New York State Attorney General Dennis C. Vacco outlined several of his legislative goals before a record turnout at CNYC's 1996 Annual Meeting. Among his priorities for the coming year are plans to continue the work of the Martin Act Task Force which he assembled to help his office home in on key issues for cooperatives and condominiums, an area he admitted was new to him when he took office last year.

"In Mr. Vacco, we have an Attorney General who works with cooperatives and condominiums," said CNYC executive board president Stuart Saft, who is a member of the Martin Act Task Force. "We at CNYC are delighted by the vigor, enthusiasm and creativity that he brings to this office."

Mr. Saft praised the Attorney General for responding immediately and creatively to a court case that challenged the Division of Housing and Community Renewal's right to set regulated rents for former co-op shareholders in foreclosed buildings, and for pushing for an accelerated method for condominiums to foreclose liens. "We heard back from him on these issues, literally in a matter of days," said Mr. Saft. The DHCR's right to set rents has been upheld in the courts (see Court Cases), and the condo foreclosure proposal is now one of the Attorney General's program bills.

The Annual Meeting was well attended by CNYC members and subscribers, who applauded the Attorney General's proposals and peppered him with follow-up questions at the end of his presentation. After Mr. Vacco's keynote address, CNYC board members presented updates on many key issues and an election was held for six directors (see election results).

Attorney General Vacco had described his Martin Act Task Force last summer at a joint hearing of the State Senate and Assembly Committees on Housing, which explored solutions to the continuing problem of sponsor defaults and non-disclosure of financial dangers. He said that this task force would "bring opposing interests into one room to work together to find solutions, with the Attorney General's office acting as a facilitator."

Cooperative and condominium advocates, including CNYC and Queens Borough President Claire Shulman, have long supported a private right of action under the Martin Act to permit shareholders who feel they have been defrauded to pursue a court action against the sponsor. At the summer hearings, Borough President Shulman noted that, "Currently, only the Attorney General can bring such an action against sponsors who fail to make material disclosures or who make false statements. Unfortunately, the Attorney General's office does not have the capacity to handle the large number of cases brought to its attention. Granting this right to individuals who have been harmed will give shareholders redress and significantly relieve the Attorney General's burden."

Mr. Vacco now proposes to give New Yorkers a private right of action to pursue Martin Act claims, subject to review by his office. "A private right of action," he asserted, "would open up the courts to hear cases of potential fraud and make cases easier to prove, allowing litigants more likelihood of prevailing."

Mr. Vacco's office would like to increase the percentage of units that need to be sold before a non-eviction plan can be declared effective from 15% to 25%. "Twenty-five percent strikes me as reasonable," he told the crowd at the Annual Meeting. "I realize that you'd rather see 50% or even 51% -- and I just heard a gentleman in the audience say he'd settle for 35%. But we're getting closer. We're working to make it so that when you make an investment in a cooperative, you can feel comfortable that you are making a good investment."

The Attorney General will also propose legislation requiring that sponsors not only disclose dangerous and hazardous conditions in the building, but that they correct them. "If the condition cannot be repaired before the closing, then money should be placed in escrow to make those repairs," he said.

When condominiums need to make major repairs or improvements, they now have little choice but to assess owners. The Attorney General wants to change that. "Current law does not provide reasonable measures for financing condo improvements," he said. "Why should the board not be able to borrow on the basis of monthly receivables? Why should they have to rely on owners to pay for the roof? It's not fair."

CNYC's Task Force on Condominium Issues, headed by board member Margaret Walsh, has been working on this issue and several others. According to Ms. Walsh, a solution may be close at hand. "The Attorney General and Bar Association representatives, including CNYC's own Stuart Saft, are now working on legislation that would allow condos to borrow money and pledge their income stream. It's a tricky thing to hash out, but we are told to expect the wording by the summer."

The Attorney General is also "aggressively pursuing" legislation that will enable co-ops and condos to collect rents directly from any subtenants of an owner who defaults. "Cooperative shareholders who pay their maintenance charges should feel secure that the power to maintain the value of their investments rests with them, and not with non-paying shareholders," said Mr. Vacco.

Citing the spate of District Attorney indictments of managing agents accused of taking kickbacks, the Attorney General declared his support for licensing of property managers. "There are many more good managers than there are bad managers, I'm sure," he said. "But the good managers should not be required to carry the weight of the bad apples. A system of licensing would establish confidence between all parties -- the boards, the managers and the sponsors."

In a separate presentation at the annual meeting, CNYC board member Ted Procas stressed the importance of monitoring managing agents, noting that "many buildings are leaving $1,000 bills on the table and expecting no one to take them." Mr. Procas and board members Martin Karp, Jonathan Mendes, Herb Rose and Margaret Walsh comprise a CNYC committee which investigates various ways to help co-ops and condos protect themselves against fraud and ripoffs. Of all the methods, including management licensing, Mr. Procas stressed that the most important advice is to "look at what we can do for ourselves," he said. "If you don't watch out for your money, who will?"

Mr. Procas strongly recommended that all boards with contract management firms read the CNYC publication, "Monitoring Management", which outlines measures for preventing and detecting fraud. The booklet is available from CNYC by calling (212) 496-7400 or by sending e-mail to info@cnyc.coop. If your building suspects its property manager or management firm of wrong-doing, the committee recommends hiring one of several firms that specialize in detecting management fraud. CNYC maintains a list of such companies in the New York City area. "If you are 100% sure that a fraud has been perpetrated," said Mr. Procas, "protect yourself by contacting the District Attorney, contacting your own attorney and, very important, contact your insurance company so that they are on notice as of the date that you uncover the suspected fraud."

Asked whether he would support a separate part in the housing court to adjudicate cases arising in cooperatives and condominiums, this experienced litigator immediately saw the potential benefits, stating that it "sounds like a very good idea. Any idea that can help to streamline the court system is certainly worth a close look." (See Housing Court.)

In closing, Mr. Vacco vowed to continue to earn his reputation as a problem-solver. "At the core, what we're talking about here is the quality of life of the people who live in this state -- in their homes," he said. "I see my office as a problem-solver for New Yorkers. My job is to first identify the problems, then try hard to find the solutions."