Responding to Shareholder Complaints
Act Quickly and Courteously
One of the biggest complaints heard by attorneys, managers, neighbors, —and yes, even publications like The Cooperator—from co-op and condo dwellers is that board members do not respond promptly to shareholder/owner complaints, or worse, they don’t even respond at all. Polite inquiries and even urgent problems are met with silence, and repeated requests for action seem to fall on deaf ears.
We’ve talked so much about communication on these pages, but it’s definitely worth repeating – good communication – between all parties, managers, agents, shareholders and board members—is the key to running a successful, solvent co-op or condo building. When the lines of communication break down at any point, problems and animosity are the almost unavoidable result.
But why do some boards have such a hard time responding to shareholders’ concerns while other boards reply to residents in a smooth, timely fashion and rectify any problems or answer any concerns? Could it be that some boards are so busy that they simply don’t have enough time to handle shareholder complaints, or they don’t have the answers, or perhaps they are even apathetic to a shareholder’s situation?
“Depending upon the board, it could be any one of those reasons,” says David Baron, senior vice president and principal of Metro Management Development Inc. in Queens. Baron has also been president of the 310-unit Bay Terrace co-op board for the past 12 years and a board member for the past 15.
“Some boards work exclusively through their agents, so correspondence is handled meeting-to-meeting [monthly],” says Baron. “Our clientele for the most part are active and involved board members. Very often, replying to correspondence is delayed on a board’s part due to the time constraints placed upon board members by other building business, as well as their own personal and professional lives. Sometimes, shareholders ask questions, the subject matter of which is still under board consideration and thus no answer or solution to the problem is yet available.”
According to Neil Davidowitz of Orsid Realty Corporation, how and when a board responds to a shareholder should be written out in a defined protocol of response that the shareholder should be familiar with.
“It should be noted in the protocol whether the shareholder should be complaining to the board or the managing agent, and whether it should be done by phone or in writing,” says Davidowitz. “Shareholders need to be educated. They need to know that if you have an issue relative to a repair in your apartment, you begin with a superintendent. If it’s not addressed, then go to the managing agent and then to the board. Once you have this defined, it sets the system up for good communication.”
A Paper Trail
If a shareholder needs to write a letter to the board, state the facts briefly in a professional and non-hostile tone. It’s also important to keep any copies of letters that were sent and note any telephone conversations in case the matter is not quickly resolved.
Depending on the severity and the urgency of the shareholder’s complaint, the protocol for handling this may vary. “First calling the manager, followed by a letter or an email with a “CC” to a board member is the best way to go,” says Baron. “Very often shareholders will simply call a board member or visit their home in an effort to bring closure to a problem.”
The manager can also step in to alleviate shareholder’s concerns and improve a board’s response time.
“Our managers provide weekly packages for our boards,” says Baron. “This package might contain unpaid invoices, checks requiring board signature and, of course, board-related correspondence. We will often provide a draft reply with the original letter for the board to contemplate and authorize, assuming the problem is of a particular nature. If the problem is of a routine nature, we will simply respond and provide the board a copy of our reply. Now with e-mail this is all accomplished more easily and we can exchange thoughts and ideas and come to a solution the very same day.”
Acknowledge and Respond
Once the shareholder has followed the protocol and notified the appropriate person, the complaint should be acknowledged immediately, even if there isn’t an answer or solution yet. If the shareholder doesn’t receive a response and has finally worked their way up the chain of command to the board, the board should also respond within 24 to 48 hours.
“Even if you don’t have the answer, shareholders should be responded to in an email or by telephone,” says Davidowitz. “Tell them it may take several days to answer their complaint and this is why; it needs to be communicated.”
If the board does not have a protocol, Davidowitz suggests that the board send out an annual reminder of how long certain complaints or questions will take to be answered.
“For example, the reminder can tell the shareholders that an application to alterate their home can take X amount of weeks and the sublet process takes X amount of weeks. This way if Mr. Jones complains about the length of time an application takes, for example, you can pull out the application and the reminder and see what the problem is,” said Davidowitz.
The Price of Silence
Unfortunately, the board doesn’t have a legal responsibility to respond to its shareholders. However, they do have a political responsibility, according to Bruce Cholst, partner at Rosen & Livingston in New York, a firm that represents 170 buildings. He recommends that shareholders take out their frustrations at the board.
“Shareholders can punish board members at the polls. Board members can be impeached,” says Cholst. “The shareholders can allow the board to be recalled if they don’t feel they are adequately responsive. However, if lack of response to a complaint results in an injury, there may be legal repercussions.”
If, however, if the board still doesn’t respond to a shareholder’s complaint, the shareholder might want to contact other shareholders with similar complaints and approach the board as a group. According to the Office of New York State Attorney General Eliot Spitzer’s website, “An attempt to influence the board is always more persuasive if it is presented by a significant number of shareholders. If your problem is one that will affect others too, it is worth organizing the other shareholders. If you do, and the attempt to change the situation is not successful, the organized group can always then seek to elect new directors at the next annual meeting.”
STILL no response? “Shareholders can get organized and call a special meeting and change the board,” says Cholst. “It’s a more effective way than a lawsuit, and it’s free.”
Of course, nobody wants litigation to be the only response to a shareholder’s complaint. Good communication can head off potentially nightmarish problems. Boards should review—and update if necessary—any protocol that has already been established about responding to shareholder complaints.
If there is no protocol, develop a system informing shareholders of the chain of command for whatever type of complaint or concern they have. Finally, if there has been no response, the board members should acknowledge the shareholder’s concerns and work quickly to rectify the situation or keep them updated on the status. But we’ll repeat it again—good communication, between all parties, managers, agents, shareholders and board members alike—is the key to running a successful, solvent co-op or condo building.
Lisa Iannucci is a freelance writer based in Poughkeepsie, New York.