One of the unique aspects of life in a condo community is that a building or HOA is in many ways a microcosm of the larger world outside. It can suffer from the same factionalism and partisan bickering as any political entity, only on a much smaller, more intimate—and therefore potentially more damaging—scale. Conflict and divisions in condo communities can and often do bleed into the community’s administration: the manager and board of directors. Even a seemingly minor conflict can upend a residential community if it’s not dealt with diplomatically—so boards and managers must be prepared to step up, step in, and do their part to defuse such issues before they turn into something worse.
Michael Davidson is the president of BoardCoach.com, a New York City-based company that specializes in nonprofit board development and management support, including coaching. Davidson explains that board members of nonprofit entities (including condo and homeowners associations) have three main duties to which they must adhere: “The duty of care, the duty of loyalty, and the duty of obedience.”
With regard to the first, the duty of care, “Board members must basically understand what’s going on in terms of the building,” Davidson says, adding that their primary responsibility is to make sure the property is well and effectively managed.
The second duty, the duty of loyalty, “requires adherence to conflict of interest obligations.” In simple terms, that means that a board member must put the community’s welfare before their own. A good example would be that if your brother-in-law owns a roofing company, you shouldn’t recommend him for roof repairs to the building. In the more abstract sense, Davidson points out that adherence 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 member presumably owns a unit, and may make decisions based on what may benefit them, but not their neighbor.
“While condo boards represent nonprofit 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 carry a heavy fiduciary responsibility.” An example 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 understand, 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,” explains 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, functional boards need persons who work in tandem, work well as a team, are well organized, 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 decision-making and educates the ownership. Sometimes a board may have to make decisions that are unpopular with the community; [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 community. Get them on a committee. Let them piece together a solution to their problem and make a recommendation to the board.” After all, the view may be different from the inside.
Howard Goldman is a partner with Goldman & Pease, a law firm located in Needham, Massachusetts. He represents numerous condominium associations, and says that factionalism happens all too easily when “there is a controlling group on the board, and those not in agreement feel out of control and frustrated. Often, those in the latter role feel disenfranchised, and that no one is listening to them.”
Goldman says there are two potential approaches to getting controlling board members to listen. One is to take what’s called a ‘derivative action,’ which is basically a lawsuit brought by a corporation shareholder against the directors, management, and/or other shareholders of the corporation for a failure to uphold their duty to the corporation as a whole. In the world of condominium ownership, a derivative action can be brought by an individual or group of unit owners to force the board to perform their fiduciary responsibility under the community’s governing documents.
A good example of how and why this approach is used would be when a board of directors doesn’t want to undertake a large and/or expensive project—like a major roof repair, for example—but the majority of unit owners want the work done. The derivative action would override the board’s preference and force them to act in the manner desired by the community.
Andrew Freedland, an attorney with 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 shareholders are unhappy with what a board is doing,” says Freedland, “I have seen recall elections. Shareholders or unit owners can call a special meeting as provided in their bylaws. At that meeting board directors can be removed and replaced.”
Van Duyne says recall elections are common enough in Nevada, as elsewhere. The rules regulating recalls fall under the Nevada Real Estate Statutes. In some cases, board members may be removed through a meeting of the ownership, and the remaining board members may appoint a replacement. Other times, the seat is left vacant until the next election, which is almost universally held annually, so the seat won’t stay vacant for long.
Goldman says the same is true in Massachusetts. Condominium owners can call a meeting of the association and demand to hold new elections. They can air their grievances and hold a vote. If a majority of owners vote to remove the board, a new election is held and a new board is elected—hopefully one that’s more amenable to listening to what the unit owners want.
Actions within the board itself are handled a little differently (and, of course, according to rules set forth in a given building’s or HOA’s governing documents). Freedland says he often gets questions from directors about removing other directors. And while the chain of events and emotions that would lead to that level of infighting might be complex, the answer to the question of board members giving a particular colleague the boot is straightforward: “Directors can’t remove other directors from a board,” says Freedland. “They can only be removed by shareholders. But they can remove a director from a specific position, say, president or secretary.” So board members can make an officer a non-officer via a vote—but that doesn’t remove the board member from the board entirely.
Real Life Examples
“Conflict can happen because people just don’t jibe,” says Michele Schlossberg, a property manager with Gumley Haft, a management firm in New York City. “They will nitpick each other. When you live in a condo or co-op, you have to realize you live in a community, and when people don’t it can become contentious.”
Schlossberg describes a situation in one community where there was a ‘coup’ on the board. A contingent of shareholders was unhappy with how the board had handled the planning and management of a large project to replace one of the building systems. A large group of shareholders didn’t feel they were being heard by the existing board, so they called for an election, collected a large number of proxies, and replaced three board members with new directors they felt would helm the project more effectively. The overall effect of the change, however, was to stymie the project even further. The new board members wanted to examine every document involved with the project to that point—then they announced they wanted to start the project over from scratch. It then took an additional three years—for a total of five—to complete a project that should have taken a year or two at most. So in that case at least, the infusion of new blood into the board had quite the opposite of the desired effect.
In another situation, Schlossberg recalls a board where the president was suspected of dishonest dealing. The rest of the board asked him to step down—but he refused. 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 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 crucial to understand what the shareholders want, and to remember that the board is there to govern everyone—not to champion pet projects or to stick it to anyone who doesn’t necessarily share one’s opinions or priorities. Put simply, “The goal is to create a cohesive board,” says Schlossberg, and the most important component of achieving that is a commitment to listen 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 ‘strongly disagree’? Produce a summary of the results.” Davidson points out that in his experience, there is often nearly 100% agreement among board members, because solutions are usually pretty simple. “If there are disagreements,” he says, “hold a discussion. And importantly, acknowledge 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 together. If you don’t like what’s happening, run for the board and change it.”
A J Sidransky is a staff writer/reporter with CooperatorNews, and a published novelist.