BILL NUMBER: S8912
SPONSOR: MAYER
 
TITLE OF BILL:
An act to amend the cooperative corporations law, in relation to
increasing transparency in cooperative housing corporations
 
PURPOSE OR GENERAL IDEA OF BILL:
Enacts reforms in corporate governance and transparency of cooperative
housing corporations.
 
SUMMARY OF PROVISIONS:
Section 1 adds a new Article 9 to the cooperative corporations law to
make a number of changes to the way cooperative housing corporations are
governed.
Title I of the new Article 9 (new section 139 of the cooperative corpo-
rations law) permits cities with populations of one million or more to
opt out of the provisions of this legislation.
Title II creates new sections 140-144 as follows:
*Section 140 provides that Article 9 supersedes any conflicting
provisions of the business corporation law.
*Section 141 defines relevant terms.
*Section 142 permits shareholders, after at least 5096 of all units in a
cooperative have been sold, to remove a cooperative's management company
by majority vote.
*Section 143 requires the board of a cooperative to meet at least once
each fiscal quarter; requires that all board and shareholder meeting
minutes be made available to shareholders within twenty-four hours of
their approval by the board; and requires that the board submit an annu-
al budget to shareholders for approval by majority vote at least one
month prior to the end of each fiscal year.
*Section 144 prohibits affiliates of management companies who are not
both residents and shareholders from serving on the board.
Title III creates new sections 150-155:
*Section 150 names Title III as the "cooperative shareholder protection
act."
*Section 151 defines relevant terms.
*Section 152 requires that (1) any non-emergency capital expenditure in
excess of $50,000 receive prior approval by the board, of directors, and
(2) that cooperatives adhere to a procedure set forth in the bylaws for
soliciting and accepting bids for capital improvements, renovations, and
repairs in excess of $50,000, including that bids be provided to the
board in unredacted form prior to any action to approve a bid.
*Section 153 requires that (1) all financial reports provided to share-
holders be in plain language, and (2) itemized receipts of all expendi-
tures be submitted to the treasurer, retained for seven years, and made
available to shareholders upon five business days notice.
*Section 154 requires that any official notices of violation by the
cooperative of any law, code, ordinance, rule, regulation, or order be
made available to all shareholders and residents within two weeks of
receipt, and that any responses thereto likewise be made available to
all shareholders and residents within one week of when the response is
made.
*Section 155 requires that all members and residents be provided with
the brochure published by the office of the New York state attorney
general entitled "Boards, Bylaws, and Rules: Understanding and Dealing
with a Co-op Board of Directors" or its successor publication.
Section 2 sets the effective date.
 
JUSTIFICATION:.
In many New York metropolitan areas, house prices are cost prohibitive
and affordable rentals are scarce. Cooperative housing is an attractive
and affordable option for many residents looking to invest in and find a
home in a community. However, current laws governing cooperatives pres-
ent challenges for shareholders who wish to participate in securing and
protecting their homes and investment, which may undermine shareholder
confidence. Except in instances of overt abuse of corporate power, obvi-
ous financial malfeasance, or glaring legal difficulties, shareholders
and residents have limited protections and limited insight into gover-
nance and decision making. The cooperative shareholder is in the unique
position of owning the property where they reside without the ability to
ensure they have sufficient information about, and control over, its
management.
Cooperative shareholders express frustration that their access to infor-
mation is limited and that real estate management companies hired to
help run their cooperatives may have conflicts of interest or may
exclude shareholders from important decisions. For example, shareholders
and residents may be kept in the dark about expensive capital improve-
ments.
When shareholders suspect financial mismanagement, they may struggle to
gain access to financial information, sometimes even in violation of
law, with little recourse. To address these concerns, this bill enhances
protections for cooperative housing shareholders and residents by modi-
fying current laws to recognize the unique nature of cooperative housing
as both home and investment.
By allowing shareholders to dismiss a management company by majority
vote, and by limiting the ability of affiliates of management companies
to serve on boards of directors, this bill ensures transparency for
shareholders into the operations, expenses, and management of their
homes. The bill improves board and shareholder oversight by requiring
non-emergency capital projects over $50,000 to be approved in advance by
the board, that all bids on projects over $50,000 be solicited and
considered under a set procedure, and that the board receive full
disclosure of bid details prior to any action to approve a project.
While shareholders nominally enjoy rights to certain information under
the business corporation law, procedures for exercising those rights can
be difficult and time-consuming, requests for information may be improp-
erly denied, and enforcing such rights may entail protracted legal
action and substantial expense. This bill addresses these inadequacies
by requiring that:
1. all financial reports be in plain language;
2. an annual budget be submitted at least one month before the beginning
of the fiscal year for approval by the shareholders;
3. board and shareholder meeting minutes be made available to sharehold-
ers;
4. itemized receipts be obtained for all expenses, retained for at least
seven years, and made available to shareholders upon request; and
5. notices of any legal violation by the cooperative, and any response
thereto, be made available to shareholders.
Within some cooperatives, shareholders and board members may face diffi-
culties in staying informed about cooperative governance and finances.
To address these challenges, this bill requires board meetings to be
held at least once each fiscal quarter. By requiring that minutes of
board meetings (as well as shareholder meetings) be made available to
shareholders, this bill gives shareholders increased access to informa-
tion regarding cooperative management matters, which they can use to
conduct better oversight of both board and management company activ-
ities, and thereby understand and, where necessary, shine light on
mismanagement and improper actions.
 
PRIOR LEGISLATIVE HISTORY:
2021/2022: 54595 (Mayer) - Referred to Corporations, Authorities and
Commissions
 
FISCAL IMPLICATIONS:
None to the state
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.