Effective January 1, 2018 the New York State Business Corporation Law will be amended to reflect that cooperative and condominium housing corporations must submit an annual report to the members of their governing board regarding any contracts entered into with interested directors. The bill which you can read here and introduced by Senator Martin Golden states that the new reporting must include the following:
- A list of all contracts voted on by the board of directors, including information on the contract recipient, contract amount, and the purpose of entering into the contract;
- The record of each meeting including director attendance, voting records for contracts, and how each director voted on such contracts; and
- The date of each vote on each contract, and the date the contract would be and remain valid.
Condo and co-op boards have been entrusted by apartment owners with responsibility for managing the affairs of entire building. Boards have meetings periodically to make decisions that involve the overall health of the building. From deciding who their property management company will be to picking the color of the walls in the hallways it is the boards responsibility to make these decisions that affect all owners of the building. As the board members become fiduciaries for the owners it is in their interest to decide on such issues in good faith and not for personal gain. When a director acts for personal gain or have business or familial relations with individuals or companies the board contracts with there may be a contract of interest. The bill seeks to end these relationships.
“Cooperative housing boards of directors are supposed to be representative of the housing development and are trusted with promoting the best interest of the co-op tenants. However, that is not always the case. In some instances, a member of the board may be benefiting financially or by other means when a contract between a cooperative housing development and a third party is entered into. This bill would establish a notification requirement so members of a co-op board are aware of existing laws. In addition, the bill would require disclosure of any contracts that were voted on… That way, co-op tenants as well as the board directors can be sure of the integrity of the management as it relates to contracts.”
Developers may be the ones most affected by the new law as newly formed boards work primarily with the developer and it other entities. Property management companies should also be aware of this should they have other entities that contract with the boards. The bill will now be headed to Governor Andrew Cuomo who is expected to sign it.
Boards interested in seeking new property management for your building Blue Harbour Property Management can be of assistance. We are a full service NYC building management company with buildings in Queens, Brooklyn, Manhattan and the Bronx.