Being on the board of your building is not just a volunteer role, it comes with a fiduciary responsibility and expectation of good faith and degree of care. In this session with Hal Coopersmith, attorney and partner at the law firm Coopersmith & Coopersmith, Hal shares the foundation of what it means to be on a board, good governance, and responsibilities, and answered key questions from attendees. Here are the top highlights from the webinar.
If you'd like to go deeper, Coopersmith & Coopersmith is offering office hours. You may sign up for office hours here.
What does it mean to be on the board of your condo or co-op? It all starts with the Business Corporation Law (BCL), which states that "directors shall perform duties in good faith and with that degree of care which an ordinarily prudent person in a like position would use under similar circumstances." Board members are not expected to be the experts in building operations and details, but are entitled to leverage the opinions, information, reports, and statements from the professionals they work with—such as their accountant, property manager, or engineer.
In New York City, condos and co-ops are governed by the New York Business Corporation Law (NYBCL), which means that they must also hold an annual shareholders' meeting to elect directors, and that shareholders are entitled to examine or review minutes of shareholder meetings, record of shareholders, annual balance sheet, and profit and loss statement.
In a nutshell, a building with a property manager should hold them responsible for the day-to-day management activities. This includes cleaning, coordinating staffing schedules, emergency maintenance, and getting bids for projects. The board functions as oversight and is responsible for long-term strategy and planning. That means establishing and upholding building policies, evaluating and selecting professionals, longer-term budgeting and fees, and ensuring that strategy is implemented.
A well organized board should prepare annual operating budgets and timely financial budgets, plan for capital improvements and repairs, keep good records to facilitate long-term projects and transitions, and stay up to date on changes in the law as well as market and management trends.
In addition, boards should protect themselves from conflicts of interest and personal liability. If a director is an interested party to a transaction with the corporation (such as a sale or vendor selection), they should disclose and their vote may not be counted. Keep in mind that shareholders are entitled to receive an annual report disclosing any contract or transaction entered into or voted on by the board wherein a director was an interested party—even if the number is 0.
A major discussion area and pain point is in the maintenance of records, which often becomes an afterthought. Leveraging technology can help boards save immense headache with loss of information, context, and paper trails that are required to support sound decision making.
Condominimum owners are considered as having real property that is deeded to them, whereas cooperative owners are considered as owning shares in a cooperative corporation, which grants a proprietary lease. That means the board of a condo has a limited relationship with the unit owners, similar to Home Owners’ Association (HOA). The board of a co-op though, has a more nuanced relationship with unit owners as shareholders and leaseholders. For instance, condo boards typically only have a right of first refusal on transfers (sales) whereas co-op boards typically have broad discretion over approval of transfers.
The governing documents—namely, the house rules, bylaws, and declaration—will define the thresholds for making amendments and what requires only board approval versus a shareholder vote. Understanding these governing documents will provide guidance into how changes can be made and where they should be applied. For instance, house rules cannot violate the bylaws, as the bylaws will take precedence over the house rules.
The information provided on this website is for informational purposes only. It does not, and is not intended to, constitute legal advice.
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