Articles

By Alyssa Gautieri

Community associations are required to maintain books and records of expenditures, budgets, audits, receipts of operation, annual reports, and meeting minutes. Do owners have the right to review these records at any time and what is the best process for allowing them to do so?

According to Stacey R. Patterson, Esq. an attorney who serves as counsel with Ansell Grimm & Aaron, P.C., “owners are entitled to review the business records kept by their particular association that are not otherwise protected by attorney-client privilege or specific state laws and policies.”

For more specific guidelines for condominiums, Patterson recommends consulting the statutes or legislation in your particular state. For example, in New York, consult the New York Condominium Act – codified at RPP §339-d et. als. and in New Jersey consult the New Jersey Condominium Act codified at N.J.S.A. 46:8B-1 et. als.. With regard to corporations or homeowner associations, owners should consult the non-profit corporation statutes in their particular states. Owners should also consult their particular association’s governing documents for procedures relating to request for documents.

Some business records may be protected by disclosure as an attorney-client communication. Attorney-client privilege protects communications between association boards and/or agents with their attorneys from disclosure to third parties. Information that is privileged involves confidential communications between an attorney and a client made for the purpose of seeking or providing legal advice. “If there’s a question about whether a communication is protected from disclosure as privileged, it is best to discuss the issue with your attorney,” Patterson said.

Further, if a board is unsure about whether something must be disclosed to owners, Patterson suggests to err on the side of transparency. “If it’s not an attorney-client communication, my recommendation would be to turn it over unless there is a compelling reason not to,” she said.

Patterson suggests that associations adopt a uniform policy for handling record requests from owners. The policy should outline the procedures that owners must follow when making these requests and how the board will respond.

Owner requests for records should be in writing and be specific. Certain states, such as New York may require that requests for association records be made in good faith and for legitimate purposes. This serves to minimize fishing expeditions. If the owner seeks copies of hard files, the board can require a fee to be paid up front before providing such copies. Further, if owners seek to inspect hard copies, it is recommended that they be required to schedule an appointment during the association’s agent’s business hours.

If a request is made during the on-going COVID-19, an in-person inspection may not be practical or safe. In the alternative, and in light of the accessibility and availability of electronic communications, it may be more practical in many cases to send documents electronically which serves to reduce costs and manpower needed as well as to avoid in-person contact”. “A switch to electronic storage of records is also a more streamlined way to maintain and access records,” according to Patterson.

The right to inspect records is reserved for unit owners only. Non-owners or renters are not entitled to inspect records unless a court orders their turnover.

Issues may arise when dealing with certain records such as delinquency reports, which are considered financial records. An association may choose to redact personal information such as names or addresses within records to protect the privacy of unit owners. Further, “the problem with providing delinquency reports is that the information is ever-changing and it is difficult to ensure that the information is up-to-the-minute accurate from the time the report is created to the time it is produced in an inspection,” Patterson said.

Patterson explained that a unit owner can pursue legal action if they believe that they have been improperly denied access to certain business records. In New York, the unit owner challenging denial of access must be able to demonstrate that the request for access is made in good faith and for a legitimate purpose.

In New Jersey, a dispute about access to records is housing-related. Housing-related disputes are typically handled through an alternative dispute resolution (ADR) hearing. ADR is an informal process handled by a mediator. ADR serves as a vehicle to attempt to resolve disputes without the cost of pursuing litigation. “In ADR, a mediator will consider the positions of the parties and attempt to resolve the dispute in the best interest of everyone involved,” explained Patterson. “If unsuccessful, the parties always have a right to their day in court”.

By Sherri Hall

Maintenance is an essential part of keeping a community association running smoothly. While some projects are considered part of a community’s regular maintenance, others are more preventative in nature. So, which maintenance projects are considered preventative?

According to Chip Hoever, Vice President of Operations at Matrix Property Management in North Brunswick, New Jersey, regular maintenance is done for items that fail from time to time and need to be repaired right away, while preventative maintenance is done in order to prevent problems from occurring in the future.

