Articles

Membership Equity in a cooperative housing corporation is one of most fundamental characteristics, and benefits recognized in this unique form of housing and stock ownership. For housing cooperatives where members gain equity in their membership or stock certificate, whether or not based on increased value of the dwelling unit, improvements, or general trends in real estate markets, in instances where a member sells their membership, the return equity amounts frequently become issues of legal dispute. These disputes, if unresolved, can easily reach a point where a former member files a lawsuit against the Cooperative seeking money damages.

Closed sessions are for the discussion of matters that should not be disclosed to non-directors because of privilege or confidentiality. Closed sessions are an invaluable tool for Boards to conduct business for the Cooperative but only if the tool is used properly. In many states, closed sessions can only be carried out if there is a statutory provision applicable to the reason for the closed session. Such reasons include pending or potential litigation, employee matters, confidential matters involving members or sometimes, matters that are of such a sensitive nature that discussion during the open portion of the session is impractical.

What are the legal obligations a cooperative housing association owes to disabled members who seek changes in the policies or rules of the Cooperative because of the member’s medical condition?

Our coop did not have its 2020 annual meeting and election of Directors. We were supposed to have voted to fill two seats last year but instead, those Directors continued to serve for an additional year even though all of our Director seats are three-year terms per our Bylaws. Now it is time for our annual election in 2021 and there will be another seat open for election this year. Can we just skip the 2020 annual meeting and election and just run all three seats in 2021 for three-year terms and just skip the 2020 annual meeting since we are already in 2021? Sincerely, Concerned Board Member Dear Concerned Board Member: No. All states require cooperatives to hold their annual meeting on the date set forth in the Articles of Incorporation or Bylaws or as soon as thereafter possible. Some states permit specific time leniency for scheduling but no states simply permit a corporation to “skip” an annual meeting or election. The Members have a right to have their annual meeting and annual election, even if it is tardy. Failure to hold the annual meeting within permitted times or even finding an alternative means for holding the annual meeting could result in a lawsuit against not only the cooperative, but individual Directors as well for failing to fulfill their fiduciary obligations. Knowing that there is a risk to the Cooperative, the Board must look to correct as soon as possible. Understandably, the Cooperative chose to adjourn the meeting because of continuing group meeting restrictions, however, the obligation to exercise due diligence to explore alternatives is a continuing fiduciary obligation of each Board member as well. This could result in not only a court interfering with the Board’s business judgment but could result in a finding that the Board acted in bad faith, neglected its duty, breached its trust and acted contrary to the corporation’s purposes. Your Bylaws indicate that all terms are for three-years however you have incumbents who sat an additional year because their seat was not put up for election due to COVID. The absence of the meeting does not also translate to a reset of the term because essentially what has happened is an appointment was made to the position that would have been vacant but for COVID. Appointments only sit until the next annual meeting and then that seat term will only be for the balance of the remaining term, i.e., two years. The Board at this point can either combine the 2020 annual meeting and election with the 2021 annual meeting and election, or, hold 2020 first and then hold 2021 perhaps later in the summer. Either way, your membership will be voting to fill two seats for a two-year term and one seat for a three-year term. Should the Board wish to explore meeting options, they really need to consult with the cooperative attorney for legal options and to show due diligence in their decision making process. Very truly yours, Co-op Counselor

You may be curious as to how a Cooperative Board of Directors determines how to expend its cooperative finances. As Cooperatives are formed as non-profit corporations, any monies derived from carrying charges from members go straight to the operation and management of the Cooperative. However, the expenditure of financials can vary from Cooperative to Cooperative depending on how a Cooperative is organized.

Now that annual meetings have been scheduled and are being held safely, a Board of Directors may be faced with questions pertaining to members being eligible to vote at annual meetings who are delinquent in their monthly carrying charges or operating payments or any other sum due under his/her occupancy agreement. This scenario may be more prevalent in today’s world as a result of the financial impact that the COVID-19 pandemic has caused. While a Board of Directors might be sympathetic to payment delinquencies, a vast majority of cooperative Bylaws provide for a prohibition of a delinquent member to vote at an annual meeting.

As Fall is now upon us, Board of Directors may be scheduling their fall inspections of the cooperative premises and dwelling units to ensure that all members are in compliance with their House Rules and Regulations. As more of us are spending more time at home these days, you may have purchased a few new items to store outside for your own personal use, such as a patio set, canopy, grill, wading pool, etc. Each cooperative has its own unique House Rules and Regulations for not only what is permitted or prohibited but how such items can be used and stored.

With summer around the corner, your cooperative may be getting ready to start planning for the opening of swimming pools and other recreational facilities, such as basketball courts, tennis courts, playgrounds, and parks. However, due to COVID-19, extra attention and careful consideration must be given to ensure that the cooperative is in compliance with any and all local and state COVID-19 restrictions as well as adhering to all CDC guidelines for these types of recreational facilities. As we all know, COVID-19 restrictions vary from state to state with respect to face mask orders, gathering size restrictions, capacity limitations and social distancing requirements, and COVID-19 restrictions are continuing to change. Therefore, it is pertinent for Board of Directors to review and monitor your state’s COVID-19 restrictions to ensure that your cooperative remains in compliance.

As we enter into the holiday season and the fall/winter surge of COVID-19 cases, we have been coming up with alternative ways to see our friends, family and neighbors. Some suggested ways to get together have included holding small gatherings outside while practicing social distancing and wearing masks. Some of us may even be planning for holiday dinners to be held outside this year with our friends, families and neighbors.