While it's true that having apathetic leadership is an all-too-common problem in a lot of co-op and condo buildings, having a board that oversteps the boundaries of its power or invades the privacy of residents can be just as bad. Ignorance of proper procedure is usually the reason for this kind of problem, rather than malice or other nefarious intent—which means that a better informed board is less apt to go beyond its authority and cause trouble for the community.
Keeping a board on-task and working within the parameters of its authority goes a long way toward fostering not just a functional community, but a neighborly one. People living in close proximity to each other are bound to occasionally rub each other the wrong way, but tensions shouldn’t be escalated by an imprudent board. An out-of-touch board won’t begin to recognize this fact but an educated board will never forget it.
All residents of co-ops and condos should know about the legal and ethical boundaries under which their boards operate, since understanding those parameters will help board members know when to exercise caution, consult their professionals, and more. Not comprehending the limits of a board's powers can lead not only to acrimony, but even to unnecessary (and expensive) litigation.
Generally speaking, a co-op board is the governing body of a corporate entity which owns the property and is the landlord. A condo board is in charge of management of common areas of the building, like hallways and recreational areas. In either setting, board members are usually untrained volunteers who learn how to manage a community while actually doing the job. In order to get the most while giving the most in this service position, board members should do a little homework. They should familiarize themselves with their community’s bylaws and any other documents that govern the board’s authority. Some attorneys who serve co-ops and condos offer tutorials on these documents to familiarize board members with the bylaws and other rules governing their community, giving an overview of board members’ duties. Absent such a service, it falls to board members to perform their due diligence and know the rules they're governing by.
Board business is detailed in the community’s bylaws, proprietary lease, and/or the condo’s declaration, and for co-ops is also governed partly by Business Corporation Law (BCL). With cooperatives, the bylaws govern how the cooperative corporation conducts business such as voting on directors, voting on officers and meeting conduct. The proprietary lease governs the landlord-tenant relationship between the co-op corporation and its shareholder-residents, transfers, subletting, respective responsibilities for maintenance and repairs to individual apartments as well as common areas. The BCL also spells out provisions for holding annual meetings; voting by proxy; allowing shareholders the right to view copies of balance and loss statements and other financial documents; and removing directors with or without cause.
Boards have a fiduciary responsibility to protect the property and people who live there, and the board cannot give itself the right to do things that aren’t prescribed in the community’s governing documents. A board’s powers often are spelled out in the community’s bylaws under “board powers” and “duties and responsibilities.” Some of those responsibilities include keeping peace and order, maintaining proper insurance coverage, drafting and enforcing rules for the community, and other managerial duties.
The board should read these documents and when possible, go to educational events to learn more about running a community, according to David A. Brauner, an attorney and counsel at the law firm of Windels Marx Lane & Mittendorf, LLP in Manhattan. “When in doubt, they should consult their professionals,” he says.
In many ways, a co-op board’s responsibilities to their community are the same as those of a condo board. The board’s obligation to manage building maintenance, staff, insurance and other tasks are similar, regardless of which framework the community was established on. The extent of the two board’s powers can be dissimilar, however. In a condo, the rules for how an owner can use his or her apartment are in the master deed or declaration, and can only be changed by a vote of the owners. In a co-op, the board can adopt rules without an ownership vote.
“In a cooperative, the biggest difference is the consent required for a sublease,” says Stuart Halper, owner of Stuart Halper & Associates in Flushing. “On the condo side, it’s the issuance of the right of first refusal of a sale or lease of the unit.”
It's a given that a board must work to ensure the safety of the property and people in the community, but how much security is too much? CCTV, logbook sign-ins, security guards and other measures are accepted these days, though having a visitor twice show his identification to guards and provide a social security number could be considered burdensome.
A logbook, which visitors must sign into and out of a community, could be seen by many folks as an innocuous practice. But that view could depend upon how the logbook is handled. Who can look at it? Can a board member come along and page through the logbook, and discover information about a resident who’s had repeated visits from a local oncologist, or from an attorney who specializes in co-op/condo disputes? To have such information about a neighbor might be considered to be an invasion of privacy.
“When a camera is positioned so it can see into an apartment, that’s crossing the line,” Brauner says. “Security is always a difficult balance for a board… How willing are you to sacrifice privacy for security? The board is charged with making that decision, but they must do so while respecting the constituency they’re serving.”
