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27 Oct 2017
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Must Co-op and Condo Board Members be Residents?

How does a co-op or condo board run smoothly when there are certain board members who are not residents of the building? Typically (especially in new or small buildings), co-op shareholders and condo owners are the primary residents of their units. However, there are also many “hybrid” buildings that continue to have rental units, units that are owned by the developers, or even “investor units”, which are purchased for the sole purpose of profit.[1]

Buildings with rental units commonly occur when a co-op or condo is converted from a rental building and the residents do not choose to purchase their unit. Many of these tenants are protected under New York City’s rent stabilization regulations, who have the right to renew their leases and are “usually allowed to remain under a non-eviction plan”.[2] These regulations were implemented in 1969 due to the rent increases in post-war buildings and continue to protect roughly one million tenants, however, they can be burdensome for co-op and condo boards who do not want non-resident board members.

Every co-op and condo’s by-laws will determine who can sit on the board. By-laws do not generally stipulate a residency requirement, however, if they do it would be clearly written in the building’s by-laws. The Business Corporation Law (BCL) of New York State, which governs co-op boards, also does not allude to a residency requirement under Section 701, but it does give boards the flexibility to “prescribe other qualifications for directors.” [3] Therefore, by law there is nothing stopping non-resident board members unless the co-op or condo decide to implement a narrower provision in their governing documents.

So what are the logistics of having a non-resident board member? Thanks to technology, it is now much easier for non-resident board members to participate in meetings through telecommunications such as FaceTime and Skype. However, the interests of residents and non-residents usually differ and can cause arguments amongst board members. Residents are more invested in the building and the way in which it operates – they have a long-term invested interest. Non-residents however, especially those who purchase units as an investment, are focused on profit, low maintenance costs, and aesthetics (for potential future sales). The combinations of unit ownership will impact how the building spends its money. To mitigate tension, board members should communicate their concerns effectively in meetings and also be open to compromise. If that fails to work, the building’s by-laws can always be adapted to serve the co-op or condo’s best interest.

[1] Sidranksy, A.J. (Nov. 2017) “Non-Resident Board Members.” The Cooperator. Avaliable at: https://cooperator.com/article/non-resident-board-members/full#cut. Accessed on Oct. 27, 2017.

[2] New York City Rent Guidelines Board. (Sept. 23, 2016) “Rent Stabilization FAQ.” Available at: http://www.nycrgb.org/html/resources/faq/rentstab.html#difference. Accessed on Oct. 27, 2017.

[3] New York Business Corporation Law, section 701. Available at: http://codes.findlaw.com/ny/business-corporation-law/bsc-sect-701.html. Accessed on Oct. 27, 2017.

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