Why Bother to Keep Meeting Minutes? Seriously: Some Boards Ask. Here's Why

Even if the BCL didn't apply, notes attorney Geoffrey Mazel, a partner at Hankin & Mazel, "Who in their right mind would advise a board not to keep minutes?" In short, it's your fiduciary duty. If you don't have a record of your meetings, says Abbey F. Goldstein, a partner in Goldstein & Greenlaw, "the technical term for that is that you're f-----."

Buy Bye

Why? Because potential buyers sometimes request minutes, for example. "That sometimes wakes up the board into thinking, 'Hey, we need to do this or we could lose a sale,'" says Goldstein.

"As an attorney, you look at the lack of minutes, and you wonder how the place is being run," observes Theresa Racht, a partner in the law firm of Racht & Taffae. "If a buyer's attorney can't find out anything about the building, they're going to tell their client to walk away."

And if you lose sales because you have no minutes, the shareholders might turn ugly. "If they feel that the absence of minutes is affecting sales, they get concerned, and they can ask, 'What kind of ship are we running?' If the items needed to do due diligence are unavailable, that speaks volumes about the building," says attorney Ira S. Nesenoff, managing partner of Nesenoff & Miltenberg. "Are people not taking their roles seriously enough?"

Courting Trouble

The failure to have minutes can hurt in litigation. Explains Goldstein: "Every court is going to require minutes, so their absence reflects negatively on the board."

"It may be hard to collect on arrears [or flip taxes]," adds Steve Wagner, a partner at Porzio, Bromberg & Newman. "A smart attorney can challenge the board and say, 'Where was it decided? Show me where it was established in the minutes.' If someone's breaking a rule, how do you show there is a rule? If it's not in the minutes, it can be challenged."

"If the board ever got sued about a decision it made," agrees Racht, "and needed to produce minutes to show how the decision was arrived at, they wouldn't be able to prove it."

Wagner points to the case of a co-op board caught with its minutes down, at 425 East 50th Street. The seven-unit, self-managed buildingapparently had no minutes and, consequently, lost a dispute over the imposition of a flip tax.

Then there was a large outer-borough co-op represented by Goldstein that passed a resolution forbidding washing machines in apartments. One shareholder refused to remove the machine and challenged the board in court, saying the rule was never properly adopted. Although the directors testified that they had adopted the resolution, they couldn't produce minutes to back up their claims. They lost.

Memories. All Alone in the Board Room

Finally, minutes are the institutional memory that allows you to govern. New boards should be able to piece together what happened in the past from the minutes. Minutes are the official record of what took place at every board meeting. They show that decisions were made by a majority in a businesslike fashion. 

To see ways minutes that can help enhance the value of your building's apartments, read part 3 or pick up the May issue of Habitat.

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