Special Assessments in Cooperative and Condominium Housing
It is no secret that a building’s board of directors may cause serious angst for shareholders in cooperative housing and owners in condominium units. A controlling presence, boards make key decisions that have great financial implications for their constituents.
Occasionally, within these buildings, the board may decide to invest in capital improvement projects. Whether motivated by local law mandating facade renovations, needed repairs such as updating an old boiler, or choosing to add an amenity like a gym, it goes without saying that these endeavors come at a cost.
Sometimes, more commonly in co-ops, boards have sums of money in reserve funds for moments like these. However, this is not always the case. As a result, ‘special assessments’ may be levied on shareholders and owners to pay for such projects.
For cooperative shareholders, assessments will be reflected as additions to their fees, and the more shares one holds, the higher their assessment will be. For owners in condos, assessments will be added to their homeowners association fees (e.g. common charges) and the amount is based on the amount of interest one has in the property. These payments almost always must be in before the projects are complete, and the duration of payments can vary depending on the nature of the project.
In response to these new assessments, controversy is likely to arise. Unfortunately for residents, once such projects have been approved, there is no going back. If people do not pay their assessments, the building may put a lien on their property. It is up to the residents to put the political pressure on and fight for their rights.
Despite these powers, board members are still obligated by law to play fairly. In accordance with the business judgment rule, boards must:
Set policies that align with the building’s governing documents
Follow all established case law
Act in accordance with the best interests of the building community
Have a reasonable corporate explanation for the projects that they plan
The information provided above is just one example that underscores the vital importance of doing research before investing in co-ops or condos. Whilst these buildings may seem ideal or cost effective, it is important to choose wisely and be educated on the internal politics of the building.
Shareholders and owners, you are certainly NOT powerless. Never hesitate to reach out to our team of professionals here at the Law Office of Marc Scolnick, PC. We truly care about taking care of our community and doing what we can to help you navigate your situation. Call us at (718) 554-6445 to schedule a FREE appointment.
Sources:
https://www.investopedia.com/terms/b/businessjudgmentrule.asp
https://www.cityrealty.com/nyc/market-insight/features/get-to-know/assessments-101-what-they-mean-home-owners-buyers-listings-incentives-offset-costs/55362
This blog post is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this post in any way seems to contradict the advice of counsel, counsel’s opinion should control over anything written herein. No attorney-client relationship is implied by this blog.