Page 180 (6):
“So long as the Sponsor or the Holders of Unsold Shares continue to own any percent of the then outstanding shares of the Apartment Corporation, the Apartment Corporation will not impose upon the shareholders any assessment whatsoever except by affirmative vote of one-hundred (100%) of the issued and outstanding shares, unless the Reserve Fund has first been reduced to a sum of $15,000, or such sum has been irrevocably committed for other improvements.”
—Curious Board Member
A “Although you do not explicitly say so, I am assuming that the question comes from a cooperative corporation. As I understand the question the corporation is in receipt of a tax rebate (it’s not stated whether this is a real estate tax rebate or some other form of tax rebate,) and it now wishes to retain the rebate and add it to its reserves. If this is a cooperative corporation, it received a rebate relating to the real estate taxes it has paid and wishes to retain that money rather than rebate it to it‘s owners as it is required by law, to do,” says David Ramsey, an attorney with the Woodbridge-based firm, Greenbaum Rowe Smith & Davis, LLP.
“You have provided language from, I assume, your bylaws, that prohibits any assessment without the approval of the 100% of the shareholders so long as the sponsor holds shares of the cooperative corporation or there are any unsold shares in the cooperative corporation. The only exception is if the reserve fund dips to $15,000 or less or you’ve committed the money in the reserve fund so that, after expenditure of the money, there will be $15,000 or less in the reserve fund. It is assumed that your reserve fund is not at a level of $15,000 or less. While the language in this bylaws provision would be of questionable validity if the cooperative corporation had a legal obligation that it was required to fulfill but could not do so without an assessment - in this instance, it appears that the desire of the board is simply to increase the reserve fund to a ‘healthy sum.’ That being so, the provision in the bylaws appears to be enforceable as written and an assessment would not be permitted. If the cooperative corporation was required, for instance, to undertake an immediate repair of the roof and had insufficient money to do so, and could not obtain 100% approval for an assessment, it could likely move in court to permit the assessment so it could undertake the required repair. There does not, however, appear to be any urgent need for the additional funds at this time and it is, therefore, unlikely that a court would support the assessment.”