Housing cooperatives, better known as co-ops, can be ideal living situations for individuals who value community, financial stability, and want something slightly cheaper than a condo. However, as in any living situation, problems can arise. You may have disputes with the rest of the co-op members or the governing body, which may be a board of directors depending on how your co-op is structured. If this dispute is based on the co-op breaking the law, breaching its contract with you, or failing to uphold its duties to the co-op members, then you may need to discuss filing a lawsuit with a lawyer.
The basics of co-ops
A co-op is structured differently than a condominium. The co-op is a business that owns the real estate. The co-op is not the real estate itself. When you buy into a co-op, you are purchasing shares of a corporation. As a shareholder, you own a portion of the business and are one of the many owners of the real estate (though there are non-equity co-ops, too, which work a bit differently). Also, as a shareholder, you are given exclusive rights to and use of one of the housing units on the property.
Co-ops may be run differently depending on their structure and size. Smaller co-ops tend to be highly cooperative living arrangements in which every resident has a say and helps maintain the real estate. Larger co-ops tend to have a board of directors, made up of a small percentage of residents, which makes significant decisions for the property.
You may sue your co-op
As part owner of a business, you may have disputes with the business. Realistically, you are likely to have a dispute with the governing body of the business. If the co-op is structured as a corporation and larger, then this body would be the board of directors. You can have a dispute with the co-op and sue it the same way you would sue any other type of business. Being a shareholder and part owner does not make you ineligible to sue.
Common disputes within co-ops
A wide range of disputes can arise between one co-op member and the board. However, some of the most common legal disputes include:
- Denials of a shareholder’s attempt to sell their shares
- Denials of a shareholder’s attempt to sublet
- Proposed use on Airbnb or other short-term rental sites
- Denials of a shareholder’s proposed renovations
- Renovations requested by the board
- Pet restrictions
- Accusations of discrimination
- Accusations of a board member’s self-dealing or conflict of interest
- Fraud or embezzlement
- Cockroaches, bedbugs, and other pest extermination
- Improperly handled votes
- Improperly levied fines
Do you need to sue your co-op?
When you file a lawsuit against your co-op, you’re suing your community where you live day in and day out. Due to the social issues that could arise, it’s best not to jump straight to a lawsuit. In most situations, it is important to go through your internal processes as thoroughly as possible. Your co-op probably has a method for receiving, reviewing, and resolving disputes.
Discuss your rights and options with a lawyer
If you and the co-op cannot come to a resolution, and you believe your rights are being violated, call an attorney to discuss your options. By talking with a residential real estate attorney, you will gain an experienced and knowledgeable opinion regarding your rights and the relevant law, and whether your rights or the law have been violated. A lawyer also can provide insight into the possible and likely outcomes of a lawsuit.
Discuss the potential cost with a lawyer
One of the reasons to think carefully about suing your co-op is the cost. Any lawsuit is going to take time and a financial investment. Additionally, your agreement with your co-op may specify that if you sue and lose, you can be forced to pay the co-ops attorneys’ fees and court costs. Financially, it may be smarter to talk with an attorney about going through the co-op board’s designated processes to try and resolve the situation.
According to Benjamin Weinstock, an experienced real estate attorney Partner at Ruskin Moscou Faltischek P.C., it is important to consult with an attorney even if you decide not to take the dispute to court.
“People wander into these co-op meetings and they don’t necessarily know the scope of what they can argue about they don’t really understand the history of the building, the history of the bylaws, or the history of the rules and regulations. In my opinion,” says Weinstock, “if someone has a legitimate or a signification enough concern, they absolutely should be represented by a competent attorney, someone who has experience dealing with co-ops, somebody who really knows the rules of the game because you stand a much better chance of winning the game if you know the rules of the game. If you don’t know the rules of the game and you want to play, you’re going to lose immediately.”
An attorney might recommend utilizing an alternative dispute resolution method, such as mediation or arbitration, with the co-op to resolve the issue outside of court. Mediation or arbitration can also take time and accumulate costs, but they are known for being less costly than a lengthy and contentious lawsuit.