Building a successful enterprise from the ground up requires dedication and commitment from dozens, if not hundreds, of people. That’s certainly the case with the creation of a new co-op or condo community, entities that are just as much about home as they are about business. The first few months or years of a condo’s existence can be especially turbulent as it involves the establishment of a board and the transition from being owner/resident-controlled. Sometimes that transitional road can be bumpy—especially if those two parties fail to see eye to eye. With the right combination of planning, communication and trust, however, the birth of a board can be a lot less painful than expected, something sure to be a relief to anyone and everyone involved.
How a Board Begins
Just the way a constitution sets the stage for how a country will be run, a condo’s bylaws determine how it will function. In addition, bylaws dictate how, in the very beginning, the condo will change hands from the sponsor who created it to the residential board members who will guide it in the future.
When a condo is created, New Jersey law dictates that an entity must exist for management of the common elements, and that governing body is the association, which is governed by the board. “The board exists from the day the first unit is sold,” says attorney J. David Ramsey, an attorney with the Iselin-based law firm, Greenbaum Rowe Smith & Davis LLP.
In its earliest incarnations, the board usually consists of three members, all of whom are appointed by the developer. “The board doesn’t really function at that point as a board,” Ramsey says. “Ninety-nine percent of the time, the developer will just say this is what we’re going to do and that’s what they do.”
Once 25 percent of the units are sold, at least 20 percent of the board must be elected by unit owners other than the developer, Ramsey says. At that point, the board expands to five people and one member is now a unit owner, comprising the required 20 percent. When 50 percent of the units are sold, then the unit owners get a second seat. At 75 percent, the unit owners take control and have the right to elect the entire board. If, however, the developer still owns at least one unit in the building, that firm will retain a seat.