Hoever explained that preventative maintenance is an important measure for an association to take to avoid certain issues from happening down the road — similar to performing vehicle maintenance which is done to prevent the vehicle from breaking down. “Preventative maintenance is more important than regular maintenance because it keeps you from having to do regular maintenance,” he said. “And you really need to plan for it and budget for it.”

“A good example of deferred maintenance is painting,” said Hoever. “Another is sealcoating driveways and parking lots. The oil-based products you put on the driveways and parking lots penetrate the asphalt and help keep it from decaying and drying out.”

Hoever likened the sealcoating treatment to that of applying sunscreen to one’s skin to protect it from getting sunburn. “You need to do the same thing with parking lots and driveways,” he said.

Hoever recommends sealcoating every five to seven years for the best results in terms of preventative measures.

In addition to painting and sealcoating, communities that have a clubhouse also need to have their HVAC systems serviced each year as part of their preventative maintenance schedule, noted Hoever.

For associations with pools, he said it’s also important to perform preventative maintenance by periodically servicing the pumps and equipment, checking motors to ensure they’re properly oiled and adjusted, and making sure the fittings are on properly to avoid filter leaks from occurring.

In high-rise buildings, Hoever noted that it’s important to run and test the elevators every month and have them serviced routinely as part of preventative maintenance.

Hoever explained that preventative maintenance projects are organized and scheduled based on how long the specific item lasts. “With painting for example, a good paint job should last four to five years,” he said.

Therefore, depending on your facility, painting should be scheduled every four to five years to prevent issues from occurring.

In addition, Hoever said that most preventative maintenance projects should be done in the spring or early summer to avoid excess heat or cold.

He also explained that preventative maintenance items should be included in the association’s reserve or deferred maintenance budget.

Due to the COVID-19 pandemic, many associations may be finding themselves behind schedule in terms of maintenance projects.

Hoever noted that the pandemic resulted in delays in a number of preventative (as well as regular) maintenance projects. Aside from the initial closures, restrictions such as social distancing measures also limited the number of workers who could be on site at the same time. In addition, workers who contracted COVID-19 or were in contact with someone with the virus had to stop work and quarantine for a certain period of time. “It threw a real monkey wrench into things,” said Hoever. “But with that being said, I see it as more of an inconvenience than a problem.”

Although he said it could take two years to get back on schedule, Hoever noted that he does see things improving in terms of the COVID-19 Pandemic affecting maintenance projects. “We’re going to be behind, but it’s not critical as long as we get caught up and keep moving,” he said.

By Sherri Hall

It’s no secret that termites are a nuisance, but is it possible for these pests to go unnoticed and can they cause actual structural damage to homes? What are some signs to look for in terms of possible termite damage or an infestation?

“Termites can cause significant structural damage to homes as they essentially bore out the interior of wood framing members,” said Steven Lang, AIA, NCARB, Architect and Executive Vice President of The Falcon Group’s Building Envelope Division. “Wood framing relies on its cross-sectional thickness to give it strength. When you reduce the thickness, you effectively reduce the amount of load that the wood framing member can carry. This effects both vertical framing members, like wall studs, as well as floor framing members like joists and beams.”

So, when termites bore tunnels through the wood, they are in turn, reducing the overall strength of those members, Lang noted. “They essentially hollow out the wood members.”

However, termites don’t always show signs of their presence on the outside of the framing members, which can make it difficult to know they are there and causing damage. Lang explained that termites typically conceal themselves well within the framing in order to hide from predators. “The damage can often be hard to assess because the termites bore into the core of the wood members, so you don’t always see evidence of their damage on the exterior surface of the wood,” he said. “And that’s kind of the issue you have — you don’t necessarily see it and you don’t know you have a problem until it’s too late.”

Lang said that it’s important to know how the community’s buildings are constructed since some types are more vulnerable to termite damage than others.

According to Lang, wood-framed homes are the most vulnerable to termites. He noted that typically, single family homes and townhomes as well as some low-rise and even mid-rise structures will use wood framing. Lang also said that engineered lumber can be affected by termites, but not as much due to the glue elements used which the termites don’t care for.

