Bankrolling the Board The Question of Compensation

Co-op and condo board members are charged with the all-important responsibility to make critical policy decisions that ensure the building, the property, and their neighbors' interests are cared for and protected. It's a job that requires looking out for others, and most of the time it comes with very little gratitude or recognition, if any. Considering the amount of hours the job requires, it’s surprising that in almost all cases there is no compensation—a longstanding rule.

“Serving on co-op and condo boards has always been a ‘voluntary’ calling,” says Chris Florio, a shareholder attorney with the law firm of Stark & Stark in Lawrenceville. “Board members can be reimbursed for out-of-pocket expenses (the attendance of industry-related trade shows or seminars, for example), but I am not aware of any board member that gets ‘paid’ for serving.”

Governing documents normally prohibit the concept of compensation altogether. The conventional wisdom isn’t so much about the actual money, although it’s a serious financial consideration, but rather the influence salary or compensation may have on a board members’ ability to govern. “Co-ops and condos are organized and managed for the benefit of their residents living in a communal setting, not to make a profit. Non-profit organizations generally do not compensate board members,” said Attorney Mindy Stern, a partner with the law firm of Schoeman Updike Kaufman & Stern LLP in Manhattan. “No one asks board members to serve, they volunteer their time. This has been the case since the inception of co-ops and condos.”

Florio agrees, and goes as far as to recommend that associations refrain from implementing any payment for service. “It goes against the grain of serving on a non-profit corporation, unlike in a for-profit situation, where a board member will get a stipend for service,” he says.

Attorney David J. Byrne, a partner in the community association practice group at Ansell Grimm & Aaron, PC in Princeton, agrees with his colleagues in that co-op proprietary leases and condo bylaws usually deem that service to the board is voluntary.  “I suppose that allowing boards to pay themselves for board duties would risk malfeasance,” says Byrne. “I don’t believe that I have ever represented a co-op or a condo that has had governing documents requiring or even permitting the compensation of board members.”

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