The Risks and Rewards of Having a Lawyer on Your Board

If your board has an attorney serving as a director — or if you're that attorney — this episode is essential. Stewart Wurtzel, member at Tane, Waterman & Wurtzel, walks through the real conflicts that arise when legal expertise meets board duty. He explains why letting your board's attorney review contracts instead of hiring outside counsel can leave everyone dangerously uninsured, how to voice a legal opinion without it becoming legal advice, and why diplomacy is everything. His practical framework for drawing boundaries without drawing battle lines is something every board member needs to hear. Habitat's Carol Ott conducts the interview.

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!

Transcript

Carol Ott: When your board has a lawyer on it, you might think legal issues just got easier. In reality, they often get messier. The roles of director and attorney can collide in ways that might surprise you. Today, we're gonna explore what can go wrong and what can go right when a lawyer serves on the board.
Tina Larsson: I'm Tina Larsson with The Folson Group. We deliver done-for-you property management searches. You make the final call, we handle the rest. Add to that our seamless project management and strategic cost optimization, and you get a partner that empowers boards to make smart, confident decisions that move your building forward.
Carol Ott: I'm Carol Ott with Habitat Magazine, and my guest today is Stuart Wurtzel, member at Tane, Waterman and Wurtzel. Thanks for joining me today, Stewart. 
Stewart Wurtzel: Thanks for having me, Carol. Good morning. 
Carol Ott: So I know this topic is very real to you as you serve on your board and are a lawyer in private practice, and I'd like to run through some real-world sit- situations and get your take on them.
Tina Larsson: Sure. 
Carol Ott: Okay. Let's say the board is reviewing a proposed roof repair contract. The president turns to the attorney board member and says, "We don't need to pay the building's lawyer for this. You can review it, right?" Stuart, is there a risk or is there a reward here? 
Stewart Wurtzel: More risk than reward. You know, there's certainly some advantage to saving some money in the short run, but it can certainly come back, you know, as a problem in the long run.
It's more of a risk because just because there's an attorney on the board doesn't mean that they are familiar with construction contracts or the various provisions, indemnification, attorney's fees, liquidated damages. And if a mistake is made in reviewing because it's not their expertise, they're matrimonial attorneys, they're personal injury attorneys who don't really deal with this, but, you know, we all have our memories from law school as to what we've learned, you know, it becomes a, a risk that something does not get picked up and not get covered.
Everybody specializes these days, and when that happens and you have a board member serving as attorney and a mistake is made, the big risk that runs in is where does the protection come from? You know, is the- Malprac- is the lawyer's malpractice attorn- you know, insurance going to say, you know, y- you were acting as a board member, you weren't retained as an attorney, and this wasn't an attorney-client relationship.
And the building's DNO policy may say, you weren't acting as a board member, you were acting as an attorney, you're not covered for that. So you run a risk that you fall in between the policies and the coverage, and now who's paying for the mistake? The building is, or the individual attorney may be. 
Carol Ott: Ah. So let's go on to the next scenario.
So many boards have at least one attorney serving as a director, and these folks face their own conflicts, whether they recognize it or not. And let's say there's a problem with a contractor the building has used, and half the board wants to sue and the other half wants to settle. So the attorney board member favors suing, but worries if she voices her opinion, it will be seen as legal advice.
So how should she proceed? 
Stewart Wurtzel: Okay. Do it all the time. Pretty much every board meeting it comes up, the first thing that comes out is, "I'm not giving legal advice, but here's my opinion." I mean, everybody who's on a board brings certain skills and background, no different with an attorney, and they have an opinion and they should be able to voice it, but they sort of need to make clear, you know, where they're drawing the line between what their opinion is as a board member as to what they should do, and what their view as a lawyer is about the strengths and weaknesses o- on their case, you know, or the issue and overhear.
Um, but they shouldn't hesitate to express their opinion. I mean, it may sway more board m- more board members one way because they say, "Ah, the attorney on the board, you know, says what it is," but it should make it very clear that we're not offering the legal advice. But that doesn't mean, you know, that every bit of legal advice shouldn't be given.
Some of the things are very simple and crystal clear that, you know, you don't even need to be an attorney to, to have the, quote, legal opinion. Shareholders in arrears and, you know, should we collect, should we do something to collect? Yeah, the answer is yes, you have a fiduciary duty, you don't need to go to the attorney and, you know.
If I'm saying as the attorney, we need to start, or I'm sorry, even as the board member, we need to start collection efforts, yeah, that's fair game. If there is a particular problem that needs to be discussed with counsel, you know, in a co-op, is this a warranty of habitability situation? Whose responsibility under the proprietary lease is this particular repair?
You know, you may wanna get, as the, the attorney board member, the attorney's position. I may have my view on it and may have my opinion, but, you know, in terms of what the position's gonna be in court, what it's gonna be, you may wanna go to the building's counsel to get their view. 
