Every home is an investment, but for co-op shareholders - and, to some extent, condominium unit owners - their home is also part of a business. As with any business, good management can make or break it and in a co-op or condominium, a big part of that management team is the building's board of directors. Like any corporation, the board has a fiduciary responsibility to shareholders to oversee building operations and finances. But when shareholders are also neighbors, and when quality of the living environment can be affected by the board's decisions, the stakes are high and board members must remember to keep a keen business sense and not be ruled by their personal feelings.
"Board members need to remember that their primary fiduciary responsibility is to the corporation, not to individual shareholders," says David Goodman, director of business development for Tudor Realty, a Manhattan management company. "It's a subtle difference, but it needs to be remembered, for example, when making budget considerations or deciding on maintenance increases." He adds that, "[Board members] can't just think about their own pocketbooks," but need to think of the long-term benefit to the corporation of, say, a flip tax, or assessment to do preventive work that will be beneficial in the future.
So how do you know if your co-op or condo board is doing a good job?
"First and foremost, ask if a building is run well from an operations standpoint. Is the super responsive? Are systems in good order? Are there good doormen and porters?" says Daniel Altman, an attorney with the Manhattan law firm of Belkin, Burden Wenig & Goldman, LLP. "Secondly, look at financials; is money spent efficiently, or is the board constantly asking for maintenance increases? That's usually a red flag."
Altman cautions, however, that in the current economic environment a maintenance increase or special assessment may not, necessarily be a sign of poor money management. Many buildings have been forced to raise maintenance fees due to skyrocketing real estates taxes and increased insurance and fuel costs.