Posts Tagged ‘co-op’

Cooperatives: Empty Seats

December 8, 2014

2014-12-08 - IMAGE, en.wikipedia.org

(Image Credit: Google Images – http://www.wikipedia.org)

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 DURING THE APPROACH AND ONSET OF THE HOLIDAY PERIOD attendance at cooperative board meetings typically dwindles. Often there are more empty seats than attendees. Unfortunately, this not only applies to shareholders but to board members as well.

Gift shopping, setting decorations, travel plans, company holiday parties, dinners, family gatherings and visiting friends generally occur in a fairly short time span, causing folks to be unreachable or unable to be at the assembly. Recognizing this, many cooperatives schedule their board of directors meetings in a manner that has the least negative effect on attendance, especially for board members.

But sometimes the business of the cooperative requires a scheduled or special board meeting in the thick of the holiday season, such as in the case of approving a new shareholder applicant or authorizing an unexpected repair. In circumstances like these convening a quorum of board members can be a challenge when more enticing seasonal festivities beckon, and it can be even more of a challenge to pull together a quorum at the last minute for a special meeting.

What is a quorum? It is the least number of members who need to be present in order for the meeting to be considered official. If there is no quorum, there cannot be a meeting and, therefore, no action may be taken on any cooperative business.

As technical advisers to cooperatives we often see a board of directors that consists of five or seven members (five members is most common) who are elected to board positions by shareholders. A quorum for a five-seat board usually is three members and for most cooperative actions a majority vote of the board is necessary.

Yet, as is apt to happen during holidays, cooperatives sometimes stumble at a point when one or more board members are absent and only a quorum is present. The stumble is likely to occur due to a misinterpretation of the word “majority.” Unless the cooperative documents explicitly state otherwise, a majority board vote typically means a majority of all the seats on the board ― not a majority of the board members in attendance.

For example, on a five seat board having a quorum requirement of three members and with only the quorum present, all three of the members must vote to approve an action. Too many times, when reviewing board minutes, we found a board secretary had improperly declared an action approved when just two of the three-member quorum voted to support a motion. The rationale, of course, was that a majority of the three members voted to approve the action. However that rationale is incorrect since two votes on a five member board do not constitute a majority, only three or more would be a majority. Consequently, in such an instance, a matter the cooperative thought was approved actually had not been, leaving the door open for opponents to the action to argue it was not authorized.

In some situations, with just two votes in favor, we had to request the full board to vote again on those measures to obtain proper authorization.

Bottom line: To better avoid potential controversy and disputes, ensure the term “majority vote” in the cooperative documents is properly defined and upheld before declaring a measure to have been approved.

 

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Need consulting, coaching or problem troubleshooting regarding other single-family or multi-family housing issues? We’ll be pleased to help you. Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use, Disclaimer and Disclosure: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog: (i) may possibly contain one or more instances of unverified information; and (ii) is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance, oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation. Statements, comments and/or opinions of blog authors and/or users of this blog may or may not reflect those of Inhouse Corporation. Users who comment on this blog are solely responsible for their comments and opinions.  Comments and/or opinions deemed uncivil or inappropriate will be removed or not posted.  

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When Idle Rumor Isn’t

June 1, 2014

 DSCN0428

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YOU’VE HEARD THEM, AS WE HAVE. They’re rumors that take flight like dandelion seeds seeking a fertile place to take root then grow and regenerate ― rumors that may but frequently do not have any relationship to truth.

In the property management arena an onsite manager usually isn’t privy to rumor involving him/ her, the management firm or the property being managed. Even when aware, most rumors typically seem trivial, nonsensical, inconsequential or ridiculous to the degree of blatant improbability. So why bother with them? Aren’t there far more important things needing attention?

Actually, such reactions can be shortsighted. Whether factual or not, we’ve found a persistent rumor is similar to a persistent trickle of water against a building foundation … it has power to undermine. And while residents are apt to lack fondness for paying rent, they should recognize the management team as being competent, professional and ethical. Yet, an unchecked rumor circulating among residents that negatively affects property management may seriously damage that recognition even when the rumor is totally unfounded.

Case in point: A troubled residential cooperative we knew did not have a professional management firm to handle day-to-day matters. Instead the co-op board of directors seemed to inappropriately tolerate its president making unauthorized, unilateral, often inconsistent or confusing, operational decisions evidently based on little understanding of property management. Compounding that situation were infrequent, irregular and poorly advertised board meetings.  It was a setting ripe for rumors … and fly they did. But the two most prevalent ones pointed to the board as either secretly planning to sell the co-op’s real property to a third-party, or allowing the president and/or one or more board members to secretly arrange their purchase of the property.

