An accurate vote count may be the single most critical – and volatile – ingredient in a co-op or condo’s annual election of directors. This came into crackling focus several years ago when a voting machine malfunctioned at a large co-op on the Lower East Side of Manhattan, resulting in an invalidated election, a re-vote, and threats of lawsuits – the sort of uproar that keeps boards awake at night.
“The real challenge is how to make things go smoothly when there’s a war going on,” says attorney Thomas Smith, a partner at Smith Buss & Jacobs. “If there’s not a contested election or some kind of hostile election, then it’s fairly easy to make sure everything goes smoothly. The predicament comes when there’s suspicion all around and different factions looking to nudge the process in a way that gives them a small advantage.” It’s a nightmare that smart boards can avoid by utilizing procedures that leave all residents, even the disappointed ones, convinced that the election was run fairly and the votes were counted accurately.
The Critical Vote Count
When counting the ballot, you have two choices: you can do it yourself, with the assistance of your lawyer, accountant, or managing agent; or you can have an outside firm handle everything. The second choice is more expensive – it ranges from about $600 in a building where all voting is done online up to $20 per ballot in a “hybrid” building that uses online and paper ballots. The expense buys the peace of mind of having a professional running everything, from soup to nuts, says Linda Gibbs, president of the Honest Ballot Association (HBA), an independent election company that comes in before the election and distributes proxies and later counts the votes.
Technology is helping to streamline the process – although its limits became obvious when the voting machine malfunctioned at the Lower East Side co-op. Gibbs says the HBA has been successfully employing online voting for the last three years. “It’s great,” she says. “The flood doors are opening and it’s giving everybody a chance to vote. And it can be done [from] anywhere in the country. So if they’re [unavailable] – if they’re on a job and they can’t come to vote, or if they’re sick and homebound – they can vote online.”
Boards that decide not to pay an outside company to handle their election must have someone count the votes. “Have a clear procedure for how and especially who is going to be counting the ballots,” advises Dean Roberts, a partner in the law firm Norris McLaughlin & Marcus. You can choose inspectors of elections from supporters of the different candidates. “If there are three different groups vying for control of the board,” says Smith, the attorney, “then you want three inspectors – one who is trusted or designated by each group.” Roberts agrees: “Those people should not be candidates. If they’re board members, it must be clear they’re not running for re-election and therefore have no skin in the game.”
Pamela Delorme, president of Delkap Management, says her company usually asks for volunteers from the audience to be counters. “We also have people at the election, and our people sit with those volunteers to verify the vote that was cast when we do the tallying,” she says. “Usually,” says attorney Stuart Saft, a partner at Holland & Knight, “the counting is done by a couple of employees of the management company. Sometimes, when there’s a really contested election and a proxy fight, we’ll call in a company like Honest Ballot Association to run the election.” In contentious elections, he adds, “the lawyers or the accountants will be asked to attend the ballot-counting, to basically do the role of inspectors of election.”
Confidentiality is also important. “Many owners want their vote kept confidential for obvious reasons,” says John Holzinger, president of Barhite & Holzinger, a management company. “If they wish to vote against a proposition favored by others, or for one neighbor versus another to serve as a board member, they often want their position kept private.”
Counting can be tricky in co-ops because there are three different methods of voting:
Straight voting. The first, and least common, is straight voting, in which each apartment is allocated one vote for each seat on the board, regardless of the size of the apartment or the number of shares held by the shareholder.
This method is used in the majority of voting situations. With conventional voting, the votes are allocated by shares. According to veteran co-op and condo attorney Arthur Weinstein, a shareholder may cast ballots for as many candidates as are seeking office. His votes for each candidate are each equal to the number of shares allocated to his apartment. For example, if a shareholder has 1,500 shares and there are three seats up for grabs, he can give his three preferred candidates 1,500 shares apiece.
In cumulative voting, the shareholders are each given a pool of votes that equal the number of shares held by the shareholder multiplied by the number of seats on the board being filled. The shareholder can cast all of his votes for a single candidate or can split them up among any number of candidates. If he has 1,500 shares and there are three open seats, he has 4,500 votes that he can split up any way he chooses: for instance, 3,000 to one candidate, 1,000 shares to a second, and 500 to a third. Or he could put all 4,500 shares on one candidate.
Condos are different. Some use a “one-vote/one-apartment” method, but in most condominiums, the voting is “pure plurality voting,” says Saft. “You vote based on your percentage interest. If you’re in a building with 20 apartments and they’re all the same size, theoretically you would have five percent of the vote, and if there are five members on the board, you could vote for up to five candidates and give each five percent.
“The Real Property Law says that percentages must be based on comparative size, comparative value, proximity to amenities, or a combination of all the factors,” Saft adds. “We always use that last point to come up with something that makes sense in a building where you might have 100 or 1,000 apartments. The percentages usually go out to five digits [after the decimal point], so it’s far more complicated in condos because the percentages are so small.”
There are two types of proxies: a “directed” proxy, which states how the absentee shareholder wants his or her votes to be cast; or a “general” proxy, which allows the holder of the proxy to vote any way he or she sees fit. According to Saft, the critical basics are: (1) a proxy doesn’t have to be the official form – a voter can sign any paper, even one that he or she then faxes; (2) the proxy-holder need not be a shareholder or unit-owner; and (3) the proxy becomes invalid if anyone alters it after it’s signed, or if it’s signed but doesn’t name a proxy-holder.
When the Counting Starts
In a hotly contested election, the actual counting is usually not done on the night of the voting. It can get very tense if it’s done at that time, notes Saft, “with a lot of people standing around waiting. It should be done the day after the election when everyone is fresh. The count should be done in the managing agent’s office the next day. Sometimes, in a really contested election, at the annual meeting I’ll take all of the proxies and the ballots and will seal them in an envelope, and sign (or have the managing agent sign) the back of the envelope. One of those professionals will then take that envelope and show up at the manager’s or the lawyer’s office the next morning, and it will be opened and counted.”
Sometimes, there will be complications with the ballots and the proxies. “There will be multiple proxies, or signed ballots where you’ll have to figure out which is the correct one,” Saft notes. “You want to be in a position where you can call the shareholder and ask them what their intent was when they turned in this piece of paper. On occasion, we’ve found that the shareholder didn’t turn in that piece of paper. Somebody signed [the shareholder’s] name and submitted it. That’s not something you can carefully do on the night of the meeting. It should be done quietly the next day.”
To guard against forged proxies, the vote tabulator will usually compare the signatures to other signed documents that the managing agent has. If there’s a question, the tabulator will call the shareholder or unit-owner to see if he or she did indeed submit this ballot or proxy that’s in question. “In proxy fights, you’ll frequently get double proxies,” Saft observes. “Multiple proxies will be signed [by the same person], and that’s why I tell shareholders, ‘You should really attend the meeting yourselves.’” The inspector also checks to see that the directed proxies are voted correctly.
Despite a board’s best efforts to keep everything above board and transparent, however, some shareholders or unit-owners may still contest the election. “In my role,” Roberts says, “I try to resolve issues so that even if people are not happy, at least they understand the process. The guiding principle is to try and determine what the intention of the voter was – and that applies to both ballots and proxies.”
“There are frequently challenges,” agrees Saft, “and getting a certification from Honest Ballot or one of the other companies goes very far to get it resolved because the judge knows they’re independent.” If you don’t have the HBA certification, and you know the voting will be contentious, Saft advises: “You really have to have the lawyer watching the entire proceeding. It’s critically important that the vote be held fairly and accurately.”