Smart co-op and condo boards treat conflicts of interest – even the appearance of conflicts of interest – the same way they treat the bubonic plague. They want absolutely nothing to do with them.
The reason for this became apparent recently when a shareholder in an Upper East Side co-op sued his board over a disputed terrace repair. While digging through the co-op’s records, the aggrieved shareholder learned that the board had hired a roofing company owned by the board president’s brother-in-law – an arrangement that was not disclosed to shareholders. The co-op’s attorney quickly pointed out that the board president had recused himself from the vote to hire the contractor. But the appearance of a possible conflict of interest was impossible to ignore.
Two bills introduced recently in the state General Assembly by two Brooklyn legislators attempt to eliminate conflicts of interest in co-op and condo boards. Last week, bill S6652A was passed by the state Senate and returned to the Assembly in amended form for a vote. Introduced by Senator Martin Golden, the goal of the bill was to ensure co-op and condo boards of directors are aware of certain laws relating to conflicts of interest. It amends the existing Not-For-Profit Corporation Law by requiring annual reports be submitted to co-op shareholders, condo unit-owners, and the Attorney General, identifying all votes on contracts. A similar bill was introduced by Assemblyman Steven Cymbrowitz.
According to Deborah Koplovitz, an attorney at Anderson Kill: “This act, even if signed by the Governor, may not apply to a condominium, since those buildings are formed pursuant to the Condominium Act and not the Business Corporation Law,” she says. “Assuming the bill is signed, it appears to address oft-heard complaints about a lack of transparency in co-ops and condos, and may serve as a deterrent to interested director transactions – or at least provide more disclosure to owners. Since transparency helps to foster better governance and harmony among owners, a condominium may still want to provide this disclosure as well, both as a matter of good governance and to avoid any claims of non-compliance.”
To read the full article: Bills Seek to End Conflicts of Interest on Co-op and Condo Boards