A co-op or condo community’s annual meeting is just business, though these gatherings can sometimes be the site of personal acrimony, or feuding between residents. But annual meetings needn’t be a source of friction, and can serve as a place where neighbors find consensus. These gatherings also are mandated by law—co-ops, condominiums and homeowners’ associations are required to hold at least one unit owner or shareholder meeting each year.

The purpose of the annual meeting is to apprise resident shareholders and unit owners of the association’s business, including the state of finances, any upcoming or ongoing capital improvement projects, votes on proposals needing residential approval, to discuss changes in management or staff, and for other urgent business. Annual meetings also give residents a chance to ask questions of their association board and management team, and to raise concerns they may have about the building or how the association itself is being managed.

Too often, though, these meetings become bogged down with residents’ complaints, usually due to owners being uninformed or wrongly informed. A little bit of care and planning in advance of an annual meeting, though, could help residents to avoid such a headache.

Gatherings Mandated

When and how an annual meeting takes place varies from community to community, as does the timing of when management is supposed to notify residents of the meeting. If management notifies them too soon, residents might forget about the meeting and not make it to the gathering. If shareholders and unit owners are informed of the meeting too close to the date of it, many won’t have time to attend. That is why notification of the annual meeting is spelled out in the bylaws of a community.

In New Jersey, the requirement of an annual meeting is a regulation of the state’s Department of Community Affairs (DCA). According to Section 5:20-1.2 of the New Jersey Condominium Act, a condominium board “shall provide for the giving of adequate notice to unit owners of the time and place of all meetings required to be open to all unit owners.” And “adequate” notice as provided under this section, “shall mean written notice at least 48 hours in advance, giving the time, date, location and, to what extent known, the agenda of any regular, special, or rescheduled meeting, other than a conference or working session at which no binding votes are to be taken.” Notice must be a) posted prominently on condominium property, and accessible at all times to unit owners; 2) mailed/emailed, telephoned, telegrammed, or hand-delivered to at least two newspapers that have been designated by the governing board; and 3) filed with the person responsible for administering the business office of the association.

In the case of a meeting where an annual election will take place, Section 8:3.04 requires that notice be provided not less than 10 days, nor more than 60 days before the day on which the meeting is to be held.

If an election or a vote on a community matter is going to happen in the annual meeting, a proxy ballot—by which a resident can cast a vote without attending the meeting—also is supplied with notification of the meeting. A shareholder or unit owner can cast a vote by filling out the ballot and mailing it to management.

The requirement to have an annual meeting also is mandated in some states by Business Corporation Law, which governs cooperatives as Limited Liability Companies. Failing to have an annual meeting could lead shareholders or others to declare that the community’s board is not acting like a corporation, and hence, should not be protected as those in an LLC. Limited Liability Companies protect individual shareholders from having their assets on the line, by only allowing creditors or others to go after the assets of the corporation.

Though New Jersey state law requires an annual meeting be held, penalties for not having the meeting are rarely enforced. More often in such a case, a resident or group of shareholders will need to file a complaint about the board not having annual meetings with the New Jersey DCA.

“Normally when that type of complaint is made, it’s usually about how the board is keeping people out of the loop,” says Karen Sackstein, a CPA based in Fair Lawn.

Residents also could get their own lawyer and sue to force the board to hold the annual meeting. Such a case might result in the court ordering that a meeting be held at a particular time and place. The court also might appoint a referee to attend the meeting to observe and take notes, and be accompanied by an independent inspector of ballots to oversee voting if an election is being held. And in the end, the same shareholders or unit owners who sue their board to get an annual meeting set could have to pay part of those legal fees, since the individual board members won’t foot that bill by themselves nor allow the community to pay.

Doing Business

While most management teams provide notice of a meeting in the requisite amount of time, that often isn’t enough to get residents to attend the meeting or even to get them to vote by proxy. It’s a familiar story, and one that many management companies would like to hear the last of—despite ample notification of an upcoming annual meeting, not enough residents vote by proxy and attend the meeting for it to be a legal forum. So the gathering turns into a mad dash to get more votes or attendees.

