Q&A: Dealing with a Difficult Board?

Q I live in a co-op building in New Jersey with a seemingly tyrannical board that displays arrogance and disregards shareholders’ concerns. For example, the board appointed a shareholder of their choosing, to the vacant seat, stating to those who applied that to be fair, the next highest vote in the recent elections had been appointed. Based on proof of election results, this was contrary to their claim as they did not appoint the shareholder with the next highest vote.

As a concerned shareholder, the board's actions are not only fraudulent but clear violation of the bylaws. What can a shareholder do to address such fraud, violation of the bylaws and breach of trust? Is there a legal body in New Jersey to address abuses of the board aside from the internal alternate dispute resolution committee?

—Aggravated in Avalon

A “From time to time, there is a condominium board that will not abide by its own documented legal requirements,” says Bruce J. Ackerman, a partner at the law firm of Pashman Stein, P.C. in Hackensack. “What you describe is somewhat unusual, because the typical bylaw provision leaves it up to the board to name anyone to a vacant seat until the next unit owner meeting at which an election shall be held for that seat on the board. That is the usual procedure as specifically included in the Condominium Act at N.J.S.A. 15A-6-5, unless the bylaws or certificate of incorporation provide for a different process. However, what you describe is clear, requiring that the board either hold a special election or name the person having the next highest vote from the last election.

“There are several avenues for relief—first is to exhaust your own dispute resolution procedure, which is generally required prior to starting suit. Second, your bylaws likely have a process to remove board members. If the community is as upset as you are, the Condominium Act, N.J.S.A. 15A:6-6 includes a procedure for removal, again unless the bylaws or certificate of incorporation provide otherwise. There are usually differences between removal “for cause” or “without cause,” which may also be provided for in your governing documents. Third, you may contact the New Jersey Department of Community Affairs, which is the administrative body governing the proper establishment of condominium developments. If they agree to take jurisdiction of your issue, they have a complaint process.

“Lastly, you may have a right to go directly to court, for breach of fiduciary duty, fraud, or simply to enforce compliance with your own governing documents. For some legal claims, you can bypass the dispute resolution procedure. You should secure legal counsel if you wish to pursue that legal remedy.

“Ultimately, the unit owners have the greatest power, that of the ballot, to change the board and elect others who will abide by the governing documents of your association.”

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