Page 5 - CooperatorNews NY April 2022

COOPERATORNEWS.COM COOPERATORNEWS — APRIL 2022 5 QUESTIONS & ANSWERS Legal Q A& Meeting, Please? Q I live in a 192-unit co-op in Brooklyn. Th e board decided that due to COVID, for the safety of shareholders there will be no annual meet- ing this year. Also, our maintenance will go up. We have a large outdoor courtyard that I suggested could be used for the meeting dur- ing the summer, but no one responded. Are shareholders entitled to an annual meeting? —Concerned Shareholder A “Th e issue of holding annual meetings has been raised even before the pandemic made them even more diffi cult,” says Dean M. Roberts, Esq., attorney with the New York City offi ce of Norris McLaughlin, P.A. “Th e New York State Business Corporation Law §602 (c) requires that corporations hold an annual meeting once a year for the elec- tion of directors and the conducting of other business. In addition, almost all cooperative bylaws incorporate this requirement as well, and therefore cooperatives are under a legal obligation to hold an annual shareholders meeting at least once a year. Th is provision allow. If a seller and buyer agree to enter purchase agreement refl ects only the higher has been further amended to specifi cally al- low for shareholder meetings to be held in a the board) selling price above the actual secretly for the off set to be eff ected surrepti- virtual format. Th erefore, there is no excuse price, while at the same time contractually tiously). or justifi cation for a cooperative not holding agree to reimburse the buyer the diff erence its annual meeting. It should be noted that between the actual sale price and the false incoming lender are fully apprised that the while the meeting may be called, it is still re- quired to obtain a quorum; i.e., a minimum taxes paid by the seller on the false selling stated purchase price, so that no party can required number of shareholders to make price? How do taxing authorities view this claim that it was defrauded by the arrange- the meeting offi cial. Th is varies from either a sale and side contract? How does the board ment. Th is is especially important with re- simple majority 50.1% to as low as one-third list it? What are the brokers’ commissions gard to an incoming lender, that it not be of shareholders, depending on the coopera- tive’s governing documents. “Maintenance increases are determined and set by the board of directors and do not require a shareholder vote. For regulated co-ops such as Mitchell-Lamas, there is an approval process that requires sharehold- er input and approval by HPD or DHCR, whichever entity regulates the co-op. In free attorney Aaron Shmulewitz of New York taxes, fl ip tax, and brokerage commissions market co-ops there is no such requirement.” Seeking Side-Deal Q In this time of COVID and de- pressed Manhattan co-op sales, disclosure (i.e., the purchase agreement re- sellers have been willing to ac- cept bids way lower than a board would ting closing credit), and without (i.e., the into a contract of sale for an acceptable (to price, but the parties arrange separately and price, what ramifi cations are there? Are actual sale proceeds will be lower than the based on? Who pays the fl ip tax, and on ‘tricked’ into loaning more money than which amount would that tax be based? —Asking for a Friend A “Such ‘sale price and off set- ting credit’ arrangements should have. are not uncommon,” says law fi rm Belkin Burden Goldman, LLP, “es- pecially in times like these that sometimes ure, and the board and brokers can list the produce lower resale prices than desired. higher price fi gure in their schedules of Having said that, there is a diff erence be- tween eff ecting such a transaction with full fl ects the higher price as well as the off set- “In the former case, the board and any would be warranted under its usual loan- to-value analysis. Doing such a transaction without such full disclosure could run the risk of the bank claiming that it was de- frauded into making a larger loan than it “In any such transaction, the transfer should all be based on the higher price fi g- comps.” continued on page 18 FirstService Residential secured $17 MILLION in Con Edison, National Grid and NYSERDA incentives for our managed properties in 2021. What has your management company done for you lately? Let’s Talk www.fsresidential.com/new-york LetsTalk.NY@fsresidential.com 212.634.5410 $17 MILLION