Impeach The Bitch! And her demented Mafia Midget too! They steal your money!
They pretend to be the FBI, but this is just their cover. Both of them are the Mafiosi! Investigate them! They belong in prison!
I am talking about the current chair of this Condo Board, Grace Bishop, and her co-habitator “Al”, of the apartment 6E.
Also, read these articles.
Co-op and condo owners often complain that their board doesn’t do enough, or that the board members aren’t involved as much as they would like in the administration and maintenance of their building. While a disinterested or apathetic board is certainly a problem, going to the other extreme can be just as bad…or maybe even worse.
Board members who let their power go to their heads can be a liability to their building community on many levels, but of particular concern is a board that oversteps its bounds and intrudes on the privacy and agency of individual residents.
Understanding the boundaries and limitations of your power is something that every board member needs to realize or else trouble—including legal problems—can result.
Balancing what is right and what is expected can be tricky for boards — so much so that sometimes, board members and non-board members alike wonder why people bother to serve in the first place.
“I always tell my fellow board members and clients that if you’re going to be on a board, you are basically a sacrificial lamb,” says Luigi Rosabianca, managing partner of the Manhattan-based law firm Rosabianca & Associates PLLC. “You don’t get paid for it, but by doing so you are providing a service to your building. It’s not only a way to protect your investment, but also your quality of life—but [board members] have to learn what being on a board means, and not to overstep their bounds.”
What can a board member really do about an ongoing noise complaint, for example? What sort of majority is needed if a vote in enacted to change something within the condo or co-op? Can a board impose rules regarding security or visitors?
Questions like these can usually be answered by reading the co-op or condo’s official governing documents, says Al Pennisi of the law firm of Pennisi Daniels & Norelli LLP in Rego Park. “The powers are designated in the corporate documents—the certificate of corporation and the bylaws—and some of the additional powers are listed in the offering plan and amended in the offering plan when it’s a co-op conversion. Primarily, it’s the corporate documents and enhanced by case law.”
It’s essential that anyone who is elected to their board read and understand what they can and cannot do as a board member.
“You need to do it with all the knowledge necessary,” Rosabianca says. “The first thing you need to do is read the offering plan or prospectus as well as the bylaws, which very specifically outline what the board’s powers and limitations are.”
In addition to the documents, a new board member can also get advice and instruction from those already involved in the process.
“When someone new comes on, they get instruction from owners, management companies and other board members if they aren’t educated about those sort of things,” says David J. Byrne, a shareholder attorney with the law firm of Stark & Stark, with offices in New York and in New Jersey. “In a practical setting, they don’t always read the documents they should.”
Condos and co-ops have different rules, and their boards have very different powers. Even comparing co-op to co-op or condo to condo will find differences, so just because you served on the board of one building doesn’t mean your current board will operate exactly the same way. Your powers and limitations will be most likely be different on any board you serve.
“The power a board has in a co-op is different than that of a condo,” Pennisi says. “Co-op boards do have more power than condo boards because they control the use of the apartments, they control the sales and leases where in a condo, the unit owner can sell at his or her discretion. Condo boards have less power but both boards can make and enforce rules and regulation pursuant to the documents.”
One of the chief complaints among residents who think their board has overstepped its bounds arises when someone—a super, handyman, or other building staff member—enters their home without permission, usually to check out something like a leak or electrical problem.
“With condos and co-ops you have classic communal living—and with communal living there are certain sacrifices that have to be made,” Rosabianca says. “You are conceding that your neighbors have certain rights to access common elements in the building, and that [building staff] may periodically need to access to your unit.”
Let’s say there is a leak in unit 4F that will affect the owner’s quality of life downstairs in 3F in not taken care of. If the owner in 4F can’t be reached to let building staff into the unit, it is reasonable to expect that the super or repair person will access the apartment to deal with the situation—with or without express permission from the owner of 4F. Upsetting as it might be to think of strangers entering one’s home without permission or supervision, that access is considered reasonable if it’s deemed necessary under the circumstances.
“I always use the ‘reasonableness standard,’” says Rosabianca, “which is vague, but most management companies are really well versed and know what to do and what not to do in situations like these. As a rule of thumb, you should ask, ‘Is this in the best interest of the building?’”
According to Pennisi, co-op documents require you to give the board access to your apartment to make repairs—but that’s not usually the case in condos.
“If there’s a leak in the walls [of your condo,] they just can’t go in and break the door down,” he says. “It has to be a bona fide emergency. If water is leaking under your door and the super or manager has tried calling you and they can’t get in touch with you, they have right to break in and make repairs. I always tell my boards to bring a witness and go in with a camera and take pictures of what the apartment looked like. Don’t go by yourself in case something is stolen and it’s your word against theirs.”
