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Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 118191
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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When my coop was formed in 1986, the Board signed a 25 year

Customer Question

When my coop was formed in 1986, the Board signed a 25 year lease (with three 10 year extensions) for the building's commercial space. The lease is with an Entity composed of the building sponsors. including three of the four members of the Coop Board. The lease allowed the Entity to sublet the space and pay rent equal to 15% of the coop's income.....claiming the "80-20" rule. It seems everything in the arrangement is to the benefit of the Entity at the expense of the Coop. Ten years before the expiration of the first lease, the Entity exercised all three of their options. That agreement was signed by the Coop president who is also a member of the Entity.
Current going rent for commercial space in this neighborhood is $350/sq foot and up. The Entity pays the coop the equivalent of about $35/sq foot.
As a current board member, I would not necessarily want to take the lease away from the individuals in the Entity, but I would like to work out something to share the gold.
What steps should we take?
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Law Educator, Esq. replied 2 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
The problem is that there is a signed contract, which is binding on the parties who signed it. Thus, to invalidate the contract you have to prove a breach or that the contract should be void. If you cannot prove breach of the contract, then I am afraid that your only recourse remaining could be to sue the board members who engaged in the self dealing and wrote the contract to their benefit without full disclosure and vote of the members, as self dealing is a breach of fiduciary duty to the co-op and a basis to hold the board members personally liable for the damages caused.
These are the options you have based on the information you provided, because you cannot just change the contract that has been signed without proving breach or that the board is liable for self dealing.