Page 10 - CooperatorNews July 2021

10 COOPERATORNEWS —
JUNE 2021
COOPERATORNEWS.COM
Formerly known as
Lipner, Sofferman & Co., LLP
and Katz Viola Lebenhart & Mauro, LLP
Over 50 Years Serving the
NY Coop/Condo Community
KVLSM LLP is a full-service accounting firm
with a staff of professionals available to guide
its clients through every facet of business and
personal tax processing. The firm has been
providing the highest level of professionalism
and guidance to the New York coop/condo
community for over 50 years.
The firm’s services include,
but are not limited to:
Contact Ken Lipner:
klipner@kvlsmcpa.com • 516-294-0400
• Financial Statement Preparation
• Audits, Reviews, and Compilations
• Mergers and Acquisitions
• Tax Preparation
• Cash Flow and Budget Analysis
• Financial and Retirement Planning
• CFO Services
415 Crossways Park Drive, Suite C
Woodbury, NY 11797
Phone: 516-294-0400 • Fax: 516-938-0491
kvlsmcpa.com
The firm’s services include,
but are not limited to:
Contact Ken Lipner:
klipner@kvlsmcpa.com • 516-294-0400
• Financial Statement Preparation
• Audits, Reviews, and Compilations
• Mergers and Acquisitions
• Tax Preparation
• Cash Flow and Budget Analysis
• Financial and Retirement Planning
• CFO Services
415 Crossways Park Drive, Suite C
Woodbury, NY 11797
Phone: 516-294-0400 • Fax: 516-938-0491
kvlsmcpa.com
Formerly known as Lipner, Soff erman & Co., LLP and Katz Viola Lebenhart & Mauro, LLP
Over 50 Years Serving the NY Coop/Condo Community
KVLSM LLP is a full-service accoun� ng fi rm with a staff of professionals
available to guide its clients through every facet of business and
personal tax processing. The fi rm has been providing the highest
level of professionalism and guidance to the New York coop/condo
community for over 50 years.
The fi rm’s services include, but are not limited to:
• Financial Statement
Preparation
• Audits, Reviews, and
Compilations
• Mergers and Acquisitions
• Tax Preparation
• Cash Flow and Budget
Analysis
• Financial and Retirement
Planning
Contact Kenneth Lipner, CPA: klipner@kvlsmcpa.com • 516-294-0400
415 Crossways Park Drive, Suite C Woodbury, NY 11797
Phone: 516-294-0400 • Fax: 516-938-0491
kvlsmcpa.com
not conflict with state or local laws,” says Ju-
lie Schechter, a partner at Armstrong Teas-
dale, a New York-based law firm with offices
across the country. “If they do, the law should
be followed, and efforts should be made to
amend the governing documents so that they
conform with the law. The Business Corpo-
ration Law, which governs how cooperative
corporations are run, has a provision that
states: ‘The bylaws may contain any provision
relating to the business of the corporation, the
conduct of its affairs, its rights or powers or
the rights or powers of its shareholders, di-
rectors or officers, not inconsistent with this
chapter or any other statute of this state or the
certificate of incorporation.’ If there is an in-
consistency between a co-op’s bylaws and the
BCL, the terms of the BCL prevail.”
When There’s a Conflict
Schechter explains, “To the extent autho-
rized in a co-op’s bylaws, the board of direc-
tors may have the authority to amend certain
provisions of the bylaws without shareholder
approval. However, any such board-enacted
bylaw is subject to repeal by a vote of the
shareholders. House Rules can be added,
amended, or deleted by the board of directors
and such actions do not require the approval
of the shareholders. If the board implements
a house rule that conflicts with an existing by-
law provision or the law, the board can simply
vote to repeal it.”
Greenstein advises that “if a rule is not in
compliance with applicable laws or is beyond
the authority provided in the bylaws, it may
be challenged by the shareholders of the co-
op or the unit owners of the condominium.
A challenge can be made seeking the court to
grant, among other relief, a declaration that
the rule is without authority and to enjoin the
board from attempting to enforce it, and pos-
sibly monetary damages resulting from such
board action.”
Brian Cohen, an attorney with law firm
Lachtman Cohen, also based in New York,
adds that “a condo or co-op’s bylaws or house
rules that are inconsistent or in conflict with
a controlling statute, or that are violative of
any general law or public policy are unen-
forceable. In New York, if a board passes an
amendment to the bylaws or house rules that
shareholders or unit owners believe is unen-
forceable, they can commence what’s called
a CPLR Article 78 proceeding in New York
State Supreme Court seeking a judgement de-
claring the bylaw or house rule null and void,
but they have to act fast because these pro-
ceedings are subject to a four-month statute
of limitations.”
Consulting Your Attorney
When making, changing, or modifying
rules, should boards automatically consult
with their legal counsel first? “Boards are not
required to involve their legal counsel in ev-
ery rulemaking decision,” says Cohen, “but it
is prudent and good business practice to do
so to ensure that any rules they pass don’t run
afoul of the law and can withstand scrutiny.”
Schecter agrees. “Boards do not need to
involve their legal counsel in every rulemak-
ing decision nor should they,” she advises. “It
would be inefficient and expensive if a board
called their attorney every time they had to
make a decision. The better practice is for the
board to have a written policy and to enforce
it uniformly for all shareholders. Uniform en-
forcement of a written policy will help insu-
late the board from liability. Attorneys should
be contacted if the board is not sure how to
respond to a certain situation, or if there is no
written policy addressing the issue.”
Greenstein believes, “It is advisable to have
legal counsel review any proposed changes
to the governing documents of a co-op or
condo, or the enactment of a new or modi-
fied house rule or rule and regulation. There
are always new court decisions and the pas-
sage of new laws affecting co-ops and condo-
miniums. Accordingly, it is important to have
counsel review the board’s proposed changes
to protect the board members against pos-
sible legal challenges and demands for legal
fees and expenses being brought.”
LAWS VS. BYLAWS...
continued from page 1
The Business Corporation Law
In New York State, the BCL is the bedrock
upon which the governance of co-ops (and
to a practical extent, condos) are governed.
“When a legal action is brought against a
board by shareholders or unit owners to chal-
lenge its decision, the court will determine if it
will apply the Business Judgement Rule,” says
Greenstein. “If the court finds that the board
had authority to take the action and acted
in good faith for the benefit of the co-op or
condominium, it will conclude that the board
acted properly, and dismiss the claim. Alter-
natively, if it appears that the board lacked au-
“House Rules can be
added, amended, or
deleted by the board
of directors and such
actions do not require
the approval of the
shareholders. If the
board implements
a house rule that
conflicts with an
existing bylaw
provision or the law,
the board can simply
vote to repeal it.”
—Julie Schechter
continued on page 11