How Boards Can Best Handle Difficult Decisions Making the Tough Choices

How Boards Can Best Handle Difficult Decisions

Sometimes, no matter how much it may pain us to do so, we all have to say or do unpleasant things. That can certainly be the case for co-op and condo board members, most of whom will one day face the dreary prospect of raising maintenance fees, instituting assessments or levying flip taxes. Those tasks may come with the territory but that doesn’t make it any easier for these individuals to have to step forward and break the news to friends and neighbors alike.

What can be done to soothe the pain of an unpopular announcement or decision? What’s the best way to earn the buy-in and support of the very people on whom these issues will have the biggest impact? It boils down to preparation, honesty and lots and lots of conversation.

Saying the Unpopular Magic Words

While board members are faced constantly with large-scale decisions and tough calls, there are a few hot-button topics almost guaranteed to stir up trouble among residents. First and foremost: the green stuff. “It’s all about the money,” says attorney Ronald L. Perl, a partner with the law firm of Hill Wallack, LLP in Princeton, New Jersey. “Decisions that result in assessments or additional charges are never popular. No one wants to spend money especially these days.”

Scott Dalley, senior vice president of Access Property Management Inc. in Flemington, New Jersey, agrees. “The most difficult decision for a board to make is an increase in maintenance fees or some sort of assessment.”

These days, more and more of these difficult financial decisions are being made, given the state of the U.S. economy and the stark rise in fuel prices over the last six to 12 months. No matter how hard a board might try to find another solution to budget shortfalls, most likely there will still be a need for an increase somewhere close down the road.

“The board is obligated to manage the fiduciary responsibilities of the building,” says Michael Cervelli of Cervelli Management in North Bergen, New Jersey. “It used to be that a lot of boards didn’t want to raise fees.” Economic realities, though, dictate that these tough decisions have to be made. “Costs go up every year as in life so how could fees not go up?” Cervelli says.

Other trouble areas for boards include capital projects and renovations, says Perl. “Large physical changes, large projects, can cause a lot of controversy,” he says. “Like redecorating lobby areas.” And while everybody wants to voice their opinions and share their ideas about how common areas should look, that’s pretty much a recipe for disaster. “You can’t have everybody involved in decorating,” Perl says.

As much as aesthetics can stir trouble, capital projects “cause problems because they go back to money,” Perl says. People don’t want to spend cash even when it might be necessary.

Nipping close on the heels of financial woes and capital projects are decisions regarding long-standing policy changes. Say a building always allowed subletting in the past but new developments forced a change. Board members should just settle back in their chairs because hours of discussion and yes, perhaps a bit of venom, are sure to follow.

Easing the Blow

What can be done to cushion the blow of unpopular decisions? First off, gathering information and showing residents that everything about the decision was done with due deliberation and care. “Proper planning goes a long way toward minimizing problems,” Cervelli says. Massive problems can ensue “if boards or the board’s professionals don’t watch the ball and no one’s planning for these (big ticket items) and then suddenly, you have a repair that could have been planned for. Now you’re faced with needing an assessment or fee increase.”

If boards can show that all the right steps were taken, they can avoid sticky situations. Plenty of unexpected situations can arise in a year, things that could not have been foreseen by those in charge. “You could have an excessive amount of snow in a year and the amount budgeted for snow removal was exceeded,” Dalley says. “The board then has to go to the residents.”

It is always better to just face the music up front. “Explain the situation in full,” Dalley says. “Boards get into trouble when they don’t communicate effectively. Use all forms of communication available—e-mail, newsletters, postings in the common areas. Let them know the reason why you had to do what you did.”

Giving residents the news in a timely fashion also will help ease the pain. “If it’s been a winter of heavy snowfall, you’ll know by March and April if you’ll need a special assessment,” Dalley says. “You don’t want to make that announcement in July or August. Residents will forget what the winter was like, they’ll be less inclined to accept the assessment and they might even think something else is behind the increase.”

Engaging residents in the decision making process is imperative, Perl says. “Even if the board has gone through all of the right steps—getting expert advice, comparing solutions—they may have worked on this problem for eight months and may have made all the right decisions but owners will still feel blindsided if they haven’t been able to observe the process.”

“Start the educational process for your residents when the board starts their own education,” says Perl. Hold informational meetings, invite the board’s consultants and experts to make presentations to residents, share the choices being made. This creates a sense of community within the building and lets shareholders and owners know that the board is being open and honest every step of the way.

When it comes to rolling out new policies or rules, the key is to let people know ahead of time and ease them into the new situation. “First of all, make sure the entire community is aware of the rules,” Dalley says. “You have to publicize that a change has been made. Allow a certain amount of time before you start enforcing the rules with any kind of fine. The first couple of times there are infractions, use it as a warning or reminder for people.” Dalley recommends allowing 30 to 45 days between the time a rule is passed and the time when it is enforced. “Let people get used to it,” he says.

Boards also should make sure that they are on firm legal footing with any and all decisions they make. “There are firm rules about how much a board can spend without resident approval,” Perl says. Sometimes the board’s lawyer may be tasked with finding ways to interpret those documents to meet the need of the particular situation in question. That’s a very dangerous way to do business. “If it looks like you’re going to require the vote of the owners, don’t try to fit a square peg in a round hole. Have the vote of owners,” Perl says. And if the vote fails and the board still feels this particular change needs to be made, they can create a legal action, inform the residents that they have done so, present the pertinent information to a judge, and ask the judge to make a ruling that shows that the work must be done. In situations where there is a significant stalemate between the board and residents, seeking a judgment before vendor contracts are signed or financing is taken out to do a job is far more preferable than starting the job and having residents take legal action after everything already in motion, he says.

Can’t Please Everyone

At the end of the day, boards have to remember that they will never please everyone. “You’re not going to convince everyone,” Perl says. But through discussion and transparency, “a consensus will start to surface.” And when a majority of residents are in support of an action or decision, they can help shoulder some of the burden when it comes to making sure that the dissenters comply and hopefully come around to understanding and agreeing on why the decision was necessary.

“Boards are not out there to make stupid or unnecessarily expensive choices because they have to pay, too,” Perl says. “Boards act in good faith. They’re trying to make good decisions. If they can build a consensus, then it will be much tougher for the minority to drag their feet.”

Sometimes, though, things like new rules will create more uproar than they are worth. Perl knows of instances when a building’s previous board was perhaps lax in rule enforcement. A new board came in and started enforcing these rules, making it seem arbitrary and out of the blue for residents. The owners rebelled. In this extreme instance, the board recognized that it was better to rescind some of the rules and acknowledge that they had made a mistake. The board told owners that they were going to re-evaluate the rules. They appointed a rules committee comprised of residents, which came up with a set of recommendations that were then circulated and discussed in length at large-scale resident meetings. Those owners that could not attend were invited to submit suggestions in writing. By the time the new rules were voted on, residents all had a voice in the process and the vast majority were in support of the changes. Consensus was reached.

“When you can justify the rule and say we had a public meeting and this is a result of the community coming together,” Perl says, things go much more smoothly.

By sharing information and creating dialogue, a sense of trust also evolves between boards, management and residents. With that sense of trust comes the knowledge that the decisions being made are in the best interests of everyone involved, no matter how painful those decisions may seem. In the end, knowledge equals peace of mind.

Liz Lent is a freelance writer and a frequent contributor toThe New Jersey Cooperator.

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