New York law has been revised to require cooperative and condominium boards to disclose contracts or transactions in which it or its directors have an interest. The New York Legislature enacted these proposed revisions to the New York Business Law and the New York Not-for-Profit Corporation Law. While these laws originally only held cooperatives responsible, amendments were signed by Governor Cuomo on April 18, 2018, that make it clear that this law applies also to condominium associations.
Condominiums and cooperatives are required to submit annual reports to its members detailing any contracts made, entered into, or voted on by an interested director. An interested transaction is a contract or transaction in which a director of the board has a substantial financial interest. The annual report is required to include a list of the contracts voted on by the board, details about the contracts, records of each meeting in which a vote occurred, and the date of any votes on the contracts.
Specifically, Section 727 of the Business Corporation Law and Section 519-A of the Not-for-Profit Corporation Law both state that the annual report must include:
(1) a list of all contracts voted on by the board of directors, including information on the contract recipient, contract amount, and the purpose of entering into the contract;
(2) the record of each meeting including director attendance, voting records for contracts, and how each director voted on such contracts; and
(3) the date of each vote on each contract, and the date the contract would be and remain valid.
If, however, the condominium or cooperative has no information to disclose, based on the aforementioned requirements, the board may provide a disclosure statement to its members. The disclosure statement is a document signed by all directors which indicates that no actions taken by the board were subject to an annual report required by the law.
Thus, the condominium and cooperative boards must furnish either a report or a disclosure statement every year. The report must indicate interested directors that participated in the vote and/or transaction with another party. Lastly, Section 727 of the Business Corporation Law requires that every year, each director receive a copy of Section 713 of the Chapter, which defines “interested director” and lays out how directors can avoid a conflict of interest.
If you have any questions about the information contained herein, or you would like to speak with one of our attorneys concerning a Community Association Law matter, please free to contact us.
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