Paula Chin in Board Operations on May 17, 2019
There are four steps to running an annual meeting at a co-op or condominium that result in the election of a new board without unwelcome vituperation or litigation. The first two steps, as noted earlier this week, are distributing a proper meeting notice and collecting valid proxies. Today we look at the final two steps.
Step Three: Achieving a Quorum. New York law states that a quorum is achieved if fifty percent plus one of the co-op’s total shares are present, either in person or by proxy. Without a quorum, an election cannot be held. But because of owner apathy and a rise in absentee owners, boards are finding it increasingly difficult get a quorum.
“When that happens at a meeting, we take a 10-minute break and ask everyone to go knock on their neighbors’ doors,” says Andrew Brucker, a partner at the law firm Armstrong Teasdale. “A lot of buildings have floor captains do this, but spreading out the responsibility is even better, and when you’re close [to achieving a quorum], it very often works.”
If it doesn’t, boards can formally adjourn the meeting to a future date. “It’s a good idea to anticipate problems and have a specific day that you can announce then and there,” Brucker adds. “Otherwise, the law requires you to send out a whole new notice, which can be costly and time-consuming.” If a meeting is reconvened and the numbers still come up short, boards can call for a special session with the sole purpose of electing directors, or consider lowering the quorum to 33 percent, which Brucker says more buildings are now doing.
What can be done to get people to show up the next time? Some boards put a controversial item on the agenda, such as a lobby renovation or smoking ban, as a way of piquing interest and getting people to attend the meeting. Others offer enticements – raffling off gift cards, flat screen TVs, or turkeys at the holidays.
Failure to achieve a quorum is not necessarily a bad sign. “Some buildings don’t get them for decades,” says attorney Lisa Smith, a partner at Smith, Gambrell & Russell. “It can actually be a sign that yours is running smoothly.”
Step Three: Counting the Vote. An accurate vote count may be the single most critical – and volatile – ingredient in a co-op or condo’s annual election of directors. While it’s relatively easy to do in smaller buildings, boards at larger properties, especially when the election is contentious, must proceed with caution.
“Most managing agents show up with a laptop loaded with an Excel spreadsheet that can tabulate results with a click,” says Smith. “But even if the bylaws don’t require it, if someone requests it, you should appoint inspectors and have them sign an oath to properly execute their duties. I usually add a sentence about keeping votes confidential, and I tell boards to have inspectors from each faction – not because you need that many eyes but to give people peace of mind that nothing’s been rigged.”
Co-op boards should also do a close reading of their certificate of incorporation. “That’s the only way to know if your building has cumulative voting,” Brucker explains. “If there are three candidates, someone with 500 shares can cast 500 votes for each person or give all 1,500 to one person. A board can be counting incorrectly for years until the day comes when a shareholder catches the mistake and takes it to court.”
Above all, boards should not yield to pressure to declare the winners on the spot. “I had a case where an announcement was made at the meeting, and the manager realized the next day he had a dozen proxies he forgot to count,” Brucker says. “A notice of correction was sent out, but the law says results are official once they’re announced, even if a mistake was made.”
Short of hiring a company like Honest Ballot to run the whole process, the proper protocol, says Smith, is to “seal up the proxies and ballots, let the manager take them back to the office, do the count the next day, double- and triple-check it, and have inspectors certify the results. That buttons everything up and saves a lot of angst.”
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