adopting and adhering to best corporate practices, Housing Cooperatives should consider Board of Director policies and agreements that encompass the fiduciary duties and responsibilities that each individual Director must agree to abide by, and employ in the practice and conduct of their duties and service to the Cooperatives they serve. Cooperatives should consult with their legal counsel and attorneys for best ways to craft policies and agreements that meet the specific needs and desires of the Cooperative.

By:  Matthew T. Nicols

Attorney at Pentiuk, Couvreur & Kobiljak, P.C.

* Matthew T. Nicols is an associate attorney at the Pentiuk, Couvreur & Kobiljak, P.C., with offices in Wyandotte, Michigan and Chicago, Illinois. Mr. Nicols focuses his practice primarily in areas of cooperative housing law, and other community and condominium association law. He is licensed to practice law in the states of Michigan and Illinois.

As State Vice-President-Michigan for the Midwestern Association of Housing Cooperatives (MAHC), I would like to invite you to attend the 2019 MAHC Certified Cooperative Specialist (CCS) program on October 5-6, 2019 at Georgetown Cooperative in Taylor, Michigan.

Who or what is a Certified Cooperative Specialist?  Quite simply, it’s you, the board member.  We all know that continuing education plays an important role in becoming a good board member.  What better way to show your members you possess the knowledge and skills necessary to work successfully with other board members and members of the cooperative than by receiving a CCS certificate.

What does the program cover?  Quite a lot.  Taught by leading cooperative housing experts, over the course of a day and a half, you will receive in-depth training on the following topics:

  1. History and Types of Cooperatives
  2. Legal Operations
  3. Financial Operations
  4. Business of Cooperatives

You can find more information about MAHC at https://mahc.coop

Co-ops are better, and we can prove it

by admin on June 9, 2017

At a time when policymakers and housing advocates explore new approaches to affordable homeownership, it is useful to look back on the superior track record that co-ops have amassed over several decades, and to recognize the role of NAHC publications in bringing this research to light. Here are six key findings.

1.    Cooperative housing produces significantly higher quality of life for the resident as compared to affordable rental housing.

Mushrush, Larson, and Krause, Social Benefits of Affordable Housing Cooperatives, Center for Cooperatives, University of California at Davis, 1997

Saegert, Susan,“Survey of Residents of Currently and Previously City-Owned Buildings in the Bronx” in Housing in the Balance: Seeking a Comprehensive Policy for City-Owned Housing, Task Force on City-Owned Property, 1994

Saegert, Susan,“What We Have to Work With: The Lessons of the Task Force Surveys” in No More Housing of Last Resort: The Importance of Affordability and Resident Participation in In Rem Housing, Task Force on City-Owned Property, 1996

Altus and Mathews, “A Look at Satisfaction of Rural Seniors with Cooperative Housing,” Cooperative Housing Journal, 1997

2.    The higher level of participation in broadly-based, regularly functioning resident associations in low-income cooperatives, as compared to affordable rental housing, was effective in preventing in-building crime as demonstrated by crime statistics over a six-month period.

Saegart and Winkel, “Cooperative Housing, Social Capital and Crime Prevention,” Cooperative Housing Journal, 2001

3.    Limited equity cooperatives create social capital that powers social activism that preserves affordable housing an maintains diversity in a hot gentrifying urban market.

Saegert and Extein, “Limited Equity Cooperatives Reinforce Anti-gentrification Measures, Cooperative Housing Journal, 2003

4.    Cooperatives lowered monthly housing costs to residents by more than 20% compared to physically similar affordable rental housing managed by the same management companies.

Parliament, Vonnegut, and Parliament, “Keeping Housing Affordable: Cooperative vs. Absentee Ownership,” Cooperative Housing Journal, 1998

5.    Manufactured home owners experience appreciation in the value of their homes in a cooperatively owned park, and pay 7% lower monthly fees than residents in rental parks.

Ward, French, and Giraud, “Effect of Cooperative Ownership on Appreciation of Manufactured Housing,” Cooperative Housing Journal, 2005

6.    Limited equity co-ops do a better job of preserving affordability than the community land trusts and programs using deed restrictions.

Temkin, Theodos and Price, Balancing Affordability and Opportunity; An Evaluation of Affordable Homeownership with Long Term Affordability Controls, The Urban Institute, 2010

7.    Cooperatives are a lower risk to lenders and the government.

A.    In an analysis of defaults of FHA-insured multi-family loans in the 221(d)(3) and 236 mortgage subsidy programs between 1958 and 1993, cooperatives had a lower default rate than rental properties owned by both for-profit and non-profit entities.

Calhoun and Walker, Performance of HUD Subsidized Loans: Does Cooperative Ownership Matter, The Urban Institute, 1994

B.    The FHA Section 213 market rate co-op mortgage insurance program has returned unneeded and unused premiums to the co-op buildings in every year of its existence. Section 213 has the lowest default rate of any FHA multifamily or single family program.

C.    The National Co-op Bank reports that of its 4386 co-op building loans, none were in foreclosure as of June 30, 2011, and the delinquency rate is less than one hundredth of one percent.
NCB also services 7388 share loans for co-op members. The bulk of those are in New York City, where NCB has experienced no foreclosures. Below is a comparison of the status of NCB’s co-op portfolio and Fannie Mae’s and Freddie Mac’s conventional single family loans and multifamily rental loans as of June 30, 2011.

 

           Single family                 Multifamily rental
90 days+ deliquent     60 days+ deliquent

Fannie Mae                     4.08%                              0.46%
Freddie Mac                    3.50%                              0.31%

Share loans                     Co-op blanket mortgages
90+ days delinquent     60+ days deliquent
NCB co-op loans            1.88%                              0.008%

[courtesy of the National Association of Housing Cooperatives]

Courtesy of the National Association of Housing Cooperatives, check out this report on the size and strength of our national cooperative community.

Multifamily Better Buildings Challenge

by admin on April 29, 2014

Click here for a memo regarding the Multifamily Better Buildings Challenge Incentive: Allowable Management Add-on Fees.

HUD Tracking Travel Expenses

by admin on April 5, 2014

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.

HUD Multifamily Policy Priorities

by admin on March 23, 2014

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.

NAHC 2013 Annual Progress Report

by admin on March 23, 2014

Click here to view a PDF of NAHC’s 2013 Annual Progress Report

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.

Rejecting a co-operative sales contract

by admin on February 11, 2014

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.