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Co-op and Condo Board Management

Real Estate Legality, Real Property

In most co-pp and Condo residencies, shareholders and unit owners select board members to make and implement day-to-day decisions for the building. Board members owe their shareholders and unit owners a fiduciary duty to protect their interests in the building. The role, which is sometimes like a secondary job, requires being proactive, communicating effectively, and most importantly demonstrating good leadership. However, as the Cooperator so aptly puts it: “boards are made up of human, and human are wildly fallible.” Mistakes are inevitable, so it is how board members deal with the aftermath of their mistakes which is important in order to avoid litigation. Building relationships with other board members, shareholders and unit owners is paramount and this includes treating shareholders equally, being responsive to shareholder concerns, and holding themselves accountable to the building’s governing documents.

A common issue which arises is when board members give each other or certain resident’s preferential treatment. For instance, permitting only a group of people to sublet their apartment even if it is restricted in the by-laws and proprietary lease or requires board approval. Condo residents have greater freedom in regards to subletting their unit, but for co-op shareholders it is ultimately the board’s decision. The board can restrict how long a shareholder can sublet, who can be a subtenant, impose fees and surcharges, and even deny subletting completely. However, these policies (especially terms relating to time constraints and surcharges) must be clearly stated in the proprietary lease and must be applied to all shareholders equally. Board members must also ensure during meetings that everyone’s vote and voice is accounted for. Favoritism and discrimination against shareholders will open up the board’s susceptibility to litigation proceedings.

Secondly, board members must fulfill their requisite duties to shareholders which includes being responsive to their concerns. Board members need to be proactive when a shareholder or unit owner has a problem concerning their unit, common areas, or even neighbor relationships. It is best to defuse situations before a shareholder or unit owner ask their attorney for assistance. For instance, for residents whose unit is undergoing renovations or construction, board members must guarantee that they follow the building’s rules such as working within the certain hours a day and completing the project in a timely manner. This will prevent noise and disturbance complains from other unit owners or shareholders. If the building’s has a duty to fix a problem in a unit, such as a leak, board members need to ensure they efficiently complete the repair so that the apartment is habitable.

Last, but not least, board members must hold themselves accountable to the governing documents of the building and not breach their fiduciary duty to shareholders and unit owners. There have been multiple instance where board members have embezzled common funds, approved projects for themselves or other board members without undergoing a proper bidding process, or making executive decisions that are not in the best interest of shareholders, unit owners or the building. Board members must be transparent in their leadership and decision making process. Attorney David Hartwell explains to the Cooperator how “[b]eing on a board is about administering a multi-million dollar asset, and members need to have that mindset when they agree to serve”. If a board members makes a mistake they must be prepared to remedy the situation. A person’s home is their most valuable asset, and therefore board members must protect the value of the building in addition to treating individuals equally, regardless of their status.

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