Q&A: Conflicted and Confused

Q I am the vice president of our co-op board. Just recently we found out through a real estate ad that the president of the board is selling his unit. Does this pose a conflict of interest? In effect should the president remain the president while he is selling his apartment? He's postponed several meetings where we're supposed to address a maintenance increase. My guess is that he's obligated to tell his prospective buyers about the maintenance increase, but one would wonder why these meetings have been continuously postponed.

—Board Vice President

A “Unless your co-op’s bylaws provide otherwise, the person can remain a board member and the president while he is selling his apartment and possibly even after he sells,” according to Joseph G. Colbert, Esq., a partner with the Manhattan-based law firm of Kagan Lubic Lepper Lewis Gold & Colbert, LLP. “There is typically a paragraph in the bylaws which explains the qualifications of a board member and of each officer.

“Assuming the bylaws allow him to remain a board member and president, you ask whether he should resign his position as president because of a conflict of interest. There is certainly a conflict of interest concerning his apartment sale and he should recuse himself from board discussions and decisions related to his sale. However, he may participate in board discussions and decisions that are unrelated to the sale. The maintenance increase decision that you raise is an interesting one because it calls into question whether he is avoiding calling a meeting so that the board cannot make a decision which may negatively affect his sale. If that were the case, his conduct would be inappropriate and arguably a breach of his fiduciary duty as a board member. A board member has a duty not to act in a self-interested way, but rather in the best interest of the cooperative. If he cannot do so, he should resign his presidency as well as his board position.

“That said, a co-op’s bylaws usually have a provision allowing other board members to call a board meeting. You do not have to wait for the president to do so. Bylaws also usually provide that the officers serve at the pleasure of the board. Accordingly, the board should be able to vote to change the officers. My suggestion would be to confront the president privately and assure he understands his fiduciary obligations as a board member. If that doesn’t resolve your concerns, you should contact your co-op’s attorney and managing agent and make sure that the board acts appropriately and in accordance with the bylaws in handling this situation. All directors have a fiduciary duty to act in the best interest of the cooperative and your board’s members should not sit idle where one board member may not be acting in the best interest of the cooperative.”

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