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Q: My luxury condo building in Manhattan has fallen into disrepair, and the board of managers is thwarting efforts to improve it. Over the past 10 years, we’ve been unable to reach a quorum for the annual meeting, which has prevented any new candidates from joining the board or voting for any real changes. The board declares there’s a lack of quorum, but attendance is not taken. The president has been there since the board began, more than 35 years ago. Mandatory work is awarded to questionable contractors, and there have been rumors of impropriety. For example, the board distributed a memo announcing a $100 penalty for each piece of correspondence distributed within the building, such as fliers in public areas or under doors. Owners’ efforts to organize have been rebuffed. What can we do?
A: The board of managers has a fiduciary duty to all owners, and there are several avenues you can take to try to get better leadership. Whatever step you take, make sure that you adhere to your condominium’s bylaws and to state law to ensure a result that stands up to legal scrutiny.
Your bylaws must contain a provision, under New York’s Condominium Act, allowing unit owners to remove a board member, along with criteria for doing so. This is typically done through a special meeting, which can be called by a board president or via a petition signed by a certain percentage of unit owners.
Condominium boards’ decisions are almost always protected by the business judgment rule, which makes it “extremely difficult” for a unit owner to challenge the board in court, said Ronald H. Gitter, a real estate lawyer in Manhattan. For this reason, he said, calling a special meeting to remove a board member for violating the governing documents is likely your best option.
Boards are not protected by this rule if they act with gross negligence or in bad faith. “That might apply to the fines imposed for distributing communications to other residents about board conduct,” said Ruta Behrend, a partner at Tane Waterman & Wurtzel P.C.
You can ask for a list of contacts for unit owners, and communicate with them in the same method that the board does. (Keep in mind that boards do not want owners abusing the list.)
You can also file a lawsuit against the board, claiming that it has breached its fiduciary duty, but this would be a more expensive, lengthy process. For a potentially quicker result, you could ask a court to appoint a receiver to oversee building operations and expenses.
“It’s a good step toward preserving everyone’s investment in the building,” said Steven D. Sladkus, a partner at Schwartz Sladkus Reich Greenberg Atlas LLP in Manhattan.
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