Q&A: Should we give our super a credit or debit card to make purchases for our building?

Q. Have you ever heard of having credit or debit cards available for building staff? Is it possible to obtain a co-op charge card for our super to use so he can purchase need materials and equipment without having to go through long procedures with the managing agent? If possible, is it advisable? 

                              —All Charged Up

A. “Although the issuance of a credit card by the board of directors of a cooperative to the superintendent of the building is not prohibited by any statute and may not be restricted by the documents governing the cooperative, it is certainly inadvisable,” says attorney Steven R. Wagner, a partner and founding member of the law firm of Wagner Berkow PC in Manhattan. 

“The purchase of shares in a cooperative corporation is an investment by the apartment owner that is, to a large extent, controlled by the board of directors as fiduciaries.  The simplest definition of a “fiduciary” is one who holds property for another and the members of the board certainly are fiduciaries by that definition.  See Board of Managers v. Fairway at N. Hills, 193 A.D.2d 322 (N.Y. App. Div. 2d Dep't 1993). Fiduciaries must act within the scope of the governing documents of the cooperative and are personally obligated to exercise a high degree of care, characterized by undivided loyalty, good faith, fair dealing.  As an example of the personal nature of the fiduciary duty, board members cannot give proxies for their votes on the board.   Business Corporation Law Section 717 also addresses the obligations of fiduciaries and provides that a director shall perform his or her duties “in good faith and with that degree of care which an ordinary prudent person in a like position would use under similar circumstances.”  

“Getting back to the super’s credit card, the board should have a hands-on approach regarding the cooperative’s financial affairs and convenience should not supersede that approach. The checks and balances in place by having funds requisitioned from the managing agent and approved by the board for expenditures over a certain dollar level are important and prudent protections for the board and the cooperative.  Giving the superintendent the decision-making ability and the apparent authority to use the credit of the cooperative and/or to spend unlimited amounts in his/her discretion could be viewed as an abandonment of the board members’ fiduciary obligations.  While the superintendent of your cooperative building may be an honest and trustworthy person, if the credit card were misused, it is entirely possible that the board members could be held responsible for the cooperative’s losses. For this reason, issuance of a credit card to the superintendent is not recommended.  

“Has your cooperative considered a petty cash system which will provide needed funds to the super for those instances in which immediate and relatively small purchases are required?  Does your cooperative have accounts with vendors that will allow the superintendent to make purchases for needed supplies without a credit card?  Does your super have an inventory system for regularly used materials and does the cooperative have, generally, the equipment needed for your super to perform his or her duties?   I would suggest that the board explore these options rather than issue a credit card to one of the cooperative’s employees.”

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2 Comments

  • Yes, it is advisable to issue your building Superintendent a pre-paid debit card, as opposed to a traditional credit card or debit card linked to one of the cooperative's bank accounts, both of which place great financial liability on the board if the card is lost or misused, as a corporate card would require an officer of the board to be personally responsible for expenditures on the card if it were to be misused. I recommend to boards that I consult for that the purchases should be limited to items which are emergent in nature, or items which must be ordered online. Example, an item needed from a local store which must be purchased C.O.D., or during severe inclement weather when the management office is closed and your Super needs to make a purchase for an emergency item or service. The limit should probably not exceed $500.00 at the outset.
  • Having a petty cash fund established with clear procedures is a much better way to fund a Super's emergency needs. In our condo the board has established a $300. P.C. fund, held by the business office. When the Super needs to purchase something other than an item normally ordered through a regular approved company, a verbal ok is obtained from either Board President or Managing agent, the item is purchased and the receipt provided to management for reimbursement. Business office has forms to record item and reason for purchase rather than through normal supplier. This way it is clear what is being purchased, and has available cash fund when required.