Breaking the Two-Thirds Barrier and Successfully Updating Your Building's Governing Documents

If you're struggling to get enough votes to update your building's outdated governing documents, Mark Levine, principal at EBMG Management, offers a roadmap for success. You'll discover why a West Village co-op needed multiple attempts to ban smoking, and how they finally achieved the crucial two-thirds majority needed for amendment approval.

Levine offers practical strategies for overcoming common obstacles like poor meeting attendance, and shows how effective communication campaigns can turn indifferent residents into engaged voters. Learn why understanding your building's demographics is essential before proposing changes to policies covering everything from current issues like e-bike fire hazards to polarizing topics like flip taxes.

You'll also hear about leveraging technology and hybrid meetings to boost participation, plus how to tap into your management company's experience with similar buildings. Whether you're dealing with quality-of-life complaints or bylaws from the 1980s, this episode provides the tactical insights needed to successfully modernize your building's governing documents. Habitat's Emily Myers conducts the interview. 

How To Run Your Building: For Co-ops and Condos

Transcript

[00:00:00] Emily Myers: Welcome to Inside Track, a conversation with New York's leading property managers. I'm Emily Myers with Habitat Magazine, and my guest today is Mark Levine, principal at EBMG Management. In many older buildings, the governing documents haven't been amended for decades. In a co-op, making changes to the by-laws and proprietary lease generally requires a vote of at least two thirds of the shareholders, and that can be difficult to achieve.

Mark, you've been dealing with the challenge of updating the governing documents at a 50 unit co-op in the West Village. What was the issue that prompted this? 

[00:00:36] Mark Levine: Sure. So if you picture a a beautiful landmarked building-- it's actually a series of three or four buildings with an interior courtyard built in the 1880s.

They've been having a lot of smoke issues. You have residents that, depending on where they're living smoke and odors can get through the building. We've had a few shareholders in this particular building who have been complaining about smoke infiltration in their units.

And while we have the allowances for smoking in the units, unless it's changed, you obviously can't smoke in any common areas. The question that the board is up against with management input is how can we counteract that when it becomes a quality of life issue? And that's when we look at .

[00:01:16] Emily Myers: So has that been done?

How has it been resolved? 

[00:01:18] Mark Levine: Yeah, they actually went through a few iterations. When you do an update to a core building document, that's not the house rules where you have to update, whether it's the bylaws or the proprietary lease, you have to do it in a certain fashion so that it can actually come into code, within the building. We had to do it a few times because we just didn't have the participation that we wanted. In the beginning, there was a loud minority of shareholders who were impacted by this, but in reality there were so many more that weren't, so. Communication was key for us to get out the notice as to why we were having a special meeting and what that special meeting agenda. For this case it was to amend the proprietary lease so that smoking wouldn't be allowed in any interior private spaces as well as the common areas. So when we put out that notice, we had to have a special meeting. We discussed it, but unfortunately at the first version of the meeting, we didn't have a quorum for the meeting.

And when you don't have a quorum for the meeting, you're absolutely not gonna meet the minimum threshold for the approval of the super majority of the shareholders that are required. So we had to do a few different series of meetings, and then eventually, through the collection of proxies through everybody attending those meetings, through communication from the board and from management, we were able to fix that. And for the shareholders who are now having these issues, they at least can know that if they do have these odors, and smoke infiltration into their units, now we have the mechanism of the law where we can go to those shareholders that are not abiding by the new law anymore and take them, whether it's with penalties and violations because now it's part of the house rules. Or we could go through the legal process. But until we did that, our hands were tied, that we couldn't really go further than saying, Hey, this is an issue that we believe is coming from your apartment.

Please stop the behavior. But now we've gotten through the extra steps so that we can have the legal process behind 

[00:03:18] Emily Myers: So you said it took a lot of communication. There were special meetings, multiple attempts to do this. Is that fairly typical? 

[00:03:26] Mark Levine: Yeah, I think when you have a super majority of shares that are needed for anything. It's hard enough to wrangle a quorum.

Unless it's something that's affecting so many people in the building, and it will affect either their quality of life or the value in their building or in their shares, their apartment. That's when you really have a high participation. But in reality, getting everybody together over Zoom and then, playing this process out, it's going to be hard to just elicit that participation from as many people as you need.

