Condominium Living -- A Mixed Blessing

Written by Posted On Wednesday, 18 January 2017 12:48

Question: We are seriously considering buying a condominium unit, but are concerned about whether we really want to live in a condominium complex. There is always a lot of "condo bashing" by the press, and we would like to have your views before we sign a contract.

Answer: Condominium living -- as this column has suggested in the past -- is democracy at its best and democracy at its worst.

Clearly, before you decide to move into a condominium complex, you should carefully review the situation. You should not only read the condominium documents, but you should also make an independent inquiry about living conditions within the community.

I suggest that for several weekends, you wander around the community, introduce yourself to the residents and ask them what they think about their association.

There is no question there are problems when one lives in a community association. The great majority of directors are honest, hardworking and dedicated. They want to make a success of the condominium, and to make sure that property values will appreciate over the years. However, there are rare occasions when a very small group of individuals -- usually called the Board of Directors -- want to take control of the association, and have no interest whatsoever in the welfare of the entire community. Many Board members, quite frankly, are on an ego trip. They want only to be called "Mr. or Ms. President."

Also, community associations often tend to emphasize the concept of uniformity. Everyone who lives in the association must conform to certain architectural standards -- whether or not they are reasonable, and whether or not they comply with the will of the majority.

There are Boards of Directors that have hidden agendas. Some want to spend association money on projects -- and are intent on making these expenditures whether or not the membership truly approves of their course of conduct.

On the other hand, there are major advantages of living in a condominium community. The owner of a condominium unit obtains the benefits of ownership (such as tax deductions and possible appreciation) while at the same time having the luxury of letting other people take care of such items as shoveling the snow, cutting the grass, or dealing with normal maintenance and repairs.

Clearly, condominium living is not for everyone. The law is quite clear that when you move into a condominium complex, you subject yourself to the rules and regulations of that association, as they exist now and as they have been properly amended in the future. The courts have said on many occasions that if a unit owner does not like those rules, they have two choices. They can either move out, or they can try to muster a majority who will change those rules. I like to add a third choice: mount a good old fashioned political campaign and run for office.

A condominium is governed by a Board of Directors. That Board is elected -- usually on an annual basis -- and the Board has the absolute right to govern that association.

If you do not like the Board, you have the right to try to either throw them out of office (in what is known as a recall procedure) or elect different directors at the next annual election.

However, if you are in the minority, and cannot develop significant support for your position, you will be very unhappy in your association.

On the other hand, Boards of Directors should also recognize that the element of common sense should be involved in the governing of the association. For example, the monies that a Board is considering spending does not belong to that Board of Directors. The monies belong collectively to all of the owners.

While the courts have made it quite clear in many jurisdictions that a Board of Directors cannot be held personally liable if they exercise good business judgment, the fact remains that many Board members do not understand they also have a fiduciary duty to all of the owners.

For example: interest rates are currently very low. A Board of Directors that controls a large sum of money in a reserve account -- for example $200,000.00 -- is uncomfortable they are only obtaining less than one ercent interest rate on these reserves.

But a Board of Directors cannot, unilaterally, decide to invest these funds in anything other than safe, guaranteed investments. Clearly, a Board of Directors cannot take the funds to Las Vegas and "invest" them on the roulette table. But is it really any different if the Board decides to invest those funds in a mutual fund -- that carries no guarantees whatsoever?

Obviously, if 100% of the membership decide to make that investment, the Board has the right to do so. But unless the will of the majority is sought -- and followed -- a Board of Directors is in jeopardy if it exercises bad judgment.

Another example: The Bylaws of the condominium association require Board (or Architectural Control Committee) approval before any exterior changes are made to a condominium unit. One owner proposes painting the outside of his or her condominium unit in a color that is not acceptable to the Board. What is the Board's obligation? On the one hand, the Board has to follow the Bylaws. On the other hand, however, the Board also has to use some common sense. Why is the color objectionable to the Board? Are there with standards giving clear guidelines as to what is and what is not permissible? And most importantly, has the Board consulted with the membership so as to determine the views of the majority?

These are very difficult questions. Boards of Directors often feel that they are "damned if they do and damned if they don't."

In order to maintain a well-run condominium association, the Board should obtain the input of the community on many decisions that the Board intends to make. Newsletters and other communication methods should be adopted so as to assure the membership of their rights.

I have found from my professional experience that most -- if not all -- of the problems created in condominium associations stem from the fact that there has been a lack of communication between the Board and the membership. While this sounds too obvious, many of the problems can be solved if the membership has full knowledge of the Board's activities -- in advance of their taking any significant actions.

Living in a condominium may not be your cup of tea. But a well-run community association does offer significant benefits for those who appreciate community living.

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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

kasslegalgroup.com

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