He noted that wood framing is being used quite a bit more now in low-rise and mid-rise structures. “There’s a lot of push from lumber associations to try to get approvals for fire ratings for their materials for use in those applications because of the high price of steel,” said Lang.

In addition, he noted that as building codes have been changing, they have been requiring foam insulation on the outside of buildings. This is done in order to provide continuous insulation to meet energy code requirements. “In a lot of cases, the termites can just bore through very easily and move up the building,” said Lang. “Those buildings can be susceptible to termite damage to a certain extent, especially if they do have wood framing in other areas.”

According to Lang, structural issues caused by termites can be remedied. “From a structural standpoint, you’re really looking at either reinforcing the damaged member or replacing it,” he said.

However, Lang pointed out that the process can be an invasive one, especially if those areas are finished. “So, if they have sheet rock over them, you’re looking at having to pull off the sheet rock,” he said.

Lang also explained that if the damaged area involves a kitchen or bathroom, it can become very expensive to have to remove cabinetry and finishes in order to get to the sheet rock.

However, he also noted that due to the redundancy in wood framing, the termite damage would need to be extensive before causing any major structural issues.

Therefore, structural remediation may not always be necessary. “You need to have a professional look and see if the members are damaged to the extent that they need to be replaced or reinforced. It is rather easy to do from a structural perspective, but it’s more of a problem in terms of costs and having to replace interior finishes,” said Lang.

Although termites are hard to detect because they conceal themselves within the wood and there is often no surface damage, Lang noted that there are some signs to look for. “Signs that you may have a termite infestation typically include finding the termites themselves. They’ll almost look like winged ants, but there are differences in their body types. Termites have equal sized wings and a broader waist whereas ants have unequal wings, a pinched waist and an angular antenna,” he said.

Lang suggests that rather than trying to determine whether any insects found are winged ants or termites, it’s best to call a pest control company to make that determination and added that either way, both ants and termites can cause damage to homes. He noted that the pest control company will be able to treat the building as well as the surrounding soils.

In addition to spotting the termites themselves, Lang noted that it is possible to also notice small tubes forming in the wood as well as wood material that looks like mud left behind in areas where the wood framing is exposed such as basements, crawl spaces or attics. Finding these can also indicate termites and again, Lang recommends contacting a pest control company to come out an assess the situation.

“It can be hard to see evidence of termites in rooms that are finished, so they may not be noticed until someone is doing a renovation project and the wood framing is exposed,” he added.

These are things that may be detectable early on, but Lang noted that some later stage signs of termites could be cracks in the interior finishes or sagging floors in certain areas indicating there’s a structural concern. “That would be later down the road if they’re getting to a point that they’re compromising the framing members themselves,” he explained.

According to Lang, termites can spread between units in multifamily communities such as townhomes and condominiums because they share framing. Although it’s less likely for termites to spread from one home to another in single family community, if termites are found at one home, Lang said it means termites are already in the general vicinity which could indicate that the area itself is prone to termites. Therefore, he suggests being proactive and engaging a pest control company to come out and treat the soils around the buildings to eliminate the likelihood that the termites are going to infest other structures.

In addition to proactive treatment of the soils around the buildings, Lang noted that other best practices for an association with regard to preventing and detecting termites include keeping mulch beds low and ensuring plants are cut back from buildings. “They just create pathways for ants, termites and other pests to get into the building and you want to eliminate those pathways as much as possible,” he said. “These are examples of preventative maintenance that can be done to reduce the chances of termites and other infestations.”

Lang noted that if unit owners are concerned about a potential termite infestation, they should talk to the property manager and have a pest control company come out and perform an inspection. “It’s better to be safe than sorry,” he said. “Get a pest control company to come out and take a look at it.”

Lang noted that the pest control company will also be able to detect any damage caused and assess how extensive that damage is in terms of a structural issue. If a structural problem is discovered, he said the next step would be to contact an engineering professional who would work in tandem with the pest control company.

