Getting Good Help Tips to Building a Better Board

 Who wouldn’t want to be on the board of directors of their co-op or condo, watching over  their most precious possession and probably their most significant investment—their home?

 Most people, actually. It’s a rare co-op or condominium corporation that has candidates vying for the job.  According to attorney David Brauner of the law firm of Windels Marx Lane & Mittendorf and president of his co-op board, come election time it’s more about “persuading people to serve, than reducing the number of people anxious to serve.”  

 Indeed, “there are cases, especially in smaller buildings, where people just drop off and  the building doesn’t have a board,” reports Stephen Elbaz, a property manager and the president of Brooklyn-based  Esquire Management Corp., which runs co-ops and condominiums New York and New  Jersey. “I have a seven-unit building where there hasn’t been a board in seven years.”  

 Why is That?

 According to real estate attorney Helene W. Hartig, who also serves as president  of her co-op board, “Many shareholders are just too tired or stressed at the end of the day to sit at  a meeting and discuss flowers in the lobby or issues with the staff. They would  rather go to the gym or chill out by watching The Voice.” Plus, time pressure has gotten more intense in recent years, she adds, “with the impact of the recession, which means longer hours at work.”  

 Another reason people don’t volunteer, says Elbaz, “is they don’t like being cornered in the hallway, the elevator and the laundry room and have  to listen to people’s complaints.” Residents often approach a board member, he says, if, say, their sink is  leaking, even though they know the normal protocol is to contact management. (“Though it probably is effective,” he admits.)  

 Worse than that, says Brauner, “One of the downsides of being on the board is the extent to which you will  sometimes be subject to personal attack by people who simply don’t agree with your decisions.”  

 No Thank You’s

 “It’s a fact of life in buildings that people are much more anxious to criticize and  whine than to say thank you,” according to attorney Bruce Cholst, a partner with the law firm of Rosen  Livingston & Cholst LLP, and (you guessed it) a current and longtime member of co-op boards  in the buildings in which he has resided. “They take for granted the good things you do and they pile on when things don’t go 100% right. It can be a thankless job.”  

 Another factor that scares people off, and rightly so, says Cholst, is “the fear of being sued personally. People are painfully aware of that. Every  time we’ve sought people to run for the board we’ve gotten resistance.”  

 But there’s a simple solution to that, he explains: directors and officers liability  insurance. “It will provide you with a defense against any personal lawsuits brought on  board members for negligence in performance of their duties.”  

 An example of a situation that could lead to a lawsuit, says Elbaz, “is if somebody applies for a co-op and they are turned down. The board doesn’t have to give a reason, but if the person says ‘well, I was turned down because of the color of my skin or my religion,’ they are very likely to be angry enough to sue” — a scary and costly situation without insurance.  

 “But with insurance,” explains Elbaz, “it is simple. You e-mail the summons and the court papers to the insurance  company, the insurance company hires a law firm and you’re done.”  

 The Good News

 Most board members agree that the benefits far outweigh the drawbacks.  

 Perhaps most important, says Cholst, “you have the ability to manage your investment and take part in decisions that  affect the value directly only if you are on the board.” It’s no wonder all the attorneys interviewed for this article are on the boards of  their building corporations.  

 “I want to make sure that somebody guards the guardians,” says Hartig, “and that we are fiscally-responsible, and that the decisions of the board are  consistent with what we think should be the quality of life in the building.”  

 Board service is personally gratifying in ways small and large. “There are some people that like it for the ability to be somebody’s boss,” observes Elbaz—“for the prestige of being on a board. For some, there is a perception that they  will get better service in the building, that if they call the super for  something, they will be taken care of quicker. Of course, that’s not supposed to happen.” (“Baloney,” he adds.)  

 But a deeper personal satisfaction comes with a heightened presence in the  community. Suddenly everyone knows your name and many do thank you for serving,  especially when the board has tackled and solved an onerous issue to most  everyone’s benefit.  

 Problem Solved

 One such issue confronted the board of a 325-apartment cooperative on the Upper  West Side. A newly elected majority of board members were committed to  addressing a troublesome situation that had persisted for a decade or more.  Former boards and management had allowed a number of absentee shareholders to  sublet their apartments way past the term allowed by the bylaws, which is four  out of six years. Some on the new board were inclined to simply evict the  subtenants, claiming that it was unfair to allow the owners to take profits on  their investments year after year while others obeyed the letter of the law.  

