My co-op might be going into foreclosure. What do I do?
I live in the Acropolis building in Astoria, a co-op which is on the brink of going into foreclosure. What can I do?
Though the situation shareholders in the Acropolis face is a serious one, it's not hopeless, and there are actions that you and your neighbors can take to save your building, our experts say.
Your first step is to do some fact-finding: Demand that your building's board allow you and your fellow shareholders to see their financial records reports, and meeting minutes.
"The shareholder would be entitled to make copies of these records and would be wise to engage the services of an accountant to review the financial information that the shareholder is able to obtain," says Jeffrey Reich, partner at Schwartz Sladkus Reich Greenberg Atlas.
"If the shareholder’s review of the books and records indicates that the apartment corporation is in financial jeopardy, they should demand that the board call a special meeting of the shareholders to address the corporation’s financial conditions and the board’s plans for resolving them."
Review your building's bylaws, he adds, to determine how many residents must be present in order to hold the meeting. And if your board refuses to cooperate, you and your neighbors may need to take action to oust them.
"Should the board not be responsive to the shareholder’s demands, consider rallying support for a special meeting to remove the existing board members and to fill those seats with individuals who have the skill sets necessary to address the apartment corporation’s financial issues," Reich says.
For further guidance, suggests Deanna Kory, a broker with Corcoran, look back to the savings and loan crisis of the mid to late 1980s, when buildings that experienced similar crises went into receivership through the Resolution Trust Corporation, a now defunct federal agency, which managed properties that had collapsed.
"Looking at what happened may help you to understand some of what is to come," Kory says. "It does look like the building will be or is in receivership—and as a result a long-term plan will eventually be instituted."
In the case of the Acropolis, its substantial debts suggest that seriously poor management has plagued the building for years, Kory says. The fact that shareholders have banded together to bring a lawsuit against the property management company is the right move, and should ultimately help to resolve these issues.
Other co-op shareholders who find that funds in their own buildings have been misused should follow suit.
"Typically, the tenant-shareholders get together and hire an attorney to investigate the books, and then often sue the managing agent and the board for the abuses of power and money that were conducted," Kory says. "Most boards require that board members and management companies are insured, so often the insurance company pays something, but often it is not enough."
This may mean extra expenses and higher maintenance fees for you and your neighbors, unfortunately.
"In my experience, all will eventually get worked out, but it will cost the shareholders more money and perhaps increased maintenance," Kory says. "It will take a while, but none of the non-board member tenant-shareholders are to blame, so eventually this mess will be rectified."
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