Although it’s not practical to walk around the community looking to see if there is a termite issue, Lang noted that there are some other steps property managers can take to be proactive. For example, he said that it’s important for property managers to be aware of any patterns regarding building damage, especially if the damage was insect-related, as that can help in the future. Lang also said that property managers should ensure that the landscaping contractors are not continuously throwing new mulch on top of old much. “Every few years, you have to pull the old mulch out,” he noted. “You reduce the protection of your building from termites as you increase the grade height against the building. Make sure the landscaping is trimmed back and that the mulch isn’t getting too high or too close to the wood framing.”

By Sherri Hall

When it comes time to send out a “Request for Proposal” (RFP), a community association may be wondering when to contact their attorney during the process. Oftentimes, associations will have their attorneys review RFPs before sending them out, but some may wait for attorney involvement until after the contract has been awarded. Does the association’s attorney need to review every single RFP beforehand? What are some items that associations should be including in their RFPs?  [Read more…] about The Attorney’s Role in 
Requests for Proposals (RFPs)

By Sherri Hall

With warm weather on the horizon, holidays like Memorial Day and Independence Day will be here before we know it. Along with the holidays and mild weather — flags of all types will soon start popping up all over, including on properties within common interest communities. What can a community association do if things get out of hand with either the type, size or quantity of flags being displayed? When it comes to residents hanging flags, associations have certain rights in terms of regulating what is allowed as well as how and when flags can be displayed.  [Read more…] about Displaying Flags and a Community Association’s Right to Regulate

By Alyssa Gautieri

A new development is typically built in an open wooded area or park where excess water, such as rain and melted snow, naturally takes its course and soaks into the ground. Once a housing development is built—complete with buildings, parking lots, and roadways—water runoff must find a new place to escape. The water can no longer permeate the soil naturally, which means it may flood roadways, destroy buildings, or erode crops if proper drainage systems are not installed. [Read more…] about How to Prevent and Handle Drainage Issues

By Sherri Hall

As 2021 progresses, many communities are hoping to be able to start reopening some of their amenities this year. Although very few have already reopened, many amenities have been closed since the start of the COVID-19 pandemic in March 2020. But will reopening require additional maintenance? And has maintenance of the amenities and the communities as a whole been affected by the pandemic? We spoke to Doris Steele, Partner at Spinnaker Management, to get her perspective on the matter.

According to Steele, the CDC regulations have prevented most communities from opening their amenities during the pandemic, mainly because of the cost involved to comply with the requirements. “Many were unable to follow the CDC recommendations with having to hire staff to monitor social distancing, contact tracing, mask wearing and sanitizing, so most communities did not open their amenities since the pandemic started, including their pools,” she said.

Steele noted, however, that while none of the communities her company manages opened their clubhouses or fitness centers during the pandemic, a couple did decide to open their pools. She explained that these associations saw a significant increase in pool-related maintenance costs as they had to purchase sanitizing stations, hire additional staffing to monitor social distancing, perform sanitizing measures every hour, on the hour, and conduct contact tracing..

For those that did not reopen their pools, they still saw their normal pool-related costs during the pandemic, said Steele. Technically, the pools had to be opened (just not for use) in order for maintenance to be performed on them, which Steele said was still necessary. “You have to do pool maintenance no matter what,” she noted.

In order to reopen the gyms and clubhouses, associations will need to ensure they have a cleaning contract in place and will need to have an initial major cleaning performed to get everything sanitized properly. Additionally, the fitness equipment will need to be serviced and cleaned.

Not only will the clubhouses and fitness centers be required to be fully sanitized, but the maintenance of keeping those areas sanitized may be more frequent than it was in the past, said Steele. “This could place an extra burden on the properties in terms of their budgets regarding their amenities,” she said.

While many associations were able to save money in terms of amenity maintenance, this will not be the case in 2021. “What you saved in 2020, you’re certainly not going to save in 2021,” said Steele. “Those retained earnings will be needed in 2021 to open the amenities due to the extra expenditures of sanitizing as per the CDC guidelines.”

Of course, Steele said associations did not remove any of their usual amenity costs from their budgets for 2021 with the idea in mind that the pandemic isn’t going to last forever, and they would eventually be able to reopen. “It’s important to keep those budget line items in there so the common charges reflect what you would normally utilize,” she said. “I think the biggest question in terms of 2021 budgets was, ‘If we do open, where are we going to get the extra money needed to follow the CDC guidelines?’ And I think reopening really depends on the CDC guidelines and the budget of each property and whether or not the property can afford to hire additional staffing to get some of these amenities open.”