How those two rumors started is anyone’s guess. Each was outrageously false because the co-op bylaws required all co-op shareholders to vote on a sale of co-op property in an open shareholder meeting. Inasmuch as a quick read of the relevant bylaws section would easily debunk both rumors the board simply laughed them off in the belief the absolute lack of truth would cause the rumors to die.

But they did not die. They persisted. They caused private worries of shareholders to evolve into shared concerns between neighbors then to morph into grumblings too loud for the board to ignore. By the time the board decided to react it was too late. Even the bylaws could not seem to dispel the entrenched misunderstanding, eventually leading to shareholders forcing a meeting with the consequence of the president being removed and several board members being replaced. Unfortunately the unrest ensnared two of the hardest working board members who probably should have been retained. Worse, the new board seemed unable to rectify the tailspin the rumors caused, which, among other things, eventually collapsed the cooperative.

What should have been done? In a nutshell: Competent professional management should have been retained; co-op business and decisions should have been conducted and made in as transparent a manner as possible, with the board conducting regular meetings under proper advance notice that provided time for shareholders to express their concerns; regular accurate communication should have been distributed to shareholders (for example, a newsletter); and rumors should have been promptly, straightforwardly and respectfully addressed.

Bottom line: Establish procedures to help prevent destructive rumors and don’t ignore them if they arise nonetheless.

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Need consulting, coaching or problem troubleshooting regarding other single-family or multi-family housing issues? We’ll be pleased to help you. Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation. Statements and/or opinions of guest authors may or may not reflect those of Inhouse Corporation.

Is the Shortcut Worth It?

March 30, 2014

Shortcuts

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EVERY ONCE IN A WHILE TAKING A SHORTCUT SEEMS TO BE HELPFUL. After all, we save a little time, stress and maybe a bit of money too … and taking a shortcut once or twice won’t hurt anything, right? And if taking the shortcut a few times in the past caused no negative results, why not avoid the long-road and just use the shortcut all the time?

Perhaps in some instances a shortcut may yield a benefit but usually, particularly in the world of residential cooperatives, a habit of taking operational shortcuts can be treacherous and undermining. To show just how treacherous shortcuts can be, let’s take a  hypothetical look at a case of shortcuts we encountered not too long ago.

We were retained as consultants to a cooperative in which two opposing resident factions had evolved. Ignoring for the moment all the problems the warring contingents produced, in order to prevent a lawsuit threat from completely ripping the co-op apart we were asked to immediately determine whether the autocratic president had authority to make unilateral decisions while failing to convene meetings of the co-op board of directors. The out-of-power faction said the president did not have such authority though it was the in-power faction that retained and wanted the matter resolved.

After several days of interviews and researching cooperative documents we learned the president relied upon a vote of the board taken one or more years ago granting him the ability to operate the co-op without further board action (the ability of the board to essentially abdicate its role was a separate question not addressed in this writing). Yet, the president had nothing in writing to support his claim. Previous and present board members seemed to recall some thoughts of conveying a few authorities to the president though memories of a specific board action in that regard, if any, were misleading and inconsistent.

Co-op documents indicated the secretary was charged with producing written minutes and board resolutions that contained the actions taken along with yea/nay votes as well as the time, date and place of the vote. However, neither the current nor immediate past secretary had produced minutes or board resolutions, though they did have incomplete sporadic notes. They did not know where the minutes and resolutions of previous boards were kept or if they existed at all. When asked why proper documents had not been produced and maintained, the implication from their responses was minutes and resolutions weren’t really needed since nobody ever requested to see them.

Evidently for several years the shortcut of keeping a few notes now and then made the secretary’s job easier and seemingly carried no consequence since no one missed the required documents and resolutions … that is, until the president’s authority was challenged. At that point the illusion of that easy shortcut came to a screeching halt.

In the end that shortcut was eliminated, the board regained control of the co-op as it resumed regular meetings and appropriate training for position of secretary/treasurer commenced. Of course, had there been a shareholders lawsuit its result could been devastating to the cooperative corporation. As the above signs states, “Shortcutting causes erosion.”

Want help to troubleshoot cooperative malfunctions? Feel free to contact us at InhouseCo@aol.com  and place the words “Cooperative Help” on the subject line.

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Need coaching, training or problem troubleshooting regarding other housing issues? Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation. Statements and/or opinions of guest authors may or may not reflect those of Inhouse Corporation.

This Isn’t A Cooperative, Is It?

