One Co-op Recovers from a Board's Poisonous Lack of Transparency

Reformers to the Rescue

Roush, who used to work in private equity, started to ask questions. She was told the minutes of board meetings were not available, and the managing agent refused to discuss his conversations with Goldman. Her unease deepened, as well it should have — Goldman, who resigned from the board in May 2012, sued the co-op that year over the issue. He won the case when the court found that the co-op board had not been diligent and had simply accepted everything Goldman had to say about share-allocation.

For Goldman, says Roush, "disclosure was scant — that was the culture. We thought it was time for a change. New blood and new ideas invigorate a building." So in November 2012, in what they now call a "coup," Roush and five like-minded shareholders won election, ousting all former members but the one who had replaced Goldman.

The lack of timely and

transparent communication 

got the old board in trouble.

Shari Laskowitz, a real estate lawyer, was elected vice president. "We saw that something wasn't right," she says. "I don't think the former board members knew what was going on, or what their rights were. Everybody had questions about who knew what and when they knew it, and how the board allowed this to happen. As a lawyer, I've had experience with entrenched boards, and they're very difficult to [remove]. It takes a community effort. In our building, we had to enlist proxies and votes. People were waking up, and they were thinking maybe they needed to give their support to somebody new."

Jaunty Antoinette

The freshly minted board members got busy. They cleaned house with their professionals, hiring a new managing agent, attorney and accountant. They refinanced the mortgage, signing a 10-year loan agreement at 3.4 percent and securing a $500,000 line of credit. They are undertaking a conversion from an oil- to a gas-fired boiler, and are planning to install storage lockers in the basement to boost revenues. Every contract, from cable TV to the laundry room, is under review.

But perhaps the most important change is the arrival of that elusive thing called transparency.

"Timely and transparent communication [are] very important to this board," says Roush, now the president. "The lack of those things is what got the old board in trouble." To enhance transparency, the board uses BuildingLink — a web-based property management platform — to communicate news, track maintenance payments, and monitor package shipments. 

The new directors also demand candor from their professionals. "We're using high-integrity professionals who have some backbone," Roush says. "I want my legal counsel to tell me not to do something. I want my managing agent not to do something if it's shady."

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