NEW YORK CITY

On several occasions boards have found themselves saddled with directors whose conduct, attitude and lack of professional understanding have made it difficult for the board to take care of business. I have found that there is no single way to deal with these problems. The New York State Business Corporation Law merely provides requirements for disclosure of conflicts of interest and methods to void contracts, but the issues of the obnoxious, ineffective, counterproductive director rarely rises to the level contemplated by the law.

Whether it's among condo or co-op board members struggling to reach a decision, or between a board and the unit-owners or shareholders over the direction of the condominium or cooperative, it's often not easy to reach a middle ground and find a practical solution. In this latest installment of our "Teachable Moments" series, a trio of veteran management executives relate three short, real-life stories of how boards confronted with conundrums were able to resolve their differences and keep their buildings moving forward. 

Budgets, believe it or not, are living, breathing things. They're not etched in stone, and sometimes you can move components and budget lines like chess pieces in which the right piece at the right time moving the right way can make a pawn a queen. Think we're being overly metaphorical? Well, just ask these two experienced and utterly practical and pragmatic property managers, as they describe how they stepped in and moved those pieces and gave condominium and co-op boards some much-needed breathing room. Because not only are budgets living, breathing things, but but so are our buildings.

Lately, a number of longstanding Manhattan co-ops have been approached by brokers on behalf of wealthy persons who would like to buy the building and turn it into a single-family residence. Think of a four-unit building for which a buyer would be willing to pay $12 million. Three million dollars for each shareholder sounds pretty good. Or actually, maybe not.

First of all, there would be sizable transaction costs. The transfer taxes alone would be more than $360,000. For the sake of simplicity, let's assume a total of $500,000, thus leaving $11.5 million for shareholders to walk away from the table with. And then what else?

Cooperative and condominium boards of directors should ensure that appropriate corporate governance policies are in place and periodically reviewed by your attorneys. In particular, this means looking into policies for conflicts of interest, code of ethical conduct, document retention/destruction policies and risk management in your accounting procedures. Co-ops should have written policies regarding admissions, and both co-op and condo boards should do so with those regarding renovations, parking, pets and subletting. Finally, you should periodically review bylaws and house rules.

By doing so, many legal problems can be avoided. Here are some additional tips:

A five-year capital plan is an important tool co-op boards and condominium associations need in order to move their building forward in a cohesive, strategic way that optimizes the resources at hand. Trouble is, once you put something in writing, your shareholders and unit-owners don't always understand that real life sometimes gets in the way: The economy plunges, and banks won't give you the loan you need; you want to install a gym, but heavy snow and unseen longtime damage makes your garage roof cave in. You know how it goes. So with residents ready to pounce, should you share the plan with the shareholders/unit-owners?

Maybe you're dealing with the ever-present danger of roof and terrace leaks, which will eventually infect the rest of the building's structure. Maybe it's about putting the brakes on plans for a roof deck with a barbecue grill until an engineering report says its OK and all the winterizing, upkeep, staff involvement and house rules are addressed. Either way, roof and terrace issues can pile up all the way to the sky. Three veteran property managers give cando and co-op boards some of their own real-life experiences, and how a board undergoing the same would do well to learn from these examples.

At a 26-unit co-op in Tribeca that he manages, Timothy C. Grogan, president of Grogan & Associates, reviews the construction contract when a buyer does a board-approved apartment alteration, makes sure the security deposit is paid, and checks that all insurance and Department of Buildings filings are in order and that periodic inspections by the building's engineer or architect are performed on time. For this, he's paid a $450 fee by the shareholder whose apartment was under renovation. Should he be?

A reader asks: How do you deal with a bylaw provision that doesn’t include "life partners"?

The facts in this particular instance are that a co-op shareholder wants to give some of her shares to her life partner. The proprietary lease limits the occupancy of apartments to certain listed family members — not including life partners. The bylaws of the corporation provide that transfer of shares must be for the entire amount of shares —  no partial transfers. Does the bylaw provision violate the shareholder's right of alienation of her shares and is the bylaw provision enforceable?

Virtually all cooperative and condominium buildings in New York City at some point will be required to perform façade work to repair damages, and when such time arises, they must enter into agreements with contractors and other professionals. Here are essential provisions that should be included in agreements with contractors and architects.