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Subject: Property manager representative on board: why acceptable?
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PaulJ6
(New York)

Posts:273


05/31/2019 4:31 AM  
Hi everyone,

I'm pretty new here. Great to meet everyone.

Non-Resident Property Manager Representative on Board

I live in a cooperative building in NYC. On the building's board, there are up to seven directors. There is no requirement that the directors be owners or residents of apartments in the building.

One director works for the building's property manager (the "managing agent"). That director is not a resident or an owner.

I am told that at annual meetings, that director is the one who takes the proxies that owners have been given and votes them.

So an employee of the property manager votes the proxies, and, given low turnout at annual meetings (as they are held at the property manager's office, far from our building), those proxies determine who's elected to the board.

Legally-Required Disclosures of Related Party Transactions Not Made

Further, I see that a new New York law requires that, in annual reports, cooperative associates disclose "related-party transactions" to owners, or that cooperative associations confirm to owners that there are no "related-party transactions". Since at least one director works for the property manager, any contracts between the cooperative association and the property manager would be "related-party transactions". However, there was no disclosure of related-party transactions, or confirmation that there were none, in the most recent annual report.

I am troubled by this: the property manager basically controls our board, and the board approves the contract with the property manager, and none of this was disclosed as required by law.

Non-Resident Representatives Common on Cooperative Boards

When I looked into the issue, though, it seems like having property manager representatives on cooperative association boards is normal, at least in NYC.

Question

Why is this situation acceptable? Why is having property manager representatives on cooperative boards normal? Why wouldn't boards (including HOA and condo boards) have only building residents or owners on them?

Thanks.
MelissaP1
(Alabama)

Posts:8503


05/31/2019 4:46 AM  
It sounds like your still developer owned and not owner owned. Which makes sense they would have a representative on the board. Once your owner owned, then that should change. The others may be set up the same way. Not sure how Realty works in NYC but seems developers like to keep their hand in the pot and not let go.

Former HOA President
PaulJ6
(New York)

Posts:273


05/31/2019 4:55 AM  
Posted By MelissaP1 on 05/31/2019 4:46 AM
It sounds like your still developer owned and not owner owned. Which makes sense they would have a representative on the board. Once your owner owned, then that should change. The others may be set up the same way. Not sure how Realty works in NYC but seems developers like to keep their hand in the pot and not let go.




Thanks. We are not developer owned anymore. The developer/sponsor ceded control in the 1980s.
SheliaH
(Indiana)

Posts:2667


05/31/2019 9:52 AM  
Well, you answered one of your questions – if your documents don’t have a requirement that board members must be owners, that’s why you have your property manager there. To change it, the homeowners need to have the documents amended, which will require a vote. Check your documents to see how this is to be done, bring the suggestion to the board and see what happens. You might also rally your neighbors together and push for a vote.

Changing Bylaws and CCRs in HOAs is not for the faint-hearted because this needs to stand up in court if someone challenges it, so talk to the association attorney for guidance.

Regarding the proxies, you said the property manager takes the proxies that owners have been given and votes them. In most cases, the owners dictate who will cast their vote on their behalf and how to vote. That doesn’t have to be the property manager; they can name someone else to attend the meeting and cast the vote on their behalf. This is what we do in our community, except the board president is authorized to cast the vote if someone else isn’t named. If the homeowner sends in a proxy but decides to attend anyway, the proxy will be cancelled and he/she casts the vote. Our proxies are mailed to the property manager, but the envelopes are opened at the meeting and counted in front of the attendees.

In your community, it appears your owners aren’t doing that for whatever reason, which is their right. If you think the property manager is doing something improper with the proxies, you need to bring that up before the board. Ditto for the location of the annual meeting – if the property manager’s office is too far away, find a place close by and suggest that to the board – it could encourage more owners to show up at the meeting and cast their own vote.

Finally, you said the property manager basically controls the board. That is concerning because the BOARD should be overseeing the property manager, who works for the association, not the other way around. To change that, change the board – that will require you and your neighbors working together, along with people willing to run for a spot who will make the board’s actions more transparent.

