Page 6 - NJ Cooperator Winter 2020

6 THE NEW JERSEY COOPERATOR —WINTER 2020 NJCOOPERATOR.COM MANAGEMENT One of the unique aspects of life in a co- op or condo is that a building or HOA is in building,” Davidson says, adding that ing so might provide a particular board many ways a microcosm of the larger world their primary responsibility is to make member with additional income, but their outside. It can suffer from the same faction- alism and partisan bickering as any political managed. entity, only on a much smaller, more inti- mate—and therefore potentially more dam- aging—scale. Conflict and divisions in co-op terest obligations.” In simple terms, that and condo communities can and often do means that a board member must put members—the duty of obedience—is of bleed into the community’s administration: the co-op or condo’s welfare before their the most importance for co-op and condo the manager and board of directors. Even a own. A good example would be that if board members. It calls upon them to un- seemingly minor conflict can upend a resi- dential community if it’s not dealt with diplo- matically—so boards and managers must be roof repairs to the building. In the more cies, and protocols of their community. prepared to step up, step in, and do their part abstract sense, Davidson points out that “The members of the board owe a duty to defuse such issues before they turn into adherence to this duty is less clearly de- something worse. Board Obligations Michael Davidson is the president of cause in a residential context, every board problem is that co-op boards are very BoardCoach.com, a Manhattan-based member presumably owns a unit or shares different from other nonprofit boards in company that specializes in nonprofit and may make decisions based on what that everyone on the board has a personal board development and management may benefit them but not their neighbor. support, including coaching. Davidson explains that board members of nonprofit resent nonprofit corporations and asso- entities (including co-ops and HOAs) ciations, they are, at their core, somewhat State boards must be especially mindful have three main duties to which they different from non-residential nonprof- must adhere: “The duty of care, the duty its,” he says, “because the board members that more or less requires associations of loyalty, and the duty of obedience.” With regard to the first, the duty of and their board positions carry a heavy fi- care, “Board members must basically un- derstand what’s going on in terms of the be voting to permit Airbnb rentals. Do- sure the property is well and effectively neighbor(s) might not want strangers in The second duty, the duty of loyalty, but those interests might not always align “Requires adherence to conflict of in- your brother-in-law owns a roofing com- pany, you shouldn’t recommend him for abide by the governing documents, poli- fined in a co-op or condo than it may be tion and within those of the board of di- in other not-for-profit organizations, be- “While co-op and condo boards rep- are investors or owners in the nonprofit to make a good-faith effort to settle dis- duciary responsibility.” An example might tion (ADR) before escalating to litigation, the building. Both have vested interests, seamlessly. The third duty incumbent upon board derstand, fairly enforce, and personally to keep within the powers of the corpora- rectors,” explains Davidson, adding, “The interest in every issue. This makes them inherently more conflict-prone.” There’s another protocol that Garden of as well. In New Jersey, there’s a statute agreements via alternative dispute resolu- notes Michael J. Vitiello, a shareholder with Giordano, Halleran & Ciesla, a law firm in Red Bank. If one or more of the parties involved in a dispute does not ap- proach the board proactively with a re- quest to attempt mediation or arbitration to resolve the issue, the board will have to get involved. Vitiello suggests that boards “spend any money wisely, because when it comes to funds, the board serves as trust- ees for the rest of the unit owners. A dis- pute resolution can involve board mem- bers or other members of a community volunteering to be part of a committee without charge, but when an association has to bring in a mediator, things can get very expensive. And that expense will be charged to everyone commonly, because you can’t specifically charge the ADR me- diation expenses to the unit-owners in- volved in the dispute.” Vitiello also points out that once a dis- pute rises to a level where those involved are really impairing other unit owners’ quiet enjoyment of the property, it be- comes a quality-of-life issue, and in many cases by then has violated at least one of the association’s governing rules or regu- lations. “This can provide a board with an easy answer, because when there’s a rules violation, that’s something more action- able.” Odd Numbers, Staggered Terms, and the Limits of Power According to Andrew Freedland, an attorney with Anderson Kill, a law firm based in Manhattan, “It’s not unusual for a board to have groups that side one way or another. What’s great about most boards is that they are oddly numbered, having five or seven or nine members, which helps avoid deadlocks on votes.” Many boards also have staggered board service terms to provide continuity for management and supervision. So, what if there are seven seats and only three come up for election and the majority of shareholders or unit owners are unhappy with the existing board? They elect three new members—but voting control of the board stays with the four prior board members not subject to the current elec- tion cycle. Basically, they’re stuck till the next election. “If shareholders are unhappy with Managing Conflict When Boards and Residents Take Sides BY A.J. SIDRANSKY continued on page 23