Page 6 - CooperatorNews Las Vegas Fall 2021

6 COOPERATORNEWS NEVADA— FALL 2021 NEVADA.COOPERATORNEWS.COM herence to this duty is less clearly defined in a residential association than it may be in other not-for-profit organizations, because in a residential context, every board mem- ber presumably owns a unit, and may make decisions based on what may benefit them, but not their neighbor. “While condo boards represent nonprof- it corporations and associations, they are, at their core, somewhat different from non- residential nonprofits,” he says, “because the board members are investors or owners in the nonprofit, and their board positions car- ry a heavy fiduciary responsibility.” An ex- ample might be voting to permit short-term rentals. Doing so might provide a particular board member with additional income, but their neighbor(s) might not want strangers parading through the property. Both have vested interests, but those interests might not always align seamlessly. The third duty incumbent upon board members—the duty of obedience—is of the most importance for co-op and condo board members. It calls upon them to un- derstand, fairly enforce, and personally abide by the governing documents, policies, and protocols of their community. “The members of the board owe a duty to keep within the powers of the corporation and within those of the board of directors,” ex- plains Davidson, adding that “the problem is that co-op boards are very different from other nonprofit boards in that everyone on the board has a personal interest in every issue. This makes them inherently more conflict-prone.” When it comes to upholding these three administrative pillars, “successful, func- tional boards need persons who work in tandem, work well as a team, are well orga- nized, and have different areas of expertise to offer,” says Robert Silversmith of the New York City-based Silversmith & Associates Law Firm, PLLC. “Boards should openly and amicably communicate with all board members as a collective group.” The Reality of Condo Community Conflict Sheila Van Duyne is the principal of the Van Duyne Law Group located in Reno. She has seen many examples of factionalism in condominium and HOA communities, and agrees that transparency is the best way to avoid the problem. “If you are on the board, you have to bring people into the process. The key is transparency, which justifies de- cision-making and educates the ownership. Sometimes a board may have to make deci- sions that are unpopular with the commu- nity; \[residents\] may hate the decision, but the board had no other choice. They may have been between a rock and a hard place.” Van Duyne further suggests that “one approach to defusing the situation is to get those homeowners who are dissatisfied to get involved in the governance of the com- munity. Get them on a committee. Let them mon enough in Nevada, as elsewhere. The three board members with new directors piece together a solution to their problem rules regulating recalls fall under the Ne- and make a recommendation to the board.” vada Real Estate Statutes. In some cases, fectively. The overall effect of the change, After all, the view may be different from the board members may be removed through a however, was to stymie the project even inside. Howard Goldman is a partner with ing board members may appoint a replace- Goldman & Pease, a law firm located in ment. Other times, the seat is left vacant project to that point—then they announced Needham, Massachusetts. He represents until the next election, which is almost uni- numerous condominium associations, and versally held annually, so the seat won’t stay scratch. It then took an additional three says that factionalism happens all too eas- ily when “there is a controlling group on the board, and those not in agreement feel out sachusetts. Condominium owners can call at most. So in that case at least, the infusion of control and frustrated. Often, those in a meeting of the association and demand to of new blood into the board had quite the the latter role feel disenfranchised, and that hold new elections. They can air their griev- no one is listening to them.” Goldman says there are two potential ap- proaches to getting controlling board mem- bers to listen. One is to take what’s called a fully one that’s more amenable to listening asked him to step down—but he refused. ‘derivative action,’ which is basically a law- suit brought by a corporation shareholder against the directors, management, and/or dled a little differently (and, of course, ac- other shareholders of the corporation for a cording to rules set forth in a given build- failure to uphold their duty to the corpora- tion as a whole. In the world of con- dominium own- ership, a deriva- tive action can be brought by an in- dividual or group of unit owners to force the board to perform their fiduciary respon- sibility under the community’s governing docu- ments. A good ex- ample of how and why this approach is used would be when a board of directors doesn’t want to undertake a large remove other directors from a board,” says of achieving that is a commitment to listen and/or expensive project—like a major roof Freedland. “They can only be removed by and take others’ concerns