Steele said she believes that making certain modifications may help associations tackle this issue and keep costs down as much as possible. “I do see communities moving in this direction to try and get some of their amenities open, but maybe with limited hours,” she noted. “In the approach that I’m taking, we’re talking about it and what it might look like in terms of starting slowly. Ultimately, I think we have to run it by each community and perhaps take a poll. Ask how many people plan to use the fitness center and what hours they would want to go. And try to customize it from there because it’s definitely going to affect the budget.”

Of course, closing amenities wasn’t the only change that took place during the pandemic. Certain projects and their timing were also affected, noted Steele. She explained that early in the pandemic, statewide shutdowns affected some of the bigger projects, as certain contractors were not considered “essential workers” and it was also difficult for some to hire staff during that time. Therefore, for example, a roofing project that started in 2020 and had previously been expected to be finished in 2020 as well may have only been halfway completed with the other half now planned for 2021.

“We did fall behind on some of the bigger ticketed items, and people were concerned that things were taking a long time,” said Steele.

In this case, she said it’s important for property managers to communicate with the unit owners. Having a one-call system, for example, is helpful for being able to send an email to every homeowner at the same time. This can allow managers to let the homeowners know what is taking place regarding certain projects and help alleviate their concerns about what is happening in the community.

Steele noted that with many unit owners home during working hours for the first time, people were more aware of things that they may not have noticed in the past. For example, people who were now forced to work from home were experiencing lawnmowers running while they were trying to work. She said it was, and still is, important for managers to communicate with homeowners and let them know that this is what typically happens when they are at work outside the home.

With everyone being home, Steele said, managers have been receiving more calls from homeowners with concerns and needs. This, she said, has put additional pressure on property managers to have their contractors perform, sometimes even outside of their contracts.

Steele noted that one of the major concerns for managers in 2020 was making sure everything got done that needed to before the first snowfall. “We just kept pushing through and were able to accomplish what was necessary going into the season,” she said. “It wasn’t easy, but we were able to navigate through it while trying to keep the homeowners updated. For the most part, people understood once it was explained to them.”

In terms of routine maintenance, those items weren’t really affected as those contractors were considered “essential,” noted Steele. “They were able to continue working and we were able to keep up the maintenance for the properties,” she said. “Everything still needs to be done. Once the snow is gone and we’re into April, the lawns need to be cared for. We’re still staying on the same schedule,” she said.

Aside from snow removal, winter maintenance items also include any necessary tree pruning or tree removal, which is best done while the trees are dormant from late fall until early spring.

Other than that, Steele explained that during the winter is the time for communities to start gearing up for their spring projects. “Right now is the time to gather contracts and prepare for projects you want to accomplish in the spring,” she said.

It’s also the time to get ready for spring maintenance items including power washing; lawn maintenance such as fertilizing, weeding, and mowing; pool-related items such as acid washing and opening preparations; fire hydrant flushing; inspections of air conditioning systems; and inspections of smoke alarms and carbon monoxide detectors.

In addition, Steele said it’s important to get any damage caused during the winter months taken care of as quickly as possible during the spring, especially trip hazards, as well as any larger projects such as roof or siding replacement.

By Alyssa Gautieri

Odor-related complaints are more common than you’d think—whether it’s cigarette smoke in outdoor common areas, the lingering scent of food in hallways, or the smell of perfume penetrating the walls. 

According to attorney John LaGumina, of LaGumina Law Firm in Purchase New York, an association has the obligation to get involved in most odor-related complaints. 

A board’s nuisance rules will play a big part when dealing with official complaints about odors caused by residents, LaGumina said. Nuisance rules discourage and prohibit residents from doing anything that unreasonably annoys or interferes with another resident’s right to peacefully possess, use or enjoy their home and property. While nuisance rules tend to be general and broad, the board can use these rules to address specific complaints regarding smoke, food smells, or unsanitary conditions causing odors that impact one or more residents.

