Page 6 - New England Condominium August 2019

6 NEW ENGLAND CONDOMINIUM -AUGUST 2019 NEWENGLANDCONDO.COM C ommunity associations are micro- cosms of democracy, run by an elected board of volunteers trusted to make good decisions on behalf of the community as a whole. Boards make the call on every large and small issue for their constituency. So it’s not only imperative that these members are carefully vetted and selected, but that during transitions of power from one board to the next, mem- bers with more experience help ease in the newcomers to shorten the learning curve and smooth the transition. Board transitions usually happen after elections at the annual association meeting (Often in smaller communities, the same people will be elected or appointed to the board year after year, which in the absence of formal term limits is not necessarily a bad thing). But they can also take place when a board of owners or shareholders in a new development takes the reins from the sponsor or landlord. There are nuances unique to these individual scenarios, but all involve new members acclimating to their roles and relying on the expertise of those who preceded them. Continuity Is Key It’s pretty rare to see the constitution of a community association board change completely from one election to the next. Unless there’s major upheaval – usually as a result of some type of scandal – at least a few board members will be holdovers from the previous administration. “A staggered board tends to work best,” says Claudine Gruen, Vice President at Garthchester Realty, which has offices in Forest Hills and Scarsdale, New York. “In many buildings, the same board remains year after year, as the members all seek re- election. In my opinion, you want at least a majority of board members to return so that they can catch up new shareholders, as well as any first-time members. Those new members can also review monthly reports and minutes from the previous year in order to better understand what the prior board had done. As management we also provide a tidy synopsis covering what’s currently underway, what projects we’re involved in, etc.” While term limits for board members are not universal by any means, they are becoming increasingly common within the governing documents of associations, according to Philip Renzi, Principal with property management firm Renzi Bulger Group in Arlington, Massachusetts. Renzi also recommends staggered terms. “This allows some continuity on the board each year,” he says, “and allows the board to keep momentum on projects or initiatives. If there are not staggered terms in place, the board should speak to its lawyer about the amendment process and alter their documents to include them.” Of course, management companies exist to help guide the board around any bumps in the road. “Ultimately the man- ager should have a list of action items and progress reports on what the previ- ous board was discussing, voting on, or had already approved,” says Renzi. “The manager should also ensure that the in- coming board and management are on the same page, so the manager can be produc- tive and not focus on tasks in which the incoming board has no interest. Manage- ment is also encouraged to bring up any previously presented recommendations or goals where no action was taken, to make sure that the new board is up-do-date on any matters that the management compa- ny believes to be important.” Square One When a building is being converted to a condo or co-op, or has been newly con- structed explicitly as a condo or co-op property, operations are initially under the control of the owner or developer, and are eventually passed along to a board of own- ers or shareholders after a certain percent- age of units have been sold. According to David Berkey, a partner with Gallet Drey- er & Berkey, a New York City law firm that represents boards throughout that transi- tion process: “Once a sponsor no longer has majority ownership of a building, it is obliged to give up majority control of the board. Usually they will wait until the next annual meeting. “When a shareholder- or ownership- majority board is in place, it must first deal with several immediate practical issues,” Berkey continues. “The first is whether to retain management. In most buildings, the sponsor will have a relationship with a management company, so it’s often a good idea for the association board to get an independent management organiza- tion to take over managing the building. This must be done via majority vote of the board, and that’s a process that has to be shepherded over, because all of the corpo- rate books and records and bank accounts must be transferred to the new manage- ment. “Then the board has to decide wheth- er to take a forensic examination of the books and records of the entity to see whether the sponsor, while it held control, had been above-board and had only spent condo or co-op monies for appropriate repairs, rather than solely for upgrades or repairs to sponsored units. “Finally,” adds Berkey, “the board has to obtain independent counsel to repre- sent \\\\\\\[the\\\\\\\] interests of the resident owners, because in many areas there could be con- flicts between the sponsor/sponsor’s rep- resentatives and the condo or co-op.” Board Transition Switching Smoothly From Old Board to New BY MIKE ODENTHAL ISTOCKPHOTO.COM INSURANCE/BOARD TRAINING continued on page 12