seriously. repair, for example—but the majority of shareholders. But they can remove a direc- unit owners want the work done. The deriv- ative action would override the board’s pref- erence and force them to act in the manner an officer a non-officer via a vote—but that survey the board members. How do they desired by the community. Andrew Freedland, an attorney with An- derson Kill, a law firm based in New York, agrees that there are often factions in co-op boards and buildings. “It’s not unusual for a just don’t jibe,” says Michele Schlossberg, often nearly 100% agreement among board board to have groups that side one way or a property manager with Gumley Haft, a members, because solutions are usually another. What’s great about most boards is management firm in New York City. “They pretty simple. “If there are disagreements,” that they are oddly numbered, having five will nitpick each other. When you live in a he says, “hold a discussion. And important- or seven or nine members, avoiding dead- locks on votes.” The second method of dealing with an can become contentious.” ineffective or unresponsive board is to re- move and replace it—it’s a complicated pro- cess, but it can be done. “If shareholders are board. A contingent of shareholders was on with it.” As Van Duyne says, and as she unhappy with what a board is doing,” says unhappy with how the board had handled encourages her clients, “we’re all in this to- Freedland, “I have seen recall elections. the planning and management of a large gether. If you don’t like what’s happening, Shareholders or unit owners can call a spe- cial meeting as provided in their bylaws. tems. A large group of shareholders didn’t At that meeting board directors can be re- moved and replaced.” Van Duyne says recall elections are com- meeting of the ownership, and the remain- vacant for long. Goldman says the same is true in Mas- ances and hold a vote. If a majority of own- ers vote to remove the board, a new election a board where the president was suspected is held and a new board is elected—hope- to what the unit owners want. Actions within the board itself are han- ing’s or HOA’s governing documents). Freedland says he often gets questions from directors about removing other between the two opposing groups, whether directors. And while the chain board. “People want to be heard,” she says, of events and and recommends that at the first board emotions that would lead to helpful to simply ask the minority what it that level of in- fighting might be complex, the board. It’s also crucial to understand what answer to the the shareholders want, and to remember question of board that the board is there to govern everyone— members giving not to champion pet projects or to stick it to a particular col- league the boot is opinions or priorities. Put simply, “The goal straightforward: is to create a cohesive board,” says Schloss- “Directors can’t berg, and the most important component tor from a specific position, say, president “Identify solutions to each conflict,” he says. or secretary.” So board members can make “Create rules for decision making. Then doesn’t remove the board member from the rank the suggested solutions, ranging from board entirely. Real Life Examples “Conflict can happen because people points out that in his experience, there is condo or co-op, you have to realize you live ly, acknowledge areas of conflict to work to- in a community, and when people don’t it ward a common solution. Once you have Schlossberg describes a situation in one community where there was a ‘coup’ on the sue,” says Freedland. “Work it out and get project to replace one of the building sys- feel they were being heard by the existing board, so they called for an election, collect- ed a large number of proxies, and replaced they felt would helm the project more ef- further. The new board members wanted to examine every document involved with the they wanted to start the project over from years—for a total of five—to complete a project that should have taken a year or two opposite of the desired effect. In another situation, Schlossberg recalls of dishonest dealing. The rest of the board Ultimately, the co-op had to call a special meeting, and the president was removed from both his position and the board as a whole by a vote of the shareholders. What Can a Manager Do? Schlossberg suggests that the best way to handle conflicts among board members— or among warring resident factions—is to try to arrive at some sort of reconciliation that’s in the community as a whole or on the meeting after an election, it’s often very is they want to see—what kind of changes they’re looking to effect by joining the anyone who doesn’t necessarily share one’s Davidson shares a similar approach. ‘strongly agree’ to ‘strongly disagree’? Pro- duce a summary of the results.” Davidson rules of the road, you can manage conflict.” “Dissention shouldn’t permeate every is- run for the board and change it.” n A J Sidransky is a staff writer/reporter with CooperatorNews, and a published novelist. MANAGING CONFLICT continued from page 1 “If you are on the board, you have to bring people into the process. The key is transparency, which justifies decision- making and educates the ownership.” — Sheila Van Duyne