Many Coops, Condos and HOAs have board members who are attorneys. Attorney board members can provide valuable input as board members but have to be careful not to provide legal advice. They definitely should not be relied upon as the Board or association’s attorneys for several reasons that will be discussed here. However, the attorney board member’s experience and training can help with identifying legal issues, framing those issues for the board, and presenting the questions with clarity to the association’s outside counsel. The attorney board member’s legal experience likewise aids attorney board members in helping the board understand the import and implications of legal advice received, and in the board’s adoption and implementation of appropriate actions in light of that counsel.
Attorney board members have to be very careful distinguishing between giving legal advice in place of outside counsel, and using their legal education and/or experience to aid in their decision making as a board member and helping other board members make decisions.
First, if the attorney board member is not a member of the bar in the state in which the association is located, the attorney board member risks engaging in the unauthorized practice of law. So if an attorney board member is not admitted to practice law in New York, the attorney definitely should not be giving legal advice to the board as it constitutes the unauthorized practice of law which is a sanctionable offense by the bar often leading to suspension or disbarment in the states that they are admitted, but also constitutes a crime in many states. In New York, the unauthorized practice of law is a class “E” felony. As such, conviction for a first-time offender can land the person in prison for up to four years or on probation while also requiring the offender to pay fines, restitution and be subject to other conditions imposed by the court.
If board members allow a fellow board member to give legal advice to the organization and engage in the unauthorized practice of law, they risk criminal punishment as well for assisting in the unauthorized practice of law, damages and claims that may result from decisions made by the board based on the unauthorized attorney’s opinion’s or legal advice and the denial of insurance coverage by the association’s insurers if a lawsuit is brought against the board members.
Even if the attorney board member is licensed to practice in the state in which the association is located so that there is no unauthorized practice of law concern, there still is an inherent conflict of interest in the attorney board member providing legal advice to the association for which the attorney serves on the board. New York’s Rules of Professional Conduct contains complicated rules regarding conflicts of interest and when an attorney has a conflict of interest it must be addressed. Condo’s in New York also have annual reporting requirements concerning conflicts of interest which must be satisfied.
There is also an ethical requirement of competency of an attorney giving advice in the condo/coop/HOA law area. If an attorney board member gives legal advice that the person is not competent to give because they don’t practice in the applicable area of law, then the attorney board member is arguably not competent to give the legal advice to the board which could also lead to a grievance complaint or malpractice claim in the event the legal advice turns out to be incorrect.
Offering legal advice on which the board relies initiates an attorney-client relationship. When that advice is provided regarding issues on which the attorney board member will also vote and that will affect the attorney board member personally, a potential conflict-of-interest issue raises questions about the
independent legal judgment exercised by the attorney board member.
Additionally, a board member is required to discharge his duties as a board member in accordance with the board member’s good faith business judgment in the best interests of the association. In New York a board is entitled to rely upon the advice of counsel in making business decisions, and by doing so helps to insulate the board from liability under the business judgment rule. When a board relies upon the advice of a fellow board member who is an attorney, especially when the attorney is not authorized to practice law in the situs state, there is arguably no protection afforded under the business judgment rule. At the very least your adversary will raise this against the board in arguing that the business judgment rule does not apply to the board’s decision or at least the attorney board member who was acting in conflict or worse, criminally.
An attorney board member can be a great asset for an association board, however, that is not an acceptable substitute for independent legal advice from a licensed New York attorney who is experienced in representing condos, coops and HOAs and their boards. The perils for the association and the board members are too great to take the risk.
