Episode 13: The role of The Coop and Condo Board
In this episode of Rock the Closing, real estate attorneys Orsolya Bartha and Dalia Zaza provide an essential primer on co-op and condo boards inspired by questions from Orsolya's Fordham University real estate students. They explain the fundamental roles and responsibilities of these boards, from managing building finances and maintenance to enforcing house rules.
The hosts discuss who can serve on boards, typical meeting structures and agendas, and the critical differences between co-op and condo boards. Most notably, they highlight that co-op boards have the power to interview and reject prospective buyers, while condo boards do not. They also clarify the distinction between boards (decision-making bodies) and management companies (execution bodies), setting the stage for a deeper dive with a property manager guest in the next episode. Throughout, both attorneys emphasize the value of board participation for new owners seeking to understand and influence their building's operations.
IN THIS EPISODE, YOU’LL LEARN:
When a real estate contract is truly ready for signing and what work must be completed beforehand
The exact order of contract signing and why the buyer always signs first
Critical steps beyond signing that buyers must complete simultaneously (including down payment requirements)
Why buyers can't celebrate yet even after signing and paying the down payment
Real scenarios where sellers can still back out without penalties during the signing phase
The precise timeline for when sellers typically countersign contracts (and what delays are normal vs. concerning)
The exact moment a contract becomes legally binding on both parties
What "fully executed contract" actually means and why it's the only time to celebrate
TRANSCRIPT
Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.
[00:00:00] Orsolya Bartha: Hello, everyone. Welcome to our next episode of Rock the Closing. Today we are going to talk about the role of co-op and condo boards. Why do we talk about it? Because the other day I was teaching my real estate class at Fordham University and my students kept asking me questions about what does the co-op and condo boards are doing, what is their role?
[00:00:29] Orsolya Bartha: And I was just trying to explain the difference between a co-op and condo. And somehow my students ended up asking me questions about condo and co-op board and about their roles. So I think it's really important to explain to our listeners because they hopefully are going to be an owner of either a cooperative apartment or a condominium apartment.
[00:00:54] Orsolya Bartha: And for them to really understand how the building works and functions. And it's important to understand what is the role of the board. So, Dalia, let me start with the first very basic question. What is the role of the co-op and condo board?
[00:01:13] Dalia Zaza: Great question. And it's true, especially in New York, co-ops and condos are very common. I mean, we probably don't see that out in the Midwest as much. So this is definitely very relevant to our area. So the role of the co-op and the condo boards, it's important to understand what they are. They basically manage the affairs of the co-op or the condo, the buildings.
[00:01:40] Dalia Zaza: So they have powers and duties which are basically to administer the affairs of the building. So they would be in charge of the operation, the care and the maintenance of the common areas, the preparation of the annual budget, assessments of common charges, what the maintenance will be, should it be decreased, increase. Why? For what? The special assessment.
[00:02:03] Dalia Zaza: Lots and lots of decisions are made by the condo board and the co-op board. So it's really important to understand that, especially if you're buying, because you want to know what's the makeup and what's been the trend in that organization. So that's definitely something to consider when you're purchasing. You don't just, you know, yes, location, location, location, but also you definitely want to consider who are these co-op and condo board members?
[00:02:31] Dalia Zaza: So, Orsolya, I will ask you, how do you become a member of a board? Who are these people?
[00:02:36] Orsolya Bartha: Right. Very important, as you are saying. So first of all, it's going to be the foundational documents of the building that is going to provide an exact answer. Generally speaking, condo apartment owners and co-op shareholders who own a unit can become board members in addition to them.
[00:02:59] Orsolya Bartha: Usually it's defined in the offering plan who can and who may serve on the board. Sometimes we see additional people like spouses, like lenders, like representatives, but again, consult the offering plan and the documents that are defining how the operation of the building is carried out, the foundational documents of the building, in order to get an exact answer.
[00:03:27] Orsolya Bartha: But mostly owners of units and apartments can become co-op board members. When I'm representing in my practice buyers, I always encourage them to become members of the board because it's a great learning opportunity to understand how the building is functioning and how the building operates for one.
[00:03:50] Orsolya Bartha: And secondly, it's also good for a buyer if they would like to achieve any type of changes from cleaner common hallways to specific renovation in the owner apartment. If they are member in the board, they have a better influence to contribute to the rules of the building.
[00:04:13] Orsolya Bartha: Okay, Dalia, how many members does a board have and what is the composition of the board?
[00:04:22] Dalia Zaza: Ah, trick question. That is going to depend on the size of the building. Some buildings are very small. There might just be six units in a building, others are very large, 50 plus. And the needs of these buildings and these co-ops and condos will be different.
[00:04:40] Dalia Zaza: So the number of members on the board, it can usually range between 3 and 7. That's the average. There's always a president, a secretary, a treasurer. Depending on the needs of the co-op or the condo, they may have other positions as well. They may also have committees and subcommittees assigned very specifically to handle certain tasks.
