Board Misconduct Understanding the Difference Between Illegal and Improper

Everyone – including the boards and managers of community associations – inevitably makes mistakes, or is guilty of using poor judgment. And while it’s very unlikely that every member of a community will commit outright illegal acts, it’s also not that uncommon. 

There’s a wide moral chasm between erring in good faith and actively trying to swindle one’s co-op or condo community. However, things can get murky. Sometimes a board will make decisions that skirt the law (or governing documents) without breaking it, or that comply with the letter of the law but not the spirit. In those situations, it can be tough for residents to understand the difference between board actions that, while not illegal, may be improper and possibly warrant intervention. 

It’s important for boards, managers and residents alike to understand that violations can happen on a spectrum, and to have a plan in place to evaluate incidents and respond accordingly. That response could range from speaking up at a meeting and putting community administrators on notice that they’ve strayed from their duties, to unseating a board or individual board member and taking full-on legal action. 

But how to know what qualifies as illegal versus what’s just poor practice? A building or association’s attorney can help to identify bylaw violations; advise the board on the potential legal (or even criminal) liability they may be courting by engaging in problematic behaviors; and help board and residents alike understand where their own behavior falls on that aforementioned spectrum. 

Drawn to Scale

First and foremost, boards and management must be on the same page when it comes to how they interpret and adhere to their community’s bylaws and other governing documents. 

“Board members’ behavior is governed by several sets of restrictions,” says Aaron Shmulewitz, a partner at the law firm of Belkin Burden Wenig & Goldman, LLP in New York City. “There are the obvious ones, like ‘Thou shalt not steal from the building’s funds’ – which unfortunately some board members still violate – to the slightly-less egregious, like engineering board votes to benefit your own interests, such as those involving contracts with a vendor that you control – which is often okay, subject to various disclosure and recusal requirements; to the even milder, like a broker on a board voting to turn down a buyer brought by a different brokerage with the hopes that the seller will engage the board broker on the rebound. Then there’s the mildest, [such as] getting elected to a board in order to give voice to one’s own interests, like those of a terrace owner in a building that contains units without terraces.”

When a board member or resident believes someone to be abusing his or her position of power, the appropriate response can vary, depending on the situation.

“It is generally inappropriate for one owner to chastise or reprimand another for perceived rule violations,” says Lisa A. Magill, Of Counsel at Kaye Bender Rembaum, which has offices in Pompano Beach and Palm Beach Gardens, Florida. “Any violation should be reported to management or the board for handling – even if it’s a board member who’s presumed to be breaking a rule. Gentle handling is good for the initial approach; reminding the person in violation nicely about the rule, and requesting future compliance may resolve the problem. If the problem is somewhat widespread, then it’s a good idea to remind the entire membership of the rules and initiate action to compel compliance, or if the rule is no longer needed, to modify the rules to meet current needs.”

And while it might seem like a good idea to draft rules with some wiggle room for subjective interpretation – especially in the case of smaller, tight-knit communities that don’t stand on a lot of formality – legal pros stress the importance of clear, unambiguous rules to be enforced consistently and fairly. 

“There’s no such thing as ‘the spirit of the rules,’” says Ellen Hirsch de Haan, an attorney with Wetherington Hamilton in Tampa, Florida. “Rules must be clear and concise, so that a person reading them knows what is expected of them. The express provisions of the restrictions are the only enforceable language. The board has control over the behavior of the directors, the manager and residents.”

Should a resident be intimidated or hesitant to report an individual board member for misconduct, it’s worth keeping in mind that a single board member doesn’t wield the authority of the whole board. “Start with the other board members to address the association,” recommends Charles M. Katz-Leavy, a lawyer for Jensen Baird Gardner & Henry, which has locations in Portland and Kennebunk, Maine. “I also suggest consulting with the association’s legal counsel. Ultimately, the owners have the ability to recall a board member if someone goes too far astray.”

Debating Documents

If there’s some doubt about whether a board member or manager’s behavior is out of bounds, the association’s governing documents may provide a definitive answer – assuming that those docs are very current. It’s possible that rules within the documents have long gone unenforced – and thus can be difficult to revive – or that certain regulations have aged poorly and no longer comport with more current state or federal laws.

“If a provision has not been enforced in the past, the board may lose its right to enforce that provision in the future,” warns de Haan. “In that circumstance, the violation would go ignored, unless action were taken to republish the rule and 

reestablish the right to enforce it going forward. And should a law change, it could render a documentary provision unenforceable, or even a violation of the law. One example would be the Fair Housing Law regarding familial status, which would make rules restricting use of a pool to adults-only during certain hours ‘per se’ violations of federal law.”

“Some inconsistencies between the law and the documents are simple and non-controversial, like sending meeting notices, conducting elections, budgeting and other procedural issues,” adds Magill. “Other times, the members may not understand that the board is required to follow the law rather than the documents, which could cause ire among the members. 

“For example,” she continues, “the association cannot enforce restrictions against children residing in the community unless that community qualifies as Housing for Older Persons. The association must allow owners to install an up-to-one-meter receiver, even though most governing documents prohibit outdoor antennae. The board may have to allow someone to maintain an emotional support or service dog on the property, even if the documents prohibit pets or animals.” 

Katz-Leavy describes the debate over which rules should take precedence as a “legal hierarchy.”

“Federal law trumps state law, state law trumps declarations, declarations trump bylaws, bylaws trump rules, etc.,” he says. “I would advise a board not to enforce a provision of a condo document that clearly contradicts federal or state statute. In Maine, we often see condo documents that have become outdated and are not consistent with the Maine Condominium Act and/or the Maine Nonprofit Corporations Act.”

Blurred Lines

Confusion can arise when a board member or manager is perceived to be engaging in behavior that is objectively not in violation of anything in the law or the documents, but just seems, well...wrong.

“I can’t tell you how many times a board or manager will call to report a violation and I cannot find a rule or restriction to cite when I prepare to send a demand for compliance,” says Magill. “Obviously you cannot enforce a rule that doesn’t exist. However, there are mores in each community that may not rise to the level of rules, but are frowned upon or will draw backlash if violated. Failing to wear decent attire, using foul language or derogatory slurs, and other simply-put bad’ behavior in common areas is problematic. Allowing your dog to urinate on the balcony so that it drips down on other units is disgusting, but not typically addressed in rules until it happens. Formal rule-making may be necessary to initiate an enforcement process, such as levying fines or pursuing arbitration, unless the conduct is so outrageous – and persistent – that it is considered a nuisance.”

“The association is on its most solid footing when the enforcement action deals with a violation of a written regulation,” admits Katz-Leavy. “Sometimes you can hang your hat on a more general rule, such as ‘a unit-owner cannot do anything that constitutes a nuisance.’ In general, the association has fairly broad latitude for regulating conduct that occurs within its common elements, but they’re much more limited when it comes to regulating activities taking place within an individual unit.”

When the governing documents do fail to indict particularly egregious behavior, a board member or resident can always try and appeal to the conscience of the transgressor. “The best guide for board members and the managing agents who work with them is common sense and an innate sense of right and wrong,” says Shmulewitz. “If it feels wrong, or you would be embarrassed if the matter came out in the media, just say no.” That may sound overly optimistic, but it’s always important for the individuals who volunteer to run their community associations to have a functional moral compass and a respect for their fiduciary duty. After all, we’re all in this together!

Mike Odenthal is a staff writer/reporter with New England Condominium.

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