Leni Cummins is quoted in a New York Times “Ask Real Estate” column responding to a question regarding the refusal to make repairs by a co-op’s board of directors. Shareholders are forced to pay for such repairs when the board refrains from doing so, prompting the question of whether boards may ignore violations and impose costs on shareholders, or whether directors can be held personally responsible.

“In New York City, the owner of a multiple dwelling, such as a cooperative corporation, is legally responsible for keeping the premises in good repair and in compliance with building housing codes,” said Leni. “But it’s the shareholders who are responsible for the financial obligations of the buildings. They could try to bring a case against a board for failing in its fiduciary duty, but because boards are protected by the business judgment rule – as long as directors are acting within the scope of their authority, in good faith, and for a legitimate corporate purpose – it could be a tough case to make. If a board knowingly allows dangerous conditions to persist, repeatedly ignores government violations, or fails to exercise any rational judgment about how and when to remedy them, a court may find that the board has stepped outside the protection of the business judgment rule.”

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