[00:05:03] Dalia Zaza: Maybe there's a construction committee, maybe there's an assessments committee, what the work needs to be done on the outside of the building, on the inside of the building, and what renovations need to be done. If this is a large property, then you may need a subcommittee just for that.
[00:05:20] Dalia Zaza: You're not going to rely on just these three people to manage and take care of all these kinds of things. They may be having to hire vendors or contractors, whatever the case may be. So the bigger the place, the more the members. That's basically going to be my answer to that one.
[00:05:37] Dalia Zaza: My question to you Orsolya is how often do these board members meet and what generally do they talk about? What is like a common agenda for them?
[00:05:46] Orsolya Bartha: Okay. Basically I can give only a general answer to it. You need to understand that every building is different and every building is organized in a different way. But generally speaking, most of the boards, they meet on a monthly basis and they do follow strict agenda.
[00:06:07] Orsolya Bartha: For example, they will be discussing building financials review, the annual budget review, who is behind with monthly maintenance or common charges review, how much it is needed for upcoming repairs, whether there should be an assessment or does the building has, for example enough reserves to carry out those upcoming projects.
[00:06:34] Orsolya Bartha: A second big item that we always see on the agenda are building policy or legal matters which may come from any department of building violations, any permit issues, any reviews for example of the house rules. Often building says very archaic house rules. They like to review it, complement them, add some more new rules that are more appropriate for the current climate.
[00:07:02] Orsolya Bartha: And any legal matter, for example, like disputes between unit owners could be brought to the attention to the board. So this would be under the agenda item of building policies or legal matters. Then a third large agenda item would be repairs and building maintenance.
[00:07:21] Orsolya Bartha: Usually the board listens to the management company who tells about what kind of repairs have been undertaken within the building in the last month and what do they predict what needs to be done in the coming months and in the coming year. So this would be really the main agenda items.
[00:07:41] Orsolya Bartha: Besides these, there might be subcommittees who are dealing with different matters. I have seen a subcommittee on environmental issue. I have seen subcommittee on large renovations like compliance with Local Law 11, which is the facade renovation. I have seen subcommittee which is responsible to keep the garden beautiful.
[00:08:05] Orsolya Bartha: I have seen subcommittee that is devoted to disputes between unit owners shareholders. So there could be many other additional items on the board's agenda. So basically that's that. Okay, now we talked about the agenda and who sits on the board. Now let's talk about can shareholders or condo unit owners participate in the board meeting? Dalia, what you think?
[00:08:32] Dalia Zaza: Okay, so this is another "it depends" answer for me. These board meetings, they are generally internal. However, it does depend on the building, the members. You might get a whole new group of members and they might decide we really want the input of all the shareholders or some of them at our meetings.
[00:08:51] Dalia Zaza: But in general these are internal for the elected board members. Some of the buildings will welcome the participation of the shareholders or their input. For instance, if there's like a dispute between shareholders, the board may act as a mediator and invite the affected parties to come and participate.
[00:09:09] Dalia Zaza: There is another meeting though that the shareholders are invited to and those are annual meetings. So the co-op and the condo has these annual meetings and that's specifically for the shareholders. They want you to come and show up. And during these meetings, this is when you elect the members of the board and that's going to be among the shareholders and the owners.
[00:09:34] Dalia Zaza: So let's say for instance, you would like to be a board member. You will get that opportunity. You'll find out when the next annual meeting is. You can basically run for board, right? The same way anyone runs for election, maybe you send a little synopsis or like a little campaign flyer to all the other shareholders and you let them know that you would like their vote to be treasurer at the next annual meeting.
[00:10:01] Dalia Zaza: Because these are your qualifications and this is how dedicated you are to managing the finances of the building. That's an opportunity to do that. And a lot of times if you cannot attend, you can usually vote by proxy or mail in your vote or whatever it is.
[00:10:19] Dalia Zaza: But another thing that happens at the annual meetings is that the board and the management provide updates about the various projects and improvements going on in the building, the building's finances. You can have your questions answered there. You can say, hey, I'd like to know when elevator two is going to be repaired because it's been down for three months now.
[00:10:40] Dalia Zaza: Or you can say, the washing machines in the basement haven't been working for a while. What's the plan there? Or you can ask, do you anticipate an increase in maintenance and when or what was the reason for the last increase in maintenance?
[00:10:55] Dalia Zaza: I know a lot of board members will send sometimes emails in between these annual meetings just to answer questions, because there might be a decision mid year to increase maintenance and they want to explain that to the shareholders so there isn't some riot that breaks out because expenses went up or maintenance went up, and nothing was ever said to them as to why that's happening.
[00:11:23] Dalia Zaza: So it's a really important job and it's not an easy job because like any elected position, you have responsibilities and your responsibilities are to the shareholders and owners. These units and this property means a lot to them. So this is important. It's important to a lot of people and that's going to be a lot of pressure.
