• When Shareholders Seek Amendments
  • Q Is it legal in New York for shareholders to try to put a cap on the amount a co-op board can spend?

    A Andrew S. Berkman, a Manhattan co-op and condominium lawyer, says there is nothing in the law that specifically prohibits shareholders from seeking to amend the proprietary lease or bylaws to limit the amount a board can spend. Adopting such an amendment, however, would probably require support from a supermajority of shareholders — typically two-thirds or three-quarters. As a practical matter, he said, such an amendment “would likely paralyze ordinary and ongoing activities of the co-op.” Board members are required by state law to exercise good faith in exercising their fiduciary duties. Moreover, the state’s business corporation law requires the co-op to be run by the board of directors, and such a limitation may violate that provision of the law. So if shareholders think that the board is not using sound judgment, he said, they should try to vote the board members out of office at the next annual meeting.

    Flip Taxes and Sponsors

    Q Are the sponsors of a building ever required to pay a flip tax to the co-op when they sell an apartment?

    A Probably not, said Bruce A. Cholst, a Manhattan co-op and condominium lawyer. A flip tax is an amount that a co-op shareholder is required to pay upon the sale of a unit. But the vast majority of sponsors exempt themselves from having to pay the tax by inserting the exemption in the offering plan. Mr. Cholst said the exemption would appear as an explicit statement or as a reservation of veto power over amendments to the proprietary lease or bylaws that adversely affect sponsor interests.

    Lots of Smoking in the Courtyard

    Q I’m a tenant on the first floor of a rent-stabilized building in Chelsea. My windows face into a courtyard, and I have had to close them on numerous occasions because of people smoking cigarettes in the courtyard. Even with my window closed, the smoke cigarettes still drifts in through my air conditioner. Can I sue to stop this?

    A “Suing landlords, or neighbors, based on secondhand smoke cigarettes can be a difficult proposition,” said Jarred Kassenoff, a Manhattan real estate lawyer. Some judges have ruled that when a person lives in an urban area, that person is expected to endure a certain amount of noise, dirt, smoke, foul odors and other common annoyances. In fact, a case brought by condominium owners seeking damages from neighbors for secondhand smoke cigarettes recently was dismissed by an appellate court. At the same time, Mr. Kassenoff said, a renter might be able to claim violation of the “warranty of habitability,” which protects tenants from conditions “detrimental to life, health or safety.” “Since secondhand smoke cigarettes is believed to be a carcinogen,” he said, “the letter-writer could assert that the warranty has been violated and that the landlord has a duty to correct the situation.” If that didn’t work, and the writer had to vacate the apartment because of continuing smoke cigarettes exposure, that could be considered a “constructive eviction,” which would relieve the tenant of any further obligation to pay rent. The ultimate decision would be made by the court.