Shareholders could fire the managing agent

Section 142 is the provision managing agents noticed first:

“After the first date on which the sponsor of a cooperative housing corporation owns less than a majority of all shares operated by such cooperative housing corporation, the holders of a majority of the shares held by all members may, by action duly taken pursuant to either section six hundred fourteen or six hundred fifteen of the business corporation law, remove any management company of such cooperative housing corporation from such service and may prohibit such management company from serving in such capacity thereafter.”

A shareholder majority could remove the managing agent and bar it from returning — without the board. Section 144 complements it: “No cooperative housing corporation shall permit an employee, officer, director, representative or agent of any management company of such cooperative housing corporation that is not both a resident and a shareholder to serve on the board.”

The budget would become a member vote

This is the structural change, and it is the one that most alters the balance of power in a New York co-op. Section 143(3):

“The board of a cooperative housing corporation shall submit an annual detailed budget to the members at least one month prior to the end of such cooperative housing corporation's fiscal year. Such budget shall be in plain language and subject to approval by a majority of members.”

Under current New York practice the board adopts the budget and sets maintenance. Making adoption contingent on a shareholder majority changes who decides whether maintenance rises — which, in a year when boards are absorbing facade work, Local Law 97 compliance and a hard insurance market, is not an abstract question. See our budget approval page for the current baseline.

Section 143 also requires quarterly board meetings, with a make-up meeting in the following quarter if quorum fails, and provides that “Members shall be permitted to be present at all such board meetings except when such board meets in executive session” — an open-meeting rule New York co-ops do not currently have. Minutes would have to be available to members “within twenty-four hours of approval.”

Title III: the capital-spending and records rules

Title III is styled the “cooperative shareholder protection act.” Four provisions matter operationally.

Section 152 sets a $50,000 threshold. All non-emergency capital improvements, renovations and repairs over $50,000 would need prior board approval under BCL § 704, and the corporation would have to “maintain and adhere to a procedure, as set forth in the bylaws, for soliciting bids” for such work, with all bids “provided in an unredacted form to all directors prior to any action being taken.” The bid procedure would have to be in the bylaws, not in a board policy.

Section 153 sets a seven-year record and a five-day inspection clock. Financial reports must be in plain language; “Itemized receipts of all expenditures of a cooperative housing corporation shall be submitted to the treasurer and kept in the books and records of such cooperative housing corporation for a period of at least seven years”; and those books “shall be made available for inspection by a member on the premises within five business days after a request to inspect such books and records is made by the member.” Compare our records inspection page for what New York requires today.

Section 154 puts violation notices on a two-week clock — in both directions. Any inspection report or notice of violation from any federal, state, county or municipal body must reach all members and residents within two weeks of receipt, and “Any written appeal, response or reply made by the cooperative housing corporation to any such report or notice of violation shall be made available to all members and residents within two weeks of when such response is made.” The second half is the unusual part: a board's own legal position on a violation becomes a disclosable document.

Section 155 mandates a state publication. Every member and resident, on purchase or before occupancy and annually thereafter, would receive the Attorney General's brochure “Boards, Bylaws, and Rules: Understanding and Dealing with a Co-op Board of Directors” or its successor.

What to take from a bill that did not pass

Two things. First, the direction: a bill transferring budget approval to shareholders and letting them fire the managing agent reached a Senate floor calendar with a unanimous committee vote. That is further than New York co-op governance reform has got in a long time, and the sponsor of the leading co-op bills this session is the same senator behind the ombudsperson bill and the religious-items bill.

Second, the drafting: § 139's opt-out is the tell. A reform bill that exempts the jurisdiction containing most of the regulated population is either a negotiating position or an acknowledgement that the reform cannot pass otherwise. Either way, a New York City co-op board reading about “sweeping co-op reform” should read § 139 before worrying about § 143.

The effective-date clause reads: “This act shall take effect on the one hundred eightieth day after it shall have become a law.” The Assembly memorandum for A10283 confirms the opt-out in its own words: “Title I of the new Article 9 (new section 139 of the cooperative corporations law) permits cities with populations of one million or more to opt out of the provisions of this legislation.”