March 15, 2014
2014-03-15 - Mfd Home Community Co-Op

Manufactured Home Co-Ops
Expand Ownership Interest

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DESPITE THOSE WHO STILL MAY SAY THERE IS NO SUCH THING AS A MANUFACTURED HOME COOPERATIVE, they really do exist … and we’ve been helping to create and operate them for more than 24 years. In fact, we worked on one of the very first such cooperatives in New York State.

Nonetheless, it still seems to surprise many since housing cooperatives (co-ops) are generally associated with  apartment buildings, especially in metropolitan areas. So when the word “co-op” is mentioned folks usually envision a massive structure reaching into the sky and encompassing numerous dwelling units. But that vision is only partly correct because the term “housing cooperative” does not describe a structure or building. Instead, it describes a form of ownership. Just as a person or company may own a property or operate a business, so too may a cooperative.

Consequently, there is a large variety of cooperative types beyond those for housing, such as farm, food, health care and credit union cooperatives. Simply stated, the cooperative entity is a state recognized formal organization wherein  members (shareholders) of the cooperative own a share of stock in the cooperative corporation, which share conveys to the shareholder certain rights. In the housing arena the co-op typically owns the dwelling structure and common areas and the shareholder has the right to use the designated dwelling space for which the shareholder pays a fee (occupancy charge) under an occupancy agreement (proprietary lease).

However, in the case of a New York manufactured home community the arrangement diverges from what might be seen as a “normal” cooperative scenario. Here the manufactured home (dwelling) is most often owned by the shareholder separate and apart from the co-op while the cooperative owns and operates the land, resulting in the shareholder getting an occupancy agreement from the cooperative for a portion of the land on which the shareholder’s manufactured home is installed. As with most other housing cooperatives, the shareholder pays an occupancy charge to the co-op.

This translates into a situation where: Each shareholder owns his/her manufactured home as well as being a part-owner (shareholder) of the cooperative corporation along with the other shareholders; the co-op owns/ operates the land; and through occupancy agreements with the co-op the shareholders are tenants of the cooperative.

In this way the manufactured home community cooperative broadens the ownership interest of shareholders in that they own their homes and share an ownership interest in the land. When that ownership interest is appropriately combined with regular training for board members/shareholders and proper operations, the manufactured home cooperative is a win for the residents and may provide a non-subsidized affordable housing resource for the town in which it is located.

For more information on New York manufactured home cooperatives, feel free to contact us at InhouseCo@aol.com  and place the word “Co-ops” on the subject line.

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Need coaching, training or problem troubleshooting regarding the foregoing or other housing issues? Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation.

A Co-Op Nightmare: When Conflict Rules, Part 3

February 15, 2014

Conflict, many persons

Conflict: When a cooperative divides.

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SOME SHAREHOLDERS ALSO FEEL THEY DON’T NEED TRAINING, after all they just need to pay occupancy charges on time and comply with the cooperative documents, right? No … not exactly.

While its true occupancy/ maintenance charges must be paid and there must be compliance with the cooperative documents, our work shows most shareholders either have little specific knowledge of those documents or forgot what they contain. The cooperative certificate of incorporation, bylaws, rules and regulations and occupancy agreements (proprietary leases) are often an unread series of mysteries.

Of course, we are not suggesting shareholders have intimate knowledge of every last detail in that paperwork, especially since it can be overwhelmingly voluminous. But at a minimum they should have a basic, if imprecise, understanding and familiarity with the documents sufficient to optimistically search for and locate relevant passages that address particular cooperative situations as needed.

Knowing the ropes can alleviate a sense of helplessness shareholders sometimes experience. Not knowing why certain tasks and responsibilities are necessary or the reasons for board actions can make them feel, rightly or wrongly, that they deliberately are kept in the dark. Moreover, if there is a lack of adequate communication between the board and shareholders that feeling can substantially magnify. Circumstances may veer out of control when shareholders perceive themselves as powerless and having  little to lose by venting their frustration as board meeting disruptions or circulating unverified rumors and allegations that can be hurtful to the cooperative, other shareholders and/or board members.

Such an environment is fertilizer for shareholder discontent and turmoil despite the fact that shareholders as a group typically hold the real power within a cooperative—and shareholders can exercise that power when they correctly employ the appropriate procedures usually provided within the cooperative structure. If a board overtly or covertly believes there is a benefit to have shareholders floundering in their efforts to make changes or have grievances redressed, that board should quickly reconsider that position. A suitably trained board would realize a cooperative is designed to be a democratically run organization in which every shareholder in good standing has a voice, a vote and energetically participates in the efficient operations of the cooperative.

