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Cooperative Assessment Fees: Do You Have to Pay What They Say?

by SuperiorInvest

Q: I am a shareholder in a Riverdale cooperative and the board recently announced a $500,000 assessment that must be paid over the next three years. According to my calculations, on average, each shareholder will be charged $5,000. The board said the assessments were necessary to cover repairs and new city mandates, but was vague about how the $500,000 figure was calculated. The exclusive 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 any way to challenge this assessment?

TO: You did well to look at your co-op documents regarding the board's authority over evaluations. But you may be out of luck.

Courts give co-op boards significant power to manage a building's finances, especially when it comes to maintenance and compliance with city codes, through a legal principle called the business judgment rule.

Even if the governing documents don't use the word “assessments,” the board still has the right to raise money to keep the building in proper order as long as it acts in good faith, said Joseph Colbert, a real estate attorney. at Colbert Law LLC in New York and Connecticut.

“Courts are unlikely to overturn a decision based solely on terminology,” Colbert said. “They prioritize the underlying authority of the board and the purpose of the position.”

In any case, an open dialogue between shareholders and the board is preferable to a costly legal dispute that would create tension in the building. “If there is basis for a challenge, it is better to aim for an amicable resolution rather than go to court to embark on a protracted and expensive legal battle,” said Debra J. Guzov, a Manhattan real estate attorney.

Start by approaching the managing agent to request the minutes of the board meeting at which the assessment was discussed and adopted. The minutes may offer insight into why the board believes the evaluation is necessary and how the $500,000 sum was calculated, Ms. Guzov said.

If the minutes don't provide the clarity you're looking for, you can ask the managing agent for details about how the money will be spent. You can also ask to review the contracts that were executed to complete the work, to see how much it will cost, although you may not have the right to automatically see them. Consult your bylaws for guidance.

If your neighbors are also concerned, write them down so they can ask questions as a group.

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