Personal Liability While Serving On Your Board

Legal Talk for Co-ops and Condos

Serving on your co-op or condo board can be a terrific experience, but it can turn into a personal nightmare if you or your board acts improperly. There are many legal protections, however, and Geoffrey Mazel, partner at Hankin & Mazel, provides an overview of what they are and the precautions you need to take. Habitat’s Emily Myers conducts the interview.
Key Takeaways for Board Directors:

1. Basic Protections

· Board members are protected through multiple layers including NY State statute, case law, and co-op bylaws

· The Business Corporation Law provides indemnification for board members

· The Business Judgment Rule offers protection when acting within authority, in good faith, and following proper procedure

2. When Protection May Not Apply

· Intentional wrongdoing or acts without authority

· No-bid contracts without proper board approval

· Discrimination against protected classes

· Conflicts of interest that aren't properly disclosed

· Actions that violate the proprietary lease

3. Best Practices for Avoiding Liability

· Hold proper board meetings with minutes and formal votes

· Consult legal counsel before making sensitive decisions

· Disclose any conflicts of interest and recuse when necessary

· For purchaser rejections, ensure:

· Full board review and vote (not just committee approval)

· Documentation of legitimate reasons for rejection

· Proper minutes and record-keeping

4. Potential Consequences

· Personal financial liability

· D&O insurance may defend but not indemnify in certain cases

· Punitive damages in discrimination cases aren't covered by insurance

The business of running a building is demanding work that requires making endless decisions — some that can quickly lead your board into a quagmire of legal difficulties. Legal Talk interviews New York's leading co-op/condo attorneys to find solutions, and get some guidance, on these challenges. For more co-op and condo insights, sign up to receive Habitat's free newsletters or become a Habitat subscriber today!