What happens at a co-op or condo community’s annual meeting should be strictly business, though these gatherings also can be a place where resident shareholders and unit owners kvetch about their concerns regarding the building or community. That could be OK if not overdone but annual meetings also can serve as a place where neighbors find consensus and share important decisions about their community. These meetings also are required by law—condominiums and homeowners’ associations must hold at least one shareholder or unit owner’s meeting each year.
The main purpose of the community’s annual meeting is to inform resident shareholders and unit owners of the board’s business. Generally, the annual meeting will cover the state of the building’s finances and any planned projects or ongoing capital improvements. The meeting might also include votes on proposals needing shareholder/unit owner approval or to elect new board members, discussion of changes in management or staff, and action on other urgent business. Annual meetings often are a time when residents can ask questions of their board and management team about the building, and how it is being managed.
Sometimes annual meetings become heavy with residents’ complaints, but more often too few people come to the meeting. Lack of attendance sometimes can bog down the process far more than a roomful of angry residents might. Not having enough residents at the meeting, either by physically being in attendance or represented through proxies, can thwart the board from legally taking action on items because it hasn’t achieved a quorum for the meeting. It also can keep residents from electing new board members.
With the right planning, the annual meeting can be both productive and conducive to neighborliness.
In the state of New York, co-ops are formed under the Business Corporation Law while condos follow the Condominium Act, and this legislation typically requires that an annual meeting be held by the board of a co-op or condo. The New York Condo Act is to condominiums what the BCL is to co-ops: a set of rules by which the boards and developers must abide in order to run their buildings fairly and legally.
Failing to have an annual meeting could lead shareholders or others to declare that the community’s board is not acting like a corporation and hence, should not be protected as are those in an LLC. Limited Liability Companies protect individual shareholders, by only allowing creditors or others to go after the assets of the corporation.
A building or community’s bylaws will dictate specifically what month or even what day the meeting is to be held. Bylaws also usually include a section titled “Notice of Meetings,” which will detail when and how shareholders and unit owners must be informed of an upcoming annual meeting.
“Typically, notification of annual meetings has to be at least five to 10 days prior, and no more than 30 to 40 days in advance,” says Stephen O’Connell, an attorney with the law firm of Hartman & Craven LLP, in New York City.
When and how an annual meeting takes place depends upon the desires of the community, but the timing of notifying residents of the meeting is of crucial importance. If management notifies residents too soon, many weeks before the meeting, residents might forget about the gathering. Publicize the meeting too close to the date, and many won’t have time to attend.
If an election or a vote on a community matter is going to happen in the annual meeting, a proxy ballot—by which a resident can cast a vote without attending the meeting—also is supplied with notification of the meeting. A shareholder or unit owner can cast their vote by filling out the ballot and mailing it to management or the board.
There are two types of proxies: general proxies, or specific/limited proxies. A general proxy authorizes the board’s president or a member of the board to attend the meeting and to vote for the proxy-giver on any matter. This type of proxy essentially enables the board member to act as if the shareholder/unit owner were at the meeting.
A specific or limited proxy authorizes the proxy holder (such as a board member) to attend the meeting, and to take action based upon the proxy. This type of proxy essentially tells the holder what the shareholder/unit owner wants to do, like how to vote in an election.
In New York, there are no penalties for not having an annual meeting.
“The general rule is that the directors serve until the new directors are qualified,” says Steven Wagner, an attorney and partner with the Wagner Davis P.C. law firm located in Manhattan. “But any shareholder can compel an annual meeting [by suing through court] if one isn’t held.”
If decided in the residents’ favor, such a lawsuit could result in the court ordering that a meeting be held at a particular time and place, and that a court-appointed referee attend the meeting to observe and take notes. The referee would be accompanied by an independent inspector of ballots, who would oversee voting. To avoid this pitfall, the board and shareholders or unit owners should pay close attention to the building’s governing documents.
“I call the bylaws the cookbook for how to run your building,” Wagner says.
A typical annual meeting might begin with the report of officers of the board, including the president’s report, which will talk about the status of the building. Next will be reports of committees, then appointment of elections inspectors. Election of new directors will follow, then new business, and old business. During the new business/ old business sections of the meeting, shareholders typically will ask questions they have or air their concerns.
Some buildings will take nominations for candidates for the board from shareholders/unit owners in the audience and allow each candidate to speak about himself, while other buildings have nominating committees. Some communities have a Candidates Night prior to the annual meeting, during which candidates for seats on the board can talk to the resident shareholders and unit owners about why they are running for the board.
Providing notice of a meeting in the requisite amount of time often isn’t enough to get residents to attend the meeting, even by proxy. Failing to achieve that required quorum will mean the board will not legally be able to conduct business at the meeting. Elections or other votes on community matters would not be able to happen, but those in attendance would be able to discuss community matters.
As important as it is for board members and the property manager to be at the annual meeting, shareholders/unit owners also must attend. “Being at the annual meeting is a very important part of being a shareholder. [Your home] is your biggest asset,” says Stacey R. Patterson, an attorney with Stark & Stark of New York City
If complex financial matters will be discussed at the meeting, the board should have the building’s accountant explain all the details. Some boards include the accountant in the meeting to take ballots if there is an election.
“A free flow of information makes the meetings go much faster,” explains Stephen B. Kotzas, an attorney for the law firm of Berry, Sahradnik, Kodas, Riordan & Benson, based in Tom’s River, New Jersey.
If ongoing litigation is to be discussed, the community’s attorney will attend. Many boards like to have their attorneys attend the annual meeting to keep things moving forward in the meeting. Many boards allow their property manager to chair the meeting and ensure that it runs smoothly. “Preparation is a key. Board members need to realize they are appointed to manage the affairs of the association,” Patterson says. “They maintain a fiduciary responsibility not to be negligent.”
If a large capital improvement project is underway or planned, the community’s consulting engineer might attend the annual meeting. The contractor working on the job also might attend the annual meeting, to explain details of the work or to answer questions from residents.
To achieve the most in the annual meeting, board members should prepare for it by reviewing each other’s committee reports, and also by reviewing the building’s budget. They should be familiar enough with these documents to be prepared to intelligently discuss building issues, and to answer questions about those issues. Board members also should try to strictly follow the meeting’s agenda.
“The shareholders’ obligation is to attend and to vote. I encourage people to exercise their right to vote,” Wagner says. “I know of some buildings where it’s difficult to get a quorum.”
Shareholders and unit owners also can prepare for an annual meeting by filling out their proxies if they don’t plan to attend. Prior to the meeting, the management team can collect all of the necessary proxies to ensure the meeting will have a quorum. The property manager also should work to keep residents informed, ahead of time, of actions that could happen at the meeting.
Residents should read the building’s newsletter, website or other communications, including the annual financial statement if possible. They should write down prepared questions they have for the board or consultants, so that they can get their questions answered correctly. Board members should understand the issues, and also know when they don’t understand those issues well enough to answer resident’s questions about them.
“If [board members] feel the answers to questions would be best expressed by experts, they should have them at the annual meeting,” Patterson says.
So no matter how formal or informal your board or annual shareholder/owner meetings are, every board should be careful to follow procedures set forth in its own bylaws. Going by-the-book with meetings—both board and shareholder—maintains continuity from one meeting to the next, makes sure important points are covered and properly recorded, and keeps everything above-board. And that’s a good thing.
Freelance writer Jonathan Barnes frequently contributes to The Cooperator and other publications.