By Sabina Mollot
After years of bitter and costly feuding between co-operators at East Midtown Plaza, the state’s highest court has upheld two lower courts decisions to prevent the Mitchell-Lama co-op complex from going private.
The battle had been between two groups of co-operators, those who wanted to go private, which would enable them to sell their units at a profit, and those who wanted the property to remain affordable.
The matter ended up in court after a vote was taken by co-operators in 2009 on whether or not they should privatize, with both sides declaring victory.
The pro-privatization residents (dubbed “privateers” by the pro-Mitchell-Lama group, whose members were in turn referred to as “antis”) said they won because they’d gotten a majority of votes if votes were counted by shares. How many shares a resident has varies according to the size of the individual’s co-op. The antis, however, argued that they had the majority, if votes were counted per co-op.
In its decision on Monday, the Court of Appeals said the antis were correct in their argument that votes should be counted per unit. The court noted, “East Midtown Plaza’s certificate of incorporation specifies that each shareholder is entitled to one vote at shareholder meetings, regardless of the number of shares owned.”
Additionally, the Martin Act, which gives the attorney general oversight of withdrawals of properties from the Mitchell-Lama program, was also cited in the decision.
The pro-privatization group had attempted to argue that the Martin Act didn’t apply because its plan did not involve the “offering or sale” of securities as required by the statute. The attorney general disagreed, however, and so did the court.
“The proposed privatization can fairly be characterized as an ‘offering or sale’ of securities under the Martin Act,” the court said
The court also said that in order for the property to go private, at least two thirds of cooperators would have to vote in favor of it, and the 2009 vote did not get two thirds in favor of leaving Mitchell-Lama.
The six judges on the panel (a seventh, Theodore T. Jones, died before the case was concluded) voted unanimously in a 14-page written decision.
East Midtown Plaza, a six-building complex with a total of 746 units, is located between First and Second Avenues and between 23rd and 25th Streets. It’s been a limited-profit housing company since 1968.
Though the litigation began in 2009, the plan to privatize was first raised close to a decade ago and since then the issue has divided residents into two warring camps. The antis had blasted the plan, saying it would make cooperators’ monthly costs go up to the point of being unaffordable for some. The privateers, meanwhile, had argued that privatizing was the best way to earn income, through flip taxes, to pay for badly needed repairs on the property. Following the court’s decision, Jeanne Poindexter, leader of the anti-privatization group, said she was relieved the fight was finally over.
“I woke up for the first time in a long time not worrying about how much longer I’m going to be here,” she said. “I suddenly feel like I’m back at home.”
Poindexter, a retiree who bought her co-op in 1974, paid $4,250 for it at that time. Now, if she were to move out, the unit could only be transferred to a new resident for about $20,000, she said.
Alan Kahn, a cooperator who led the pro-privatization committee, declined to comment on the decision beyond saying, “At this point, we’re very disappointed.”
He said it would be up to the co-op board to decide what, if any, further steps to make regarding another privatization attempt.
The 1955 Mitchell-Lama Law offers developers financial incentives, including tax breaks, to put up housing for people with low and moderate incomes. In return, developers agree to a set of regulations governing rent, profit and tenant selection.