 The problem was, some of those subtenants had been part of the community for  years—some for decades. There were complaints and tears and threats from the  subtenants and other shareholders when word got around that the board might  start evictions. The building fell into turmoil. The debate within in the board  became heated.  

 “I like fixing things,” says Paul Maffei, a former financial software engineer and president of that  co-op. In addition to the hardship it would have caused entrenched subtenants  who might suddenly have had to move, he recalls, “you have a legal problem.” Owners could claim that it was unfair for the current board to enforce the  bylaw without notice while previous boards sanctioned the sublets implicitly  through non-action.  

 Maffei came in with a proposal that all at once cut through the contentious  board division and won an easy majority. “I said ‘let’s allow every subtenant with a lease to stay four more years, starting today, so  they have plenty of time to find a new apartment.’ But we would increase the sublet fee according to what year they are in.” If the tenant had been there beyond four years, the owner was charged the  maximum sublet fee of 25 percent.  

 When the decision was announced, happiness prevailed across the land and board  members enjoyed wide acclaim and appreciation, with handshakes and hugs all  around.  

 Beyond personal gratification, board membership can be a self-improvement  project. “It has been a very good source of personal development for me,” says Cholst. “When I joined my first board in the mid-‘80s, I had trouble making decisions. To succeed in life you have to have the  ability to make judgment calls and not suffer recriminations. That’s what being on the board has taught me.”  

 Brauner says of his service, “professionally, I probably learned far more of value to me in my role as counsel  to co-op corporations by serving on the board than I ever learned in law  school.”  

 Same Faces, Different Year

 There are pros and cons to having the same board members serve year after year.  

 “There’s tremendous value to the experience that board members acquire,” says Brauner. “They learn how things need to be done and what makes sense and what doesn’t.”  

 On the other hand, “It is advisable for a building to have ‘new blood’ on the board,” according to Michael Berenson, president of AKAM Associates, which manages  co-ops and condos throughout metropolitan New York. “New board members may be able to contribute different and valuable perspectives  and greater energy.”  

 Reelecting the same members year after year could create stagnancy and foster  apathy, which, says Hartig, “can easily trickle down to the staff and managing agent. Failure to address  significant issues can manifest in a more rundown building—both cosmetically and structurally—and, in turn, reduce resale values.”  

 An apathetic, laissez-faire board might fail to execute proper oversight of  operations. In the worst case, says Hartig, “that’s when you see buildings where the managing agent runs rampant and all of a  sudden there are sky-high expenses, because nobody is monitoring the monthly  statements.”  

 In one building she represents, says Hartig, “one small illegal alteration case turned into cause celebre because no one was  watching the attorney’s fees. The board members just picked up the phone and spoke to the attorney,  who billed for all their time. No one was monitoring the situation. They had  attorney’s fees of over $100,000 and they’re stuck with a case that is going nowhere—that has been stagnant for three years with attorney’s fees going through the roof. So now in addition to fighting with the  shareholder you are fighting with the person who is supposed to be your  advocate—because nobody was watching the store.”  

 To properly run the corporation, advises Berenson, “boards should operate like businesses and ensure a succession plan so that  people aren’t stuck serving multiple terms simply because no one else has stepped up.”  

 Recruiting Candidates

 How do boards recruit fresh talent when shareholders are often reluctant to  serve?  

 Broadly speaking, “the atmosphere in the building has a great deal to do with whether people want  to be on the board,” says Brauner. The board and management should work to create a positive,  inclusive atmosphere in the building. “While a certain amount of confidentiality is a necessary part of board  deliberations,” he says, “it is incumbent on the board to communicate as much as they can to their  shareholders so they feel a part of the process—and wherever practical, to involve shareholders in some of the decisions.”  

 To make shareholders feel a part of the governing process in his building, says  Brauner, “we routinely circulate something called ‘board briefs.’ Soon after every board meeting, we circulate a brief summary of the highlights  of the meeting by e-mail blast or physical copies, separate from the minutes.”  

 Come election time, or when a vacancy comes up midterm, the board should send  out an email inviting participation. But before that a proactive board might  seek out individuals they believe could make an especially valuable  contribution, if, say, they are in finance or building management or  construction.  

 “The first thing you do,” advises Cholst, “is to write a letter putting a spin on board service that is very positive,” saying that, for example, “this is your chance to influence decisions directly—to influence the course of events in your building and help to maintain values.  It provides a platform express your views.”  

 And it can’t hurt to butter them up. You might add, “more than one person on the board thinks that you’d be very good,” suggests Cholst. “The sense you want to convey is, we need you, we need your talents, we need your  experience, we need your time.”  

