NY Times – Is a Co-op Required to Report Break-Ins to Shareholders?
NY Times – Is a Co-op Required to Report Break-Ins to Shareholders? https://chaifetzlaw.com/wp-content/uploads/2015/06/Screenshot-2024-07-10-at-10.34.56 AM-1024x184.png 1024 184 Lawrence Chaifetz https://secure.gravatar.com/avatar/17f5d285c2de2b73cd492fc998c5afdc?s=96&d=mm&r=g
Q. In January, a burglar slipped into our co-op in Hudson Heights, Manhattan, behind a shareholder who was walking out. He stole a laundry cart and packages. The theft was reported to the police, but it took the board almost two weeks to notify shareholders. The notice minimized the event, failing to give a full account of it. What responsibility does the board have to shareholders in reporting security breaches?
A. The burglary raises questions about the safety of your building. Did the incident expose vulnerabilities in the building’s security system? What will be done to make sure such an episode is not repeated? The answers to these questions should come from the co-op board, which has a fiduciary responsibility to act in the best interests of the co-op and its shareholders.
The board might be proceeding with caution because it wants to make sure that the information it provides is accurate and does not undermine a continuing investigation. However, by not communicating its motives, the board is making it hard for residents to feel confident in it.
“The board should have immediately advised the shareholders that it is trying to obtain information regarding this incident,” said Lawrence Chaifetz, a Manhattan real estate lawyer. The board should also assure residents that once an investigation is complete, it will inform them.
The board is protected by the business judgment rule, a legal principle that gives it wide latitude in the decisions it makes. But as shareholders, you have a right to request answers. Shareholders could circulate a petition calling for a special meeting or request permission to attend the next board meeting. You and your neighbors could also send a letter to the board and the managing agent expressing your displeasure with the board’s response.
If you ultimately lose confidence in the board’s ability to protect the building, you could try to elect new members.
