New York's Cooperative and Condominium Community
Jennifer V. Hughes in Board Operations on March 8, 2012
"It's like getting inside information when you buy a stock," says attorney Eva Talel, a partner at Stroock & Stroock & Lavan. "I assume that they are going to do this to help them make money, saying, 'We possess a resource of about 50 or 100 — or whatever — buildings in New York City that no one else has,' because board minutes typically reflect a building's operations and board deliberations and things that as a general matter are confidential. Originally, I think that [the managing agents who uncovered this] tripped over the fact that this was being done. In conversations with their colleagues it became more apparent that this was an organized situation."
The discovery of the illicit scanning, says an executive at the management company that discovered the culprit, led to a major change in the firm's policy. Now, anyone who wants to look at the minutes has to sign a document defining the scope of the review. It is very narrow, essentially saying you can read it, you can take some notes, but you can't remove it – and you certainly can't copy it.
REBNY to the Rescue
The situation has reportedly happened at a number of firms, and it has occurred so frequently that the Real Estate Board of New York (REBNY) is proposing issuing a document that all its member management organizations can use to protect their shareholders/unit-owners.
The affidavit essentially says that before anyone can see board meeting minutes, he or she must read and sign the document, identifying his/her firm and stipulating that the sole purpose for viewing the minutes is for due diligence; that the person will not use any recording, scanning, or copying devices; and that they will not share the information with anyone other than those who need it for the prospective purchase.
"Unless they sign, they will not be afforded access to minutes," says Talel, who is an attorney for REBNY's Residential Management Council.
Talel could not say how many managing agents had been hit by the problem but described it as "widespread," and notes that REBNY would not have taken action if it had been an isolated incident. "There was apparently a run on this kind of action going on," she says. "Once people began to realize it was going on, they tried to do on their own what they felt they could do to keep it from happening. [REBNY] decided [everyone] needed a uniform approach to this."
Talel says that REBNY is less concerned with uncovering who was doing the scanning and more focused on preventing it in the future. The legal affidavit was expected to be presented to the residential management council by the end of February. "We're not concerned with punishing anyone," she says. "We just want to prevent this."
Adapted from Habitat March 2012. For the complete article and more, join our Archive >>
Engage, enrage, ask questions and give answers with your community of board members. Submit your questions and comments here!
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.
Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments
Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise
Got elected? Are you on your co-op/condo board?
Then don’t miss a beat! Stories you can use to make your building better, keep it out of trouble, save money, enhance market value, and make your board life a whole lot easier!