.
,
The Documents Often Overlooked
By Dale J. Degenshein
Practitioners who represent buyers of co-op or
condo apartments perform their due diligence.
Those who represent buildings are familiar with
the governing documents. Board members,
particularly if they are lawyers, know their
building’s documents. Often, this means they have
reviewed the by-laws and proprietary lease in a coop and the declaration and by-laws in a
condominium.
A
co-op’s
certificate
of
incorporation and a condominium’s tax lot
drawings are frequently overlooked, however,
even though they are important and may contain
material information that may be relevant to the
buyer’s decision to purchase the unit (and will be
binding on the buyer after the closing regardless of
whether the buyer discovered it in due diligence.)
Turning first to the certificate of incorporation, the
vast majority of New York’s co-ops were (and still
are) formed under the Business Corporation Law.
Pursuant to that Law, there are certain rules
regarding the governance of the co-op that can be
found in the by-laws or the certificate of
incorporation (the certificate is on file with the
Secretary of State.) For example, quorum
requirements can be set in either the by-laws or the
certificate and, indeed, in order to require a
supermajority quorum (concededly, rarely the case
for a co-op) the provision must be in the
certificate. N.Y.B.C.L. 608. The certificate may
include specific requirements for the election of
directors, such as number of votes required if more
than a plurality. N.Y.B.C.L. 614.
A particularly telling example: a building had been
holding elections for years based on straight voting
– i.e., if you owned 100 shares, you could vote 100
shares for each person you wanted to elect. When
the board retained new counsel, she did something
apparently no one else had done – she read the
certificate of incorporation. It turns out that the
certificate provided for cumulative voting – i.e.,
you multiply your 100 shares by the number of
open seats and vote them any way you want (e.g.,
if there were three open seats, you could vote 300
shares in any formulation – 200 for one person,
and 50 for each of the others.)
Why was this so important? Numerically,
cumulative voting often allows minority factions a
seat on the board. And that is precisely what
happened in that building. Further, the authority
to vote cumulatively is only valid if found in the
certificate. N.Y.B.C.L. 618. If cumulative voting is
called for in the by-laws, as it sometimes is, but the
certificate is silent, cumulative voting is simply not
properly authorized.
information is important, and should be read
against the declaration and by-laws, to determine
and confirm such things as responsibility for repair
and maintenance, ability to use a roof or setback,
insurance requirements and the like.
One caveat – tax lot drawings today contain far
more information than tax lot drawings of 20 and
30 years ago. They are recorded and available and
recently-recorded drawings can be found on
ACRIS. Historically, certificates of incorporation
and tax lot drawings were often not reviewed.
Regardless of the reason, practitioners and board
members should look at these documents carefully
and keep them with their building files as the
information they contain will be instructive and
may be invaluable.
Turning to condominiums, tax lot drawings –
which are the architectural drawings filed with the
City’s Tax Map Unit and recorded with Register
of the City of New York –should not be
overlooked in due diligence or board governance.
Why are they important? According to the
Condominium Act, at N.Y.R.P.L. 339-p, the tax
lot drawings must show the layout, location, unit
designations and approximate dimensions of the
units as they were filed with and approved by the
appropriate governmental agency (the Department
of Buildings in New York City.) N.Y.R.P.L. 339p. They also, together with the declaration, tell
you whether an area is deemed part of a unit, a
common element, a limited common element or
whether an area – such as a hallway, a staircase, an
elevator, a lobby – is part of a specific section
(residential, commercial, garage.) Some tax lot
drawings identify easements and licenses. All of this
_______________________
Dale J. Degenshein is Special Counsel in the New
York office of Stroock & Stroock & Lavan LLP
where she represents cooperative and condominium
boards as well as real estate developers.
For More Information
Dale J. Degenshein
212.806.6657
ddegenshein@stroock.com
New York
Maiden Lane
New York, NY �
Tel: ..
Fax: ..
Los Angeles
Century Park East
Los Angeles, CA �
Tel: ..
Fax: ..
Miami
Southeast Financial Center
South Biscayne Boulevard, Suite
Miami, FL �
Tel: ..
Fax: ..
Washington, DC
K Street, NW, Suite
Washington, DC �
Tel: ..
Fax: ..
www.stroock.com
H
H
This publication may be attorney advertising.
Prior results do not guarantee a similar outcome.
____________________________________________________________________________________________________________
Reprinted with permission from the March 5, 2014 issue of
Law.com. Further duplication without permission is prohibited.
All rights reserved. This Stroock publication offers general
information and should not be taken or used as legal advice for
specific situations, which depend on the evaluation of precise
factual circumstances. Please note that Stroock does not undertake
to update its publications after their publication date to reflect
subsequent developments. This Stroock publication may contain
attorney advertising. Prior results do not guarantee a similar
outcome.
Stroock & Stroock & Lavan is a law firm with a national and
international practice serving clients that include investment banks,
commercial banks, insurance and reinsurance companies, mutual
funds, multinationals and foreign governments, industrial
enterprises, emerging companies and technology and other
entrepreneurial ventures. For further information about Stroock
Special Bulletins, or other Stroock publications, please contact
Richard Fortmann, Senior Director-Legal Publications, at
212.806.5522.
