Being pushed out of your comfort zone is stressful, but change can be a good thing. While co-op and condo boards have had to scramble the jets over the past year in response to COVID-19, it’s also been an opportunity to test out new policies and new ways of doing business – and to take lessons from it. Indeed, there have been more than a few unexpected upsides to shaking up the old order. Here’s a look at half a dozen COVID-induced changes that boards might want to stick with in a post-pandemic world:
It took a while for everyone to get up to speed, but given their obvious upside – including convenience and increased shareholder participation – it would seem that virtual annual meetings are definitely a keeper. Gov. Andrew M. Cuomo’s emergency order in March 2020 suspending the Business Corporation Law requirement that co-ops hold annual meetings at a specified site paved the way for all-virtual gatherings, but with the decree set to expire this December, boards that want to continue them will need to examine their governing documents.
“It’s tricky, because bylaws typically require that annual meetings be held in a fixed place,” says Christina Forbes, a senior vice president of property management at FirstService Residential. “If that’s the case, boards need to pass an amendment to their bylaws so they can conduct virtual annual meetings legally.”
As for board meetings, co-ops and condos would do well to continue those online as well. “There’s just better control of the agenda, especially when you’ve got someone who’s going off topic and just keeps talking,” says Ira Meister, the president of the management company Matthew Adam Properties. “It also puts things in more of a business perspective than when you’re sitting in someone’s living room chatting.”
Robert Ferrara, the president at the Ferrara Management Group, concurs. “They’re more professional and on point,” he says. “As a result, things get done quicker.”
For buildings that do make the switch to virtual annual meetings, it’s essential to establish a protocol to ensure that elections are smooth and secure. It’s a good idea to snail-mail a written notification and to send an electronic one as well; the latter should include a calendar invite, a direct link to the meeting and instructions on how to access it.
“You want nominations submitted in advance, not made from the floor,” says Phyllis Weisberg, a partner at the law firm Armstrong Teasdale. “It’s also a good idea to hold a candidates’ night or two, so that when it comes to the annual meeting there’s just the balloting.”
To avoid shareholder concerns about election legitimacy – or accusations of fraud after the fact – larger buildings might want to bring in a professional voting company, such as Election Services United or Honest Ballot, which can help boards and management companies prepare for and conduct elections, including setting up a secure electronic voting process.
“There are ways to protect against voter fraud,” says David Berkey, a partner at the law firm Gallet Dreyer & Berkey. “But you have to have everything in place first.”
From viewings to applications to closings, going virtual is a win-win for co-op and condos, especially amid a sales market that is improving but remains soft. “Boards should do everything they can to facilitate sales, both now and post-COVID,” says Margery N. Weinstein, a partner at the law firm Ganfer Shore Leeds & Zauderer, who stresses the importance of giving attorneys for prospective buyers virtual access to board meeting minutes.
“I have some boards that want people to come to the building and sit and read the minutes book right there in the lobby,” says Forbes of FirstService. “They’re concerned about the information being put out on the Internet and possibly compromised, so you have to explain that it’s all password protected.”
In other cases, it may be the management company that’s reluctant. “Every (company) has its own policy and things they recommend to their clients,” Weinstein says. “But a board can always say to its managing agent, ‘We want our minutes to be sent virtually in a protected fashion because it makes the process easier for buyers.’” The same applies to buyer application packages, adds Weinstein, who advises using a system such as BoardPackager rather than making and circulating eight hard copies with sensitive information. “That,” she says, “seems so 20th century.”
The final step is virtual closings – when the buyer, seller, their attorneys and sometimes the title insurer and a bank attorney sign documents and have them notarized remotely. Even if the temporary Executive Order permitting remote notarizations is made permanent, there are still kinks to be ironed out. “We haven’t gotten to the perfect situation yet with virtual closings, because some co-ops and condos still require wet-ink signatures,” Weinstein says. “It gets even more complicated if the buyer is financing, because some banks are insisting on getting wet-ink documents in order to fund the loan. Even if your building doesn’t require such signatures, people should be prepared for snags in the process.”
Savvy boards should also anticipate that there will be ongoing expenses due to the pandemic, then factor them into their future budgets. “There will continue to be increased costs for things like extra cleaning, extra personnel and more sick days or sick leave for employees,” Weinstein says. “You’ll want to consider how to approach your annual budget with all this in mind when you start planning for 2022 later this year.”
For his part, Ferrara, the manager, found that co-ops and condos that increased their budget lines last September were still taken by surprise by unforeseen COVID-related costs. “We had a condo in Peekskill where some owners complained that the amount of trash their neighbors were putting out was way more than they thought,” he says. “It was just their perception, because they were there all day instead of coming home at dusk when it was already collected. But it suddenly became a big issue, and the board had to implement additional clean-up services.”
As for contracts with vendors for building renovations, Weinstein suggests that boards consider taking a tougher stance by adding performance clauses to prevent companies from using the pandemic as a “force majeure” reason for not completing projects or getting them done on time. “People have been particularly attuned to the hardships caused by COVID,” she says, “but when we’re out of the pandemic itself, boards will want to find the best way to enforce those contracts. This is all evolving in the courts as we speak, but boards should examine the remedy provision in any contract they’re entering into to see if there’s a possible challenge by the other side, and perhaps they should insert some language to protect themselves.”
6. House Rules
“We’ve certainly seen boards add new house rules on mask-wearing, social distancing, food deliveries and all the basics,” Ferrara says, “but there may have to be other tweaks along the way.” He singles out ways of managing the glut of packaging waste. “People aren’t breaking down cardboard boxes,” he says, “and they’re even ripping their names off so you can’t identify them. When we can, we go after them individually, because they won’t stop until they get a nasty-gram in the mail.”
And what will the future bring? Forbes of FirstService offers a prediction: “Although things might appear to be going back to some kind of normal, there are pandemic policies and procedures – as well as checks and balances – that boards should continue. We’re going to be living with the effects of COVID for the foreseeable future.”