I signed an unusual proxy at the closing for my co-op. What can I do now?
- A proxy is discretionary and you should not feel coerced into signing one at a closing
- If you sign more than one proxy, the one with the most recent date is the valid one
You may be asked to sign a proxy at your closing when the co-op is being purchased by a trust but it is discretionary, not mandatory.
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I bought a co-op and at the closing was asked to sign a mandatory proxy naming the long-standing board president. I signed it but it seems wrong. What can I do?
There is no such thing as a mandatory proxy and this type of activity seems problematic and highly coercive, our experts say. There are lots of documents to sign at a closing but your attorney should make it clear that a proxy is discretionary.
"If the buyer feels coerced into issuing the proxy for election purposes without being informed about the candidates and if the board refuse to close without it, the proxy would be subject to challenge," says attorney Bruce Cholst, a partner at the law firm Herrick.
Proxy practices in co-ops
Most co-ops and condos do allow voting by proxy and this enables owners and shareholders to appoint another building resident to vote on their behalf in quorums and elections. It is also perfectly legal for a board to send out proxy forms appointing themselves as the proxies.
"It's not only legal, it's standard practice," Cholst says. Boards will send out proxies in the context of a re-election campaign or to make sure there's a quorum. Proxies are sometimes included with the annual meeting notice.
However, it is equally important that proxies are not tampered with or fraudulently signed.
One context where you may be asked to sign a proxy at closing is when the co-op is being purchased by a trust. "If the owner of record is not likely to be on the premises because another person is occupying the apartment, the board may want to get a proxy for quorum purposes only," Cholst says.
However, in any context you would be perfectly within your rights, as an incoming shareholder, to say you are not going to issue a proxy in favor of a candidate you don't know. If you sign more than one proxy, the one with the most recent date is the one that's counted.
Overriding a proxy by voting in person
To be presented with a proxy at the closing in this context seems "wholly improper,” says Dean M. Roberts, an attorney at Norris McLaughlin.
Luckily, he says, the problem is easily resolved by the shareholder executing a new proxy to a different person or voting in person at the next election.
“Once a proxy is given it can be rescinded either by expressly revoking it in writing to the person it was granted to or by simply executing a new proxy or voting in person. The last proxy executed supersedes any that are executed before and voting in person always overcomes any proxy,” Roberts says.
Running for board membership
The larger issue is the questionable behavior of the board president. If you’re unhappy with the current board, your best approach is to join the board yourself and make changes from within. "The remedy is a political one not a legal one," Cholst says. For many co-op shareholders, their apartment is one of their largest investments and if you are on the board you can look out for your interests.
Do some research into how elections are structured and get updated information on the names of the building’s shareholders. New York's Business Corporation Law allows owners to get a list of shareholders’ names and addresses but not necessarily their email addresses. Emails are obviously useful for digital communications so in your written demand for contact information make sure you ask for email addresses and phone numbers. Don't be surprised if the board refuses to give you email addresses because of privacy concerns—you may have to do some online research based on the list of shareholder names to get email addresses yourself.
If you decide to put yourself forward at election time, craft a clear statement about why you are running and approach your neighbors with friendly conversations about the changes you’d like to see on the board. Explain why you are asking for their vote.
When the election is held, an inspector of elections will be selected according to the building’s bylaws to ensure the election and voting process are all above board. If you have reason to believe the election was not fair or honest, there's a special procedure for challenging elections. You have four months to move forward with a case.
"Move quickly and do not depend on the board to voluntarily respond in a timely way, because some boards, looking to play hard ball, might try to stall the process until the statue of limitations passes," Cholst says.
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