Page 17 - NY Cooperator April 2020

COOPERATOR.COM THE COOPERATOR — APRIL 2020 17 Cesarano & Khan, PC Certified Public Accountants PROVIDING PROFESSIONAL SERVICES TO THE COOPERATIVE AND CONDOMINIUM COMMUNITY Reporting on Financial Statements • Tax Services Budgeting & Consulting • Election Tabulation Services For additional information, contact Carl M. Cesarano, CPA 199 JERICHO TURNPIKE, SUITE 400 • FLORAL PARK, NY 11001 (516) 437-8200 and 718-478-7400 • info@ck-cpas.com cesarano &khan1_8 use this_:cesarano &khan 4 7/22/15 4:59 PM Page 1 Such is the case with attorney Alessan- dra Stivelman, a partner at Eisinger, Brown, good look for a board, and can stymie its de- Lewis, Frankel & Chaiet, P.A. in Hollywood, liberations and decision making. Florida. She says that she and several of her relatives own five separate homes in the same provide that “An association cannot employ homeowners association—so hypothetically, or contract with any service provider that is the board could include up to five members owned or operated by a board member, or of her extended family. Size Matters While related owners could technically within the third degree of \\\[blood or marriage serve on the board together, such an arrange- ment could easily get very tricky in the board- room. “It depends how many directors there tradicts the disclosure provision, since it’s un- are, right?” Stivelman theorizes. “Because clear whether the relationship is completely whenever you have a majority of the directors banned, or would merely need to be disclosed. discussing association business in person, then it’s considered a quorum. So if you have a three-member board, and two of them are relationships on a board to foster conflicts talking \\\[about\\\] anything related to the asso- ciation, that \\\[conversation\\\] should be had at tions. After all, as previously mentioned, most an open board meeting”—not at Aunt Edna’s board members are neighbors first—and be- dinner table, or during Superbowl halftime. ing neighbors can lead to its own set of chal- Why? Because as soon as someone starts talk- ing about the association’s assessment, it could the boardroom. Depending on the size of the constitute a de facto board meeting—albeit an board, a couple or small group of friends can inappropriately noticed one—and that could amount to a voting bloc, or even a majority— cause legal and procedural headaches down or at the very least, be seen as such. And in the road. Cholst points out that it tends to be small more powerful than reality. buildings that run into this kind of issue, “Be- cause small buildings have small boards, and recounts a time when the intertwinings of two people can very often constitute a major- ity,” thus technically being able to make de- cisions without the other (unrelated) board considered many of her fellow board mem- members. There is also a smaller pool from bers—who had also been her neighbors for which to pull candidates, “So...if they have to upwards of 15 years—good friends. When the resort to a husband and wife in order to fill apartment adjacent to a board member’s unit board seats,” he continues, “that too is a real came up for sale, an ethical dilemma ensued. problem.” Cholst therefore advises smaller The adjacent board member had expressed buildings to make a conscious effort to in- volve every shareholder/owner in the gover- nance of the community so that everyone is would have to recuse herself from that trans- motivated to serve on the board, and says that action’s discussion and vote—not because she board service is really “imperative” for resi- dents in smaller buildings. Is There a Broker in the House? In addition to familial relationships, pro- fessional relationships also can be problematic the other board members who were friends for boards. Axinn explains that “If a member were conflicted as well. If they all—or even of the board is a lawyer or real estate broker some—abstained on the vote, as might be with a pending transaction at the building, recommended in such a circumstance, with that raises many issues, such as whether the one director already recused, they wouldn’t professional has access to information or in- fluence with other board members that some- one else who is not on the board doesn’t have.” to reject the sale (notwithstanding that boards He speaks from his own professional experi- ence. “I have a co-op right now that is dealing tion for any reason, or for no reason), any op- with a broker on the board,” says Axinn, “and posing votes would have the same result. They it can lead to several potential conflicts.” New York and Florida have recently add- ed provisions in their state statutes for conflict acted with the duties of loyalty and care re- of interest disclosures, but neither fully pre- cludes a potentially conflicted member from running for or serving on the board. There- fore, says Cholst, if a real estate professional which attorney Axinn says are “definitely not such as a broker is elected to serve on a board enough!” to mitigate the potential conflicts in those states, “At an absolute minimum, the a board may face. At the very minimum, he broker has to be recused from all admissions, recommends that co-ops amend their bylaws discussions of board packages, or right of first to require board members to also be share- refusal decisions”—a practice that Cholst says holders (or representatives of shareholders in is hard to