Tuning Up Your Governing Documents

A co-op or condominium’s governing documents are akin to a car — every so often, you need to bring it into the shop to change the oil and look under the hood. Like a busy automobile owner who can’t go a day without a car or who has no time to sit in a repair shop’s waiting area, board directors who are besieged with other building-related issues and often put off servicing their building’s governing documents until it is too late and something breaks.

Below is a non-exhaustive, “Jiffy Lube” version of provisions that boards can consider when looking to ensure that their building’s governing documents are well-oiled and humming along.

1. Become E-Friendly

It’s 2023, and governing documents should be “e-friendly.” While the State legislature has now formally allowed for both co-ops and condominiums to conduct virtual meetings, thought should be given to allowing board meetings — and, depending on the size and demographics of the building, shareholder or unit-owner meetings — to be noticed by way of email, as opposed to regular USPS mail.

2. Banish Arcane Language

Your building’s bylaws most likely contain some arcane language when it comes to conducting annual meetings. For example, conducting an annual meeting pursuant to Robert’s Rules of Order is impractical and can easily be used to advance an obstructionist agenda. As for inspectors of election, it’s OK to have them, particularly where there may be a hotly contested election. However, it can be unproductive, unnecessarily burdensome and confusing to be wedded to an antiquated procedure for an election of inspectors. When it’s appropriate to have inspectors of election, a request for volunteers can be made at the beginning of the meeting. Finally, despite there being no legal requirement, most buildings’ bylaws contain a prescribed agenda for annual meetings. There is no reason for a board to be locked into a prescribed agenda that can then be challenged or cause the board to be criticized for not strictly following. Instead, boards should be able to tailor their agenda to the business that needs to be addressed at the meeting.

3. Stagger Board Elections

In my experience, bylaws that contemplate staggered boards (where not every board seat is up for election in a single year, and board members serve multiyear terms) result in the most productive boards, because there is very little chance of an entire turnover at once and there will be at least one board member with institutional knowledge of projects that are underway, recently completed or about to begin.

4. Embrace Mediation

Litigation — especially by serial litigants — is one of the largest drains of time and money for a building. Bylaws that contain language that a shareholder or unit-owner seeking to sue the building must (at the board’s option) first engage in nonbinding mediation are an effective guardrail against the commencement of litigation. Moreover, mediation is a useful — and often successful — tool to resolve disputes before they proliferate into time-consuming and expensive litigation. 

5. Fees: What and When

Boards should, within reason, be able to impose late fees and interest in connection with any monetary defaults by shareholders or unit-owners. Boards should also be empowered — again, within reason — to impose a transfer fee or flip tax, sublet/rental fees and alteration fees (over and above reimbursement of actual expenses). Perhaps more iimportant, when a board incurs attorney or other professional fees due to a default in a co-op proprietary lease or condominium bylaws, there should be unambiguous language providing for the recovery of those fees, as well as the recovery of fees for successfully defending a claim brought against the building by a shareholder or unit-owner. Governing documents should be checked to ensure there is clear language allowing the board to impose and collect these types of fees.

6. Protect Yourself

Being a board member of a New York City co-op or condominium has never been more challenging and complex. Individuals who volunteer their valuable time to serve on the board of their building are providing an immeasurable contribution to their community and should be protected by indemnity provisions that spell out how they would be reimbursed in the unlikely event they were personally sued and not provided with a defense by the building’s directors’ and officers’ liability insurance policy. An appropriate indemnity provision will articulate, among other things, the scope of indemnity available to board members; the method for determining a board member’s entitlement to indemnity; and the methodology for the advancement of indemnity-related expenses.

7. Clarify Who Can Own

Ownership of apartments by LLCs and trusts is more common than ever, and so long as a building has express language as to the requirements for these forms of ownership in its governing documents, problems and disputes can easily be avoided. 

8. Go Smoke-Free

There is no question that exposure to secondhand smoke is bad for your health. In addition, the odors that can spread from tobacco products and soon-to-be fully legalized cannabis can be unpleasant and bothersome. For these and other reasons, many buildings are amending their governing documents to prohibit smoking anywhere in the building, including inside apartments. These smoke-free provisions can include grandfathering or phase-in language to soften the blow for existing smokers that live in the building. 

9. Repair Responsibility

A thorn in the side of almost every board at one time or another is the hopelessly complex and often inconsistent language regarding insurance, and maintenance and repair obligations. Any board considering bringing their governing documents in for service should focus on ensuring that the documents are clear as to who — the shareholder or unit-owner or the co-op or condominium — is responsible for insuring which parts of an apartment and, likewise, who is responsible for repairing the apartment in the event of a casualty loss. This clarity will avoid all-too-frequent disputes regarding who is responsible for paying for what portion of apartment repairs in the event of a leak, flood, fire or other occurrence. 

10. Get Buy-In

These refinements are a small sample of potential updates that can be incorporated into governing documents that may be overdue for periodic servicing. Boards should also consider any unique characteristics of their building/community that would benefit from being incorporated into the governing documents. It must also be kept in mind that because changes to a building’s governing documents typically require a supermajority (i.e. 66% or two-thirds) of shareholder or unit-owner approval, it is critically important to approach any potential changes with a plan to obtain community buy-in. This often includes multiple pre-vote communications and/or town hall meetings to explain the proposed changes and why they will be beneficial. 

Robert Braverman is a principal and the managing partner at the law firm Braverman Greenspun.