[00:11:47] Dalia Zaza: My question to you is, Orsolya, these board members, do they receive any compensation? What's the reward for all this?
[00:11:56] Orsolya Bartha: No. The answer is simply no. Basically, think about yourself as an individual. You have your life, you have your work cut out, you have family or you have your friends. And in addition to it, you volunteer to be part of the board, to work and contribute to the leadership in your building.
[00:12:21] Orsolya Bartha: This is all done on a voluntary basis without any compensation. It's more like supporting your mini community where you are living the community of the building. So this is an absolutely voluntary work. As such, it might be pleasant, it might be overwhelming, it might be a lot of work, but you might find it interesting and a learning experience and it may provide you with new skills that you are learning as serving as a board member.
[00:12:55] Orsolya Bartha: And it definitely will contribute to you feeling better, more informed about what type of building you are living in and how the building is managed that you are sharing with communities. I would encourage everyone to become and have this experience, to be a member on the board.
[00:13:16] Orsolya Bartha: Okay, enough of that. We talk generally a lot about co-op and condo boards, Dalia. Now can we look into it? Is there any difference between a co-op board and a condo board? Is there anything?
[00:13:30] Dalia Zaza: We definitely explored a lot of the shared responsibilities and duties of both of these types of boards. However, there is one major difference that everybody needs to know and especially if you're a buyer or you're representing a buyer, or even if you're a lender.
[00:13:47] Dalia Zaza: So the major difference is that with a co-op, co-op board has the right to interview prospective purchasers and tenants, whereas a condo board will not do that. The condo boards have no right to approve or disapprove a purchaser.
[00:14:07] Dalia Zaza: I remember when I first bought my co-op, I went for an interview and it's nerve wracking when you're being interviewed by a co-op board because they could reject you. You could be sitting there across from them with a bank check for the full purchase price of this co-op, waiting to buy it. And they can just say, we just don't want you living here. So that's kind of a scary thing.
[00:14:35] Dalia Zaza: Obviously it's not going to be arbitrary, but it can be nerve wracking a little bit to a lot of purchasers. I know that sometimes co-op boards will ask about what kind of pets you have. I remember with mine they dominated the conversation whether I had any pets and if I planned to get any pets.
[00:14:53] Dalia Zaza: And I thought it was interesting because walking through the building, I heard dogs in every apartment building in every apartment. And I realized that they're allowed, they just don't want anymore. So that was something I definitely realized.
[00:15:10] Dalia Zaza: But in general, we would like to hope that co-op boards are being unbiased and that they're really interviewing you in an appropriate way. But that's definitely something that is a difference because with a condo board there's no picking and choosing who gets to buy there or live there. So that is the big major difference.
[00:15:31] Dalia Zaza: Another difference that a lot of people inquire about from me anyway, Orsolya, is the difference between the board and the management company. Because I think that sometimes at least my clients and a lot of purchasers don't understand that there even is a difference between the board and the management company. They think the terms are interchangeable. So is that in fact the case?
[00:15:59] Orsolya Bartha: Right. I am coming across the same questions. Yes, it's definitely. When you are on the other side it can be confusing. What does the board is doing and what is the management company responsible for? The easiest way to look at it is when you think about democracy and the separation of powers.
[00:16:22] Orsolya Bartha: So basically the co-op board is the decision making body and the management company is responsible for execution whatever decisions the board has made. But how it really works in practice I am not going to talk about because we have a fantastic property manager coming to talk to our audience and I can't wait to listen to him and he will explain all the nitty gritty details and maybe share some secrets into it.
[00:16:53] Orsolya Bartha: How a board and management company differ and how do they collaborate and work together on our next episode.
[00:17:02] Dalia Zaza: That's a great point. There are definitely a lot more things to discuss when it comes to the board and the management company. I think we could probably have 10 episodes about it, but I feel like this was a really good introduction and just some general information just to get us started.
[00:17:19] Dalia Zaza: I'm really excited about our guests coming up next week and until then we would love to hear some of your questions or comments and maybe we can even ask them to our guest speaker. So thank you so much for tuning in. Once again, we appreciate you so much. We will see you next time on Rock the Closing.
[00:17:47] Dalia Zaza: Thank you for tuning in to Rock the Closing. This podcast is hosted by real estate attorneys who offer valuable insights. Please remember that the content is for educational purposes only and does not constitute legal advice. Always consult a qualified professional before making any decisions. This podcast is copyrighted by Rock the Closing and any reproduction, syndication or rebroadcasting of the content requires written permission.
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Music Credits
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Disclaimer:
Thank you for tuning in to RTC! This podcast is hosted by real estate attorneys, who offer valuable insights. Please remember that the content is for educational purposes only and does not constitute legal advice. Always consult a qualified professional before making any decisions. This podcast is copyrighted by Rock the Closing, and any reproduction, syndication, or rebroadcasting of the content requires written permission.
