New England Condominium March 2020

Managing Through the Coronavirus Crisis What Condo, Co-op & HOA Boards Can Do BY JOSEPH COLBERT AND TEAM COLBERT LAW March 2020 NEWENGLANDCONDO.COM change. For example, communities usually have rules against creating a nuisance condition; is having a fever and continuing to use common areas like the laundry room, rooftop recreation- al area, gym, playrooms, pool, etc., a ‘nuisance’? Perhaps that needs to be spelled out in a rule change. Before deciding that, however, you should confer with counsel to make sure the rule is within the confines of the law, doesn’t discriminate, and is 205 Lexington Avenue, NY, NY 10016 • CHANGE SERVICE REQUESTED continued on page 8 THE CONDO, HOA & CO-OP RESOURCE CONDOMINIUM NEW ENGLAND continued on page 8 Despite the best intentions of board members, residents, and even managers, co-op and condominium properties don’t always run like well-tuned machines. Sometimes they hit a bump in the road... and sometimes they break down com- pletely. The reasons behind such a break- down can come from many directions, in- cluding financial missteps, physical plant problems, and interpersonal disputes. Money and Maintenance In any business, money is always a po- tentially huge problem—and co-op cor- porations and condominium associations are no exception to this rule. Financial complications tend to come from two directions: One is financing, the other is reserves. Financing tends to be the larger po- tential problem for co-ops, where there is usually an underlying permanent mort- gage on the entire property that must be paid monthly. That said, there are con- dominium associations that undertake community-wide financing for any num- ber of reasons that can make the whole community liable in the event of default. Reserves (or the lack thereof) are the other area where co-op and condo prop- erties may find themselves in financial distress. Like just about everything else, physical plants and common elements age—and if proper reserves have not been built up and maintained, buildings may find themselves in the financial weeds if a major physical component like a roof or boiler suddenly needs repair or replace- ment, or if a bad winter or other unfore- seen event causes extensive damage to the property. According to Stuart Halper, vice presi- dent of Impact Management, a co-op and condo management firm with offices in On March 11, 2020, the World Health Organization (WHO) declared the corona- virus outbreak a global pandemic. Here in the US, the Centers for Disease Control (CDC) has detailed recommendations for individual preparation and response to the outbreak of COVID-19, the disease caused by the novel coronavirus. On March 14, President Trump declared a National State of Emergency, joining many states — in- cluding New York —that had already made their own declarations in the previous days. This is a scary time throughout the world, and we have to take immediate action to help our communities. This is especially true for condominiums, cooperatives and homeowners associa- tions. Unlike schools, sporting events or other large gatherings, that can be cancelled or dispersed to avoid proximity to other people, these communities contain residents who live amongst each other and share common areas. When quarantined, told to stay home from the office, or to work from home, residents are still a part of a mass of people who are stuck living amongst each other. So what can management and boards do to protect their community associations as we navigate this new reality? Here are some steps you and your board-management team can take right now. Consider Your House Rules For all practical purposes, your board is a quasi-governmental body. For the most part you are allowed to make your own rules, provided that you do so within the con- fines of the law. Your board should review your house rules and determine whether new rules are needed. Rule changes can be done by a board vote. With residents home from work and children out of school, there are going to be a lot more people in the common areas during the day for the unforeseeable future. The rules may have to The motivation for volunteering to be an uncompensated (and sometimes under- appreciated) condo, HOA, or co-op board member is usually a sense of civic duty com- bined with the desire to protect one’s own in- vestment and quality of life. This means that the majority of board members actually live in the buildings and communities they serve. And that means that most board members are neighbors, serving with and for people who share not just common areas with them, but maybe even actual walls and ceilings. Such closeness has its benefits: familiarity with the community’s unique issues, people, and history; easy access to documents and other on-site information; and proximity to other board members for meeting quora, for example. But closeness also can lead to con- flicts, from the personal to the professional. So how do directors separate the business from the kibbitz in the boardroom? Fiduciary Duty Upon election, board members become fiduciaries, charged with making policies and decisions in the best interest of the com- munity. A fiduciary has two primary duties: duty of care and duty of loyalty. The former means a board member must exercise rea- sonable care when making decisions that will impact the building or community. The latter is a standard that requires a board member to act in the best interests of the corporation or association. Both of these duties prescribe a respon- sibility to put one’s personal interests aside in execution of board business, says Mary-Joy Howes, partner in the law firm of Good- man, Shapiro & Lombardi, LLC with offices in Massachusetts and Rhode Island. “Board members must always have the association’s best interest as their number-one priority,” she says, “and unit owners need to be able to trust that the elected board is acting in the as- sociation’s best interest at all times. The board members’ loyalty must be to the association and the association only.” Family Ties In practice, however, fiduciaries carry out their business more or less on the honor sys- tem—and much of real estate is a family affair. The stewardship of buildings and communi- The Challenges of Managing a Distressed Property Getting Back on Track BY COOPER SMITH Relationships on the Board How Close Is Too Close? BY DARCEY GERSTEIN continued on page 10