Q&A: Can Management Company Serve on the Board?

Q My question is about being elected to the board of a condo association in New Jersey. We have a building management company hired by our board. Can the management company executive be elected to the board? Does the executive have any influence in running the election and/or meeting for the election? Can the incumbent members of the board use the proxy forms that they state are the only forms allowable to secure votes one month before they hand out these forms to those who are seeking election to replace incumbent members?

—Management Matters

A “As a threshold matter, your association is likely a non-profit corporation organized and existing under the New Jersey Nonprofit Corporation Act. In this regard, the Nonprofit Corporation Act provides that members of a nonprofit corporation’s board of trustees need not be members of the corporation unless the certificate of incorporation or bylaws provide otherwise. See N.J.S.A. 15A:6-1. Accordingly, you should consult with legal counsel and review the master deed, bylaws, certificate of incorporation and any and all amendments thereto,” explains attorney Jeffrey S. Paige, Esq of the Manalapan-based Cutolo Law Firm, LLC.

“In many instances, the bylaws will restrict board membership to unit owners or representatives of unit owners in cases where a unit is owned by an entity or trust. Even if the governing documents allow non-members to serve on the board of directors, the association should be apprehensive electing a property manager to its board of directors where that individual is also not a unit owner. Simply put, while the association’s relationship with its management company may be amicable now, the relationship may deteriorate resulting in the termination of that management company by the association. In that instance, the management company executive would continue to serve as a board member for the remainder of his or her term and could be subject to re-election.

“In addition, the executive may necessarily have to recuse themselves from many important decisions to be made by the board as a result of potential conflict of interest, especially decisions regarding the association’s relationship and contract with said management company. You are strongly encouraged to seek counsel’s advice regarding whether the property management executive may serve on the board and whether same would be advisable if the governing documents allow same.

“Typically, the managing agent will assist the board in conducting association meetings in an orderly fashion and in compliance with the association’s governing documents. The management company may assist in the selection of volunteers to tally the votes, assist in determining eligibility to vote based on unit owners’ good standing and oversee the fairness and transparency of the election. In addition, the association should consult with counsel and may wish to insist on counsel’s attendance at election meetings to ensure a fair election in compliance with the governing documents and applicable law.

“New Jersey law requires fair and open elections for community associations. In this regard, the association should consult with legal counsel to first ascertain the type and timing of all notices and proxy forms for use in a board election. In many cases, the form of the ballot and/or proxy shall be determined by the board subject to the governing documents. Significantly, any proposed form of proxy must be consistent with the requirement of fair and open elections. You should consult counsel and the association’s governing documents to determine whether the dissemination of proxy forms for an election in the manner you described violates the time frames specified for notice of the election meeting by the governing documents and applicable law. In that instance, counsel should be consulted to determine whether such violation may subject the election to legal challenge.”

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