With the season of annual meetings and board elections being upon us, we provide this Memorandum to serve as a brief, bullet point summary and update of our advice regarding actions by board members of cooperatives and condominiums. We urge all boards to reach out to us for more detailed advice and with any questions, concerns, or needs regarding any of the topics mentioned below.

A. Fiduciary. A board member is a fiduciary who must act in good faith and with a degree of informed care, consistent with the relevant governance documents and best interests of the cooperative/condominium, even if not consistent with his/her personal best interests.

B. Business Judgment. Board members should make decisions within the scope of their authority, in good faith, and in reliance upon relevant information, documentation, and opinions, so that the decisions are more likely to be protected by the “business judgment rule” and not subject to viable challenge, even if it is subsequently determined to have been a mistaken decision. The basis for such decisions, including copies of relevant reports, should be maintained to bolster all such decisions. The board can be “wrong”, but it should not be uninformed.

C. Confidentiality. Each board member should keep confidential and not disclose to any other person (including a spouse), non-public information obtained as a board member. This includes information about current unit owners or prospective unit purchasers, and internal board deliberations and decisions. Boards should adopt policies to maintain such confidentiality.

D. Liability. Board members should always act in good faith, in a manner which they believe to be in the best interest of the cooperative or condominium. Doing so will increase their protection from personal liability under the indemnification provisions of the by-laws, the business judgment rule, and insurance. All cooperatives and condominiums should maintain ample and comprehensive directors’ and officers’ liability insurance. A board member may not be protected in the event of a breach of his/her fiduciary duty, a breach of confidentiality, self-dealing, acting in his/her self-interest, exercising a personal vendetta/agenda, or discriminating on the basis of race, sex, sexual preference, religion, ethnicity, material status, or disability.

E. Dealing with Others. Board members should elicit assistance and advice from the managing agent and the board’s other professionals, and should allow the agent to be the board’s principal liaison with unit owners, staff, contractors, etc. Boards should establish and maintain a relationship with outside professionals, including counsel, accountant, architect/engineer, and insurance agent.

F. Operations.

1. Boards should have access to and be guided by the organizational documents. The documents are: for a cooperative, the certificate of incorporation, by-laws, and proprietary lease; and, for a condominium, the recorded Declaration, By-laws and the filed floor plans.
2. Minutes should be taken of all shareholder/unit owner meetings and all board meetings. Draft minutes should be reviewed by all board members before being finalized. While meetings may be held and decisions made by conference call or videoconference, rather than in person, making decisions by round-robin email or text may not be legally sufficient. Though it is not necessary (and often not advisable) for the minutes to include the details of discussions at those meetings, decisions made should be specifically noted in the minutes and the basis for the decisions – whether board members’ observations, specific documents or advice of management, other professionals or contractors – should be noted.
3. The views of all board members should be aired only within the board, with dissent or disagreements considered confidential. Every board member has an equal vote and should not personalize differences with other board members or cause a public display of disagreements.
4. All board members should be familiar with the building’s finances and should understand the budget and the basis for major financial decisions or plans.
5. The board should communicate with shareholders/unit owners to keep them apprised of significant current and upcoming events.
6. Board members should consider creating a unique and separate email address for all building-related communications. If the building becomes embroiled in litigation, your personal email accounts may be subject to discovery and searches if your board communications and your personal or professional communications are conducted on the same account. Similarly for texts.  Also remember that all written communications, including those among board members, are subject to discovery and disclosure in the event of litigation. Do not say something that you would not want to have broadly shared and, if litigation is pending, do not engage in written communications about the subjects of the litigation, other than with counsel, without first conferring with counsel.
7. Boards who have not recently done so should consult with management and counsel about updating their governance documents both for conformity with actual practices and conformity with current law.
8. Each board should engage an insurance consultant both to advise on building insurance policies and to advise on and review insurance requirements and policies of shareholders, contractors or others from whom insurance coverage is necessary or appropriate.