This has all been speculated and we’re not sure if it will happen; however, many of us are wondering if this can be done legally. What can we do about it if a majority of the board approves this?
—Conflicted in a Condo
A “Unless this condominium’s master deed and/or bylaws prohibit same, it is elementary that the board of a condominium can decide to procure maintenance services via an independent firm, or direct employee, with the vote or approval of the unit owners. In turn, as a general and initial matter, the board can take a direct employee for these services, on the condominium’s behalf,” says David Byrne, a shareholder attorney with the firm of Stark & Stark in Lawrenceville.
“The next threshold inquiry involved here is that relating to N.J.S.A. 46:8B-13(a). This provision of New Jersey’s Condominium Act provides: ‘...all meetings of that governing board, except conference or working sessions at which no binding votes are to be taken, shall be open to attendance by all unit owners, and adequate notice of any such meeting shall be given to all unit owners in such manner as the bylaws shall prescribe…’
“While this provision includes language empowering a condominium board to make ‘employment’ decisions at meetings not open to attendance by owners, that should be interpreted as involving employment matters after the actual decision is made to create the employment. This ‘open meeting’ provision of the condominium act does not entitle the unit owners to participate in any board votes and/or discussions surrounding the decision to engage the direct employee. The board must simply either vote on the hiring at a board meeting (proper notice having been given) open to the attendance of unit owners, or ‘ratify’ a prior decision in that regard, at such an open meeting.
“The master deed and/or bylaws of this condominium may have terms or provisions relating to the employment of a board member; the employment of a unit owner; the voting on the board by a board member with a significant stake in the vote; or the issues raised by this question. A detailed review and analysis of those governing documents is crucial. Aside from that though, New Jersey’s Non-Profit Corporations Act provides that the hiring by a condominium of a member of that condominium’s board of trustees is not necessarily illegal. See N.J.S.A. 15A:6-8. In fact, such a transaction or business arrangement is not ‘void or voidable solely’ because of the employee’s status as a member of the board. In fact, neither the at issue trustee’s presence at the board meeting at which his hiring (or transaction) is approved nor the issue trustee actually voting for his own hiring, are sufficient in and of themselves to void the hiring.
“None of that matters so long as the terms of the hiring or transaction are ‘reasonable as to the’ condominium ‘at the time’ the hiring or transaction is approved by the board. The trustee’s interest in the decision is disclosed and either the board approves it unanimously, or the board approves it by a majority vote of the ‘disinterested trustees,’ even if the amount of the disinterested trustees fail to make up a quorum.
“In the end, it is certainly legal for this board member to also be a condominium maintenance-related employee. In opposition, owners have available to them any rights granted by virtue of the applicable governing documents, such as annual elections, and board member removal efforts, should the unit owners agree that such a hiring is wrong and decide to exercise those rights. Lastly, any board member employed by the condominium upon whose board he serves must be mindful of his fiduciary duty to the condominium which may require votes and/or decisions by him as a board member that conflict with his interest as an employee.”