Putting the property manager on the board to fill a vacancy

Started by ChrisE8 • 23 replies • 580 views

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ChrisE8
Posts: 454

Posted:

I don't have enough experience with HOAs to know how common or normal this is. I'd welcome any thoughts.

I own a rental property governed by a condo association. The board consists of 5 people, 2 of whom work for the property management firm. One of the property manager's employees who was on the board resigned for whatever reason, and the remaining directors filled the vacancy with another employee of the property management firm. No property management employee on the board lives in the community, although one of the two owns a few properties in it.

No owner announcement was made; I just heard about it through some other owners who were complaining.

I checked the bylaws and this is fully legal, but how normal is it? It seems like putting an employee of the property management firm on the board would create all sorts of conflicts of interest.

I'm not going to do anything about this, as it's just a rental property; I do not care. But for my own knowledge, I'd be curious to hear what others think of this.

Many thanks.

JohnC77 (California)
Posts: 562

Posted:

Any chance you live in a co=op or live in New York City?

Could it happen? Absolutely. If the governing docs don't state that directors need be owners,

Should it happen? Who knows, at least they should be qualified.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

But, to be clear, Chris, you noted one of the two non-resident board members/employees of the company is a property owner? Any chance the one they just voted in is, as well?

ChrisE8
Posts: 454

Posted:

The property is in a NYC co-op.

The property manager employee who stayed on the board is an owner (but does not live in the co-op).

The property manager employee who was just voted in by the board is not an owner.

In any event, this is really out of curiosity. It doesn't bother me either way.

Thanks.

JohnC77 (California)
Posts: 562

Posted:

I thought it was a co-op, in which case and especially in NYC, this is quite common.

ChrisE8
Posts: 454

Posted:

Thanks. I don't doubt that it's common as per your responses above (thanks) but why would a property manager install its own employee on a client's board? Seems like that would create conflicts of interest that could land the property manager and the director in trouble.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

If the employee was also a property owner is the situation, right? In at least one of the persons in question?

ChrisE8
Posts: 454

Posted:

Of the property manager employees on the board:

One who was on the board and is still on the board is an owner (a landlord, like me).

The one who resigned was not an owner, and the one who was just added is not an owner.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

OK - so the Board must be able to appoint directors who are not owners? It should say this in your Bylaws.

ChrisE8
Posts: 454

Posted:

Quote:

Posted By GeorgeS21 on 09/21/2020 1:06 PM
OK - so the Board must be able to appoint directors who are not owners? It should say this in your Bylaws.

Yes. The appointment is fully legal, by the terms of the bylaws.

I am wondering why a property manager would put its own person on the board. It just seems risky.

In a regular corporate board, an investor can often choose a director, and the investor may have some type of other business relationship with the company, and in that case the board would be really careful to ensure that approvals are really carefully done for all matters in which the investor has a financial stake. Usually the conflict has to be clearly disclosed, disinterested directors have to approve and sometimes investors have to approve as well. It's a lot of hassle and there are risks to the board, the company and the investor.

In a typical HOA board, the directors may not be as knowledgeable about how to approve items where there is a conflict of interest, and the directors might not know that they need to be disclosed to owners under NY law. It just seems bound to create a problem for the board due to the conflicts of interest.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds like still under control of the developer and not the owners. Which would make sense as the owner can put their people into those positions.

Former HOA President

ChrisE8
Posts: 454

Posted:

Quote:

Posted By MelissaP1 on 09/21/2020 2:03 PM
Sounds like still under control of the developer and not the owners. Which would make sense as the owner can put their people into those positions.

Good point, and I would have thought so. In this case, the building is about 100 years old and it became a co-op a few decades ago, and it's been at least 80% owned by individual owners for at least about 20 years. Surprisingly.

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By MelissaP1 on 09/21/2020 2:03 PM
Sounds like still under control of the developer and not the owners. Which would make sense as the owner can put their people into those positions.

NOPE..tbis is typical for a co-op in NYC.

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By ChrisE8 on 09/21/2020 9:35 AM
I don't have enough experience with HOAs to know how common or normal this is. I'd welcome any thoughts.

I own a rental property governed by a condo association.

Did this turn into a co-op overnight?

ChrisE8
Posts: 454

Posted:

It's been a co-op for a long while.

I appreciate everyone's feedback and I don't doubt anyone that this is typical for a NY co-op--but why would a property manager put its own people on a board? Seems kind of shady. The owners who told me about it are griping about it. Unless a community has a shortage of capable board member prospects, why wouldn't a board require every director to be an owner, unaffiliated with the property manager?

KerryL1 (California)
Posts: 14,550

Posted:

Only JohnC77 seems even a bit familiar with NYC coops, so it simply doesn't seem like this is a forum which can help you determine if your arrangement is typical or "normal."

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By KerryL1 on 09/21/2020 6:59 PM
Only JohnC77 seems even a bit familiar with NYC coops, so it simply doesn't seem like this is a forum which can help you determine if your arrangement is typical or "normal."

If you do some research, Trump Tower and Trump Plazaare co-op's. Many of his residential properties are co-op's.

ChrisE8
Posts: 454

Posted:

Thanks, everyone. If the property in question were a HOA outside of NYC, would it be normal to put a property manager on a board if the HOA was not under developer control?

So much of what is normal in NYC is considered shady elsewhere. I don’t consider NYC the arbiter of what’s normal or reasonable, especially in real estate matters (so many scams, red tape and dishonesty in NYC).

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By ChrisE8 on 09/22/2020 4:20 AM
Thanks, everyone. If the property in question were a HOA outside of NYC, would it be normal to put a property manager on a board if the HOA was not under developer control?

It would be unusual for a property manager to be on an HOA board in Florida if the developer was gone AND the property manager wasn't a homeowner in the community governed by the HOA.

That aside, governing documents can contain some pretty unusual things from time to time. If the CC&Rs said the night clerk at the local convenience store was eligible to serve as a Director, then they'd be allowed to run for the board and serve on it if they won.

New York's got nothing on Florida when it comes to shady real estate matters.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Co-ops are a horse of a different color, especially in NYC. This is not Kansas Toto.

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By GenoS on 09/22/2020 11:41 AM

New York's got nothing on Florida when it comes to shady real estate matters.

Where do you think they came from?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

If I was asked, I would say FL has had many more shoddy real estate deals then NY, especially in associations of any type.

ChrisE8
Posts: 454

Posted:

Gosh, I thought that NY real estate was the shadiest. But at least NY real estate people are often the meanest, so it wins something, right?

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