The Real.Est List
What happens when a board member is a seller?
Q. Does a board member have to resign when he puts his co-op unit on the market for sale? I don't recall anything in our building documents saying they have to, but should they, ethically, to avoid a potential conflict of interest?
There has been concern expressed that they may be subject to information that may not be available to others not on the Board and selling their units.
As a related question, what procedures, if any, should our Board follow when a Board member is a real estate agent with a listing in our building?
A. Unless your bylaws require the board member to resign, he or she doesn’t have to, say our BrickTank experts.
But our experts are of two views about whether the board member should resign anyway.
Some say it’s a good idea to make a clean break.
“That eliminates the chance that a board member might be accused of acting with self interest with respect to votes on issues that might affect the transaction, such as maintenance increases, assessments or material changes in corporate policies such as subletting or pet policies,” says real estate lawyer Eric Goidel.
He suggests that the seat be left vacant temporarily, and if the board rejects the buyer, “it’s only fair to offer the position back to the board member.”
Others on our panel say it’s enough to sit out any discussions about the apartment up for sale.
“They just recuse themselves from voting on issues pertaining to the sale,” says real estate attorney C. Jaye Berger. “It’s no different from many other issues which may arise in a building where a board member may be personally involved.”
As for a board member who is a real estate agent holding the listing, they should also recuse themselves from reviewing any applications to buy the apartment, says property manager Michael Wolfe.
Real estate lawyer Jeffrey Reich says the board should pass bylaws that “restrict board members from engaging in transactions which are to be submitted to the board for approval, or at least which prohibit the board member/broker from participating in any discussions or votes relating to any such transactions.”
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