Security in buildings has become a tricky issue in recent years, and since most governing documents were written prior to current concerns about terrorism and other threats, boards sometimes enact security measures that some residents feel may go a bit too far. But does having an especially robust security program in a co-op building ever cross the line from “overzealous” into “invasion of privacy?”
“There could be ‘too much’ security in a practical way or an economical way but not really from a legal point of view,” says Byrne. “The boards probably have a pretty broad discretion to set rules on security, so although it might seem like they are overstepping their power, they aren’t really.”
Some boards feel it’s necessary to have cameras all over their building, a thorough ID check for all visitors, and building access controls that residents may feel are going too far. Some buildings require key code access or card access, and some use cameras to record people coming and going. While it’s fair to say that most residents get a certain peace-of-mind from knowing access to their building is tightly controlled, others find it intrusive, says Pennisi.
“People say, ‘You have no right to take my picture coming and going,’ or they object to having their Social Security number used as an ID” Pennisi continues. “But a number of courts have ruled that [building rules] supercede the individual’s right, because [buildings] have the right to know who’s coming and going. You can’t publish their information or show the videos, however. That would be going too far.”
When it comes to what boards and managers can do with any personal information they collect on building residents, civil rights and privacy laws have the final word. In short, boards and management are prohibited from making any of that information public.
Unfortunately however, “Things happen like that all the time,” says Rosabianca. “People make mistakes …most of the time it’s just errors, rather than fraud. I’m on a couple of boards where they distribute board applications to all board members, and they include a lot of personal details. You’d like to think that your board members are responsible with the information and will shred the information afterwards.”
If materials are being handled properly, Rosabianca continues, one copy of your personal information should be kept under lock and key at the manager’s office—and no one on the board should be distributing that information, or keeping copies for themselves. Some boards are even policing themselves in this respect by blacking out certain information on sensitive documents they see in the course of carrying out their duties to the building.
Though rare, there have been cases where board members have—either through negligence or ignorance—acted improperly with building information or money. Michael Crespo, president of Citadel Property Management Corp. in Manhattan, says he recently dealt with an unscrupulous treasurer.
“We recently had a situation where, in an effort to clear up the books of a building we’d just begun managing, we asked the board’s treasurer if it would be OK to send out two deposit checks that had been collected for [construction] work and move-in fees several years prior,” he says. “The deposits were clearly for a one-time item, and there really was no reason to keep holding on to them—they were just throwing off the balances, and we wanted to clean it up. The board’s treasurer suggested that we do a journal entry and make them ‘disappear.’”
Crespo says that after explaining that these were real deposits that were owed to shareholders, “The treasurer continued to press the issue and explained that he had done this type of thing at his job all the time. In either case, I explained that we know the difference between correcting a journal entry and sweeping someone’s money under the carpet. Needless to say, the shareholders in question (who were also on the board) wanted their money. We ended up cutting them a check.”
While the vast majority of board members take their position in stride and are solely interested in doing what’s best for their building community, some board members do let authority go their head. Most managers and board attorneys have at least one or two stories about boards imposing ridiculous rules on their residents—regardless of whether they actually have the authority to do so.
“Boards do sometimes abuse their power,” Byrne says. “I’ve encountered boards that don’t actually have published rules, yet think they do. There are boards that set unreasonable restrictions on things, or think they have the power to charge residents fines when they don’t.”
Other examples of boards overstepping their bounds and abusing their position include members trying to get family members elected to the board or overseeing applications for people they know, or giving work contracts to friends or family.
“Those are the type of ‘wink-wink’ things you see,” Rosabianca says. “You really want to avoid these types of conflicts. If you are on a board, you should be above the fold. You shouldn’t be soiling your hand.”
Keeping a board in check and on the right side of propriety and the law could be something as simple as pointing out that more rules are not always better.
“We simply like to remind the boards that we deal with that when they implement excessive amounts of rules that infringe upon their neighbors, these rules will often come back to bite the people who created them,” Crespo says. “We’ve seen it time and again: a board puts practices into effect that are very difficult to enforce, and which the very people who implemented them are the ones who end up violating them the most. This is where we like to be the voice of reason. We ask that boards be realistic and use discretion, and ask if they would like these rules enforced upon them.”
Since board members are elected, building residents really have the final say if they think a board member is abusing his or her power. In other cases, a building’s manager or legal council will usually alert the board if board members’ behavior is heading into dangerous territory and the manager or attorney feels they’re abusing their power as a board.
