Many of us have recently spent time cleaning and organizing our homes during the shelter in place/stay at home orders. This may have even included organizing your most vital documents. Members living in a cooperative have an extra vital document to keep in a safe place and that is his/her membership or stock certificate.
So what happens if a member loses, misplaced, or destroys his/her membership certificate? The first step is for the member to contact the cooperative’s Board of Directors in writing either through the Cooperative’s resale office or management agent. The second step is for the Board of Directors to contact its cooperative attorney for assistance. An experienced cooperative attorney will be able to conduct an analysis of the cooperative’s Bylaws with respect to lost certificates as well as prepare any required affidavits for the re-issuance of a member’s membership certificate.
A cooperative must ensure that a proper protocol is set in place when reissuing stock certificates so that the cooperative not only follows it Bylaws but is fully protected. Generally, a cooperative’s Bylaws will provide for the authority for the re-issuance of lost membership certificates. The Bylaws will provide for a strict re-issuance procedure which typically involves the member attesting to the fact that he/she lost or destroyed the membership certificate along with the requirement of the member to indemnify the cooperative against any claim that may be made against the cooperative as a result of the lost, misplaced, or destroyed membership certificate.
When a member comes in to sign for his/her reissued membership certificate, the member must be presented with an affidavit. The purpose of the affidavit is for the member to represent to the cooperative that the member’s previously issued membership certificate has been lost, stolen, or destroyed in order to induce the Cooperative to reissue his/her membership certificate. The member must attest to the following:
- That the member is in fact the member of record for his/her respective dwelling unit of the cooperative that he/she holds the membership certificating evidencing the same;
- That member acknowledges and agrees that he/she cannot surrender his/her previously issued membership certificate as it has been lost, stolen, or destroyed;
- That the member acknowledges and agrees that the reissued membership certificate supersedes the prior issued membership certificate which has been canceled by the Cooperative’s active Board of Directors;
- That the member agrees to indemnify the Cooperative in the event that the original membership certificate is transferred or conveyed to another individual; and
- That if the membership certificate is later found or comes into the member’s possession, power or control, the previously issued membership certificate must be immediately turned into the cooperative for cancellation.
Once the Board is notified of the fact that a member has lost, misplaced or destroyed his/her membership certificate then the Board must cancel the member’s prior issued membership after the member has executed the affidavit. The Board canceling the prior issued membership certificate works to declare the prior issued membership certificate null and void. After the affidavit is executed and the prior issued membership certificate is cancelled, then the new membership certificate can be issued to the member. When the issuance of the new stock certificate occurs, there ought to be language on the face of the membership certificate that reflects the fact that the reissued membership certificate supersedes the prior issued membership certificate that has been cancelled. Moreover, the Board of Directors must ensure that the information required by the Bylaws to be reflected on the membership certificate is accurate.
Ensuring that a cooperative has the proper protocol set in place when reissuing stock certificates is very important. The membership certificate affords the member the right to occupy his/her dwelling unit and participate in the governance of the cooperative. Not having the proper protocols in place when a member loses, misplaces or destroys his/her membership certificate can affect voting and occupancy rights which can lead to litigation, and for some cooperatives, it can even affect the ability for the cooperative to seek a Principal Residence Exemption.
It is vital for a Board of Directors to contact its cooperative attorney when a member loses, misplaces or destroys his/her membership certificate. An experienced cooperative attorney will be able to make this process as seamless as possible.
Alyssa Gunsorek is an associate attorney with experience in contract negotiations. She has contributed articles for various publications including the MAHC Messenger, NAHC’s Housing Cooperative Quarterly, and Pentiuk, Couvreur & Kobiljak’s Cooperative Law Journal.