It doesn’t matter what the problem is in your community – ultimately, the homeowners are responsible for holding themselves and the board accountable. If you want a more transparent board, it may also require YOU to step up and serve – decide what you want to do and get to work. Good luck!
RichardP13


Posts:0


05/31/2019 10:43 AM  
I have been asked by an association I once managed to run for a position on their Board. I am considering that next year. It is not a requirement there to be a member or owner of the association.
PaulJ6
(New York)

Posts:273


05/31/2019 11:46 AM  
Posted By RichardP13 on 05/31/2019 10:43 AM
I have been asked by an association I once managed to run for a position on their Board. I am considering that next year. It is not a requirement there to be a member or owner of the association.




Thanks--great point.

Why would you accept the offer to join the board unless you are paid to be on the board? Just curious. I'm on some nonprofit boards and am not paid anything for them, but they're charities. I wouldn't join a non-charity board unless I were paid, given the risk of liability and the time commitment.
RichardP13


Posts:0


05/31/2019 12:11 PM  
Why not? Money isn't everything, besides I know what the time restraints are they fit within my schedule.
PaulJ6
(New York)

Posts:273


05/31/2019 12:47 PM  
Posted By RichardP13 on 05/31/2019 12:11 PM
Why not? Money isn't everything, besides I know what the time restraints are they fit within my schedule.




* Risk of being sued
* Other potential uses of time (charity boards, family time, etc.)

That said, I do admire people who do as you do--very generous of you.
NpS
(Pennsylvania)

Posts:3658


05/31/2019 8:18 PM  
Hi Paul

As a cooperative, you have a different structure than HOAs or Condos.

In a coop, a corporation owns the building. If accepted, you can buy a share in that corporation. And that share gives you the right to live in one of the units. But you never own that unit. If there's a falling out between you and the corporation, the corporation can, depending on the contractual relationship, buy your share back and evict you. In many ways, you're more like a tenant than an HOA or Condo owner.

With that much control in the hands of the corporation, I would expect that there are many business practices that are foreign to most of the folks on this forum.

Sikubali jukumu. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


06/01/2019 2:55 AM  
Hi NpS, yes, you’re right. But for a cooperative, the board is even more like the board of a corporation. The board has fiduciary duties to the corporation’s shareholders (ie, other owners and me) even more than a HOA board has duties to HOA owners. “Real” corporate boards may have an “independent director” who is not a stockholder in them, but hat director would be there just because key owners and management want someone neutral, unaffiliated with anyone else, to prevent the other from getting that board seat.

In my cooperative building case, the nonresident is tied to a key outside service provider, the property manager. That is a direct conflict of interest and in a “real” corporation, that wouldn’t be tolerated.
NpS
(Pennsylvania)

Posts:3658


06/01/2019 4:03 AM  
Well said John

Then again, when there is risk of eviction, the dynamics of the relationship are different. You might need to find a new place to live if you cross swords with the wrong person. You might own a share in the corporation today, but you can be bought out for any kind of infraction of a coop document which others can and will interpret differently than you do. And at the root of everything, we are still talking about neighbor-to-neighbor disputes with all the drama and emotion and tribalism and self-centered behaviors that convinces many to keep their mouths shut and others to want more control.

So while the laws say one thing, the practicalities say another. The more at risk you are, the easier for others to abuse the trappings of power.

I know people who live in coops who don't even have a shot at becoming a director. It's closed. There are rules of admission that you would never satisfy. It is a corporation, but it's a closely held corporation. Not public. Not subject to the same regulatory scrutiny.

I'm not saying anything about what's right or wrong. I'm just saying that it's a different kettle of fish than most of us are familiar with. You don't just buy into a coop. You apply, you get interviewed, and you get accepted or rejected. From day one, you know that you are being invited in to an exclusive club and someone else can determines when it's time for you to go.

Sikubali jukumu. Read all posts at your own risk.
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