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Lightening the Load

Since Marissa Mack moved into the co-op at 325-327 Pleasant Avenue in East Harlem in 2010, she has served on the board all but one year. The 16-unit co-op has just 14 shareholders – all of the units have one bedroom, and two are rentals –­ and many residents are elderly. So Mack, 36, has provided a much-needed burst of energy.

Now board president, she puts in about 30 hours a month running meetings, reading e-mails, going over proposals, and answering phone calls. She is assisted by the treasurer, Belen Mendez, a 40-year veteran resident who’s been on the board since 1998.

In addition to overseeing the bank accounts, three times a week Mendez files papers, signs checks, and goes over reports from the property manager. And because she is retired, a familiar face, and at home a lot, residents tend to come to her, not the property manager, when they have a complaint. “I don’t mind – it keeps me going,” Mendez says. “Eventually, though, someone will have to take my place because I’m not getting any younger.”

“Our building is very well run,” Mack notes. “We get bids for everything. We have commercial space [that]we rent in both buildings. We meet monthly and record all of our minutes.” But as dedicated as Mack is to the co-op’s well-being, she’s beginning to feel overburdened. Despite that, the board has been reluctant to extend too much authority to the new property manager, Veritas, which came on in January, largely because the directors were “burned” by the previous manager, says their current Veritas agent, Lisa Mejia. Mejia says she is responsible for getting bids, handling repairs, hiring a part-time super, and communicating with the board and residents. But when it comes to expenditures, no matter how small or how urgent, she is not allowed to act without first consulting the board. “I told the board, I’m here to make sure you trust management,” Mejia says. “But I’m limited because I’m questioned on every work order I place.”

Such limits have left a burden on the board in general and Mack in particular. Fulfilling her board responsibilities outside of her full-time job eats up hours, which Mack would eventually like to spend attending graduate school. The board secretary, also in her thirties, isn’t likely to take over – she works full-time and is hoping to go to law school. An even less likely candidate is the vice president, who is retired and spends part of the year in Florida.

Getting residents to attend the occasional shareholder meetings can also be tough. Mack called one near the beginning of the year to introduce residents to Mejia, their new manager. Two shareholders and one renter showed up.

Mack says the board is caught in a dilemma: “We just don’t have a big pool of shareholders to pick from. But our current board is kind of burnt out.”  This situation is all too common, especially in smaller co-ops. While finding competent shareholders to volunteer their time is a challenge for any co-op, getting those volunteers in a small co-op can be so difficult that those people who do serve may feel trapped – and unable to step down.

“It’s a big problem,” says Ralph Westerhoff, the chief executive of BrickWork Management, which specializes in small co-ops and condos. “In many cases, you’re lucky if you get enough people to serve to fill all the slots on the board. People work long hours, they don’t have the time; they’re burned out enough.”

Feel the Burn

Burnout occurs more often than you might suspect. “We have this problem in all small and even medium-sized buildings,” says Martin S. Kera, president of Bren Management. “There aren’t enough people with time and interest. Even if they’re willing to, they don’t necessarily have the knowledge to be on a board. If you’re lucky, you might have one person to carry the ball in the building.”

With board elections looming in June, Mendez is wondering if they will muster a full slate of candidates. The secretary, she says, has announced that she doesn’t want to run again. Buildings without a full board or a board that rarely meets often end up relying heavily on the managing agent, something neither Mack nor Mendez wants to do. Kera sees it all too frequently. “It’s not a great situation because you’re turning over control to the managing agent,” he says, “but the building wouldn’t function if we didn’t do it. There’s nobody making decisions.”

Some buildings have tried to deal with the problem by mandating board service for all buyers. One shareholder and former board president at a 10-unit co-op on the Upper West Side says that his board always asks prospective buyers whether they are willing to help work for the co-op. “It’s not written in the bylaws, but we ask it,” says the shareholder, who spoke on condition of anonymity. “If someone said, ‘No,’ I don’t think they’d get in.” Residents there have an incentive to help out – lower maintenance costs. The co-op is self-run and does not have a property manager.

But requiring board service can also backfire, warns Patricia Kantor, a lawyer with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. She knows of prospective buyers who have walked away from co-op deals because they didn’t want to serve. And forcing the unwilling into service may not yield great results anyway. Says Kantor: “You’re taking on potential liability and fiduciary obligations – do you really want people who aren’t interested in being on the board doing that? I’m not aware of a building where it has been extremely successful.”

Setting term limits for board members is a way of staving off burnout, but it may also be the wrong approach for smaller co-ops; there may not be enough other candidates available to step in. Smaller co-ops commonly have board presidents who have been serving for many years, notes Kera. “They get accused of being dictators by some dissident voices, but it seems to me that the small buildings run best with a dictator,” he says. “They make decisions and get [things] done.”

Dictatorships aside, boards of smaller co-ops can take other steps to reduce the workload on existing members, and recruit new ones for the future. Here are some strategies:

Don’t meet every month

Unless the building is in a crisis of some sort, meeting every single month is overkill, says Westerhoff. In his experience, a quarterly meeting is usually sufficient. Just in case, however, the board might want to set aside a certain day of the month for meetings – say, the second Monday, for example – and then decide up to 48 hours beforehand whether it really needs to meet or not. If monthly meetings are required under the bylaws, the board will have to vote to change that requirement, Kantor notes.

Meet virtually

New York State law allows for virtual board meetings, Westerhoff says. The board just needs to enter into the house rules a formal section on electronic and virtual meetings and how they are to be conducted. Attorney Howard Schechter, a partner at Schechter & Brucker, a well-known specialist in New York State co-op law, says that there are only two permissible ways meetings that are not in-person can be held: by a conference call at which some or all of the directors participate by technology that allows everyone to hear what everyone else says; or by unanimous written consent, which can be accomplished through e-mails in accordance with established procedures. New York State law does not permit a vote by e-mail."

According to Stuart Saft, president of the Council of New York Cooperatives & Condominiums and a partner at the law firm of Holland & Knight, a board meeting conducted via e-mail is not valid.  The New York Business Corporation Law, Section 708(c), states: "Unless otherwise restricted by the certificate of incorporation or the bylaws, any one or more members of the board or any committee thereof may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting."

Set up committees

Get other residents involved in building business by asking them to serve on a committee that might be of interest. Kantor recalls one building that wanted to add a gym.  “A lot of people were really interested in that,” she says. “The board figured that if they could get a couple of people to work on that committee, they could eventually transfer that interest to a board seat. And it worked. The key is to get people to care about the building.”

Westerhoff, too, advocates committees. Committees can relieve the burden on the board, he says, while also training people for future board service.

Allow property managers on the board

Some bylaws require board members to be either shareholders or the spouse of a shareholder. Kantor says she knows of one building that amended its bylaws to remove that requirement. They were then able to fill a board seat with their property manager. Kantor points out, though, that such a decision has pros and cons, and is not necessarily a good idea.

That approach could set up potential conflicts of interest, says Ken Jacobs, a partner at Smith, Buss & Jacobs, a law firm. “The managing agent would have to be very careful about recusing himself in votes that might affect his position, and in distinguishing what benefits him from what benefits the co-op,” Jacobs says. He would rather see fewer board members, or the involvement of the property manager only when needed to break a tie.

Stagger the terms of board members

Having to run for re-election every year only adds to the burden on board members. Jacobs suggests establishing three-year terms for each seat, and rotating them so that each year, a different seat is up for re-election. That gives board members a chance to acclimate before they have to run for re-election, and reduces pressure on the decision-making process.

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