Q: I am a shareholder in a Riverdale co-op and the board recently announced a $500,000 tax assessment that must be paid over the next three years. By my calculation, each shareholder is charged an average of $5,000. The board said the estimates were necessary to cover repairs and new city mandates, but made it unclear how the $500,000 amount was calculated. The lease and bylaws do not give the board specific authority to impose assessments, but do allow it to set maintenance payments and cash requirements. Is there a way to challenge this assessment?
A: It was correct that you looked at your cooperative's documents regarding the board's powers in the valuation. But maybe you're out of luck.
Courts give cooperative boards significant authority to manage a building's finances, particularly when it comes to maintenance and compliance with city regulations, through a legal principle called the “business judgment rule.”
Even if the word “assessments” is not used in the governing documents, the board still has the right to collect money to keep the building in good condition as long as it acts in good faith, said Joseph Colbert, a real estate attorney with Colbert Law LLC in New York and Connecticut.
“Courts are unlikely to overturn a decision based on terminology alone,” Colbert said. “They prioritize the underlying authority of the board and the purpose of the prosecution.”
In any case, an open dialogue between shareholders and the board is preferable to a costly legal conflict that would lead to tensions in the building. “If there is a basis for a challenge, it is best to seek an amicable resolution rather than engage in a lengthy and costly legal battle in court,” said Debra J. Guzov, a real estate attorney in Manhattan.
First, contact the executive director and request the minutes of the board meeting where the review was discussed and approved. The minutes could shed light on why the board believed the assessment was necessary and how the $500,000 sum was calculated, Ms. Guzov said.
If the minutes do not provide the clarity you want, you can ask the managing agent for details about how the money will be used. You can also ask to review the contracts entered into to complete the work to see how much it will cost, although you may not automatically be entitled to see them. Check your statutes for guidance.
If your neighbors are also concerned, involve them so you can do your research as a group.
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