 A good way to ease people into board service is invite them to join committees. “It’s a good way of getting people involved,” says Maffei, “so they can see if they want to join.” At the same time, the board can get a sense of how much they contribute. “We can see if they do anything,” he adds.  

 Of course, the true purpose of an auxiliary committee is to do research on  important, complex issues. “The board doesn’t have the time to become an expert on everything,” says Cholst, “so it can appoint a committee of three or four people and let the committee do  the legwork.”  

 For owners with an eye toward joining the board, says Brauner, “the easiest route is volunteering to serve on a building committee or to assist  the building in some other way so that when the next regular vacancy occurs the  existing board will look to you as a logical candidate. Then you have the  benefit of the board behind you.”  

 The more common approach to winning elections is to send out letters, knock on  doors, chat up fellow shareholders and unit owners, and most important, gather  proxies. With enough proxies you can win an election before it starts.  

 Whichever route you take, most board members say it is worth the trouble. Many  view their building as a kind of microcosm of the larger community and see  their board service as their way of contributing to society.  

 “I think we have an obligation to give back,” says Hartig, “and if you want to make a positive difference, what can be more important than  right in your own backyard?”  

 Besides, she adds, “we can’t bitch and moan and complain if we are not willing to roll our sleeves up and  do the job.”   

 Steven Cutler is a freelance writer and a frequent contributor to The  Cooperator.  

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Comments

  • Researcher in the Know on Tuesday, June 24, 2014 10:36 PM
    Hmmmm. This article has created a fairy tale of an exit from Coop problems while smoothing out the many rough edges of coop life today by a patina of re-assurances that a well managed coop--by a management company , of course, with a good lawyer, of course, can resemble a small piece of domestic heaven. Nonsense! Real life in 99% of NYC "coops"---struggling or East Side wealthy---represent an atavistic institution if there ever was one. In all but a few that They are beyond fractious to the point of enriching lawyers and alienating residents. Many coops occur in old buildings with infrastructural and maintenance problems that have been neglected for years--while debt, costs and charges have spiraled out of control.Those employed to solve problems-- managers and attorneys--, have found a sweet spot in the city economy. They sit back and get paid--alot--and contribute to bleeding coop reserves via bad advise that leads to escalating maintenance and assessments. Most people who buy in a coop and most board members know little about management or administration, about real estate finance, how to make optimal decisions, or how to communicate well and solicit input from diverse populations. Many large old coops inhabit buildings need of frequent attention and frequent decisions --about which no one agrees. At the same time, managers have at the ready a stable of contractors, architects and others more than willing to vie to get paid--and in turn too often pay back. Newer Condo's--especially in developing neighborhoods-- are frequently the result of an owner creating a coop or condo to get out from under legal problems and huge bills. When they are left holding too many rent regulated apartments after a conversion, they then sell remaining apts. to one or another of the eagerly awaiting buyers who specialize in picking up leftover rental units post a conversions or they renovate and churn-- "encouraging" old and new occupants to vacate times over--meanwhile still keeing control over Boards for any number of years. Shareholder members of many boards are sometimes selected by owners of unconverted units or are "elected" because there is no competition--especially in a fractious but needy building. Building problems are thereby compounded by a combustible combination of greed, inexperience, and arrogance--not least in relationship to shareholders who end up excluded from decisions about how best to use their money. Add to the mix lawyers and management companies who in combination soon gain control over the "coop" and the board; some are more subtle than others but most side with the residual owners of remaining rental units. Soon these people and management companies and their favorite attorneys and contractors etc. are allied, and can simply take over-- subtly or overtly: They soon form a closed shop with Supers and staff, and quite cleverly work as a team to make sure that the Board delegates the actual decision making and running of a coop to them. Costs soon begin to increase regularly; it may seem harsh to note that their collective hands are almost never far from a till of one kind or another. ............................................ In point of fact, coops have moved far away from their initial purpose--housing a middle class in a literally "cooperative" building of people who knew how to put their shoulders to a wheel and move things along for the good of the whole. These days Coops and Condos are simply another corporate form of big business. Budgets expand, more and more money is borrowed and fees go up and up--even through downturns Shareholders either have to keep paying more and more or they have to sell out and try to fin another place to live. Sound familiar to anyone? No need to go on quite yet...but do keep your eyes open for the full story........IF if is approved and posted by the powers that be behind the "Cooperator"