Listen Up! The Top 5 Things Lawyers Wish Boards Knew

Listen Up!

 While some condos and co-ops are lucky enough to have lawyers serve as members  of their board, the majority of boards don’t have an in-house legal expert. They often reach out to their attorney to  answer questions, vet documents and send the occasional stern letter to a  contractor or recalcitrant resident.

 The problem is that sometimes, boards will reach out too often, calling  attorneys about things they should already know. However, lawyers know boards  aren't comprised of a bunch of psychics—there can only be one Miss Cleo, after all. So, to answer boards' frequently  asked questions, and to save both boards' and attorneys' phone call time, we  polled some area lawyers to come up with a list of the “Top 5 Things Attorneys Wish Boards Knew.”  

 Who You Gonna Call?

 Often times, boards make the mistake of taking legal matters or other  administrative tasks into their own hands in an effort to save funds. However,  this is a misstep that can lead to financial woes much greater than the cost of  professional counsel. Experts say they wish boards would not be penny-wise and  pound-foolish and contact their attorneys for advice in handling problems  before a manageable situation spirals out of control.  

 Case in point, says one attorney, “In a condominium [we represent], there was water damage to a unit several years  ago which resulted in mold. Even though the unit owners complained several  times, nothing was done—the attorney wasn’t called, the insurance company wasn’t called. Eventually, the unit owner sued for his losses, including health  issues.”  

 Because the board sat on the case for so long, the insurance company has now  refused to pay for the condo’s legal defense, resulting in a large unwanted exposure. “Had we been notified of this at the beginning, we probably would’ve recommended quick mold remediation and getting a release [from the unit  owner, stating the problem was fixed] which would have put end to the claim,” the attorney says.  

 An association needs more than just the backing of an attorney. Experts suggest  employing additional guidance such as a certified public accountant, insurance  agent and engineer, if need be.  

 Jennifer Loheac, a shareholder attorney with Becker & Poliakoff in Morristown, emphasizes, “Rely on the association professionals! I urge boards in almost every action  taken to insulate the board and the association from liability. The manager  does not run the pool—the pool management company does. The board should not be defending choices in  insurance. Let the insurance agent speak to his or her own recommendations and  why. If there are delinquency actions or litigation or other questions of  liability, that is why you have an attorney. When people question why there is  not more money in reserves or how the budget was prepared, the board should  have the management COO or accountant in attendance. As a board of volunteer  community members, let the association professionals speak to the various  professional actions or inactions,” Loheac says.  

 A Failure to Communicate

 As any couples' counselor will say, strong and steady communication is essential  to a successful relationship. This sentiment applies to the board/owners  relationship as well.  

 “Many lawyers say that good boards 'communicate.' Yes, that’s true, but consistent communications is only part of the story,” Loheac says. “Yes, communications should be transparent and sincere, but they should also be  controlled and concise. There’s a difference between transparent communications and communications that are  too detailed, long-winded and tend to create more questions than answers for  people who are not the decision-makers.”  

 “Sometimes,” Loheac continues, “boards, in a desire to 'be transparent,' share too much detail that is best left  with the board members who know the whole story. If the goal is to inform and  not to empower hundreds of homeowners to 'take a vote,' then it’s best to keep communications factual and concise.”  

 Fluid communication is also imperative for the attorney-client relationship.  While your attorney is surely an expert on all things community association  related, he or she is not omniscient. It's therefore vital for boards to keep  counsel updated on any questions or concerns members might have, experts  stress. As many condo boards know all too well, lack of knowledge in legal  matters is something that can ultimately cost the association money. That's why  it's so vital to have a cooperative relationship with your legal professionals—they're the main line of defense between your association and unwanted exposure  and expense.  

 “You know what would be really helpful? If board members, whether they do it  themselves or they do it through a property manager, convey their concerns and  questions,” Anne Ward, senior counsel in the condominium law department at Ehrlich,  Petriello, Gudin & Plaza, LLP in Newark, says. “Sometimes, I find I get asked to do something by a property manager and the  board will decide to take an action, and months later, I’ll get a weird email saying, ‘What’s the cost benefit analysis of that?’ which is something that they should have [asked] in the meantime.”  