Ironically, we find the more stable cooperatives are those that adhere to cooperative principles, are transparent and aggressively ensure continual communication with shareholders. Those boards proactively seek ways to create incentives that encourage shareholder participation at all meetings, on committees and at social events. Such activities boost shareholders’ realization that they truly have a stake in their cooperatives’ success which, in turn, fosters an ownership interest in the cooperative and thereby aids in dispelling the harmful “landlord versus tenant” temperament that too many mistakenly embrace in the co-op setting.

Moreover, filling a seat on the board should not be a lifetime activity for any person. Ideally every shareholder should serve on the board of directors at some point. This would give each of them the hands-on experience of knowing the challenging difficulties a board encounters and strives to deal with on a regular basis … hopefully portraying the board and shareholders are on the same side.

Consequently, appropriate shareholder training would impart or restore the basic understanding of a cooperative, explain the gains derived from participation in all activities and show shareholders how to responsibly and respectfully employ such authorities as are given them in the cooperative documents. It would also help them understand their obligations as well as those of the board. All of which often quells or reduces the conflicts, disagreements and organizational gridlock that can grip less transparent co-ops.

All in all, effective training establishes the platform on which a successful co-op can be built.

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Need coaching, training or problem troubleshooting? Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation.

A Co-Op Nightmare: When Conflict Rules, Part 2

February 9, 2014

Conflict, many persons

Conflict: When a cooperative divides.

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SO WHAT CAN BE DONE TO AVOID CONFLICT IN THE FIRST PLACE? We have yet to find the one remedy that works in every situation. Differing situations typically require differing variations of cure. However, there are actions that should be implemented in all cases to proactively help reduce conflicts and diminish their severity when they do take place.

Experience shows disagreements between residential cooperative shareholders and their boards of directors are frequently rooted in misconceptions and misunderstandings, which seemingly result from something many co-op boards seem to dismiss too readily: Training — regular specific training for the board, co-op officers and shareholders. Consequently we’ll begin to look at training.

Too often we find a co-op views training as an unnecessary expense or needless luxury … and we’ve heard most, if not all, of the so-called rationale reasons to avoid it: The board has an attorney and knows what to do; shareholders don’t need training; its a waste of time; we already do what’s right; no one will attend; etcetera, etcetera.

Unfortunately, reality frequently paints a contrasting picture.  Many times board members have little or no background in business (yes, a residential cooperative is a business), have an incomplete knowledge of applicable co-op and housing laws, and may be unfamiliar with the corporate documents to be enforced. This is not a criticism but rather an observation that underscores proper board training can be beneficial and open opportunities for each board member to give his/her best efforts in service to the cooperative.

Yet, beyond other responsibilities involving legal, operational and residential aspects of the cooperative, the board needs to be a driving force for unifying and keeping co-op members on the same page. Like any group, a cooperative is most effective when everyone pulls in the same direction. It’s no easy task and is a never-ending work in progress. Even for the cooperative that does provide occasional board training, we’ve found new board members under the impression their only task is to attend board meetings. While attendance at meetings is necessary, newbies and veteran members alike often have no clear or full idea what is expected of them, what their authority is or what comprises their responsibilities. For example, some board members are shocked to learn they typically have a fiduciary duty to the cooperative–that is, placing the interests of the cooperative ahead of his/ her own personal interests.

When a board is in this situation it flies by the seat of its pants, generating decisions that can easily become inconsistent (or worse) and cause confusion that can leave the cooperative vulnerable to strife as well as potential liability. Without understanding their roles there is an absence of focus or a straightforward vision, and without focus inadvertent inconsistencies are likely to follow. When it occurs such erratic behavior tends to ferment uncertainty for shareholders, who may see it as whims that fluctuate according to who is involved and the prevailing mood. By itself this type of climate yields a fertile ground for uneasiness that can turn into shouting matches at board meetings or divide shareholders into factional camps. But if this situation is coupled with a lack of adequate two-way communication between the board and shareholders, it starts to get nasty with rumors and accusations running amuck.

This is especially true when the board needs to enforce rules against shareholders.  When the board interprets a rule one way for a violator then interprets it another way for a different person, anyone who is treated more harshly may feel “picked on” or singled out, an event that can turn ugly very quickly.

So, the very first thing to consider for smooth cooperative operation is proper training for the board and its officers, which can be two different types of training sessions. If both types of training are not provided on a regular basis, at least once every two to three years, they should be.

Certainly, each cooperative shareholder should be grateful for every person who serves as a board member. But what should be gratitude can be rapidly replaced with contempt, and it can happen even more quickly without the guidance and focus of training. Indeed, when the cost of training could be a bargain when compared to the stress and burdensome expense of dealing with these difficulties.

More next time.

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Need help with training or problem troubleshooting? Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement that at no time will the reader rely upon or act upon anything contained or implied in this blog and that any and all actions that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation.