A Board Too Far When Boards Overstep Their Authority

Having apathetic leadership is a problem in some buildings, though a board that oversteps the boundaries of its power or invades the privacy of residents also can be a headache. An informed board, however, should be less apt to go beyond its authority and cause trouble for the community they serve.

Keeping a board on-task and working within the parameters of its authority is not just about avoiding trouble, but also a question of lessening harm. People who are living in close proximity to each other are bound to occasionally rub each other the wrong way and tensions shouldn’t be increased by imprudent actions taken by the board. An out-of-touch board won’t begin to recognize this fact, but an educated board will never forget it.

Reading Up

All association board members and residents should know about the legal and ethical boundaries under which boards operate. Understanding those parameters will help board members to know when to exercise caution, consult their professionals, and more. Not knowing the limits of the boundaries of the board’s power, though, can lead to trouble, and even unnecessary lawsuits.

Board members are volunteers who learn, while doing their volunteer job, how to manage a community. But like any occupation, one can handle it better with some research. To start, board members should familiarize themselves with the community’s bylaws and any other documents which govern the board’s authority. Some lawyers who serve community associations and HOAs will offer a tutorial as a service to help board members become familiar with the bylaws and other rules governing the community, giving an overview of board members’ duties.

Boards have a fiduciary responsibility to work to protect the property and people in the community, and the board cannot give itself the right to do things that aren’t proscribed in the community’s governing documents. Part of that fiduciary responsibility involves much more than maintaining common property of the community—it’s also about maintaining peace and order, maintaining insurance, making rules for the community and other managerial duties.

“Board members have an obligation to manage and govern the affairs of the association, or govern the corporation,” says Wendell Smith, an attorney and partner with Greenbaum Rowe Smith & Davis, LLP, a firm with locations in Roseland and Iselin, New Jersey.

At first glance, it might seem that the powers of a board of an association are the same as those of a co-op board. While the board’s obligation to manage maintenance, staff, insurance and other tasks are similar regardless of which framework the community was established on, the latitude of board powers can be dissimilar. In a condo association, the rules for how an owner can use his or her unit are in the master deed or declaration, and can only be changed by a vote of the owners. In a co-op (of which there are very few in Nevada) the board can often adopt rules without a vote of the resident shareholders.

“It is a major distinction. Sometimes boards go off the tracks,” says J. David Ramsey, a shareholder attorney with the Morristown, New Jersey-based community association law firm of Becker & Poliakoff. “You only want to have a rule that deals with the problem—you don’t want to be killing a fly with an atom bomb.”

In a co-op setting, the cooperative corporation owns the units and leases them under a proprietary lease to the shareholders, who own shares in the corporation instead of real property. Partly because of this, a co-op board has more leeway in determining who can and cannot live in the community than a condo, HOA, or community association.

Knocking First

A board must work to ensure the safety of the property and people in the community, but how many security measures are too much? The public has shown a willingness to accept measures including CCTV, logbook sign-ins and security guards in lobbies and entry areas, though having a visitor twice show his or her identification to guards and then provide a social security number could be considered onerous, depending upon the style of the community such measures are intended to protect.

And while a logbook where visitors must sign in and out of a community could be seen by many folks as an innocuous practice, that view might depend upon how the logbook information is handled. Who has access to it? Can a board member come along and page through the logbook, and inadvertently (or intentionally) find out information about a resident who’s had repeated visits from a well-known local oncologist, or from an attorney who specializes in association disputes? To have such information about a neighbor might be considered by the neighbor to be an invasion of privacy.

“It gets to where some people know who’s coming and going. I think that’s a bit overboard,” says Scott Piekarsky, an attorney and managing member of the law firm of Piekarsky & Associates, LLC, based in Wyckoff.

Piekarsky believes having a master key for the community is a good idea and one that perhaps should be included in the governing documents. That way, if there’s smoke or water coming from a unit, or if nobody’s answering the apartment’s door for an extended period, management can quickly gain entrance to help, he says.

Privacy is a serious matter, and the personal information of residents must not be shared by board members. Many industry insiders say never publish personal information such as a list of which residents are in arrears with maintenance fees, since it could be cause for a slander lawsuit. Having the wrong person’s name on such a list, or the incorrect amount next to a person’s name, could make the board and the community liable.

“Most attorneys would advise against posting that information,” Smith says.

Often the bylaws of a community will state something like “the board of trustees shall have all powers afforded in the bylaws.” While such phrasing can give the impression of a general mandate under which the board is free to act, it isn’t so. Courts have been reluctant to approve board action that’s based on general language in bylaws, says Robert C. Griffin, a partner at the law firm of Griffin Alexander P.C., based in Randolph. “Courts have decided all actions of a board must be reasonable. If you can’t establish that your actions were reasonable, it will not be backed up in court,” he says.

Common sense is needed when board members are enacting new rules, but others in the building must use their heads, too. Residents don’t expect nosy neighbors intruding on the logbook to scrutinize their visitors, nor do they want others poking around their property. But according to a community’s bylaws, in certain cases, such as an emergency, building staff can demand entrance into an apartment or unit and even get the fire department to break down the door to get in if needed.

Building workers have a right to enter a unit to fix problems such as plumbing leaks, electrical problems and other urgent maintenance issues that need to be addressed inside the home. Usually the unit owner is given at least a day of advance notice, but emergency admittance also can be required.

Sometimes, odors coming from a unit are signs of trouble behind closed doors. In communities with a lot of retired people, a resident with dementia or some other malady night lose control of his or her faculties, creating an unhealthy and foul-smelling mess inside the unit. Finally, the stench creeps into the hallway and adjoining units and everyone is complaining—until the building’s management must get help for the sick resident, who’s steadfastly refused repeated management offers of help.

Residents operating businesses out of their units also can be problematic. Cases of residents doing commercial cooking in their units or even raising dozens of chinchillas for sale are well-known, but nonetheless similar cases still continue to occur. In such instances, the health department in the local municipality can be the building management’s best ally, since health officials can issue violations and shut down illegal activities, Griffin says.

Just as residents expect to be safe and secure in their own unit, they also presume that their personal information held by the building will be kept confidential and secure. Such data should be kept locked up and password protected, experts recommend.

Piekarsky likes to have members of boards he represents sign a confidentiality agreement to not share other residents’ personal data. “We try to make people understand it’s private and personal information,” he says.

Seeking Advice

When it comes to protecting the life and limb of those in the community, it can seem like there is no limit to what can be done, at least that is, with regard to what is expected of a building’s management. If board members know of a foreseeable harm that could be fixed on their properties, they must have it fixed, for themselves and for all of those who live in and frequent the place.

One such building community found itself in some trouble a few years back, according to Ramsey. In this case, the 40-year-old high-rise, leaking severely, was at risk of bricks falling off of the building and hurting people, so the board decided to act. They approved a $7 million project to do the repairs. They didn’t realize the bylaws said projects that exceed $50,000 required a vote by owners and approval by two-thirds of them, before the work could proceed. Some owners contested the $7 million project.

“The board was put in a very tough situation,” Ramsey says. “This building had been leaking for years.”

With the right advice from legal counsel, a competent association manager, or both, the aforementioned board could have avoided the hassle of a lawsuit. All they needed to ask consultants such as their lawyer and accountant was: do we need to have a vote of all the owners to approve this? Such a question would elicit the right response and ensure the board did the right thing. But they failed to seek the help of their professional consultants, as is so often the case when a board makes a bad decision.

While it’s one thing to inadvertently flout rules because you didn’t know they exist (though that is no excuse if you’re a board member), creating a new rule for the community that is bound to fail also is a waste of time.

In this second case involving Garrison Apartments in Eatontown, retirees controlling the community’s board, passed a rule saying that any resident who’d sit in the lobby by the door could be credited $25 monthly for helping to provide a lower-cost security option for the apartment units. However, others who didn’t do so would be charged the same amount monthly as in an administrative fee or penalty.

The problem with this security solution for the cash-strapped building was that the people on the board would sit around the lobby drinking coffee all day anyway, and were giving themselves a credit for doing so, while penalizing others.

New York attorney Steven Wagner of Porzio, Bromberg & Newman P.C. (which also has locations in New Jersey and Massachusetts), argued the case on behalf of the residents not interested in working the security detail. “I argued that they didn’t have the right to treat shareholders unequally… I won on a technicality,” he says.

The upshot: the board was allowed to continue to pay the $25 stipend, but no longer able to charge those who didn’t do any “security watch” shifts. Again, this conundrum might’ve been avoided entirely if the board members had sought out and heeded the advice of counsel. Maybe it’s an American inclination to go it alone, or a lack of awareness of the gravity of the issues with which the board is dealing, or who knows what, but sometimes board members forget that their consultants are there to advise them. “Look to your professionals, your consultants,” Smith says.

Jonathan Barnes is a freelance writer and frequent contributor to The New Jersey Cooperator.

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