 For his part, Ronald L. Perl, a partner with Hill Wallack LLP in Princeton says,  "We wish clients would call us before small problems become a crisis—or better yet, before issues even become problems. Preventative legal advice is  so important.”  

 Be Transparent

 Transparency has proven to be a hot-button issue these past few years, a fact  that leads many board members to ask: What is the best way to practice  transparency?  

 The first step to ensuring owners feel like they are clued in to the happenings  of the association is to make meetings as open and accessible as possible. This  includes not holding meetings unannounced to owners and making meeting minutes  (from open meetings) and building documents (such as financial records,  governing documents) available for review.  

 “Transparency is very important,” Wendell Smith, a partner with the law firm of Greenbaum Rowe Smith & Davis, LLP in Woodbridge, says. “Except for matters that involve personnel which are confidential, like  litigation or contract negotiation, the unit owners should have a right to  examine documents up to a point.” “There has to be a procedure,” he continues. “You just can’t come in and say, ‘I want to see all the documents in your files from the last ten years.’ What do you want? Justify the purpose of it. They should be made available.  That’s the change that’s evolved over the years. It used to be ‘Keep it secret, it’s none of their business,’ but it doesn’t work that way,” he says.  

 Associations should consider reserving a block of time before or after meetings  to allow owners to raise issues and concerns and ask questions. Experts also  recommend keeping owners updated about decisions made during board meetings and  other things going on—anything from amendments recently passed to upcoming building construction— to newsletters and community bulletin boards.  

 Avoid Litigation at all Costs

 The purpose of having proper legal representation is to ensure an association or  corporation is properly maintained and protected so it will never have to go  through the headaches (and legal fees) that typically result from litigation.  

 “Avoid litigation whenever possible because it is very expensive and you’re much better off going to mediation because you could be into the six figures  very quickly with any type of serious litigation,” Smith warns. “People don’t understand that. Their emotions take over and sometimes there are dollar signs  painted in their eyeballs.”  

 Ward agrees, saying, “Frequently, litigation takes on a life of its own, and many months down the road  you’ll find the board goes, ‘Oh my God, I didn’t realize it costs this much money or ‘Oh my god, we’ve spent all this money and we haven’t gotten the results we wanted.’” “If somebody had asked the question, ‘What are the consequences?’ I could have explained the costs. Someone has to explain to them how lengthy  litigation could be. There’s never a guarantee. That’s just the nature of it, you know,” she says.  

 Litigation should always be last resort. There are several different arbitration  and mediation options to pursue before settling on the decision to pursue a  case, as well as preventative steps to take. For example, before finalizing a  construction deal, put a note in the contract stating that both parties will  engage in non-minding mediation in case of a dispute.  

 Scott Piekarsky, an attorney with Piekarsky & Associates in Wycoff points out that under New Jersey state law, if a condo  association is aware of a dispute—either between residents or between a resident and the association itself—then the association must offer what is called alternative dispute resolution  (ADR) before the matter can move on to litigation. This could come in the form  of a resident committee, a judiciary committee, a covenants committee or an  outside mediator.  

 "In New Jersey and in other states, the Community Associations Institute trade  organization has an ADR program," says Piekarsky. "Lawyers, managers, and  others volunteer for the program so that associations can submit disputes to  that. Basically, under Jersey law and the Condo Act, you really must get  involved if a housing-related dispute is brought to your attention."  

 Keep the Peace

 Boards are comprised of a diverse group of people, each with their own ideas on  how things should be run, so of course, not every vote will be cast in everyone’s favor. Therefore, disagreements are bound to occur. However, Loheac warns  against letting residents know that.  

 “Boards should always reveal a unified front to the community,” she says. “By all means, trustees should passionately disagree behind the scenes, but once  a decision is made, it’s important for the board to speak with one voice. How can a community have  confidence in a board that is, itself, divided?”  

 Just like how board member disagreements are to be expected, it’s a given that owners will not always agree with the board’s decisions—sometimes rightfully so. If a board makes a poor decision or a neglected  oversight, they should be willing to apologize, Loheac says.  

 “Homeowners appreciate that boards can make mistakes. Becoming defensive over an  obvious error in judgment or inaction causes far more problems and undermines  the trust homeowners have with the board.” 

 Enjolie Esteve is an editorial assistant at The New Jersey Cooperator.

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