Working Toward Common Goals Avoiding Board/Sponsor Conflict

Nothing worth doing is ever easy. That rule of thumb certainly applies when it comes to the creation of co-ops and condos. Whether constructing a new building or converting an existing one, it can be a tricky business. The person or group establishing the co-op or condo must solve a whole flurry of issues before the first resident ever sets foot in the building. His or her partners in this adventure—those brave souls who sign on to be the building's first board members—have their own interests in mind as well, working together to try and create a place that they can call home.

For sponsors and board members, good intentions abound. There may come a time in even the best sponsor/board relationship, however, when trouble arises and the two find themselves at odds. The best way to prevent these problems? Know what to expect.

Launching the Project

In the beginning, after the conversion has been approved by the state attorney general's office, all the paperwork filed and construction completed, there comes a time when a co-op or condo will transition from the hands of its sponsor into the hands of its board. It's the board that ultimately will control the entire enterprise.

"In the beginning, the board will consist solely of sponsor representatives," says attorney Robert Braverman of the Manhattan-based law firm of Braverman & Associates. The size of the board is determined by the building's initial offering plan. After a certain amount of time, a first round of elections will be held and slowly the makeup of the board will begin to change. "They might only be electing a couple of people at a time," Braverman says. "On a nine-person board, for example, you could start out with only two or three non-sponsor designees." The sponsor's place on the board generally serves a vital purpose: helping guide the business in its early stages.

In these first months or years, "It's important that sponsors are on the board so that they can conduct the business of trying to sell those remaining units," says attorney Adam Leitman Bailey of Adam Leitman Bailey PC in Manhattan. By working hand-in-hand with residential board members and others invested in seeing the successful launch of the co-op or condo, the sponsor has a good chance of creating a welcoming and functional environment for new and prospective residents.

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