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QUESTION/ANSWER BY JOHN H. GETTINGER, ESQ.

Question:

Can board members be paid?

Answer:

Yes board members can be paid, but it would be highly unusual in a homeowners association setting. Section 715(d) of New York's Not-for-Profit Corporate Law (the "Statute") provides "unless otherwise provided in the certificate of incorporation or the by-laws, the board shall have authority to fix the compensation of directors for services in any capacity." However, most of the association by-laws which we have reviewed provide that directors and officers of the association shall serve without compensation.

Directors and officers can be compensated for services which they render to the association while acting outside of the scope of their duties as directors and officers. A contract between a corporation and a director or an entity in which a director has a substantial financial interest is not void or voidable for this reason alone. However, pursuant to the Statute, the interested director must disclose to the board his financial interest in good faith and the contract must be approved by not less than a majority vote of the directors without counting the vote of the interested director. Moreover, the board must determine that the transaction is fair and reasonable and in the corporation's best interest. As a practical matter, any contract between a homeowners association and a board member is subject to scrutiny by the homeowners. We counsel our association clients to avoid such contracts unless there are significant and compelling reasons to enter into them.

As such, for the most part, homeowners association boards are made up of individuals who volunteer their time and effort to serve their communities. Unfortunately, board members are often criticized, harassed and even threatened for their service. The expression "no good deed goes unpunished" is painfully true for those volunteers who serve their community.

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