As we know, a Condominium Association has many duties and obligations to fulfill including the collection of assessments, and the enforcement of the provision of the Condominium Documents.(1) In addition, the Association also has another very important duty: the maintenance and repair of the common elements. This duty not only is relevant to the aesthetics and the upkeep of the appearance of the condominium, but also encompasses safety concerns as well. A Board of Directors of an Association that ignores its maintenance and repair duties or otherwise does not take them seriously enough exposes the Association to potential liability from claims of co-owners and others who come to the condominium. This article will focus on some key issues that Boards must consider in the fulfillment of their maintenance and repair obligations, and will also discuss the ramifications of neglecting such duties and not diligently taking action in a timely fashion.
When faced with a maintenance and/or repair issue, the stating point, of course, is to determine whether the area in question is, in fact, an item for which the Association has the duty to maintain, repair and/or replace. This may not necessarily be as simple as it sounds. While the Master Deed for the condominium generally will define the general and limited common elements of the condominium project and delineate the corresponding maintenance and repair responsibilities of the co-owners and the Association, sometimes the item in need of repair may fall into a “gray area”, leaving it unclear who has the responsibility of repair. For example, while the Master Deed may provide that the Association has the duty to maintain the structure of the floor between unit levels, consider what happens when a co-owner requests that the Association fix a floor in his unit that constantly squeaks when walked upon. The question then arises: Is a floor squeak a structural problem, which the Association must remedy, or a “cosmetic” one that is left to the co-owner to solve? In dealing with a repair responsibility that falls into such a “gray area”, the Board would be wise to seek out advice and assistance from its legal counsel and professionals associated with the construction industry. Inaction or procrastination by the Board in addressing the issue ultimately engender legal action by a frustrated co-owner to enforce the Association’s repair responsibilities, resulting in the Association, at the very least, incurring attorney fees and costs to defend the lawsuit.
Associations may find it helpful to create a “repair matrix” in the form of a chart that can serve as a quick reference guide for determining the maintenance and repair responsibilities of the Association and co-owners. This chart should be submitted to the Association’s attorney for review and any additions or corrections.
Once the Board determines that the Association is responsible for the maintenance or repair of a particular area, it should then thoroughly evaluate the scope of the need maintenance/repair and obtain estimates from licensed contractors. Obviously, this step is less complicated when dealing with simple or routine maintenance such as painting the exterior of buildings, as opposed to being confronted with the problem of deteriorating roads or roofs, for example. Some contractors may propose different repair approaches than other to solve the problem. It is the Board’s duty then to determine which repair approach to adopt. While the Board may not necessarily be compelled to select the most expensive repair, the Board may want to think twice about choosing the cheapest repair that merely represents an “band-aid” solution that may ultimately prove not to be a proper repair. While cost is an important consideration, it should not be the sole basis for the decision. Conversely Association funds in the short term may only lead to the expenditure of even more money down the road to rectify a failed “repair”.
Perhaps the most important thing that the Board should do is to take prompt action. The time frame within which the Board should act as dictated, of course, by the type of maintenance or repair that is needed. Routine maintenance associated with the appearance of the condominium is less urgent than addressing potential safety concerns or conditions that may lead to damage to the common elements or a co-owner’s unit. For example, sidewalks that are heaving and creating a tripping hazard require quicker action than scheduling the repainting of signs or buildings. For those repairs needed to correct safety hazards or to avoid damage to the common elements or units, prompt action should be taken by the Board, and any concern regarding the availability or expenditure of funds should not be allowed to pose a serious impediment to moving forward with corrective measures. If the Board has truly been attentive to its duties, a reserve fund should be available for any major repairs. The Board has a statutory duty to ensure that adequate reserves are set aside for major repairs and replacement of common elements. It is a breach of the Board’s fiduciary duty to fail to establish reserves. If such reserves are not set aside, a Court will probably not listen very favorably t an Association that claims that it did not have the money to make a repair, where the failure to respond resulted in an injury to a co-owner or damage to a co-owner’s unit.
The importance of promptly responding to a repair request from a co-owner was made very clear by a recent jury verdict in the Los Angeles Superior Court. The jury in the case Mary Jamison Moller v. The Atherton Homeowners Association found a condominium association liable for $495,000.00 in water damage to a resident’s units. The resident had made repeated complaints to the Board in 1991 of water damage, mustiness, and moistness in her unit. The Board did not take action, however, until 1994, when an architect was hired to design a drain system to alleviate the problem. By the, the condition had grown worse, and in addition, the system was not installed properly and did not work. The resident developed health problems, allegedly because mold and mildew began to grow inside the unit’s walls. Among other things, the jury found that the association was negligent and had breached it s fiduciary duties. The resident was awarded damages for pain and suffering and the trial judge ordered the association to raise $250,000.00 to pay for repairs to the unit.