Some industry experts say a master key for the community, held by the property manager, is a good idea, and should be provided for in the governing documents. That way, if there’s smoke or water coming from a unit, or if nobody’s answering the apartment’s door for an extended, unexplained period, management can quickly gain entrance to help.
Informational privacy is also a serious matter. While a board might be tempted to 'out' residents in arrears on maintenance fees to shame them into paying up (and some have done so successfully), the legal pros contacted for this article stressed that they would never advise a board to take such action. As a rule, they say that the personal information of residents should not be shared by board members. Publishing sensitive or personal information can lead to both hostility and litigation. Having the wrong person’s name on an arrears list, or the incorrect amount next to a person’s name, could make the community liable for slander—and defending such a suit will likely cost far more than whatever amount the resident may have owed.
Common Sense for the Common Good
Bylaws of a community often will say something like “The board of trustees shall have all powers afforded in the bylaws.” Such phrasing can give the impression of a general mandate under which the board is free to act, but that's not actually the case. Courts have been reluctant to approve board action that’s based on general language in the bylaws. According to Brauner, the majority of cases wherein a board has overstepped its authority could have been avoided by consulting legal counsel before making a decision that seems questionable.
Board members need common sense when enacting and enforcing rules, but others in the building must use their heads, too. Residents don’t much care for nosy neighbors scanning the logbook, and they certainly don't want anybody poking into their apartment. But in certain emergency situations, building staff are entitled to enter an apartment to fix problems such as plumbing leaks, electrical problems and other urgent maintenance issues that need to be addressed inside someone’s home. Usually the shareholder or unit owner is given a day or more advance notice.
Just as residents expect to be physically safe and secure in their own apartment, they also should be able to reasonably assume that their less tangible personal information will be kept confidential and secure as well. Such data should be kept locked up and password protected. Some experts recommend that a board keep only one paper copy of such records, such as records of an applicant’s financial info.
Some attorneys representing co-ops and condos like to have members of boards sign a confidentiality agreement to not share other residents’ personal data. For some board members, signing such a document underlines the gravity of responsibility of dealing with neighbors’ personal information.
When it comes to protecting the life and limb of those in the community, it can seem there is no limit to what is expected of a building’s management. If board members know of an imminent threat to their properties, they must address it in a timely manner, both for themselves and for all of those who live in and frequent the place. Sometimes, though, attempts to remedy harms are heavy-handed.
For example, one attorney recalls the case of a building that was charging a resident $1,500 in late fees per day for being 90 days behind in construction on his apartment. The board had a right to charge a fee, but the amount was so high that the client’s attorney argued it was a penalty and not a liquidated damage provision, and was therefore uncollectable.
While it's one thing to overlook rules you didn’t know existed (though as a board member, you should be very well acquainted with your own building's rules), creating a new rule for the community that seems arbitrary or bound to fail is not only a waste of time, but a needless assault on community goodwill.
For example, in the case of one cash-strapped condo in Harlem, the retirees who controlled the community’s board passed a rule saying residents who’d sit in the lobby and keep an eye on the door would receive a $25 monthly credit on their maintenance bill, while those who didn’t do lobby 'security' duty would be charged an extra $25 on their monthly bill. The problem with this security solution—in addition to not really providing much in the way of actual security—was that board members would sit around the lobby drinking coffee all day anyway, and were crediting themselves for doing so, while penalizing others who couldn’t do so because they were at work all day long.
Attorney Steven Wagner, a principal at the law firm of Porzio, Bromberg & Newman PC in Manhattan fought the case for residents not interested in working the security detail. “I argued that they didn’t have the right to treat shareholders unequally… I won on a technicality,” he says.
Ultimately, the board was allowed to continue to pay the $25 rebate, but could no longer charge those who didn’t do any “security watch” shifts. This issue might’ve been avoided entirely if the board members had sought out or heeded the advice of counsel. Maybe it’s a lack of awareness of the gravity of the issues with which the board is dealing, but sometimes board members forget their consultants were hired to advise them.
Many of those consultants urge board members to build consensus, rather than making decisions that divide the community’s residents.
“I tell my clients to get to ‘Yes,’ rather than telling everybody ‘No,’” Wagner says.
Jonathan Barnes is a freelance writer and a frequent contributor to The Cooperator.