One of the unique aspects of life in a co-op or condo is that a building or HOA is in many ways a microcosm of the larger world outside. It can suffer from the same factionalism and partisan bickering as any political entity, only on a much smaller, more intimate—and therefore potentially more damaging—scale. Conflict and divisions in co-op and condo communities can and often do bleed into the community’s administration: the manager and board of directors. Even a seemingly minor conflict can upend a residential community if it’s not dealt with diplomatically—so boards and managers must be prepared to step up, step in, and do their part to defuse such issues before they turn into something worse.
Michael Davidson is the president of BoardCoach.com, a Manhattan-based company that specializes in nonprofit board development and management support, including coaching. Davidson explains that board members of nonprofit entities (including co-ops and HOAs) have three main duties to which they must adhere: “The duty of care, the duty of loyalty, and the duty of obedience.”
With regard to the first, the duty of care, “Board members must basically understand what’s going on in terms of the building,” Davidson says, adding that their primary responsibility is to make sure the property is well and effectively managed.
The second duty, the duty of loyalty, “Requires adherence to conflict of interest obligations.” In simple terms, that means that a board member must put the co-op or condo’s welfare before their own. A good example would be that if your brother-in-law owns a roofing company, you shouldn’t recommend him for roof repairs to the building. In the more abstract sense, Davidson points out that adherence to this duty is less clearly defined in a co-op or condo than it may be in other not-for-profit organizations, because in a residential context, every board member presumably owns a unit or shares and may make decisions based on what may benefit them but not their neighbor.
“While co-op and condo boards represent nonprofit corporations and associations, they are, at their core, somewhat different from non-residential nonprofits,” he says, “because the board members are investors or owners in the nonprofit and their board positions carry a heavy fiduciary responsibility.” An example might be voting to permit Airbnb rentals. Doing so might provide a particular board member with additional income, but their neighbor(s) might not want strangers in the building. Both have vested interests, but those interests might not always align seamlessly.