Time to Give Your Governing Documents a Tune-up?

Like the family car, co-op and condo governing documents need periodic tune-ups if you want to avoid costly breakdowns in relations between boards and residents. The “mechanic” guiding these tune-ups will be the board’s attorney. Here’s a check list:

Bail on snail mail. The state Legislature has now allowed for both co-ops and condominiums to conduct virtual meetings, and many are doing so. It might be time to start sending notices of board meetings — and, depending on the size and demographics of the building, shareholder or unit-owner meetings — by email, as opposed to regular USPS snail mail.

Banish outdated language and procedures. Your building’s bylaws most likely contain some arcane language when it comes to conducting annual meetings. For example, requiring the use of Robert’s Rules of Order is impractical and can easily be used to advance an obstructionist agenda. As for inspectors of election, it’s OK to have them, particularly where there is a hotly contested election. However, they can be unproductive, unnecessarily burdensome and confusing. When it’s appropriate to have inspectors, ask for volunteers at the beginning of the meeting. Finally, most buildings’ bylaws contain a prescribed agenda for annual meetings, but that’s unnecessary. Instead, boards should be able to tailor their agenda to what needs to be addressed at the meeting.

Stagger board terms. In my experience, bylaws that stagger board terms (where not every board seat is up for election in a single year, and board members serve multi-year terms) result in the most productive boards. There is no chance of an entire turnover at once, and there will always be at least one board member with institutional knowledge. 

Embrace mediation. Litigation is one of the largest drains of time and money for a co-op or condo board. Bylaws should contain language that a shareholder or unit-owner seeking to sue the building must (at the board’s option) first engage in nonbinding mediation. Mediation often resolves disputes before they escalate into time-consuming and expensive litigation.

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Be free to recoup fees. When a board incurs attorney or other professional fees due to a default in a co-op proprietary lease or condominium bylaws, there should be unambiguous language providing for the recovery of those fees, as well as the recovery of fees for successfully defending a claim brought against the building by a shareholder or unit-owner.

Protect yourself. Individuals who volunteer their valuable time to serve on their board should be protected by indemnity provisions in the governing documents that spell out how they would be reimbursed in the unlikely event they are personally sued and not provided with a defense by the building’s Directors’ & Officers’ liability insurance policy. An appropriate indemnity provision will articulate, among other things, the scope of indemnity available to board members; the method for determining a board member’s entitlement to indemnity; and the methodology for the advancement of indemnity-related expenses.

Clarify responsibility for repairs. Boards should make sure that the governing documents are clear as to who — the shareholder or unit-owner, or the co-op or condominium — is responsible for insuring which parts of an apartment and, likewise, who is responsible for repairing the apartment in the event of a casualty loss. This clarity will avoid all-too-frequent disputes regarding who is responsible for paying for what portion of apartment repairs in the event of a leak, flood, fire or other occurrence. 

Get buy-in. Since changes to a building’s governing documents typically require approval by a two-thirds supermajority of shareholders or unit-owners, it is critically important to approach any potential changes with a plan to obtain community buy-in. This often includes multiple pre-vote communications and/or town hall meetings to explain the proposed changes and why they will be beneficial.

Robert Braverman is a principal and the managing partner at the law firm Braverman Greenspun.