Q: My luxury condominium building in Manhattan is in disrepair, and the board of trustees is blocking efforts to improve it. For the past 10 years, we have been unable to reach a quorum for our annual general meeting, preventing new candidates from joining the board or voting on substantive changes. The board declares a quorum lacking, but attendance will not be accepted. The president has been on the board since its inception over 35 years ago. Mandatory work is being awarded to questionable contractors, and there are rumors of fraud. For example, the commission distributed a memo imposing a $100 fine for each communication distributed inside the building, such as flyers placed in public areas or under doors. The owners' efforts to organize were rejected. What can we do?
answer: Boards have a fiduciary responsibility to all owners, and there are steps they can take to ensure better leadership. Whatever action you take, be sure to comply with your condominium's bylaws and state law to ensure an outcome that stands up to legal scrutiny.
The bylaws should include a provision that allows unit owners to remove officers under New York Condominium Law, and the criteria for doing so. This is typically done through a special meeting called by the board chair or through a petition signed by a percentage of the unit owners.
Ronald H. Gitter, a Manhattan real estate attorney, said condominium boards' decisions are most often protected by the business judgment rule, which makes it “extremely difficult for unit owners to challenge boards in court.” “It's difficult,” he said. For this reason, he said the best option is likely to be to call a special meeting to remove directors who violate the governing documents.
You are not protected by this rule if the board acted grossly negligently or in bad faith. “This may also apply to fines imposed for distributing communications about board actions to other residents,” said Ruta Behrend, partner at Tane Waterman & Wurtzel PC. .
You can request a contact list of unit owners and contact them in the same way as the board. (Please note that the Board does not want owners to misuse the list.)
You can also sue the board for breach of fiduciary duty, but that is a more expensive and lengthy process. For faster results, you can ask the court to appoint a trustee to oversee the building's operations and expenses.
“This is a good step toward protecting everyone's investment in the building,” said Stephen D. Sladkas, a partner at Schwartz Sladkas Reich Greenberg Atlas LLP in Manhattan.
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