“I’ve been in situations where people are knocking on doors to get two or three people [to vote by proxy] to get a quorum,” says Sackstein.

In some communities, the percentage of residents that must attend the meeting or vote by proxy is more than 51 percent. In other communities, voting and/or attendance by a certain percentage of the total number of shares are required, because some owners will have more shares in the community than others.

If a quorum is not achieved, the board will not legally be able to conduct business at the meeting. Elections or other votes on community matters will not be able to be taken, but those in attendance will be able to discuss community matters.

Generally speaking, annual meetings are held to elect new members to the board; to discuss the building’s financial state; and to discuss ongoing or planned capital improvement projects. Many boards also have a residential question and answer portion of the meeting, when shareholders and unit owners can voice their opinions about how the community is being run, or other concerns. But when residents aren’t adequately informed of ongoing community business, they often misunderstand what is going on, and waste meeting time complaining about non-issues.

If complex financial matters will be discussed, often the board will have the building’s accountant come to field questions and explain details. If ongoing litigation is to be discussed, the community’s attorney will be asked to join the meeting. Some boards always like to have their attorneys attend the annual meeting, while others don’t want to pay for their services unless the lawyer is absolutely needed.

Sometimes the board will require the accountant to be at the meeting to take ballots in an election, or to report to residents on the building’s financial state.

“It’s easier to get bad news from a third party than from your neighbor,” says Jules Frankel, CPA, MBA, a shareholder with Wilkin & Guttenplan, P.C., CPAs, located in East Brunswick.

If a large capital improvement project is underway or planned, such as a roof replacement job, the community’s consulting engineer might attend the annual meeting to talk about the project. The contractor working on the job also might attend the annual meeting, to explain details of the work or to answer questions from residents.

Annual meetings always require the presence of the board and also the property manager. Some boards rely on the property manager to run the meeting, or to take ballots for the votes. Other more cautious boards prefer to have their attorney present at all annual meetings, if for no other reason than to ensure that the meeting moves forward smoothly. In some buildings where communication is less than ideal, boards find that having the association’s attorney present as a guide is helpful in keeping attendees focused on business.

Planning Ahead

Unlike a single-family homeowner, who makes all of the decisions regarding the upkeep or improvement to his house, a resident in a co-op or condo community makes decisions about their domicile collectively, with their neighbors. Having a go-it-alone approach in such a community won’t work for anyone—not for the average resident shareholder or unit owner or for members of a board. Because of this fact, residents of a co-op or condo community must communicate clearly and frequently with each other. By doing so, they will avoid misunderstandings and acrimony.

To achieve clear channels of communication, the community’s management team should try to keep residents in the loop on all major aspects of a building’s operation. For example, if costs for fuel oil are rising quickly, meaning maintenance costs for residents could soon be increased, it might be best to let residents know about the possibility as soon as it seems clear that fees will be increased.

Similarly, an imminent special assessment, due to an unexpected building repair, should be explained to residents as soon as possible, be it through the property manager’s monthly newsletter to the community, through the building’s website, or other means. Simply put, when it comes to communication between the management team and residents in a community, transparency is absolutely essential. And when the annual meeting is coming soon, all parties are best served when residents know specifically what will be addressed at the meeting and why it will be discussed.

That process should involve keeping residents informed of details of managing the building throughout the year, not just in the month before the annual meeting. If an issue has been problematic and will be discussed or acted upon at the annual meeting, residents should know about it, long before the annual meeting notification is sent to them.

Shareholders and unit owners also can prepare to have an annual meeting move expeditiously by filling out their proxies if they don’t plan to attend. Similarly, the management team can work diligently in the weeks before the meeting to collect all of the necessary proxies to ensure the meeting will have a quorum.

Residents must do their part to prepare for the meeting by doing their homework, too. They should read the building’s newsletter or other communications, including the annual financial statement. Doing so should answer most, if not all of the questions they might have about building operations. And that will make the process go smoother for everyone involved.

Jonathan Barnes is a Pittsburgh freelance writer who frequently contributes to The New Jersey Cooperator and other publications.