How soon should a Board take action to make a repair? At least one Court has held that a condominium association must perform a repair within a “reasonable time”. What constitutes a “reasonable time”, the Court stated, is a question of fact that depends on the circumstances. In Lemon v. Golf Terrace Owners Association, the Supreme Court of Alabama found that the Association did at within a reasonable time when it took over three years for a re-roofing project to progress from the planning stage to actual construction. The resident in that case had a serious roof leak in his unit and sued the Association for failure to fix it within a reasonable time. The roofs in the project were over sixteen years old, were defectively designed and not subject to a permanent repair. More and more roofs began to deteriorate and leak. The Board appointed a committee to develop a plan to deal with the roof problem and an architect was hired to prepare a design. The Board was constrained in its actions, the Court noted, because it then was required by the Condominium Documents to submit the new design for a vote by the co-owners. Once the approval was obtained, the Board then had to secure four bids from roofing contractors, one of which then had to again be submitted for co-owner approval. The Court expressly acknowledged that “[t]he delay in the construction appears to have resulted from the fact that the Association had to follow the corporate procedure set out in the [Condominium Documents] for making extensive structural alterations to the roofs… The record affirmatively shows that the Association took [the co-owner’s] problem seriously.” The Court then went on to document extensive efforts undertaken by the Association to try to stop the leaks in the co-owner’s unit while awaiting construction of the new roof. Thus, it appears that if a Board diligently pursues any procedures mandated by the Condominium Documents before a repair project can be undertaken, an argument can be made that the Board should not be held responsible for the delay in actually effectuating a repair. If there are no constraints on the Board’s ability to make an immediate action, however, the Board should not unduly hesitate to begin the repair.
Finally, there has been a recent development that impacts the liability of an association for allegedly failing to fulfill its maintenance and repair obligations of which Board members and Association counsel should be aware. It has long been presumed that the “business judgment rule” would, in most cases, insulate a Board from liability for a business decision made in good faith, so long as the Board members acted on an informed basis, were disinterested and independent, and were reasonably diligent in informing themselves of the facts. Generally, Courts will not review such matters of business judgment and discretion. There has recently, however, been a dent placed in this “shield” from liability by a California appellate court in Lamden v. La Jolla Shores Clubdominium Homeowners Association (1998). In that case, the complex experienced a major termite problem and an exterminator recommended fumigation to control it. The Board decided against fumigation, however, based on its review and careful consideration of several factors. Instead, the Board decided to spot treat the infested areas. A co-owner sued, alleging that the association should fumigate instead of spot treat. The Board defended the lawsuit by stating that its conduct was in conformity with the “business judgment rule”, and the trial court agreed, holding that the Boar had acted in good faith and had a rational basis for the decision to reject fumigation.
On appeal, however, the trial court’s decision was reversed. The appellate court essentially held that the “business judgment rule” is not the applicable standard when reviewing maintenance/repair decisions. The court reasoned that the Association was “for all practical purposes” the complex’s landlord, and must, therefore, exercise due care for the “tenant’s” property. The court stated that this common law relationship between the Association and the co-owner required that, in performing its maintenance and repair duties to the common areas, the Association was to exercise due care to protect the co-owner’s unit form undue damage. This common law standard, the court held, was to be applied instead of the “business judgment rule”, and the Association’s conduct should be scrutinized under an objective standard of reasonableness rather than a determination of whether the decision was made in good faith. At this point, most state courts have not yet issued any similar decisions, but it is probably only a matter of time before a skilled attorney will raise this issue in a lawsuit brought against an Association in regard to an alleged failure to properly carry out maintenance and repair duties. Accordingly, Boards should also consider whether their maintenance/repair decisions are reasonable and prudent, in addition to ensuring that they are made in good faith and represent an informed business judgment.
In summary, like other duties, Associations must take their maintenance and repair duties seriously and take prompt action to pursue a course of repair when necessary. Neglecting a needed repair can have deleterious consequences. To avoid a problem with funding repairs, the Board should also be faithful to its duty to set aside adequate reserves. If an Association acts diligently to address a maintenance and repair issue, and does so in good faith, while being well informed, it will significantly reduce any potential liability for claims that it did not live up to its obligations.
(1) While this article primarily refers to condominium associations, the issues discussed can equally apply to other community associations as well.
By Richard M. Delonis, Esq, an attorney with the law firm of Williams, Mullen