New York Law Journal
"Conflicts of Interest: A Broker on the Board"
Cooperative and condominium boards are entrusted by apartment owners with responsibility for managing the affairs of their building. Apartment owners generally understand that board members are fiduciaries and expect boards to take actions which are in good faith and in the best interest of the cooperative or condominium community they serve, as a whole, and not for a board member’s personal interest or gain.
This column deals with potential board member conflicts of interest, focusing in particular on the broker-as-board-member scenario. We examine recent cases involving the business judgment rule, the definition of an interested director and safe harbor provisions that can save an interested director transaction from being successfully challenged. We also review very recently proposed/pending New York State legislation which would require boards to annually disclose to owners all interested director transactions entered into. Last, we provide recommendations on how boards can navigate conflicts of interest and minimize the risk of litigation.