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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!