Six Big Things Attorneys Wish Boards Knew How Do You Measure Up?

Whether you serve on the board of a co-op, condo or HOA, chances are you and your fellow community administrators are volunteers. Perhaps you're fortunate enough that you or one of your colleagues has professional legal expertise to bring to the table—but even if that's the case, sooner or later you'll need to consult with outside legal counsel on some issue, whether it be the sale of an apartment in the building, or an acrimonious situation between neighbors, or between a resident and the board itself. 

When that day comes, it pays to keep a few things in mind before picking up the phone (and starting the billable hours clock) to call your building's attorney. We polled some co-op, condo, and HOA lawyers across the country to find out the top half-dozen things they wish boards knew...before lawyering up.

Don't 'Just Wing It'

Any board worth its salt is concerned about controlling costs and working within a budget; they know it's not fiscally responsible to get a lawyer (or accountant, or architect, or engineer) involved in every little issue that crops up. While that may be true, the converse—not ever calling in the pros, can be just as problematic, and costly.

“Use your professional resources,” advises Ryan D. Poliakoff, a partner with the Boca Raton, Florida-based law firm of Backer Aboud Poliakoff & Foelster. As senior counsel, Poliakoff most often finds that boards fear using the association’s attorney services for a variety of reasons. Besides budget concerns, a board may not realize when it's time to call for professional consultation. Poliakoff points out the importance of calling upon the right resource for the need at hand, whether it be a property manager, bookkeeper or an attorney. “An elected board creates and defines policy but these professionals have specific knowledge on liability and risk for complex issues,” he says.

Jennifer Loheac, a shareholder attorney with the law firm of Becker & Poliakoff in Morristown, New Jersey, agrees. “Rely on your association professionals! The board should not be defending choices in insurance. Let the insurance agent speak to his or her own recommendations, and why. If there are delinquency actions or litigation or other questions of liability, that’s why you have an attorney. As a board of volunteer community members, let the association professionals speak to the various professional actions or inactions."

“Every association should have an attorney upon whom they can rely for advice,” adds Mark Roth, an attorney and partner with the Chicago-based law firm of Orum & Roth, LLC. “A good attorney,” he says, “well-versed in association law will generally save an association much more than the cost of that lawyer’s advice. Boards should consult their association attorney before a contemplated actions is taken— not after.”.

“Remember, you are not on an island—use your resources,” says Charles Perkins, Jr., a senior partner at the law firm of Perkins & Anctil in Westford, Massachusetts. “Most associations have an accountant, manager, attorney and an insurance agent. You don’t need to try to figure out of the blue what you need to do. You can use your resources to help you manage your association.”

Change it Up

Legal pros agree that maintaining 'institutional memory'—the cumulative administrative expertise that carries over from one group of leaders to their successors – is hugely helpful when it comes to community governance. But boards can find themselves stuck in a rut if they insist on following previous members' footsteps too closely. Don't get caught in the trap of picking up old members' bad habits. If something is broken, fix it, says attorney Sima L. Kirsch, founder of the law firm of Sima L. Kirsch, PC in Chicago.“Just because the previous board did it does not mean it is correct,” Kirsch says. “When a transition occurs, the new board cannot escape its fiduciary duty by merely saying, 'Well, that's the way we've always done it.' A transition review of the state of the corporation and its operational systems is an exercise in best practices.”

Kirsch also recommends keeping on top of governing documents, and recommends revising them before an issue arises. “Many associations’ operating documents are outdated and/or contain provisions unfriendly to current circumstances,” he says. “It is difficult to get enough votes to amend them when no issue exists, and almost impossible when a community becomes divided over an issue.”

Transparency & Communication

Any good marriage counselor would say that clear, consistent communication is essential to a successful relationship. According to legal pros, this sentiment applies just as readily to the board/resident relationship.

“If I had a nickel for every meeting I went to and heard complaints about transparency and communication, I'd have a lot of nickels,” says Adam Finkelstein, a partner with the Manhattan-based law firm of Kagan Lubic Lepper Finkelstein & Gold, LLP in New York City. “It's probably the number-one thing you can bet on hearing in a meeting.”

And—uncomfortable as it may be—communication is especially crucial should the board make an error in judgment or administration. “Once a mistake is noticed, don’t engage in a cover-up,” advises Lourdes Ferrer Lieberman, an attorney and founder of Ferrer Law Group in Weston, Florida. “Take positive action and fix the problem; sometimes a simple phone call can clear up any confusion and prevent a negative action.” Ferrer compares timely board intervention to a medical scenario. “When you treat an illness in time, it is easy to heal, but left untreated, it may be impossible to achieve a healthy outcome.” And as more than one legal pro is quick to point out, the appearance of impropriety can be just as damaging as actual misdeeds when it comes to community morale and trust in the board. 

Crucial as it is for boards to communicate with residents, it's equally vital than they not overshare and wind up in unintended legal hot water. For example, says Mark Rosen, of-counsel to the Boston-based Schofield Law Group LLC, “When a  unit owner falls into arrears; you can’t be completely transparent. There are laws that govern that in terms of privacy and fair debt collection. Their identity, the amount in arrears, etc., is really not the business of every unit owner. That’s just not right. There may be other sensitive issues that the board just can’t share with all the unit owners.”