And this building actually does have a small sponsor contingency, so there was a block of shares that we were able to get quickly, so that helped in adding up to the 66%. But all the other shareholders, we had to have one-on-one conversations and really try to get them to come to the meeting and put their vote in appropriately. 

[00:04:16] Emily Myers: This was a smoking issue. What other issues typically prompt an effort to amend the governing documents? 

[00:04:21] Mark Levine: Right now we're dealing with a lot of things that are reactive. When I say reactive, it's something happened in the city whether that's a, an e-bike situation where we know that lithium ion batteries, if they're not properly charged and stored, they could be a fire hazard.

Proprietary lease. The bylaws, the house rules. We're looking at those issues that affect the life safety of all the other buildings or the other occupants. So in this case, I would say yes, smoking, you have a lot of secondhand issues. It's been proven that you could have deteriorating health issues, but on the life safety side, also for the E-bikes and for the electronic scooters, those are more fire safety issues, which we're really trying to avoid having those go up in all of the buildings. So from the smoking to the E-bikes, that's the next step of these building wide meetings.

But just as an important caveat, you don't have to have a special meeting for this. If you have an annual meeting coming up, you can also put that vote as it would be written on the notice of the annual meeting on the agenda so that you can kill two birds with one stone. 

[00:05:22] Emily Myers: Okay, so perhaps you can briefly talk through the process of proposing and voting on amendments to the bylaws and proprietary release and the governing documents broadly.

[00:05:29] Mark Levine: Sure. So we have to first understand with the co-op or the condo counsel, what is it that we're looking to change? What's the language of the existing and what are we trying to do by changing it or adding a new rule? And once we have that language sorted out, that will be put onto the notice of the annual meeting or the special meeting.

So it'll say that the agenda for this meeting is for this purpose, and the purpose will be listed out, however many different votes you're gonna have. So in this case, let's say to amend the building documents so that smoking is not permitted in any common or any personal area, however that language is written would have to go on that notice of the annual meeting.

From there, when we get to the meeting, whether you attend it in person or by proxy, we always say, if you can't attend the meeting in person, please give your proxy to somebody else so that they can represent your shares. And depending on the building's bylaws, you may be able to give it to somebody that's outside of the ownership of the building.

Other times you may have to have somebody that's already in the building holding that proxy. Please review your bylaws for that. But when you get to the meeting and it's discussed, and then it's closed out, and then a vote is ready, the ballot is going to have that specific language: it's gonna say, and let's take it from a co-op perspective, the name, the number of shares, the person who's the shareholder, or the people who are the shareholders.

It's gonna have the language for the vote: with regards to this particular issue, with this language, I vote either I approve or I do not approve. And then once that's all handled in we put that together into our spreadsheet. We add up the positives and the negatives, and hopefully we'll get over that 66% hump. But as I said, communication is key so that everybody understands before they get to the meeting, what is the core complaint that this is resolving?

Why is this going to help me and is it in my interest to vote yes? If we're putting out something in the special meeting that's going amend the important building documents, there's probably a good reason, a theory behind why. So understanding and explaining is the battle there so that everybody could be on the same page.

And those people who are smoking in their units. That's an uphill battle that you're also not gonna be able to win. Those people we know are probably not gonna wanna be inconvenienced by not smoking and not vaping, not having anything that's like that. Making sure that you have the votes to go in sometimes before the meeting is really important.

And there are times that we will put out surveys so that we understand, if this rule is proposed. And you can say the same thing about a flip tax. A flip tax is a very polarizing type of discussion if a building doesn't already have it. But this goes along the same lines of altering the building document. Just the smoker in the unit if they're in the unit, they don't wanna vote yes for it; the shareholder who knows that they're going to be moving out in a year or two may not also vote for a flip tax.

In each of these issues, you have to gauge what is everybody in the building? Who are the shareholders? What are their intentions of staying in the building? Will this affect them? And that might be a much different story than a flip tax where everybody in the building has been there for 10 to 15 years, they're not moving out.

This is their place to stay. It's not a starter building with smaller apartments per se. And the benefit of that, in this case is that the long-term shareholders will have the benefit of the flip tax money going into the reserve fund. So hopefully it'll settle down on the assessments that would be needed by those existing shareholders.

