For many, the function and relationship between the board of directors of a co-op or condominium community and their attorney is more or less opaque. Who does the attorney represent? Individual owners or shareholders can’t contact the community’s counsel for legal advice; if they need counsel, they must find one outside the community’s legal arrangements. So the community’s attorney isn’t there as a resource for residents. How about the board members? Technically, the answer is no there as well. While board members certainly may interact with the corporation or association attorney for community business, they cannot and should not approach the community’s counsel for personal legal advice. It’s the corporation or association that the community’s counsel represents. He or she is there to protect the integrity and interests of the community as a whole and functioning entity.
Defining the Client
“The building’s attorneys are hired with the approval of the board, purely to advise the board and its managing agent regarding day to day matters and with the interests of the corporation or association as whole in mind,” says Mark Hakim, an attorney with Schwartz Sladkus Reich Greenberg & Atlas in New York City. “Attorneys for the building do not represent the board or the individual residents. The board members are generally voted into office and manage the building with authority derived from the governing documents (e.g., the bylaws, lease, etc.) and applicable statutes. When requested, we advise on a myriad of matters, from day-to-day matters such as sales, leasing, house rule and other enforcement, to disputes, to negotiating contracts for management, repairs, alterations, telecommunications, etc. to attending to litigation and other similar matters, to attendance at annual and other meetings. That’s by no means an exhaustive list; it’s our responsibility to attend to all of their legal needs and concerns.”
“We are required to give advice — nothing more,” adds Ellen Shapiro, an attorney with Marcus Errico Emmer & Brooks, located in Braintree, Massachusetts. “If a board doesn’t choose to accept our recommendations or to enforce rules, etc., you, as their counsel, can’t force them. You give them information, and they then choose whether to move on it.”
“The relationship between a board and their attorney should be professional and cordial,” says Scott Piekarsky, an attorney with Phillips Nizer in Hackensack, New Jersey. “The relationship is for the benefit of the association, not the personal self-interest of board members. Sometimes board members don’t understand this relationship and how it functions. If they haven’t served on a board before or they haven’t worked in a corporate setting with an attorney, they may not know this.” This relationship should be explained to all new board members when elected.
Sima Kirsch, an attorney specializing in community law in Chicago, sums it up thusly: “The best relationship will be one where the attorney operates as a corporate/business attorney in the first instance, guiding and educating, in the hopes of protecting the board, and in addition handles legal matters. Unfortunately, too often boards are difficult to control, and/or their membership act like vigilantes. They rarely see the benefit of [proactive] legal engagement and only call in counsel as needed. Keeping this in mind, and the scope of condominium and co-op representation, I look for ways to encourage a board to find a different way of looking at their operations. This type of arrangement allows for the process of putting their house in order resulting in best relations all around.”
Kirsch explains that “ethical issues arise in communications, as well as representation. First, an attorney should perform a ‘conflicts check,’ to make sure no association client or board member is in conflict with any other client — including service providers that might perform work for the association. Also, we must be certain that the attorney has no personal issue, involvement or preference over a matter they are handling.”
Piekarsky again stresses that “the client is the association, not the board. Attorneys report to the board as an entity. There has to be confidentiality. When we discuss personnel and collection issues and the like, we need to know that the board understands how confidential this is. They can’t tell other people. If a board member has a personal legal issue, the attorney needs to tell that board member that he or she as the attorney for the association or corporation can’t handle it. If there is impropriety, the attorney needs to tell the board that as well. When in a confidential setting, there can be sensitive situations.”
For an attorney representing a condominium association or a co-op corporation, the biggest ethical issue is when a board member is the violator of the trust between attorney and client. “That’s uncomfortable,” says Shapiro. “You have a close working relationship with board members, and they rely on you. Now someone among them is the violator. You have to put the ‘friendship’ aside. They may fire you or recommend a change in attorney, but your duty is to the association in its entity. You have to honor that. You have to tell the whole board what’s going on if there is an impropriety.”
Hakim makes an interesting point about the personal interactions inherent in condo and co-op representation. “The ethical issues are generally the same as one may find in any matter, except that here with residential communities, the attorney must walk a fine line to ensure that the advice he or she is giving is not skewed merely to appease those that hired him or her.”
A Fine Line
“The building’s counsel does have to walk a fine line,” says Hakim. “We speak with the board and/or management regularly, and it could easily be seen as favoritism — or worse. There should be as much communication as is needed to make sure the day-to-day issues are addressed — no more and no less. Meaning, tell me the issues, and I can tell you what type and amounts of communication are needed at that point. There is no playbook, per se, and issues that may seem mundane on Monday can spin out of control and become problematic by Friday. No attorney should ever provide advice that is intended to damage the community. An attorney being asked for his or her recommendation should never, for example, provide advice that would likely steer the board to a decision contrary to the building’s best interests or one in which would financially benefit the attorney. When a sponsor develops a building, they install a management company and often engage the building’s attorney, at least initially. We often are chosen by boards to replace that initial counsel. We often recommend that course of action to avoid even the appearance of any self-dealing behavior.”
Kirsch offers a real-life example of how corruption can seep into a residential community. “I represented a group of unit owners in an attempt to help them mount a campaign against a 10-year seated board that was using the same attorney [for the association] who also represented two of the board members. These owners tried for years to get replacements on the board — however with the board, lawyer and agent all in the proverbial ‘bed together’ it was impossible. We worked tirelessly behind the scenes and mounted a campaign that resulted in a tremendous turnout that overthrew the regime and seated a new slate of officers. Incredibly, despite accomplishing this, the board chose to go with another large named law firm. This board unfortunately has ended up in some serious trouble having replaced the same for the same.”
Small Associations & Cost
Smaller communities may not have the resources to keep an attorney on retainer. Attorneys representing associations and corporations are aware of that, and are generally willing to make more affordable arrangements. “We tell them to call us when they need us, and as you need us,” says Piekarsky. “We bill for services as we go. I had a situation like this recently from a small condo association. They needed a lien, and we gave them an estimate of the cost of the services. They found the fees reasonable and hired us. I look at it as a situation where they will need legal services from time to time, so why not serve them?”
Kirsch suggests that the more important question is how to pick the correct attorney for the money. “Realize that legal fees are controlled by many factors, including the level of expertise of the attorney. Perhaps someone not so experienced charges $275 per hour, and someone more experienced charges $350. The inexperienced attorney might take five hours to complete the work, where the experienced attorney requires three. Also, perhaps the $275 per hour attorney doesn’t have to cover the overhead the $350 per hour attorney has.”
“Also,” Kirsch continues, “keep in mind there’s a difference between larger firms and smaller firms. Although larger firms may sometimes — but not always, and many times don’t — get the work out faster, smaller firms can give you more personalized service. When it comes to choosing an attorney, it involves knowing who you are as a community and what your needs are. [Look for] an attorney who concentrates in condominium law, and is not just a general real estate attorney. When you hire a condo lawyer you are hiring someone who should know all of the laws, statutes, and case law that control condominiums and cooperatives. Having an attorney who is willing to take the time to get to know your association as different and distinct from all others can help keep your association working at its best.”
The attorney/client relationship in residential communities is both necessary and complicated. Above all, it is meant to protect the rights of the community, not to insulate the board or provide legal services to individual owners.
A J Sidransky is a staff writer and reporter for New England Condominium, and a published novelist.