Page 8 - New England Condominium June 2019

8 NEW ENGLAND CONDOMINIUM -JUNE 2019 NEWENGLANDCONDO.COM M ost newly-elected condo or co-op board members aren’t experts in running a multi- family building or development. They may be eager, enthusiastic, and commit- ted to serving their community. But they also probably have little idea of how to do that until they’ve learned a bit more through experience. Fortunately, co-ops, condos and HOAs all have an established set of governing documents laying out the rules that everyone in the community must follow. And while governing documents do act as guidelines for board members, viewing them purely in that light down- plays their significance. For all intents and purposes, governing documents are a board’s bible. Everything pertinent to the governance of the community should be included – and the sooner that a board member realizes this the better. Deviat- ing from these foundational documents can result in trouble not only for the board, but for the community at large, depending on the magnitude of the trans- gression. Mistakes happen, of course, but ignoring or contradicting one’s govern- ing docs – even with good intentions, or for the sake of expediency – only leads to trouble. Read Those Rules Getting familiar with governing docu- ments should be the first thing any board member – or resident seeking board membership, or even a resident invested in the operations of his or her building or association – should look to do. “Unless and until bylaws and rules and regulations of a cooperative corpo- ration or condominium association are changed, a board has a fiduciary duty to uphold and follow that framework for operating the organization,” says Mi- chael T. Reilly, an attorney with Norris McLaughlin P.A. in New York City. “They are not optional guidelines; these are the requirements that must be followed un- til they’re properly amended, changed or removed from the organizational docu- ments. “It’s essential for each board member to have a working knowledge of these governing documents when they take office,” he continues. “I suggest that ev- ery new board member be provided with a hard and digital copy of all governing documents, and that each board member be provided with a lecture on fiduciary duties when the new board is in place and the officers are elected.” Of course, there’s a learning curve to becoming an effective board member, and mistakes can be made. Fortunately, the business corporation law (BCL) ex- ists to indemnify members who err with the right intent. In short, the BCL “is the shield that allows most board members to sleep at night,” says Leni Morrison Cummins, an attorney with Cozen O’Connor in New York City. “When condo and co- op boards take action, those actions are generally protected by the business judg- ment rule, which mandates judicial def- erence to board determinations – as long as the board action is within the scope of its authority, taken in good faith, and in the lawful and legitimate furtherance of the co-op’s or condo’s purpose. In short, this means that boards must follow their own rules and governing documents.” An attorney can help keep a board on the straight-and-narrow as well. “From legal counsel’s perspective, helping a cli- ent focus on legitimate goals helps pre- vent bad conduct,” says Michael Gelfand, a senior partner at the law firm of Gelfand & Arpe in West Palm Beach, Florida. “As we counsel association directors, we help them keep in mind that they volunteered to do the right thing. In Florida, direc- tors must attend a two-hour class or sign a paper stating that they have read and will uphold their governing documents. When a director reflects on that certifica- tion, they invariably fall onto the road of good intentions, especially when they’re reminded that in Florida, most associa- tion records are accessible to owners.” Failure to Adhere Again, acting outside the rules laid out within an association’s governing docu- ments not only opens up the offending board member to penalties, but can put the entire association at risk. “When \\\[board members\\\] deviate from their governing documents, it ex- poses the board to liability,” says Cum- mins. “Therefore, as an attorney to many condominium and cooperative boards, most of my advice pertains to keeping those boards protected by the business judgment rule. This often means that I am called on to interpret occasionally ambiguous governing documents, or to amend governing documents. “But one of the biggest pitfalls that I see occurs when boards ignore issues rather than face them,” she continues. “Ignoring an issue and failing to make a decision of any kind on it also exposes a board to liability. The business judg- ment rule protections only apply when a board actually makes a decision. There- fore, even if an issue will undoubtedly be voted down, it is important for boards to consider and vote on all issues that come before them.” Additionally, while apathy can cer- tainly be an issue in any association, boards are hopefully acting under the watchful eyes of an engaged community of residents. “Human nature is such that the owners who are not on their asso- ciation board often feel an imperative to scrutinize the board, and to assume that anything they haven’t been informed of is a nefarious plan in the making,” says Gary Daddario, a partner with the law firm of Marcus, Errico, Emmer & Brooks, P.C., which has offices in Massachusetts and New Hampshire. “In light of that, LAW & LEGISLATION ISTOCKPHOTO.COM Governing by the Book Deviating From Governing Docs Can Cost You BY MIKE ODENTHAL