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Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Bored Issues

The board member was angry about a widespread concern: the shareholders in his Queens co-op didn’t seem to care much about the issues facing the property. As long as the maintenance remained low, they didn’t want to get involved. There was one thing about which some of them were anxious, however: one of the residents was accused by some of being a thief. The angry board member suggested a solution: “Put the thief in charge of the building, and soon, apathy won’t be a problem.”

It was a joke – but it gets to the center of a situation that challenges many boards in both co-ops and condos: how do you get the residents of your building excited about (or at least involved in) its activities? “It’s a Catch-22,” says Alvin Wasserman, director of asset management at Fairfield Properties. “If you’re doing a good job as a board in running the building, and there are few maintenance increases, then people don’t take an interest.”

Adds David Goodman, a management executive at Tudor Realty: “This is the 10th time we’ve tried to get a quorum [at a Manhattan co-op]. No one is interested. It is said that this is a sign that everything is going smoothly and everyone is happy. In some of these places, they even have open board meetings. And no one turns up. It’s inexplicable.”

The difficulty is compounded in condominiums, which often contain a large number of non-owner residents who never come to meetings. “That’s a problem,” says David Berkey, a partner in Gallet, Dreyer & Berkey. “It also affects the ability to recruit new members, and you have the board going on and on. Resident-owners are more concerned about quality-of-life issues than outsiders.”

The consequences can be grave. “Shareholders have to pay attention,” says attorney Abbey Goldstein, a partner at Goldstein & Greenlaw. “It can be a serious problem where you have a board that is either dishonest or neglectful. When you have a dishonest board, you can have them do a lot of damage even if the shareholders are active. It’s worse if they don’t take an interest. Nobody is acting as a gadfly, raising issues regarding spending and contractors. Where shareholders are not active, it creates an atmosphere that is conducive to this sort of thing.”

Wasserman adds that a board that just focuses on keeping maintenance low and “not funding a reserve, not taking care of capital projects, at the same time, then apathy can backfire, and it all catches up with you.”

So how does a board overcome indifference? A few solutions turned up in a recent Legal Talk Podcast, “Shareholder Ennui,” conducted by Carol J. Ott, publisher of Habitat. The following is an edited transcript. The participants were Arthur Weinstein, an attorney in private practice, and Bruce Cholst, a partner at the law firm of Rosen, Livingston & Cholst. They discussed issues raised by Tom Bettridge, board president of a 47-unit Brooklyn co-op.

 

CJO Shareholder ennui. That’s the bane of all co-op boards. Tom’s board tried to amend their bylaws a number of years ago, just to increase the number of board directors from three to five. Pretty innocuous stuff.

 

TB But it never got passed, and as far as I could tell, it wasn’t because anybody cared that much; it was just they didn’t care enough one way or the other.

CJO That’s the rub for any board that wants to amend or change bylaws. Not only do you have to figure out if anyone’s economic interest will be affected, you have to goose the shareholders to vote.

BC One of the so-called “creative methods” that I’ve relied on is – if it’s a building where the apathy is so strong that nobody ever shows up for a quorum, nothing could ever get done – a maintenance raffle: one month abatement of maintenance if the shareholder participates at least by proxy, if not in person, at the meeting. And for the first time in the building’s 18-year history, I achieved a quorum and we did pass bylaw amendments.

AW I have to say, I find that building to be disgraceful.

BC I do, too, frankly. I could go on record with that, but it did work, and it is a creative method, and it is one I have repeated on occasion.

CJO Short of a maintenance raffle, how does a board get shareholder attention?

AW If they are seeking to make changes, they should consult with their lawyer to determine what is necessary in this particular building to effect the amendment change that they want. And if it can be done by what we called consent, then they go around with a written form of consent, that says, “I’m a shareholder, here’s the proposed language of the bylaw change, and I hereby consent.”

BC Or alternatively a proxy – a simple proxy.

AW Exactly. That’s what I led off with before – that says, “Here is a form of proxy, to be used to vote in favor of the following amendment to the bylaws, at a meeting to be scheduled x date or any adjournment thereof – or at any adjournment of that meeting.” So it’s relatively simple for a lawyer to draft up, but it has to be drafted in conjunction with the proper review of the bylaws.

BC Or alternatively, you can have an informational meeting – the equivalent of a press conference – where the board gets its message across. Or they could do it in a form of a newsletter. One very effective method I’ve had is to set up a little table to greet shareholders as they come in from work, possibly with a wine and cheese table. They linger – and then they’re captive audiences for the board’s lobbying efforts.

 

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