Wendell Smith, a partner with the law firm of Greenbaum Rowe Smith & Davis, LLP in Woodbridge, New Jersey, agrees, but adds that “There has to be a procedure, however. You just can’t come in and say, ‘I want to see all the documents in your files from the last ten years.’” A board or manager is entitled to ask what exactly the resident wishes to view, and why—but, says Smith, “They should be made available. That’s the change that’s evolved over the years. It used to be ‘Keep it secret, it’s none of their business,’ but it doesn’t work that way.”

In the end, says Mark S. Einhorn, a partner with the law firm of Marcus, Errico, Emmer & Brooks, P.C., in Braintree, Massachusetts, “There really are few issues that boards should not discuss in an open forum,” he says. “The more open a board is, the less likely owners will feel that the board is  disconnected from the owners.”

Choose a Captain

Want to know what irks attorneys more than almost anything? When several people from one board call about the same thing—or when three different board members reach out on the same day to discuss three different issues. Choosing one person to be the point of contact between your community’s legal counsel and the rest of the board-management team can eliminate this inefficiency.

As long as that chosen person is diligent about getting input from the other board members, and sharing the attorney’s feedback with them, “I think a liaison can be very useful ” says one attorney. “It does save some attorney time, because there are not 45 different questions coming in from each board member. The communication has to be free flowing both ways for it to really work well. You don’t want to have the attorney liaison be the only person on the board who knows what’s going on with legal concerns.”

Naming a point-person between the board and the attorney saves more than just time—it can save money, says Rosen, because “You’re not...multiplying the costs by having three or four conversations or three or four email exchanges. If it’s one person, then they have the responsibility to disseminate that information to the remainder of the board.” Rosen says that designating a core contact person provides a much more structured flow of information to the boards and keeps their attorneys better in the loop without the need for repetition or additional expense.

Avoid Litigation!

The purpose of retaining legal representation is to avoid running afoul of the law in day-to-day business, but it’s also to provide a line of defense should litigation rear its ugly (and expensive!) head. Litigating anything is nearly always a long, costly process—and one that has ramifications beyond just stress and expense. An association runs the distinct risk of having sales slump and property values decrease as prospective buyers shy away from investing in a community embroiled in litigation. On top of that, “Many lenders have underwriting guidelines that will not allow them to make loans in connection to a unit in a building that is the subject to litigation.”

Some states—including Florida—require ‘presuit mediation’ between warring parties before the courts get involved. “In a condominium, certain disputes must go to arbitration first,” says Eric M. Glazer, a principal of the law firm of Glazer & Associates P.A. in Fort Lauderdale, Florida and president of Association Mediation, Inc. “These are pet cases, parking disputes, problems over common elements, cases involving elections, improperly held board meetings and failure to provide access to records. They start out in arbitration, and then can be referred to the mediator. Hopefully it resolves the case. On the HOA side, cases have to start in mediation. Arbitration can take several months, but that's still less than what a court cas e can take.”

Echoing the sentiments of nearly all his peers, attorney Adam Leitman Bailey, founding partner of the law firm of Adam Leitman Bailey, P.C. in New York City puts it bluntly: “Litigation is too expensive and usually a waste of money. Most of the cases in my office could have been resolved if meetings were called with the unit owners or shareholders before the disagreements escalated.”

Keep the Peace

Boards are comprised of a diverse group of people, each with their own ideas on how things should be run, so of course, disagreements are expected to occur. However, experts warn against taking things personally and letting minor disagreements escalate into public confrontations. “Boards should always reveal a unified front to the community,” says Loheac. “By all means, trustees can passionately disagree behind the scenes, but once  a decision is made, it’s important for the board to speak with one voice. How can a community have confidence in a board that is, itself, divided?”

“Remember,” says Bailey, “that peace at home and on the board will allow the board to conduct business in the best interest of the owners. No one ever really wins a fight. The fight you have in one meeting may cause hatred for many meetings to come. Better to hold back the insults and discuss things nicely before making an enemy.”

No matter how harmonious and united a board may be, it’s a given that owners will not always agree with the board’s every decision—and sometimes, the owners may have a legitimate point. If a board makes a poor decision, or fails to act in some way, they should be willing to apologize, Loheac says. “Becoming defensive over an obvious error in judgment or inaction causes far more problems and undermines the trust homeowners have with the board. Homeowners appreciate that boards can make mistakes.”

Related Articles

The Biggest Legal Mistake Boards Make...

and How to Avoid It!

Top Legal Issues - Nightmares & War Stories - What You Can do When Things go (Really, Really) Wrong

Seminar - The Cooperator Expo New Jersey

The Cooperator Fall Expo Returns to Javits

More Education, Services, and Community

Board Misconduct

Understanding the Difference Between Illegal and Improper

Biggest Mistakes Boards Make

Attorneys Sound Off

So You've Been Sued...Now What?

First Steps to Take

 

Comments

  • I am a condo board member and often hear my fellow members say at our meetings "what goes on in here stays in here ". How can that be fair to our unit owners? Shouldn't everything go in the minutes except for names and amounts owed and the like? Transparency is forgotten too often since too many vendettas are ruling the meetings.