Frank Lovece in Board Operations on October 17, 2013
"[You] wouldn't necessarily circulate any kind of formal plan unless you're absolutely bound by the timing of it and the prices because you will have backlash from people if you decide not to proceed on something, or if prices change, or the scope of the work changes," says Theresa Racht, a partner in the law firm of Racht & Taffae. "That doesn't mean you don't let shareholders know in very general terms that you have your eye on certain projects and ways to finance them and what the overall cost would be."
She recommends being open with residents but not necessarily distributing documents. "If you're getting an engineering report, people need to know you have it. But you have no obligation to distribute it to shareholders. If your shareholders ask if you've done evaluations and have an engineering report, however, you need to tell them whether you have or not. If they ask to see it, you have to make a decision if you want to let them or not."
Don't Fan Residents' Suspicions
Racht warns boards should understand the repercussions. "If you say, ‘We're not going to tell you,' the immediate reaction is, ‘You're hiding something.'"
So what should you tell them? Notes Racht: "You can say, ‘Yes the board is working with the engineer and the managing agent, and we have a list of items that need to be addressed in the near future and in the distant future, but we have not done a rigid schedule of certain projects at certain times."
"I have [board-member] friends in buildings who say, ‘We don't want to tell the residents anything,'" says Gary Mindlin, co-op board president of the roughly 450-unit 150 West End Avenue, in the Lincoln Towers complex on Manhattan's Upper West Side, who takes the approach that if you educate your shareholders or unit-owners, you can stave off suspicions and problems. "At our meetings, we give a lot of information. You want to deliver it so that people are educated but not scared. The more you communicate, the better off you are — I really believe that."
Deran Cadotte, a former board president who has worked on capital plans at the 76-unit co-op at 250 Cabrini Boulevard in Manhattan's Hudson Heights, cautions that you have to "market" information to manage residents' expectations.
"When you reveal things at a shareholders' meeting, you are exposing the board's take on the priorities of future projects," he says. "Shareholders may have different opinions on those priorities once you open that door. I would recommend really cogent communication."
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