Page 15 - New England Condominium February 2020

NEWENGLANDCONDO.COM NEW ENGLAND CONDOMINIUM -FEBRUARY 2020 15 EVERYTHING FROM A (ACCOUNTING SERVICES) TO W (WINDOWS). (Sorry, no zebra trainer this year.) SEAPORT WORLD TRADE CENTER, BOSTON — TUESDAY, MARCH 31, 10-3:30 FREE REGISTRATION: NE-EXPO.COM THE NEW ENGLAND CONDOMINIUM EXPO 2020 WHERE BUILDINGS MEET SERVICES urban Boston. Prescribed medication for a psychological condition, the owner at some point stopped taking it, and subsequently underwent an alarming personality change. She harassed both the association staff and her neighbors to such a degree that com- munity employees and residents feared for their own safety. Th e troubled owner also fell behind on paying her common charges. Eventually the situation became untenable for everyone, and wound up in court. How- ever, in lieu of proceeding to a foreclosure, the court was sympathetic, and directed a settlement called an ‘agreement for judg- ment,’ which functioned as something like a stay of the foreclosure action. Th e owner resumed taking her medications, agreed not to engage in further off ensive behav- iors, and consented as a stipulation of the agreement that if the behaviors resumed, the association could proceed to foreclo- sure. Not all situations end so neatly. Th e rights of the owner are squarely in the path of an association trying to remove an of- fending resident, whether a unit is leased out or owner occupied. Th e legal pros spoken to for this article are in general agreement that the path to removal is sub- stantially blocked if there is no monetary default. Th e optimal situation for an asso- ciation is when the unit owner is in default on monthly common charges. When that’s the situation, the association has the right to request a receiver to step in and collect rent from the tenant which can then be turned directly over to the association for both current charges and to make up ar- rears. A similar tactic for a non-paying own- er is described by Schechter: “While a unit owner in a condominium cannot be removed for non-payment of common charges, there are tactics that boards of trustees can use to accomplish the same re- sult. For example, during a foreclosure ac- tion, a condominium can request the court appoint a receiver to collect rent from the unit. If the unit owner is still living in the unit and refuses to pay the rent ordered by the receiver, the condominium board can bring an action to remove the unit owner for failure to comply with the receiver’s order. If the action is successful, the unit owner can be removed.” Overall, the power of an association is very limited when it comes to removing troublesome or non-paying owners and/or their tenants. When a situation does arise, associations should act quickly, turning the issue over to their attorney for resolution. Dawdling will only cause unpaid charges or off ensive incidents to pile up, adding to both the material and the social cost to everyone involved. Ownership comes with rights and responsibilities, as does the stewardship of board trustees. Both are to be taken seriously and acted on with alac- rity. A J Sidransky is a staff writer/reporter with New England Condominium, and a published novelist. quires adherence to confl ict of interest obli- gations.” 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 roofi ng company, you shouldn’t recom- mend him for roof repairs to the building. In the more abstract sense, Davidson points out that adherence to this duty is less clearly defi ned in a co-op or condo than it may be in other not-for-profi t organizations, because in a residential context, every board member presumably owns a unit or shares and may make decisions based on what may benefi t them but not their neighbor. “While co-op and condo boards represent nonprofi t corporations and associations, they are, at their core, somewhat diff erent from non-residential nonprofi ts,” he says, “because the board members are investors or owners in the nonprofi t and their board positions carry a heavy fi duciary 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 seam- lessly. Th e third duty incumbent upon board say – but the majority of unit owners want members—the duty of obedience—is of the the work done. Th e derivative action would most importance for co-op and condo board force the board to acquiesce to the commu- members. It calls upon them to understand, nity members, despite their own preferences. fairly enforce, and personally abide by the governing documents, policies, and protocols of their community. “Th e members of the board owe a duty to keep within the powers of holders or unit owners controls the majority the corporation and within those of the board of board votes? How can that even happen? of directors,” explains Davidson, adding that Many boards have staggered board service “Th e problem is that co-op boards are very terms to provide continuity for management diff erent from other nonprofi t boards in that and supervision. So, what if there are seven everyone on the board has a personal inter- est in every issue. Th is makes them inherently the majority of shareholders or unit owners more confl ict-prone.” When it comes to upholding these three elect three new members—but voting control administrative pillars, “Successful, functional of the board stays with the four prior board boards need persons who work in tandem, members not subject to the current election work well as a team, are well organized, and cycle. Basically, they’re stuck till the next elec- have diff erent areas of expertise to off er,” says tion. Robert Silversmith of the New York City- based Silversmith & Associates Law Firm, board is doing,” says Andrew Freedland, an PLLC. “Boards should openly and amicably attorney with Anderson Kill, a law fi rm based communicate with all board members as a in New York, “I have seen recall elections. collective group.” The Reality of Co-op Confl ict Howard Goldman is a partner with Gold- man & Pease, a law fi rm located in Needham, replaced.” So it’s complicated, but it can be Massachusetts that represents numerous con- dominium associations. “Yes,” he says. Fac- tionalism happens. “Th ere is a controlling sachusetts. Condominium owners can call group on the board, and those not in agree- ment feel out of control and frustrated. Oft en, hold new elections. Th ey can air their griev- those in these roles feel disenfranchised and ances and hold a vote. If a majority of own- that no one is listening to them.” Goldman says there are two potential ap- proaches to getting controlling board mem- bers to listen: One is to take a derivative ac- tion. Th e other is to remove and replace the board. A derivative action is essentially a handled a little diff erently (and of course lawsuit brought by a corporation shareholder according to rules set forth in a given against the directors, management and/or building or HOA’s governing documents). other shareholders of the corporation, usually Freedland says he oft en gets questions from for a failure by management. In the world of directors about removing other directors. condominium ownership, a derivative action And while the chain of events and emotions can be brought by an individual or group of that would lead to that level of infi ghting shareholders to force the board to perform might be complex, the answer to the ques- their fi duciary responsibility as outlined in tion of board members giving a particular the community’s governing documents. A good example of how and why this ap- proach is used would be when a board of a board,” says Freedland. “Th ey can only directors doesn’t want to undertake a large or expensive project – extensive roof repairs, Odd Numbers, Staggered Terms, and the Limits of Power What happens when a minority of share- seats and only three come up for election and are unhappy with the existing board? Th ey “If shareholders are unhappy with what a Shareholders or unit owners can call a special meeting as provided in their bylaws. At that meeting board directors can be removed and done. Goldman says the same is true in Mas- a meeting of the association and demand to ers vote to remove the board a new election is held, and a new board is elected. Hope- fully, the new board will be more amenable to listening to what the unit owners want. Actions within the board itself are colleague the boot is straightforward: “Di- rectors can’t remove other directors from MANAGING... continued from page 1 continued on page 16