“A board can terminate a person or refuse to allow a sale,” says Pennisi, “but they have to act reasonably and within the corporate documents and if they don’t the courts will strike it. Usually the managing agents and their counsel guide them to not go astray.”
“The best run buildings are those that are the most transparent with nothing to hide,” adds Rosabianca. “I think every unit owner has the responsibility to police their board and if they don’t like what they are doing, vote them out.”
Keith Loria is a freelance writer and a frequent contributor to The Cooperator.
A condominium, cooperative, or homeowners’ association elects a board for a specific purpose: to manage the community’s day-to-day business, oversee special projects, and draft and uphold the rules and regulations that keep life orderly and harmonious. In fact, the board has an inflexible fiduciary duty to act in the best interests of the community as a whole.
This means that boards have an obligation to stay consistently on the side of good, advocating for residents and promoting neighborly well-being – and most boards do just this. However, boards are made up of humans, and humans are wildly fallible. Having sampled even a morsel of power, some find themselves starving for more; oftentimes other less malicious folks simply make mistakes, and rather than correct them, keep on stumbling down a wrong path.
Once a board crosses over to the dark side, it can mean serious consequences for not only its members, but every owner or shareholder in the building or HOA. Infighting, backstabbing, loss of funds, declining property values, and even legal consequences may well ensue if the ship isn’t righted.
As Henry A. Goodman, a principal at Goodman, Shapiro & Lombardi, LLC, a law firm that has offices in Massachusetts and Rhode Island, puts it, “In any organization, things can go wrong; either by virtue of error in judgment, human frailty, or even corruption of one sort or another.”
It’s imperative that both boards and residents be aware of the reasons and signs that an operation has gone bad, in order to avoid the former and correct the latter as quickly as possible.
Board members of residential communities rarely view their position as an opportunity to head a criminal enterprise. When blunders occur, it’s usually due to ignorance of the rules, or an unwillingness to alter ill-advised behavior that has simply become habit.
“In Illinois, a majority of appellate court decisions in which they’ve found a board or members thereof to be in breach of fiduciary duty have been because the board failed to adhere to the covenants of its declaration or the rules and regulations,” says attorney David Hartwell, a founding partner with the Chicago law firm of Penland & Hartwell. “One of the big problems is that a fair number of board members, either when they take their position or even throughout their time serving, have not fully read through the declaration and rules and regulations. So many times I get a call from a board member asking ‘Can we do this?’ And the answer lies within their documents; they just haven’t read them. You can’t know whether you’re within the boundaries if you don’t have a clear view of what those boundaries are.”
When it comes to board business, this type of ignorance is anything but bliss. “I have found that the boards that are operating improperly are rarely doing so due to malice,” notes Michael E. Chapnick, a shareholder with the Florida-based law firm of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, PA. “It’s usually due to ignorance of their duties and obligations. They’re simply unsure as to what they’re allowed to do, what they are not, how they’re allowed to do a thing… and sometimes it comes down to simple education. Board certification courses certainly help.”
A board can err by doing something as seemingly minor as failing to notify owners of a rule change. “Sometimes a board will adopt or amend a house rule, and, rather than send a formal notice, they’ll send an email, or simply begin enacting the rule,” explains attorney Stewart E. Wurtzel, a partner with Tane Waterman & Wurtzel, P.C., in New York City. “Then, when down the road it comes time to enforce this rule, the fact that they didn’t follow the corporate documents can become a problem. Say that the documents specify that a notice must be sent by certified mail; they may spend an excessive amount of time litigating over a fine or a rule change that they simply failed to notice properly. It’s not usually malicious; they just feel as if they always did something a particular way, and it’s a minor issue until it’s actually enforced.”
Other board transgressions manifest due to relationships – or lack thereof – within the community. Showing favoritism toward friends, aggression toward rivals, or letting those with whom one does not want to deal at all act out unchecked are examples of this. It’s the board’s responsibility to treat everyone in their association fairly, and it’s a slippery slope once a board starts straying from this basic tenet.
“I’ve seen cases where a board has allowed board members – and only board members – the privilege to sublet,” says Andrew D. Stern, also a partner with Tane Waterman & Wurtzel. “Needless to say, this leaves corporations vulnerable to claims of disparate treatment and unreasonable conduct, and this can expose them to liability.”
“Boards, especially in bigger buildings, will occasionally look the other way when dealing with a direct neighbor who is breaking the rules,” admits Keith Hales, president of Hales Property Management in Chicago. “Obviously, this isn’t fair to everybody else. And then there’s the flip side of that, where someone they don’t like steps over the line, and the board throws the book at that individual.”