administer. Even if it were seamless, the case of sponsor designees) to insure that a board member’s perpetual recusal is not a Stivelman says that Florida statutes also any person that has a finite financial relation- ship with a board member, officer, or relative relationship\\\] of a board member or officer.” This provision, she explains, somewhat con- Love Thy Neighbor There are certainly opportunities for close even without familial or professional affilia- lenges. Familiarity has its pros and cons in an elected fiduciary role, appearances can be A co-op board member in Manhattan friendship, neighbor-ness, and board service created conflict during her directorship. She interest in buying the next-door unit herself and combining it with her own. So clearly, she stood to gain from it financially, but to elimi- nate even the possibility of anyone thinking she would pressure the board to reject the sale so that she could buy the unit. In this case, have the requisite number of approvals for the sale to proceed. Even if they had good reason have the statutory right to reject any transac- all risked being seen as conspiring with their friend no matter how they voted, even if they quired of their position. Navigating these dynamics usually comes down to the bylaws, the provisions of many of the board member also have some owner- ship interest in the building. “Also,” he adds, “many condos require a unit owner to be in good standing (i.e., not in arrears or default) in order to vote—but there is no similar re- quirement that a unit owner or shareholder be in good standing to run for the board. That means that a person can be in default or in a litigation with the apartment corporation and still run for the board, which would lead to many problems down the road when the board meets to discuss litigation strategies.” So go ahead and love thy neighbor; keep your friends close … but if you serve on a board with them, tread carefully, especially if you are married, related, financially be- holden, or involved in a business that has the potential to benefit from contracting with the co-op or association. And while you’re out for drinks on a Friday night, try not to discuss board business. n Darcey Gerstein is Associate Editor and a Staff Writer for The Cooperator. safety by cutting corners when they want to do something quickly—standing on a nearby chair when getting an appropriate ladder would be the proper way to reach something high up, for example—but at the end of the day, when a building violates a labor or safety law covering their employees, the owner is li- able. “The owner is responsible, whether it is a cooperative, condominium, or rental,” says Persanis. “The owner is ultimately responsible for what goes on at the building. Consequenc- es are usually fines.” “If \\\[an injury happens\\\] on the job, if the employer has been grossly negligent, there could be exposure to litigation and things along those lines,” says Sparer. “If there’s an OSHA violation in connection with it, even if the employer was trying to be consistent, there could be penalties there.” But Sparer also ac- knowledges that “Employers in New York are very sensitive to the issue \\\[of safety\\\] for a vari- ety of reasons—not least of which is avoiding injury for their employees.” STAFF SAFETY... continued from page 13 In the case of a clear-cut violation, staff should first notify the building’s managing agent of the situation, and let them take it from there. “All violations of any kind should be first brought up to the managing agent so that they may be rectified as quickly as possible,” says Persanis. “If that doesn’t work, then the employees may contact their union represen- tative. For violations of labor law and unfair la- bor practices, the employees may contact their union or the National Labor Relations Board. Administrative grievances can be directed to the Department of Labor or OSHA for health violations.” But, of course, avoiding unsafe condi- tions—and the injuries they may cause—in the first place is far preferable to taking chances with employee safety and hoping for the best. According to Jay L. Hack, a partner at Man- hattan-based law firm Gallet Dreyer & Ber- key, LLP, conducting a formal risk assessment can help guide your board or management. “I strongly recommend that you conduct a risk assessment of your buildings, determine what risks exist, decide whether there are methods available to reduce those risks, and then take appropriate steps to implement those methods when it is reasonable to do so under the cir- cumstances.” The Final Word While there may be a lot of abbreviations involved in the training and ongoing safety protocols for building staff, what should never be abbreviated are the actual precautions and information that are in place to ensure their safety. Proper education, implementation, and compliance—for both employees and their employers—are the cornerstones of a safe and injury-free working environment for the doormen, porters, handymen, security per- sonnel, maintenance workers, elevator opera- tors, and managers who service and support the city’s many co-op and condo buildings. Take advantage of the training, advocacy, and support that are available through a variety of organizations in the city and elsewhere, and always keep in mind that it’s better to be safe than sorry. n Darcey Gerstein is Associate Editor and a Staff Writer for The Cooperator.