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Questions from a new Board Member
Being a new board member in co-op isn’t an easy job. I ask many questions and search for answers but still have a few questions that I would like to ask more experience board members to answer.
1. Which documents a board member is entitled to see?
2. Can a board member know manager’s monthly project plans for the upcoming month?
3. Is a manger required to present a monthly detailed financial report at each board meeting?
4. Does a board member have a right to free access to co-op financial information?
5. Is there any restriction for how long and when a board member can review financial information?
6. Should a board member be supervised by two management office employees while reading co-op monthly financial report?
7. Can a board member take notes during reviewing financial documents?
8. Should a board member have a full and free access to financial documents while co-op is taking multimillion dollars loan?
9. Is a manager required to answer shareholders’ letter? If yes, what is the time frame?
Thank you for the link. The article is great and now I do not have doubt about a board members rights!
However, the question is how to enforce a board members right to examine corporate records?
Do you have any idea how to do that?
Hi, here's my answers based on how most of our client relationships are working throughout the years:
1. As a Board member you should have access to whatever books and records / documents you are requesting. Granted, these documents do not have to be mailed, emailed, or taken off premises from the Management office, the Management company should allow you to view the documents so long as they are given adequate notice and that you are able to view them in the place where they are kept. Some management companies keep PDF copies of most documents, so they can share what they feel comfortable with sharing digitally to save you a trip.
2. In terms of what is ongoing on a monthly basis, some managers keep spreadsheets of open items and the prior meeting will give you a good sense of what is coming up in the next month. The minutes from the last month's meeting or last few months meetings will show you what is ongoing, what is being bid out, what work is taking place, etc. The financial filings and routine payments of the bookkeeping staff are calendared out well in advance. You can always ask the manager to provide weekly or bi-weekly updates via email so that you can keep up with the times. The monthly management package should have information on what was being worked on in the past month since the last meeting.
3. This depends on the Board. Your contract with the management company should spell out the monthly obligations for the financial reports. Some buildings will receive them by the 10th of the month and some by the 20th. Whether or not the manager goes over those reports that were given out prior to the meeting at the actual meeting is up to the Board that you are on. Often, the treasurer will work with the company's controller to get a handle on exactly where you are at the time the report was made. The manager should always bring you up to speed with regards to shareholders who are negligent in monthly maintenance payments and any legal proceedings that are coming up or in process as a result.
4. As with my answer to #1, all Board members should have access to documents, but with prior notice and an understanding that the management company may ask you to visit their office.
5. There shouldn't be, but scheduling ahead with the company will help as they may need the conference room for another closing, meeting, etc.
6. I would think that standing guard would be unusual. We're all adults and on the honor system.
7. You should be able to take notes so that you can ask intelligent questions regarding the material that you have viewed.
8. it is the management company's responsibility to give you the correct information and the complete information for whatever options you are considering. You should have either your treasurer or a committee of the Board talking to the managing agent so that whatever options are given for a loan are backed up with hard numbers and facts. There is no other way for the Board to make a qualified decision.
9. Per the Prop Lease, any complaints are usually required to be in writing. At the very least, when in receipt of a written and signed letter, the Manager should acknowledge, in writing, that the letter was received and that either the issue was resolved or needs to be brought up with the Board. If they can get it out within a week of receiving the initial letter, that's even better.
Hope that helps.
Mark Levine
mblevine@ebmg.com
Excel Bradshaw Management Group, LLC
Mark,
Thank you very much for the answers which confirm that my way of thinking is correct, just the way everything is done in my cooperative is wrong.
1. I as a board member cannot see all documents, especially monthly financial reports.
2. We are not informed by a manager on what projects is he working right now.
3. A manager is not giving us detailed monthly financial reports.
4. Right now we have a restriction that a board member in order to review financial information needs to sign a confidentiality agreement. Surprisingly, a manager does not need to sign it and have a free access to that information.
5 & 6. If a board member sign a confidentiality agreement, he/she can review financial record one an hour per week under close supervision of one management office employee.
7. Previously, we were told that we could not take notes. I questioned that and right now we can take notes.
8. Financial information is only for that board members who signed a confidentiality agreement.
9. Our manager does not answer shareholders’ letters!
As you see, everything is done in the opposite way.
Do you have any suggestions how to fix our co-op?
From seeing what you've written you have one of two choices. Either the Board members who were there prior to you are enforcing this behavior to the management company and you can try to reason with them to overturn this or the management company is enforcing this rule without authority. If it's the latter, the Board has to make an effort to change this mode of operation or you have to look around for a new management company that has a bit more transparency on the agenda.
Mark B. Levine, RAM
mblevine@ebmg.com
Excel Bradshaw Management Group, LLC
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I don't know the answers to all your questions. But this is what I do know: "a director of a corporation has an unqualified and absolute right to inspect all corporate books and records." That's a quote from an article to be found here:
http://www.stroock.com/SiteFiles/Pub240.pdf. This article goes on to cite specific case law. It's a must-read article for us newbie board members.
You might also want to review the responses to my BoardTalk post titled: Denying Board Member Right to Read Building-Related Contracts
- New Bd Member Jul 25, 2011.
Last, but by no means least, you will want to find out about the Alliance of Co-op and Condo Owners (ACCO), and once you find out about them you will want to join. Here's why I say that: I initially hired an attorney for answers to my questions. While awaiting my attorney's response, I got in touch with ACCO and received a wealth of information. Good thing, too, because my attorney's evaluation of my rights as a board member was completely wrong. Had I not connected with ACCO and heard what they had to say, I would have been inclined to trust the attorney's advice and walk away with my tail between my legs.
Sometimes, knowledge really is power.
Good luck.
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