Hales also warns against a recent trend he’s seen of conflict-averse boards. “Boards don’t want to pick up the phone or talk to a person,” he says. “Nobody wants to call someone to see what’s going on regarding a particular incident and maybe squash it. I’ve found that all you have to do a lot of times is reach out, and you can solve 90 percent of the problems – especially with things like noise issues. As a manager, I’ll get calls saying ‘We have noise; you guys need to do something about this,’ and my response is ‘Have you gone upstairs? Have you knocked on the door? Have you told them that the noise was somewhat bothersome, and asked them to turn it down?’ And they’ll reply that it isn’t their problem. But yes, it actually is. They’re adults, and they’re not in a rental building. They’re an owner in a condo property, just like all of their neighbors. You get people hiding behind a manager or an attorney, and that’s when fireworks start. It just fuels animosity between both parties, and then you escalate it to the board, and when they don’t want to deal with it, it spills over. Then you have people wasting time and money because someone didn’t want to turn off their music.”
Sometimes board members can just get way out into the weeds, blatantly ignoring clearly stated rules. While these transgressions may arguably provide the most engaging anecdotes, they’re also the most destructive to the fabric of a building or association community.
“You’ll see with some frequency instances where an officer or president runs the board as if it’s a one-man show,” says Wurtzel. “They’ll refuse to approve an applicant solely because they don’t like them, dismissing a board vote. Or they’ll approve contracts without proper bidding or full documentation; without backup. And of course, if they’re hiring someone’s friend as a contractor who’s not as independent as they should be, things can get even worse.”
“I knew of a board where for years, unbeknownst to anyone, the president was embezzling enormous sums of money,” relates Hartwell. “The property manager eventually noticed various anomalies via the building’s accounting, and called out this president. That property manager was abruptly fired. Then the next property management company was so happy to get a big account, that they were unwilling to call anybody out on the carpet.”
And occasionally board transgressions can reach late-night cable levels of tawdriness. In one building, “A board member invited an employee of the condominium to her home for lunch,” recalls Goodman. “When the employee arrived, she indicated that she was for lunch, and asked him if he liked what was on the menu. An affair ensued – until the wife of the worker got wind of it. The worker quit his job and indicated that he was going to sue the board for sexual harassment. This was a case of vulnerability and ignorance of the consequences of a board member’s actions.”
So what authority does the owner or shareholder have to check a board that has violated its trust and neglected its duty?
“The owners’ or shareholders’ power relies on the association’s transparency,” says Stern. “To the extent that it’s possible, the shareholders should be reading minutes and developing a relationship with the managing agent. An absence of transparency is often considered a red flag. To an extent, these organizations are representative democracies, and there is a limit to how much an individual shareholder or unit-owner can supervise their board’s activity. Needless to say, in almost all of these organizations, audited financials are distributed to owners and shareholders annually, and to the extent that they’re able, they should be reviewing these documents. Should money start to disappear, that’s another red flag.”
Chapnick urges residents to consistently attend board meetings. “Listen up, and understand what’s happening,” he says. “If you don’t follow something, ask questions. If you can’t get answers from your board, ask your property manager. Understand what the law is, and how it applies to your community. That starts with the declaration, the articles, the bylaws, whatever the relevant statute is.”
Of course, it doesn’t fall entirely on the owners or shareholders to police their board. Should a board willfully disregard the rules for long enough, it can face serious personal, financial and legal consequences.
“There’s a mechanism that allows a unit ownership to remove a member from serving on a board,” says Hartwell. “The board itself can’t do it; it has to go to a vote of the unit membership. Board members can also be held personally liable, without indemnification coverage from association or coverage from the directors and [officers] insurance policy. And sometimes the mistakes can leave them on the hook for hundreds of thousands of dollars.”
Some offenses, like misappropriation of association funds, can result in criminal charges, depending on local statutes. “The best way to handle this type of financial issue is to begin with a records request,” suggests Chapnick. “Examine the association’s official record, get copies of the budget, get copies of the check registers; just follow the money. Understand who is using what, and by what right they’re doing it. Once you’ve compiled that, if you believe that there’s evidence of fraud, theft, self-dealing, etc., take your account to the police department’s economic crimes division.”
“Being on a board is about administering a multimillion-dollar asset, and members need to have that mindset when they agree to serve,” Hartwell summarizes. “Because it’s serious stuff. When you start doing things that could materially affect a unit owner’s property value, they’re going to come at you with pitchforks and spears. So you better make sure that you’re doing it correctly.”
Mike Odenthal is a staff writer/reporter for The Cooperator.