Page 9 - Nevada Cooperator Winter 2020

NEVADACOOPERATOR.COM THE NEVADA COOPERATOR — WINTER 2020 9 YOU’LL LEARN SO MUCH YOUR HEAD COULD EXPLODE. (Our lawyers said we had to warn you.) LAS VEGAS CONVENTION CENTER — WEDNESDAY, APRIL 29, 10–3:30 FREE REGISTRATION: LV-EXPO.COM THE COOPERATOR EXPO 2020 WHERE BUILDINGS MEET SERVICES rivative action can be brought by an in- dividual or group of shareholders to force a new election is held and a new board is one community where there was a ‘coup’ the board to perform their fiduciary re- sponsibility under the community’s gov- erning documents. A good example of how and why this approach is used would be when a board handled a little differently (and of course ing systems. A large group of shareholders of directors doesn’t want to undertake a according to rules set forth in a given didn’t feel they were being heard by the large and or expensive project—like a ma- jor roof repair, for example—but the ma- jority of unit owners want the work done. from directors about removing other di- The derivative action would override the rectors. And while the chain of events and new directors they felt would helm the board’s preference and force them to act emotions that would lead to that level of project more effectively. The overall ef- in the manner desired by the community. Andrew Freedland, an attorney with to the question of board members giving the project even further. The new board Anderson 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 board to have groups that side one way or another. What’s great about most boards is that they are oddly numbered, having five or seven or nine members, avoiding deadlocks on votes.” The second method of dealing with an ineffective or unresponsive board is to remove and replace it—it’s a complicated process, but it can be done. “If sharehold- ers are unhappy with what a board is do- ing,” says Freedland, “I have seen recall elections. Shareholders or unit owners can call a special meeting as provided in a particular colleague the boot is straight- their bylaws. At that meeting board direc- tors can be removed and replaced.” Van Duyne says recall elections are “They can only be removed by sharehold- common enough in Nevada, as elsewhere. ers. But they can remove a director from then took an additional three years—for The rules regulating recalls fall under a specific position, say president or sec- the Nevada Real Estate Statutes. In some retary.” So board members can make an should have taken a year or two at most. cases, board members may be removed officer a non-officer via a vote—but that So in that case at least, the infusion of new through a meeting of the ownership, and doesn’t remove the board member from blood into the board had quite the oppo- the remaining board members may ap- point a replacement. Other times, the seat is left vacant until the next election, which are almost universally held annu- ally, so the seat won’t stay vacant for long. Goldman says the same is true in Mas- sachusetts. Condominium owners can “They will nitpick each other. When you call a special meeting, and the president call a meeting of the association and de- mand to hold new elections. They can air alize you live in a community, and when the board as a whole by a vote of the their grievances and hold a vote. If a ma- jority of owners vote to remove the board, elected—hopefully one that’s more ame- nable to listening to what the unit owners ers was unhappy with how the board had want. Actions within the board itself are a large project to replace one of the build- building or HOA’s governing documents). existing board, so they called for an elec- Freedland says he often gets questions tion, collected a large number of proxies, infighting might be complex, the answer fect of the change, however, was to stymie forward: “Directors can’t remove other ment involved with the project to that directors from a board,” says Freedland. point—then they announced they wanted the board entirely. Real Life Examples “Conflict can happen because people calls a board where the president was sus- just don’t jibe,” says Michele Schlossberg, pected of dishonest dealing. The rest of a property manager with Gumley Haft, the board asked him to step down—but a management firm in New York City. he refused. Ultimately, the co-op had to live in a condo or co-op, you have to re- people don’t it can become contentious.” Schlossberg describes a situation in on the board. A contingent of sharehold- handled the planning and management of and replaced three board members with members wanted to examine every docu- to start the project over from scratch. It a total of five—to complete a project that site of the desired effect. In another situation, Schlossberg re- was removed from both his position and shareholders. What Can a Manager Do? Schlossberg suggests that the best way to handle conflicts among board mem- bers—or among warring resident fac- tions—is to try to arrive at some sort of reconciliation between the two opposing groups, whether that’s in the community as a whole or on the board. “People want to be heard,” she says, and recommends that at the first board meeting after an election, it’s often very helpful to simply ask the minority what it is they want to see—what kind of changes they’re looking to effect by joining the board. It’s also cru- cial to understand what the shareholders want, and to remember that the board is there to govern everyone—not to cham- pion pet projects or to stick it to anyone who doesn’t necessarily share one’s opin- ions or priorities. Put simply, “The goal is to create a cohesive board,” says Schloss- berg, and the most important component of achieving that is a commitment to lis- ten and take others’ concerns seriously. Davidson shares a similar approach. “Identify solutions to each conflict,” he says. “Create rules for decision making. Then survey the board members. How do they rank the suggested solutions, ranging from ‘strongly agree’ to ‘strong- ly disagree’? Produce a summary of the results.” Davidson points out that in his experience, there is often nearly 100% agreement among board members, be- cause solutions are usually pretty simple. “If there are disagreements,” he says, “hold a discussion. And importantly, acknowl- edge areas of conflict to work toward a common solution. Once you have rules of the road, you can manage conflict.” “Dissention shouldn’t permeate every issue,” says Freedland. “Work it out and get on with it.” As Van Duyne says, and as she encourages her clients, “we’re all in this to- gether. If you don’t like what’s happening, run for the board and change it.” n AJ Sidransky is a staff writer/reporter with The Nevada Cooperator, and a published nov- elist. “Successful, functional boards need persons who work in tandem, work well as a team, are well organized, and have different areas of expertise to offer. Boards should openly and amicably communicate with all board members as a collective group.” — Robert Silversmith