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For Whose Eyes Only?
To show or not to show – is that a question boards should be asking? If outsiders are so concerned about seeing the minutes, should you provide them? Or zealously guard them? “If the board declines, I think that can detract from the saleability of the apartment or may affect the pricing,” says David L. Berkey, a partner at Gallet Dreyer & Berkey.
Nonetheless, showing them depends on how you view those records and your responsibilities. Most boards release an edited version of minutes, or a summary, that leaves out specific details on a variety of topics, such as financial issues, potential litigation, and debates over purchases and contracts before they are made.
Far fewer boards go to the other extremes: detailing and releasing everything from the meeting in their minutes or releasing nothing. The boards that make their minutes public do so on a restricted basis. They generally issue copies to their managing agent, and then shareholders or unit-owners must come to the office to see them. Some boards allow photocopying; others permit only reading and note-taking.
Most professionals report little interest in minutes among residents; more often, it is prospective buyers who want to see them. Their attorneys ask to review minutes to get a bead on what is going on in the building. Denying them that chance can be bad for the building’s bottom line.
“Most boards recognize that they work on behalf of the shareholders, and they want to make it more fluid to conclude a sale,” says attorney Marcie Waterman Murray, a partner at Tane Waterman & Wurtzel.
Just Say No
Veteran co-op and condo attorney Arthur Weinstein knows he’s in the minority but reports that his advice to the 100 boards he represents is not to release – at all, to anyone. He argues there is no legal requirement under the business corporation law that minutes be made available. Bylaws are almost always silent on the issue, too.
As Weinstein sees it, the problem with releasing the documents is that they can reveal a great deal that might be taken out of context and used against the board in a lawsuit. And because of that, most boards that allow the public to view them try to be circumspect in what they report. “Boards are maintaining skeletal minutes because they know people are looking over their shoulder,” he says.
That’s a problem, Weinstein argues, because full and detailed minutes are actually a good thing: they can protect a board down the road. Say a board rejects a prospective buyer but the official minutes don’t contain details on the rejection. Five years later, if that prospective buyer sues, the current board has little to use to defend itself. “In a [skeletal, detail-free] summary, you don’t have the benefit of knowing why a board made their various decisions,” he observes.
Weinstein adds that he does not know of any instance where a prospective buyer rejected a deal because he or she could not see the minutes. “A good read of the financial statements will give you what is really important for the prospective buyer,” he says.
However, revealing too much in the minutes can backfire, asserts Andrea Bunis, the principal at Andrea Bunis Management. “If you say that Miss Jones has not paid maintenance in 14 months and the board is putting a lien on it, you could have shareholders coming to board members and asking, ‘How are you going to make up for that money? Why should I pay my common charges if my neighbor is not?’”
Bunis adds that, over the years, some of the boards she works with have rejected her advice and released very detailed minutes of board meetings. “Their philosophy is, ‘What do we have to hide?’ and sometimes that is fine when there are no arrears and the squirrels are all in their cages,” Bunis says. She’s had some rare instances, too, where boards write their minutes as if they’re “writing a novel. The minutes are so long, they don’t want to miss anything,” she says. “I’ve always said, ‘It’s your building and you do what you want. We can only give you our opinion.’”
Larry Hohlt, president of the co-op at 40-50 East 10th Street in Manhattan, argues that it’s often better to communicate with shareholders about important issues via memos and e-mails rather than including details in the minutes. For example, about 18 months ago, the building undertook a new mortgage that added a significant amount of debt. The issue was mentioned in the minutes, but Hohlt also wrote a detailed memo that was sent to every shareholder indicating how much they were borrowing and why.
“You want to err on the side of communicating, but not necessarily in normal minutes,” he says. All his memos include his phone number and e-mail address, and Hohlt says he makes himself available for shareholder questions and concerns, noting: “We try to keep people in the loop. There are much better ways than [releasing the] minutes to discuss something.”
On the flip side, attorney Rob Braverman, a partner at Braverman & Associates, says that, contrary to his advice, a few boards over the years have put their minutes on a web page – a far wider circulation than just storing the minutes in the managing agent’s office. “They’ve spun it that in the 21st century, the ease of access trumps any possible danger from a wider release,” Braverman says. “It’s reasonable to agree or disagree with that.”
The issue of all or nothing can be seen not only in whether to release minutes, but also on what issues to include in minutes. Few issues are as controversial as bedbugs, and two different boards handled a bedbug situation in their minutes in two divergent ways.
“If there are material issues that are discussed in a meeting, they need to be addressed,” Braverman says. “Certainly a board should not be sanitizing minutes, but you don’t want to go too far [in the other direction], either.”