LEGAL TALK

Serving on your co-op or condo board can be a terrific experience, but it can turn into a personal nightmare if you or your board acts improperly. There are many legal protections, however, and Geoffrey Mazel, partner at Hankin & Mazel, provides an overview of what they are and the precautions you need to take. Habitat’s Emily Myers conducts the interview.

Key Takeaways for Board Directors:

1. Basic Protections
    • Board members are protected through multiple layers including NY State statute, case law, and co-op bylaws
    • The Business Corporation Law provides indemnification for board members
    • The Business Judgment Rule offers protection when acting within authority, in good faith, and following proper procedure

2. When Protection May Not Apply
    • Intentional wrongdoing or acts without authority
    • No-bid contracts without proper board approval
    • Discrimination against protected classes
    • Conflicts of interest that aren't properly disclosed
    • Actions that violate the proprietary lease

3. Best Practices for Avoiding Liability
    • Hold proper board meetings with minutes and formal votes
    • Consult legal counsel before making sensitive decisions
    • Disclose any conflicts of interest and recuse when necessary
    • For purchaser rejections, ensure:
        - Full board review and vote (not just committee approval)
        - Documentation of legitimate reasons for rejection
        - Proper minutes and record-keeping

4. Potential Consequences
    • Personal financial liability
    • D&O insurance may defend but not indemnify in certain cases
    • Punitive damages in discrimination cases aren't covered by insurance