When the Interests of Boards and Resident Groups Diverge Board-Versus-Resident Fights Are Common, Says an Attorney

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Late last year, a conflict developed between a board and some residents at the Windsor Oak co-op in Queens over shelters protecting a colony of feral cats that lived behind the property. As the New York Post reported, a contingent of shareholders accused the board of repeatedly destroying the shelters, despite the colony being protected via its registration with the Mayor's Alliance for New York City Animals. The board apparently had apparently wanted to build a clubhouse and additional parking spaces on the land which the cats had made for their homes. Eventually, the board acquiesced to leave the cats alone and table its clubhouse dreams, but not before the seeds tension between various factions (pro-cat residents/pro-parking lot board/anti-cat residents) were planted throughout the community.

While these types of dust-ups rarely involve cat colonies, dissension between a condo or co-op board and various interest groups within the building are not rare. For every association that lives in blissful harmony, there exists another that is at each other's throats. As a board's main job is to represent its owners and shareholders and adhere to its fiduciary duty, it can be difficult to perform that primary function when a large contingency of residents is diametrically opposed to one of the board's initiatives.

Big City Squabbles

“Unfortunately, board-versus-resident fights are common,” says Thomas D. Kearns, a partner at Manhattan law firm Olshan Frome Wolosky LLP. “In one frequent dynamic, a minority consisting of a few shareholders loudly voices its specific focus. Then there are simple policy differences. But the worst situation is when a shareholder disagrees with a decision that was made with respect to themselves.

“The story about the feral cats is an example of that first type of dispute,” he continues. “A group of shareholders wanted the building to take one specific action. An alternate example of this could involve a fight over cell antennas on the roof where one group objects to installing them, despite research that shows that the antennas pose no danger.”

Ira Brad Matesky, a partner with Ganfer & Shore, a law firm also in Manhattan, offers an elevator-based anecdote to further illustrate this type of dispute. “We represented a high-end building which had traditionally-used elevator operators,” he recalls. “It was like a throwback to 70-some years ago, as these days most people know how to use an elevator themselves. So the board was determined, as an economic move, to eliminate the operators in question. This was obviously unpopular with those employees, but it also stoked the ire of some of the residents – typically the senior or longer-established ones. And perhaps the more well-off residents didn't object to the expense...I can't say for sure as I did not perform a demographic breakdown.”

Matesky thinks that a majority of the owners agreed with the board that having elevator operators became a frivolous expense; yet a significant minority who opposed to cutting the operators wanted to hold a special shareholders meeting to vote on whether they should go forward with the board's plan. “The board initially ignored the request,” he continues, “thinking that this was just a group of malcontents. But that minority faction actually went to court, claiming that they'd filed a petition approved by a sufficient number of shareholders in accordance with the bylaws of the association to give them the right to hold a special meeting. At that point, the board still felt that the majority of owners were on its side but also thought that, were this untrue, it was worth finding that out.

“So even though they could have contested the legitimacy of that aforementioned petition, the board called the special meeting, where an overwhelming amount of shareholders voted to support the board's action and get rid of the elevator operators. The dissident group of shareholders admitted that they were wrong, and that they apparently did not represent the majority. As such, they accepted the results. But for a time, the building was very much divided.”

And occasionally an in-house conflict results in a power shake-up. Matesky recalls of a building in need of repairs, with a group of unit owners claiming that the expense was necessary and another in disagreement.

“Sometimes, the minority faction is able to persuade the board or other owners to come around to their point of view," he says, "while other times I've seen the entire composition of a board change over one specific issue,  And a firm like ours...we represent the board as an entity. So I found myself in a situation where the majority of a board voted to take on a renovation project, and we were defending it in a suit filed by a shareholder who felt the project to be a waste of money.”

Matesky adds that the shareholder ran for the board with some like-minded others and won. “The next thing I knew,” he says, “we were in negotiations to cancel the renovation contract on behalf of that new board. There may be some cognitive dissonance, but when a board composition changes, the policy in the building may follow suit. And given discretion of the Business Judgment Rule, unless it's something that is mandated by law or pertains to the residents' health and safety, a decision to do work and the decision not to do it may be equally valid.”

At the end of the day, most inter-association conflicts like these are resolved along the least contentious path, says Kearns. “Most residents don't want to get into fights with their neighbors,” he admits. “And to that end, oftentimes the squeaky wheel minority will win their dispute,” as their challengers eventually succumb to the path of least resistance.

Mike Odenthal is a staff writer at The Cooperator.

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Comments

  • The interests of Boards and Resident Groups really do Diverge. At our co-op, the board made a decision to close the laundry room for no good reason, but the other residents want the laundry room open. The board does not want to do needed building repairs (new roof, new intercom, tuck pointing, ....) because it is cheap and greedy, but some of the other residents want the needed repairs. The board does not want to pay the $19,000 in unpaid property taxes right away, but some of the other residents want those taxes to already be paid off. The board welcomes investors, but some of the other residents don't want investors.