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Habitat Magazine Insider Guide




Becoming a Board Member Yourself

Gerard J. Picaso in Co-op/Condo Buyers

Like every other commodity or person, buildings have reputations. Lawyers, accountants, managing agents and brokers who work in this industry all know the reputation of a building. If the board is not conducting itself properly, then the building is not being run properly. Prospective buyers often get wind of this, and a building's bad standing affects the price of its apartments. Just as significantly, decisions made by a dysfunctional board affects the quality of life of the residents and the value of their apartments.

My company was involved with a building in which the board president ran the whole show. He was impossible to work with: A series of engineers had quit various jobs, and the co-op had seen three different managers come and go in six years!

This means that, outside of the president, no one knew the history of the building. Every engineer and managing agent had to start at square one, which is costly and leaves these professionals without crucial background information. Board members with inquiries were often told, "We don't know. We will find out and get back to you." Everything took an extraordinary amount of time because we had to sift through several companies' records.

We resigned before the first year was finished because the president had ordered us not to follow the board's decision regarding the implementation of a much-needed security system. If there were a security breach, this decision exposed the board — and us — to potential liability. So the co-op turned around and hired another agent, who is probably still sorting through the records as he tries to figure out what is going on. This obviously is not good for the reputation of the building or its residents' quality of life.

Financial Fallout

The finances of a building are crucial for resales. We have seen boards that could not resolve their differences on the amount to raise the monthly carrying charges — and so they did nothing! The next year, after running a deficit, they had to double the increase. Savvy buyers understand this and are hesitant to buy into buildings with bad financial reputations.

Thankfully, dysfunctional boards and building are uncommon. But, if you think you are in one, or things seem to be going that way, how do you fix it? Some people say term limits effectively eliminate bad boards and bad board members. This may be true, but they can also eliminate good boards and good board members.

What's the alternative? Sometimes the only way to protect your investment is to get active in the governing of your building. This means attending every annual meeting and coming prepared with intelligent questions that are asked in a respectful, thoughtful manner. There is nothing worse than an owner standing up at a meeting, waving a bunch of papers and screaming questions and accusations. Even if such questions have merit, their substance gets lost by the presentation.

And while asking questions in an open forum is important, and can enlighten other owners to possible problems, the most effective way to change things is to change the board. You have this opportunity at every annual meeting. Find out who the problem board members are, and zero in on them. Get candidates who are qualified — including you — and who have a political bent.

Research the voting mechanism and take advantage of it. If the board is so horrible that you believe it cannot be saved, then get out your bylaws and find out how a special meeting of all owners can be called. Usually it requires a petition of at least 25 percent of the owners. In that way, you can force a new election.

Any of these courses of action will take a tremendous amount of time and energy on your part, as well as on the part of other owners. But in the end, if you can be successful, you have taken control of your destiny — and your investment.

Illustration by Danny Hellman

Adapted from Habitat February 2007. For the complete article and more, join our Archive >>

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