From cigarette and marijuana smoke to strong perfumes and unsanitary conditions, LaGumina pointed out issues in addressing different odor-related complaints.

Cigarette Smoke

Not only is the smell of cigarette smoke unenjoyable to most bystanders, second-hand smoke can have detrimental health effects. According to LaGumina, “if a board receives a second-hand smoking complaint, it has to be addressed.”

“For decades, the law said that the board had no responsibility for what happened inside a unit, including smoking. There is a persistent trend in recent case law, however,  that holds that boards now have the duty to do something. Courts are increasingly likely to penalize boards for doing nothing about a smoking complaint,” he said.

“If the association receives a complaint about smoking, that presumably violates the nuisance rules that are already in place,” LaGumina said.  Thus, “the board can send a warning letter and if the conduct continues, the board can eventually fine the resident.”

“Residents do not have the constitutional right to smoke and outright smoking bans, if properly adopted and approved by the unit owners, can be upheld,” LaGumina said. Most governing documents also give the board alone the ability to adopt regulations concerning smoking in the common areas—which include decks, terraces, and patios.

To ban smoking inside a unit, at least two-thirds of the unit owners would have to agree to amend the governing documents. Even without an interior smoking ban, a board can still, on their own, enact a new rule and policy that second-hand smoke complaints will be considered nuisances and result in warnings and fines. 

If a resident with asthma or allergies is filing second-hand smoke complaints, it could become a more serious issue. “If an adjoining resident has a medical condition that makes them more sensitive to second hand smoke, the board’s duty to take action escalates,” said LaGumina.

According to LaGumina, the board could also hire an engineer to look at the building and decide if anything could be done to better seal off units and stop smoke from penetrating adjoining units.

Marijuana 

If there is a complaint from a resident about the use of marijuana, the association would follow the same steps as recommended for a second-hand smoke complaint—most often issuing a warning followed by a fine for breaking the nuisance rules.

“The board is not under any duty themselves to contact the police, and police departments often may not respond to calls regarding marijuana use.  However, the board can remind the complainant that they have the right to contact the police,” LaGumina said. “Unless the board members witnessed the smoking, the board usually does not have the ability to make a first-hand complaint to the police.”

If a resident is prescribed medical marijuana, condominiums and HOAs are required to offer a reasonable accommodation to their no smoking rules. If a resident complains about the use of marijuana by another resident who is legally allowed to use marijuana, LaGumina suggested speaking to the resident with the legal marijuana prescription and trying to arrive at a compromise. 

Food Smells

Whether it’s the scent of a homemade meal in the oven or the stench of burnt burgers after a barbecue gone wrong, it’s not uncommon for residents to complain about lingering food smells that come from their neighbors. Even if the smell is a good one—such as cookies baking in the oven—proper ventilation should not allow residents to smell food that’s cooking next door.

In the case of a complaint, the association should follow the same steps as they would for any other nuisance, according to LaGumina.

If an association warns or fines a resident who is responsible for distracting food smells, it must be careful to avoid any discrimination. “Any food smell policies put in place definitely need to be uniform to prevent a discrimination lawsuit,” said LaGumina. 

If there are many complaints about surrounding food smells, the associations could contact an engineer to see if there are any defects or ways to improve ventilation. “Many of the older condominiums don’t have the basic ventilation that helps circulate the air for food smells,” LaGumina said. “The association can certainly set up an inspection policy and try to require owners to install kitchen fans and encourage unit owners to use kitchen fans.”

Body Odor & Perfumes

It’s possible that a resident is allergic to the perfume used by another resident, or that a resident has an especially noxious problem. “Anything that causes annoyance to other residents can be considered a nuisance,” said LaGumina, who noted that these body odor or perfume issues are not very common. 

These issues should be handled as a smoke complaint would be. The association can resort to the typical clause in most governing documents that bans noxious fumes or odors.

Unsanitary Conditions

If a resident is hoarding, it will likely become evident to their neighbors over time—and there may also be a smell that emanates from their unit. In these cases, an association must tread lightly; a resident may be hoarding due to a mental health condition or another ailment or infirmity. The situation can be treated as a nuisance, although more extreme measures may be required. 

“Hoarding situations are unfortunate, and once they arise, it takes a long time for them to go away,” said LaGumina, who added “there are different ways for a board to approach a hoarding situation.”

According to LaGumina, the association can write a letter to Adult Protective Services (APS)—an agency that helps elderly adults (65 years and older) and dependent adults (18-64 who are disabled), when these adults are unable to meet their own needs. APS may come out to inspect the situation to determine if the person is endangering themselves. 

The association can also contact the fire inspector as hoarding conditions can constitute a fire hazard. “The association may have to be persistent in these tough situations,” said LaGumina.

Keep in mind, regarding access to a unit that may be hoarding, board members or managing agents do not have the right to enter a unit unless the owner agrees.  Without such permission, a court order would be needed which could involve costly and time-consuming litigation.

By Sherri Hall

With information on the COVID-19 virus and how it spreads constantly being revised, many people who live in community settings are concerned and want to be sure their associations are taking the steps necessary to keep residents and staff safe. This is especially true for those living in a high-rise community where air ducts are shared throughout the building. [Read more…] about Installing UV Lights in Air Ducts — 
Will it Kill the COVID-19 Virus?

By Alyssa Gautieri

There are quite a few ways that an association manager can breach their fiduciary duty to the association, whether it’s acting outside of their scope of responsibility or performing a task that was unauthorized by the board. As hired workers, do managers have the same fiduciary duty to the association as the board?

According to attorney Sara A. Austin — a partner at Austin Law Firm, LLC in York, Pennsylvania — fiduciary duty is a legal concept that refers to the duty owed by one person to another person or entity. The fiduciary, whether a real estate agent, lawyer, or association manager, acts on behalf of the principal.

“The fiduciary must act in the best interest of the principal — in this case, the association — even if it would hurt the fiduciary  by doing so,” Austin said. An association manager must perform their established duties while putting their client’s interest ahead of their own and preserving good faith and trust.

A manager is hired by the board to act on behalf of the association and is essentially “stepping into the shoes of the board to complete delegated tasks,” Austin said. “In essence, managers have the same fiduciary duty to the association as the board.”

If the association is professionally managed, the manager handles most of the day-to-day operations, whereas the board deals with governance matters. “The manager has no more power than the board does, so if the board is not authorized by statute or otherwise to do something, a manager cannot do it,” Austin said.

A breach of fiduciary duty occurs when the fiduciary acts in their interest, rather than the best interest of the principal. A manager or management company signs a contract at the time of employment or engagement that should outline those responsibilities. A breach of duty may occur if a manager performs duties that are contrary to the contract or go beyond the authority that was granted to them by the board. 

For example, if a board authorizes the manager to sign a contract for a job that costs $2,000 but the contract states the job will cost $3,000. In this case, the manager has exceeded his or her authority. If there is a breach of fiduciary duty, a manager could be liable for the damages to the association.

The association must protect itself from a manager that acts outside of their authority. The board should have a clear understanding of its contract with the management company, according to Austin. The contract should outline the manager’s responsibilities, who is monitoring the manager’s performance, and how the manager reports his or her actions and performance  to the board.

The contract should also outline how checks and balances are going to occur, “especially when it comes to financial issues,” said Austin, who noted that communication between the manager and the treasurer is very important. “There has to be awareness of what is going on so if something seems amiss, it can be stopped early.”

There may also be a breach of fiduciary duty if the board directs a manager to perform a duty outside of the scope of their responsibility and the manager complies. For example, the manager alone cannot approve the budget even if the board were to ask them to do so. “The manager needs to know what the board can delegate to them,” said Austin.

If the board is pushing for a manager to perform a duty that cannot legally be asked of them, the manager should not take that action because they could be held liable if the duty is performed. Any changes in authority should be written down, whether in the bylaws or manager contract. “Having it in writing protects everyone,” said Austin. The manager can contact the president of the board or the association’s counsel, or the management company may seek their own counsel if issues persist.

When it comes to avoiding any breaches in fiduciary duty, Austin said, “it’s really important for the board and the management agent to have a good working relationship.”