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Relationships on the Board How Close is Too Close?

The motivation for volunteering to be an uncompensated (and sometimes underappreciated) co-op or condo board member is usually a sense of civic duty combined with the desire to protect one’s own investment and quality of life. This means that the majority of board members actually live in the buildings and communities they serve. And that means that most board members are neighbors, serving with and for people who share not just common areas with them, but maybe even actual walls and ceilings. 

Such closeness has its benefits: familiarity with the community’s unique issues, people, and history; easy access to documents and other on-site information; and proximity to other board members for meeting quora, for example. But closeness also can lead to conflicts, from the personal to the professional. So how do directors separate the business from the kibbitz in the boardroom?

Fiduciary Duty

According to Mary-Joy Howes, a partner in the law firm of Goodman, Shapiro & Lombardi LLC, which has offices in Massachusetts and Rhode Island, upon election, board members become fiduciaries—a term derived from the Latin word for ‘trust’—who are charged with making policies and decisions in the best interest of the community. A fiduciary has two primary duties: the duty of care and the duty of loyalty—meaning that a board member must exercise reasonable care when making decisions that will impact the community, and that regardless of personal feelings, board members must act in the best interests of the corporation or association. 

“Board members must always have the association’s best interest as their number-one priority,” Howes says, “and unit owners need to be able to trust that the elected board is acting in the association’s best interest at all times. The board members’ loyalty must be to the association and the association only.” 

Decisions made out of self-interest or to benefit a group of directors are therefore in violation of fiduciary duty—but in reality, board business runs more or less on the honor system. At least in the state of New York, residential boards are not really overseen by any other regulatory or governmental body. It is solely up to their electorate—the other shareholders and unit owners of their communities—to exercise their essential duty: voting in their annual elections for a board that will faithfully represent their interests.

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