New York co-op owners are very particular about their neighbors, and boards don’t hesitate to reject potential buyers if their finances aren’t on par with the rest of the building, or if they believe an applicant simply isn’t the right fit.
When it comes to the composition of boards, too, board members can be similarly picky – some don’t like brokers among their ranks.
Brokers’ experiences with their boards run the gamut from rejection to acceptance of their bids to serve on boards, and compromise situations that limit them from doing business in their own buildings.
Marcos Rada, a broker at Douglas Elliman, serves on his building’s co-op board and actively seeks listings there. Leslie O’Shea of Stribling serves on her board, but can’t solicit business where she lives. Jacky Teplitzky, also of Douglas Elliman, was rejected outright when she sought to join her building’s board.
There are arguments on both sides that weigh the interests of the building against brokers’ self-interests. The stakes whether it’s the value of apartments in a building or the effect on brokers’ incomes can be high.
Some boards prize the knowledge a broker can bring to a building, which can effectively raise resale prices within a co-op. A board member broker can also advise on the level of monthly maintenance costs or weigh in whether portions of a building should be renovated.
But the potential for conflicts of interest troubles some co-op boards, which bar brokers over concerns that self-promotion will come before the needs of shareholders. Critics say that brokers can’t entirely be removed from the admission process, and that confidential information about the building will be inappropriately disseminated among the brokerage community as a result.
Marolyn Davenport, vice president at The Real Estate Board of New York, said there is no inherent conflict of interest.
“Boards know a broker knows how a co-op is structured and has the understanding of maintaining an asset,” she said. “To exclude them because of their profession doesn’t make sense. Most boards welcome lawyers on their boards and they too might have conflicts of interest or represent people in the building. Architects sit on boards and they may be doing work for people in the building too.”
Davenport acknowledges that “clearly a broker would need to recuse themselves on any decisions on a potential buyer where they have an interest in the transaction.”
Marc Luxemburg is president of the Council of New York Cooperatives, but speaking as a lawyer he believes the disadvantages outweigh the advantages for a board.
“It’s an awkward situation for the board because there is an inherent conflict of interest when a prospective purchaser is brought by another board member who is a broker,” he said.
He also worries that brokers may try to trade on their positions to get an advantage for listings from people that are selling in the building. “There are some people that try to let it be known that they have a lock on the building,” he said. “A lawyer on the board should not represent the building in a purchase or sale because they run into the same potential conflict of interest that the broker has. I was on the board of my building for 30 years and I can’t say that I got a single piece of business that involved the building. I got other business; there is nothing wrong with that.”
Rada, at Douglas Elliman, said he has been able to successfully balance his duties as a broker and a board member. He was president of his Soho co-op board before he worked as a broker, and is now the board secretary. He is currently selling two apartments in the co-op and says he will recuse himself when prospective buyers are interviewed.
“I didn’t want to have my motives questioned,” he said.
O’Shea, of Stribling, has more restrictions than Rada she is unable to market herself to the residents of the Upper East Side building where she lives and serves on the board.
About 18 months ago, before she became a broker, O’Shea asked to be on the board and was soon named its vice president. When she became a broker, she was told it was fine if someone in the building wanted her to sell their apartment, but she should refrain from soliciting business in the building.
A deal done by another broker who lives in the building soured some shareholders, and that led to O’Shea becoming the building’s representative for setting prices and marketing, and educating residents about what services they should demand from brokers, she said.
“I thought I would not like that I wasn’t doing the business myself, but instead I have gotten a lot of satisfaction in helping the individuals and the building,” O’Shea said. “I can go back to pursuing the business when I am no longer on the board, rather than doing both roles poorly. It will be interesting to see once I step down from the board how much business I get from people in the building.”
Meanwhile, Teplitzky, at Douglas Elliman, was rejected by the board of her Upper East Side building.
“I have presented my candidacy to be on board in the past,” she said. “But some of the board members say there is a conflict of interest, which I don’t see.”
The board’s decision wasn’t based on the building’s bylaws, or any written rules, but was a decision made by the current board members.
“The fear is brokers are doing this to self-promote to get listings in the building,” she said. “But quite separate from that, we are out on the street every day looking at other buildings.”
“We can help make decisions on whether to renovate the lobby or convert extra space into a gym,” she said, “or give advice on whether a flip tax is advisable, or if the maintenance is too high compared with other buildings in the area.”
After Teplitzky bought her apartment, she said units in her building were undervalued, and the board sought her out for advice. She said she advised the board to scale back from having two doormen on duty at midnight, and to renovate the hallway, lobby and other areas for the first time since construction was finished. Teplitzky says she provided valuable services with broad benefits to her neighbors.
“The building was very tired,” she said. “Now we are on par with other buildings.”