Can you get paid for serving on your co-op or condo board?
- Salaries are not allowed but sometimes a board member may be indirectly compensated
- Conflicts of interest are taken seriously and require full disclosure by board members
In the rare circumstance that a board member receives compensation, it would need full vetting and disclosure to avoid claims of conflict of interest.
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It would be highly unusual for a board member to receive compensation for serving on a board, our experts say. Co-ops and condos are not run as for-profits and introducing any salary would skew incentives and create conflicts of interest.
A board member has a duty of loyalty to the building but personal financial interests can test that responsibility. A conflict of interest arises when a board member has a financial interest in an issue on which the board is making a decision.
Most co-op bylaws have rules clarifying that board members do not receive a salary and any payment for services would need to be authorized in writing and approved by a majority vote of shareholders.
“Condominiums have similar provisions,” says attorney Jeffrey Reich, a partner in the law firm Schwartz Sladkus Reich Greenberg Atlas.
"The short answer is that compensation is not permitted," says Mark B. Levine, principal at property management firm, EBMG. However, in the unlikely scenario where a special meeting was held to vote on a proposed compensation plan for board members and it was approved by two thirds of the total shareholders in a co-op, it would be possible.
Receiving compensation for services provided
In the rare circumstances where a board member does receive compensation, it would usually be as an indirect payment in their capacity as service providers.
For example, a board member may own a boiler company, an architectural firm, or an accounting business, which could provide a necessary service for the building. They might even provide that service at a lower cost than competing vendors.
Levin says he has also had real estate brokers on the board who have worked on deals in the building. "Typically, they would recuse themselves from voting on anything related to the sale of the unit. Another possibility would be a board member who is an attorney whose firm represents the co-op board," he says.
With the appropriate disclosures and approvals, a board member could receive indirect payment to their company if the firm is vetted and their services are approved for used by the building.
Full disclosure of conflicts of interest
Board members need to be fully transparent about their personal interests when transactions or agreements are under discussion that involve their personal business. Members have a fiduciary responsibility to act in the best interests of the condo or the co-op. Bylaws also underscore how self-dealing is prohibited and would be a breach of fiduciary duty.
“It could present conflict of interest issues for a board member to be retained to provide services to the board,” Reich says.
Annual filings are required about any transaction where a board member has a conflict of interest.
This means the board must prepare a report each year, to be shared with owners or tenant shareholders, disclosing the contracts or transactions in which any board member had an interest. This report will generally be signed by every director and will include the names, addresses, amounts, and reasons for contracts with vendors or service providers.
"There will also need to be a list of all contracts voted upon, who voted for them and who benefitted from them," Levine says.
His advice to board members is to create as few conflicts as possible and also steer clear of any form of compensation for their work on the board.
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