Non-Resident Board Members How Do They Affect Operations?

For many reasons, common-interest communities such as co-ops, condominiums, and HOAs prefer that the people living in the community’s units be the actual owners of those units – rather than renters, or subtenants, or relatives of the owners. The conventional wisdom here is that owner-occupants have a more deeply vested interest in the overall health and smooth operation of their community than non-resident owners, because it’s their actual property – not some faceless landlord’s. Same goes for board members – it seems pretty obvious that someone serving on their building or association board will be more effective and engaged if they actually live in the building or association, and not several states away.

Ownership Possibilities

In the world of common-interest communities, the vast majority of owners are also occupants. They purchase their unit as a primary residence, and live there the majority of the time. But other possibilities do exist. In some communities, particularly in existing apartment buildings that have been converted to co-op or condominium ownership, any number of units may be owned by the original landlord or building owner – usually referred to in this instance as the sponsor. These units may be encumbered by holdover tenants who didn’t opt to purchase their unit when the building converted, and who in turn may be subject to various rent regulations, such as rent stabilization in New York City.

In newly-constructed buildings, there may be some number of units still owned or retained by the developer. These may also be rented to non-owners, but are not likely to be subject to older rent regulations designed to protect tenants who chose not to purchase their units, such as in the above-mentioned conversions.

Lastly, in either existing conversions or new construction, there is the possibility of investor units; apartments that have been purchased by a third party and operated as a source of investment income as one would any rental property. An investor could own one unit or many; the maximum number usually dictated by the community’s governing documents.

Board of Directors: Who May Serve?

According to Phyllis Weisberg, an attorney with Montgomery McCracken Walker & Rhoads, which has locations in New York, Pennsylvania, New Jersey and Delaware, at the state level in New York and elsewhere, “There is no residence requirement to serve on the board of a co-op or condo.” Rather, “One must look at the bylaws.” Weisberg also points out that for co-ops in New York, which are subject to the BCL—the Business Corporation Law—there is no residency requirement unless provided for in the community’s bylaws.

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