Living in a co-op or condo community is a social arrangement as well as a business and residential one. You are part of a community, and that community should feel ‘organic.’ It is also perhaps the purest form of representative democracy. Members elect a board of directors to oversee and make decisions for the entire community. But the question is: once you have assigned your representation to five or seven or even nine of your neighbors, how much information are you entitled to have access to in the day-to-day operations of the community?
Who Is Protected?
While your vote places your neighbors in control of the community, a co-op or condominium owner is also passing certain rights to information to the board members. Thus, are there limits to how much non-board community members can expect to know?
Mark Hakim, a co-op and condominium attorney based in Long Island, says: “A board has a fiduciary duty to its shareholders. With that comes the duty to hold the sensitive information disclosed to it or discussed in board meetings confidential--except as set forth under the building's governing documents or at law. While maintaining confidentiality protects board members from possible liability for a disclosure of sensitive information, it also helps maintain the privacy of the shareholder/unit when, for example, a board discusses personal issues such as arrears, litigation with the building, infestations within a unit, etc.”
It is advisable not even to mention names, or if possible apartment identifiers, in the board’s official minutes. “Furthermore, shareholders and unit owners need to be assured,” says Hakim, “and for a building and board to operate effectively, that private matters will stay private, except what may be permitted under the building's governing documents or at law.”
What About the Minutes?
Julie Schechter, a partner at the New York office of law firm Montgomery McCracken Walker and Rhoads, says: “While there is no standard or official way in which meeting minutes should be taken, the Business Corporation Law—which governs co-ops—does require that minutes be kept. The purpose of keeping the minutes is to create a permanent record of the actions taken at board and shareholder meetings. In fact, the actions taken are the only parts of the meeting that really need to be included the minutes. We advise our clients only to include in the minutes who was in attendance, who was absent, action items, and the date.” (New York State’s laws governing condominiums reflect a similar position).
“Accordingly, minutes should not be a word-for-word account of the deliberations at a meeting, especially because the minutes can be used in a lawsuit,” continues Schechter. “In fact, minutes that provide an excessive amount of detail by outlining every word that was exchanged at a meeting actually detract from the purpose, which is to evidence corporate decisions. Minutes should provide a clear, concise, complete and accurate statement of corporate action. For example, the board voting to hire a certain contractor to perform work in the building should be included. The specifics of what the contractor agreed to perform in the building should not. That information can be found in the contract between the contractor and the co-op.”
Hakim confirms Schechter’s viewpoint. “To determine how protected board minutes are in any specific instance,” he says, “ I would first need to review the building's bylaws to determine if any restrictions or rules were included as to require or prohibit disclosures of board minutes. Absent any, a director must be permitted access. But shareholders, on the other hand, are not required, by law, to have access to the minutes of the board. They do, however, per Section 624(b) of the BCL, have a right to review minutes of the shareholders—those from the annual meeting—provided it is for a ‘purpose which is in the interest of a business or object other than the business of the corporation’. There has been a recent trend in the courts to permit broader access to a building's records, which would include board minutes. As a predicate to review of the minutes, or pursuant to recent case law, co-op corporations often require a shareholder to sign an affidavit that the review is for a legitimate corporation purpose.”
Protecting the Corporation
Schechter goes on to say that “anything discussed in a meeting that has to do with pending litigation should be left off the record (to avoid more litigation). Some co-ops also omit from meeting minutes any discussions of specific personnel or of individual shareholders who are in arrears or who are problematic. Those people can be mentioned in minutes, but only vaguely enough so as to avoid potentially slandering them. For example, stating that the board has started an action on the person owing three months’ rent is appropriate, while stating that the board has started an action on John Doe in 6D who owes three months’ rent is not.”
The takeaway is simple. As in any democratic system, you elect a representative to oversee the corporation and make decisions on your behalf. That choice is based on a relationship of trust. The effective operation of a co-op or condo relies upon that trust. Part of that trust, as well as the protection of your privacy rights, is the tacit acknowledgment that the board is there to govern in your interest without endless interference or double checking of its decisions--except when necessary, of course.
AJ Sidransky is a staff writer at The Cooperator, and a published a novelist.