Legal Experts Share Advice On the Balancing Act
Any recent web search of condominium news will reveal countless blog posts from disgruntled unit owners, many of whom feel their individual associations have been less than transparent in controversial board decisions. But these calls for increased transparency have left many board members puzzled.
Recent years have seen changes to condominium law throughout much of New England. And as board members scramble to keep up, many questions have arisen as to the facts about board transparency—what attorney Foster Cooperstein in Newton Centre, Massachusetts, calls “the new legal buzzword.” So, just what is transparency, in concrete terms? Or, for that matter, do concrete definitions even exist?
“In any organization, there needs to be a reasonable degree of openness,” says Cooperstein, who has practiced condo law for nearly three decades. “Even if the board makes the best decisions in the world, if everything is done behind closed doors, without any possible input from unit owners, there’s always someone who’s going to suspect [wrongdoing]. If people have the opportunity to understand why decisions are made, there is less likelihood of problems.”
But striking the balance between transparency and reasonable confidentiality can be a frustrating process for condo associations. And it is just this question of balance that often creates the greatest headaches for those who sit on condo boards. Regardless of the individual state, board members are legally bound to admit all unit owners to any general session—and to provide them with written notice beforehand. Beyond that, many other legal requirements are subjective at best. And though few easy answers exist, experts say there are some governing principles that can help in navigating the murky waters of transparency.
“I think it’s a balancing act,” says attorney Samuel “Sandy” Moskowitz of Boston’s Davis, Malm, and D’Agostine, PC. “As far as the management company goes, they have to be completely transparent with respect to the board. Between the board and the unit owners, that’s different. And I think in that case it really comes down to a question of what is the statute.”
The question of individual state statutes comes up frequently in any conversation on board transparency. And while statutes vary throughout New England, experts say basic rules of thumb should govern board members’ actions. “I start off by looking at the statute and say, does the unit owner have a right to see this? And if the unit owner doesn’t have a right to see it, I am very cautious about providing access to those documents. Most owners think they have very broad rights to see all of the association records, when, in fact, those rights are limited based upon statute and what the condominium bylaws specifically provide.”
Perhaps the one true universal upon which all experts agree is the right of an individual unit owner to fully review a property’s banking statements and other financial documents. “If the management company has them, upon reasonable request at a reasonable time, unit owners should be able to view them,” says Cooperstein. “Again, like anything else, the word ‘reasonable’ is big. And that doesn’t mean someone can come in every week to ask to see the books, because that’s interfering in the operation and it’s extremely hard to justify.”
Beyond that, unit owner rights vary somewhat from state to state—and, depending on association bylaws, from property to property. “You want to look and see exactly what does the statute require access to,” says Moskowitz. “And those things are actually fairly well itemized in the statute [for each state]. The board can get itself into trouble if it then gives access to owners for things beyond those that are provided in the statute. Of course, the condo bylaws, in some cases, may create rights for unit owners that are not specifically spelled out in the statute.”
Considering the unique aspects of condo law, allowing unit owners access to condo documentation will often raise more questions than it answers. And in those cases, condo law professionals advise caution in attempting to answer a unit owner’s questions.
“There are certainly times when a manager or board member is in a reasonably good position to provide information without necessarily violating the limitations on giving legal advice,” says attorney Carl Lisman of the law offices of Lisman, Weber, and Lekerling, PC, in Burlington, Vermont. “I think a good manager can know both when to volunteer information and when to say no.”
However, when it comes to the sometimes-tricky legal language of an association’s Master Deed or other governing documents, experts agree that erring on the side of caution is almost always best. “My general advice to a board is all you do is make the documents available,” says Cooperstein. “If there’s a question of financials, then some explanation should be made. But if we’re talking about interpretations of a document, absolutely not. We’re talking about documents that have legal significance. And condo boards, management, and trustees are not lawyers.”
“The board member may see the benefit in explaining how the board sees a certain provision,” says Moskowitz, “but I don’t think it would be that board member’s place to then advise the unit owner of what the unit owner’s rights are. The unit owners have to educate themselves about that.”
While unit owner access rights are sometimes unclear, a board member’s right to access crucial documents is sweeping—and nearly universal. “Let’s say, for example, there’s a situation where a board member is adversarial to either other board members or possibly to the association,” explains Moskowitz. “Only under those circumstances would the board member’s rights to see the association’s records be limited.”
And even then, some legal pros would caution against one or more board members expressly attempting to prohibit another board member from accessing important condo docs. “In some cases board members must be guided by law,” says Cooperstein. “But in most cases they’re not really guided by law—they’re guided by general principles. Even if someone has the proverbial axe to grind, that doesn’t necessarily mean they can’t make a reasoned and fair decision.”
Despite the reasonable concern many condo boards have over questions of legal transparency, Cooperstein says he often reassures clients that there are still some situations in which openness is definitely not expected. “And they’re not so much the big issues, they’re the detail issues,” he says. Those detail issues include personnel changes and the basic logistical matters of any business. “For instance, if you have a super in a condo, many people over the years may have become friends with that person and lost sight of their objectivity when it comes to that person’s effectiveness and whether the person is doing what he should be doing.”
Ironically, it is just such a scenario—the dismissal of a popular employee—that can often result in feelings of ill-will and charges of collusion. Considering the obvious need for discretion in such cases, experts say slow deliberation and tactfulness must rule the day. The same must also be said in that most contentious of all condo debates: the HOA fee increase.
With its penchant for bruised egos and battered pocketbooks, there is likely no scenario more prone to incite contempt than an unpopular increase in condo fees. And as many board members know well, the cries of foul play that sometimes accompany it are often motivated more by anger than any true fears of wrongdoing. Anticipating these problems before hand—and giving additional attention to “openness” to controversial issues—may go a long way in smoothing the choppy waters left in the wake of a fee increase or controversial expenditure. “There are certainly times that decisions are going to be made that are not popular decisions,” says Cooperstein. “And those are the kinds of decisions where it is most important that people have the kind of opportunity to listen, at least, if not participate.”
In the end, say legal experts, condo transparency is more a philosophy than a true legal issue. Unpleasant situations can often be thwarted through simple, open communication. “A lot of the times, matters get contentious internally because of the perception by unit owners that they’re being abused by the board or professional managers,” notes Lisman. “More often than not, my experience tells me that there is less abuse going on than the owners think. And certainly lack of sharing information is what’s happening.”
“This is more a practical issue than a legal issue,” says Cooperstein. “The problem oftentimes is not really a legal issue, it’s communication. I think we find that in all of life. If you do not communicate, people make assumptions. And they often make negative assumptions. The bottom line is: make every attempt to be open.”
Matthew Worley is a freelance writer and a frequent contributor to New England Condominium.