The spirit of cooperation has run dry at one of Hyde Park’s historic co-ops.
Ten residents of a former cooperatively-owned building on 5000 East End Avenue have filed suit in Cook County’s Circuit Court alleging that the building’s Board members improperly handled the conversion of the co-op. Some residents, who claim they cannot afford the conversion costs, now face eviction.
Once the tallest building in Hyde Park, the 29-story tower was built in the 1920s, and is the former residence of former Senator Carol Moseley Braun (J.D. ’72).
Co-ops were common in the pre-war era in Chicago and New York City, when residents owned shares of the building under a corporation. Major decisions in the building were made by elected members of the Board.
In March 2010 the residents voted to dissolve the 5000 East End Building Corporation, and prepared a plan for the conversion of the property into condominiums. Under the plan, the Board would dissolve the corporation and each resident would receive the deed to their unit. Their leases would be terminated.
Before the plan was proposed, the Corporation was nearly $3 million in debt to National Commercial Bank (NCB) for repairs, with the property valued at $7.9 million.
Seven months after the March decision, residents alleged that the Board then approved a special assessment that intentionally overestimated the value of the property to $8.5 million to cover debts and defer maintenance projects.
The plaintiffs now contend that the Board violated the dissolution plan and the Illinois Business Corporation Act (IBCA), which requires a two-thirds vote by the shareholders in order to approve any special assessment. The plaintiffs also claim the deeds were supposed to be returned to the shareholders following the dissolution, which never occurred.
“The board adopted a multimillion dollar special assessment and decided that only those shareholders who paid their share of the special assessment in one lump sum would receive deeds to their units. The rest of the unit owners were left in a state of limbo, unclear as to whether they are shareholders in a co-op, owners in a condominium, or neither,” Daniel Bronson, the plaintiff’s attorney, said.
Many of the residents are retired and live on fixed incomes but are now required to pay amounts as high as $176,000 to keep their homes, according to Bronson. He also said they are especially disadvantaged by the move because they will not have their property deeds to finance the payment of the assessment.
The Board maintains that they acted in the interest of the conversion process, and that the residents would not have been able to convert their homes into condos without making the “city-mandated and necessary capital improvements to the Building,” according to a statement made by the Corporation.
The case has a status date set for some time in September, but Bronson believes the case will not go to trial for another year.