But this is a play by play different circumstances for different rules that are proposed, and you have to look at each one on its own face value. 

[00:09:02] Emily Myers: And I guess knowing the demographic of the building and the kind of character of the building is an important part of the success of these projects.

[00:09:11] Mark Levine: Exactly. 

[00:09:12] Emily Myers: So are there specific sort of best practices you would recommend then for updating governing documents? You've talked about communication, you talked about having a real understanding of the character of the building. But is there anything more practical that you can discuss?

[00:09:28] Mark Levine: I think when you're working with a management company, whoever that management company is, as long as they have a series of buildings that are like yours, and like yours doesn't need to necessarily mean that they, they look or the characteristics are the same, but if you are a co-op, do they have other co-ops, or you are condo, do they have other condos you can pull upon without sharing personal and protected information that's confidential?

You could pull upon all these different house rules and bylaw interpretations and changes and say, okay, these other buildings have done this. This is a good idea. And we look at a lot of bylaws and offering plans that haven't been changed since, you said in the beginning of this decades. Decades is true. Probably looking at a lot from the 1980s, a lot from the 1990s.

You have the original house rules that came from the actual offering plan that haven't been amended since. There are parts of the house rules that don't really exist anymore. There's some that have come up based on technology. I think just looking at it from, what is different in the last 40 years? What have other buildings done? And use your manager to pull from those other buildings that have done the updates, that have done the work, that have paid the attorneys for it, and then you have a baseline where you can move forward from that, even if it's just a template. Use that template as a starting point and then move off of it. Take out what you don't need, add what you need. Very important to have policies in place for if you have garage spaces, if you have storage spaces, bike spaces, like there's a lot of things that can go wrong. There's a lot of protection that can be put into place. So a lot of these buildings that are around for the last 34 years that have never really taken a project like this on and made sure that all of your i's are dotted, your t's are crossed and that you're protecting yourself. That's where you can rely on your management. That's where you can rely on other building documents for other buildings that will, put your building on the right path.

[00:11:15] Emily Myers: And just lastly, just the shift to online hybrid meetings, does that simplify things at all? Does it help with communication and with quorums and that kind of thing? 

[00:11:25] Mark Levine: I think that's going to depend on the manager. When you're looking at it, I personally have a really comfortable level with online forums using Zoom, using Google forms for voting, using Excel sheets for tabulating the votes. When you go to another company, it might not be as seamless as that, or they may not feel as comfortable. So in those regards, you might opt to have a in-person meeting because of that, but it really depends on the strengths. I think when you're looking at a quorum, it's certainly easier, in a condo, especially when you have a high investor condo where there's a lot of renters in the building. There's people that live elsewhere that are owners, even overseas. When you have that situation, of course that's going to be easier to get everybody on a Zoom depending on if it makes sense based on where you are in terms of the world. It could be 9:00 PM or 7:00 PM here, it could be 2:00 AM wherever you are. Time zones notwithstanding it's a lot easier. 

When you have a co-op, I I've seen a lot of buildings that didn't have quorums before COVID, that in the Zoom world now they've got quorum, because it's so easy just to sit at home and not have to worry about going either to a meeting room or going to a basement and sitting with everybody. So you could literally do what you need to do in your house and, pop onto a Zoom and then get off. So I think that from that perspective, it's a lot easier. And I actually enjoy running a Zoom meeting versus an in-person meeting, which we've done a few this year with Zoom. We have it down to a science, especially since COVID hit, because the sign-ins take 10% of the time that it does in person when everybody literally has to stop at a table and sign in. And then you have to do the math on figuring out if you have a quorum. It's a one stop shop when it's on Zoom. So it just takes a lot of the process out of it and you can just focus on the meeting and go through the meeting a lot better and have a functional outcome hopefully when everybody is participating.

But we always say to everybody, no matter if you're on the board or if you're a shareholder, unless you vote, you have no voice.

So just take the time, understand the issues, put your 2 cents in. It's hard to complain about something when you didn't vote for something . That's always the the catch 22 for a shareholder or for a unit owner who doesn't. Using it as many different avenues as we can to get everybody into the field as easily as possible is our interest.

[00:13:36] Emily Myers: Great, Mark, thank you so much. Mark Levine, principal at EBMG Management. 

[00:13:41] Mark Levine: Thank you.