Q My question is this: can a cooperative board of directors require board members to be residents of the state of New Jersey?

—Garden State State

A “Co-ops are often governed by the same rules and procedures that apply to corporations in general. This is so because they usually are corporations,” says Stuart J. Lieberman, a founding shareholder with the law firm of Lieberman & Blecher, P.C., in Princeton. “Therefore, co-ops usually must follows our state statute that controls how corporations function and what they can do, which is called the Business Corporation Act and is found at N.J.S.A. 14A:1-1. This can be easily located online and is even fairly straightforward to read.

“The part of the corporations law regarding the composition of the Board of Directors is found at N.J.S.A. 14A:6-1. It provides that the business and affairs of a corporation shall be managed at the direction of its board, except as in this act (the Corporations Law) or if its certificate of incorporation otherwise provides.

“It further requires that directors shall be at least 18 years of age and need not be United States citizens or residents of this State or shareholders of the corporation unless the certificate of incorporation or bylaws so require. Furthermore, the statute specifically provides that the certificate of incorporation or bylaws may prescribe other qualifications for directors.

“Thus generally speaking, no residency restriction may be in place unless the certificate of incorporation or the bylaws otherwise expressly creates such a restriction. As to the certificate of incorporation, that can be readily reviewed and if such a restriction is found to exist that would resolve the question. But these documents are usually pretty vanilla and will usually not contain such a restriction.

“Also most bylaws will not have such a restriction but they should be reviewed nonetheless. Bylaws are often recycled from association to association, are often not too project specific, and usually lack this kind of detail. But they might have such a restriction and if the restriction was put into place through regular procedures it appears it would be valid.

“If not there now, bylaws can be amended to include such a provision. But amending bylaws often requires a significant level of approval from the owners. First, some unit owners may not agree this is a good idea. Especially owners who live out of state. Second, amending bylaws can be quite expensive because very often unit owners throw written ballots out or fail to come to the clubhouse (or wherever) to vote.

“So the best answer is this. Unless the governing documents contain this express residency requirement, it would not be valid. If they do contain it would appear likely to be valid. If the documents currently do not contain the requirement an amendment may be possible. But in all likelihood, difficult and costly to achieve.

“Naturally, boards and management companies are forbidden from imposing restrictions on director membership that are not supported by the governing documents. Attempts to so would be deemed arbitrary and could lead to costly litigation which would not likely have a favorable ending from the co-op’s standpoint. So I suggest consulting the co-op’s governing documents and adhere to the requirements found therein. That is always a safe course to follow.”