Carol Ott: Should the attorney Board member, when they're giving their advice, sort of what you just said, preface it by saying, "I'm not giving legal advice"?
Stewart Wurtzel: Well, you know it, I think it should be pretty clear, you know, what's, you know, w- you know, what the view and where the position is coming from. That's always safe and, you know, it comes up at my board meetings all the time is, is, you know, I'm not giving legal advice, this is my view, you know, but I'm happy to discuss this with building council.
And, you know, there have been times over the years, you know, that our documents in our condo, you know, you know, are less than clear and council and I have gone over and discussed and, you know, we've not always agreed and we've sometimes come to a consensus, but the ultimate decision is his, even if I disagree.
You know, I don't agree with your legal opinion on this particular case, but you're the attorney, you're the one representing, you know, I, I will give way. I voiced my opinion the same way as anybody else do, a teacher reading a document, an accountant reading a document. We all have our views and opinions, but the role of the council, outside council, is to give their opinion, and I'll give way.
Carol Ott: So let's, let's look at a different kind of situation, which you've sort of touched on, when the board actually asks the attorney director to do legal work. So let's say you're the board's outside legal counsel. The board asks the attorney board member, however, to draft new house rules, which he does. The co-op saves money by not using outside legal counsel, and now down the road you happen to review these house rules and find that they're problematic, and that kind of pits two attorneys against one another.
How does that play out? 
Stewart Wurtzel: Diplomacy. Um, you know- You know, basically, you know, we're, we're still obligated to give our legal opinion and, you know, we can explain, you know, why, um, you know, we, we have this view and, you know, um, you know, we've seen over the years, you know, this exact scenario where a board member's drafted something, um, and they put something into the house rules which is inconsistent with the proprietary lease or the bylaws and, you know, they figure, oh, well the, you know, it's a natural extension.
Well, no, it's actually a change and it's a problem and it's not, you know, enforceable and, you know, it becomes problematic. So we explain the situation, you know, that- Uh, we understand why and where you came from, but it's just not right and, you know, need to change it, or here's the consequence. You know, stick with it, but bear in mind it may be subject to challenge and, you know, you may lose.
You know, um, so, you know, we raise it certainly, um, and, you know, advise the client on what the problems are, you know, but, you know, we're not berating the attorney. It's not, you know, "You shouldn't have done it," you know. I mean, we'll usually say to the board, you know, 'cause a lot of times they'll come to us beforehand and say, "We wanna take the first shot at this," you know, "We don't wanna pay you for all the drafting fees."
And say, "Okay, we get it. But before you enact it, why don't you let us review it and go over so we can go over the problem spots now, um, you know, and deal with it?" 
Carol Ott: I see that diplomacy actually is crucial here. Um, sort of in conclusion regarding these scenarios, what's your advice for boards and attorneys who sit on the board about setting boundaries from the start?
Stewart Wurtzel: I think that needs to be pretty clear, you know, w- you know, where the boundaries are and what they are. But, you know, they're not necessarily hard-line boundaries, you know. These boundaries get blurred sometimes as to where and, you know, and/or what, um, you know, and how far you're gonna go. So it's, I'm an attorney, board members, yeah, I am happy to give you my experience.
I don't care what practice field I am in. If we're talking about litigation, you know, anybody who, you know, is a litigator in any field is gonna certainly have their opinions on cost and expense and timeliness and likelihood of success and jury and this, that, or whatever, you know, and valid opinions. Um, so as a director, you have a fiduciary duty and obligation to express your opinions.
That's what you were elected and that's what you were there to do. And having an attorney on the board, don't get me wrong, it is a good thing, but just you sort of knowing, you know, where and what the limit is, you know. The more diverse views, backgrounds that you have on a board, the better, you know, it is.
You know, if I can, you know, our board here just sort of really, you know, quickly is when we were coming out of Sandy and had a lot to do, I had a construction guy, I have an accountant guy on the board, we had me. You know, we all played roles very heavily based upon our experience. But the construction guy wasn't the construction manager here, but he was involved supervising, and the accountant wasn't, you know, going in and being the accountant for the project, but he was reviewing.
So we're all bringing our experience and backgrounds to the building, which is great for a board. That's what you wanna see. But we're not usurping the roles of the professionals because, you know, most of us, you know, b- besides the liabilities- Most people don't have time to necessarily get involved and supervise and do what an attorney needs to do.
You know, the legal bills are high because they take time, and if you don't have the time to put into these things and, you know, you're not fully sure what you're doing, you know, as the board member, you may be getting more involved in a time situation than you want to because you have to learn. 
Carol Ott: Thank you, Stewart.
This is very practical advice that I think every board member and every attorney who's sitting on the board should heed. Thanks for joining us today. 
Stewart Wurtzel: My pleasure. Thanks for having me, as always.