Read More »" /> Co-op Law for Dummies. Randall Pentiuk; Pentiuk, Couvreur & Kobiljak P.C. | National Cooperative Law Center - Part 3

Co-op Law for Dummies

VII. Managing Your Documents

A. Why is this important?

B. How to manage your documents:

1. Safeguard the documents in a vault

2. Create clarity

a. Date the documents

b. Get rid of unadopted versions

c. Place notations on approved documents that tie back to meeting minutes

d. Have the President and Secretary attest to authenticity

VIII. Summary: the 7 lessons of Knowing Your Governing Documents

A. Although many cooperatives have “boilerplate” clauses, this is misleading and every cooperative must be viewed within
its own environment, taking into account the entire universe of applicable governing documents. Do not assume that your
cooperative is governed in the same manner as others.

B. The universe of governing documents consists of the “visible” – articles; bylaws; and HUD regulatory agreement – as well
as the “invisible” – the state corporate statute; federal, state & local law; Roberts Rules, etc.

C. Make sure you keep your governing documents protected; one of the worse things that can happen is to not have certainty
in this area. Follow the procedures of safeguarding and keeping them in order.

D. To be effective, you must recognize the interaction of the various governing documents we have identified. Qualified
legal assistance is required for more sophisticated issues, as it can become quite complex.

E. There is a hierarchy that must be considered. For example, if state law prohibits some act, then it preempts bylaws that
allow that act.

F. HUD plays a dominant role while the original mortgage is still in effect; once it is gone, so goes the Regulatory
Agreement. This provides you with an opportunity to address problems of the past, eliminate confusing language that will
then be obsolete, and consider other options such as moving from limited equity to market rate – if it makes sense for
your cooperative [this is a rather involved decision that is beyond the scope of this class, and requires an analysis of
your members’ economics as well as the market conditions of the surrounding area].

G. From time to time, amendments are desirable. Make sure you comply with all requirements, including HUD approval if it is
still in the picture.

IX. Finale: Discussion of strategic moves to lock the cooperative into remaining a cooperative in the future.

A. Amendments to bylaws: require large percentage of members to approve; restrict authority of board, etc.

B. Covenants running with the land; place title into a trust

C. Amendments to articles

D. Know who governs a housing cooperative

1. Background: You may be surprised to hear the answer given by even experienced Board members. Thus, it bears
repeating what may be obvious to some.

2. Answer:

a. It is not HUD – although many cooperatives still are subject to a Regulatory Agreement [and some aggressive HUD
officials like to act as though they are empowered to dictate to the Board – which is why you need experienced
legal counsel and management that are capable of challenging HUD directives].

Example: Detroit HUD demanded that refinancings must be approved by the membership. We said “no.” and
demanded that they present authority for their position. They had none and backed down. This is a
decision that is vested with the Board in most bylaws.

b. It is not Management, the Cooperative Attorney, or the Auditor. While professionals serve important roles and
their advice should be sought and given due weight, they were not elected by the membership. Accept their advice,
consider it carefully, but do not feel bound to follow it unless there is solid legal reason that makes it
mandatory upon you.

c. It is not the membership. While the members elect the Board, typical bylaws limit the role of the membership.

d. It is the Board of Directors. Typical bylaws vest the operating and policy decisions to the duly elected Board.
The law looks at the Board as fiduciaries and imposes the duty to act in the best interest of the membership. You
are authorized to hire professionals and to rely on their advice. You may ask the membership what they think. But
the ultimate decision rests with the Board.

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