Spring Cleaning Beyond the Physical – A Board of Directors’ Checklist
By Hans G. Huessy, Esq.
[Published in Condo Media magazine – March 2019 Issue]
Annual maintenance of a condominium project should not be limited to its physical components. It is equally important to ensure that an association’s bylaws, rules, insurance, and capital reserve study are in good shape. One invaluable service a project manager can provide to their board of directors is to maintain an annual to-do list to ensure certain matters get timely attention. To that end, what follows is a checklist that can be maintained by or on behalf of a condominium board and revisited on an annual basis to keep all aspects of the project up to date.
If the construction and/or operation of your project required one or more permits, any such permits should be gathered into a binder and kept in a secure location. These permits could include building permits, zoning permits, elevator permits, stormwater discharge permits, and other matters regulated on a state or local level. Depending on the age of your project, you need to ensure that the developer provided the association with copies of all relevant permits (and warranties) when the declarant relinquished control of the project.
Often these permits include duties to file reports or undertake regular inspections. If those tasks are not timely completed, a permit may expire with dire consequences. For example, if a stormwater discharge permit expires, the regulatory body that issued the permit may require the association to reconstruct the stormwater management system to current standards, which can represent a significant unbudgeted expense. To this end, any mandatory actions set forth in the association’s permits should be calendared to make sure they are timely completed.
CAPITAL RESERVE STUDY
Too often associations file the original capital reserve study in a folder and forget about it. This can have unfortunate consequences. The costs of repair or replacement of key project components can increase more quickly than the rate of inflation, especially if there is a change in the relevant building codes. The capital reserve study should be updated every five years to reflect current building and regulatory costs. This will ensure that payments to the capital reserve remain adequate to pay for major replacement projects such as roof and siding replacement. It is also a good idea to make an advance determination as to what building components are considered the obligation of the association, as opposed to the unit owner. Often the definition of a unit can be rather vague in the declaration and it is unclear who is responsible for replacing a unit’s windows, doors, outdoor AC unit compressors, etc. Making such decisions before the components fail will make this process much less disagreeable.
An association should consider commissioning a building inspection every 10 years to track actual wear and tear of key components against the projected useful life of those components that informed the capital reserve study. At a minimum, there should be an annual inspection of all fire alarms, fire extinguishers, carbon monoxide detectors, and the sprinkler system.
REGULAR REVIEW OF DECLARATION, BYLAWS, AND RULES
At least every five years, the association documents should be reviewed to make sure they remain up to date and in line with current statutes. If there have been multiple amendments and the declarant long ago relinquished control and most retained declarant rights have expired, creating a revised and restated set of documents can be very useful and make the documents much more user friendly. It is also good to revise association rules in advance of a potential problem, rather than after complaints have been received. Recent developments that merit consideration with respect to updating ones rules include: whether or not to allow short term rentals such as Airbnb; whether a smoking ban includes a ban on vaping; if marijuana is legal in your area, considering what restrictions one may want to put on its use-for example, not in common areas; and how to accommodate comfort animals if pets are not otherwise allowed.
Often, an association obtains a certain level of insurance coverage and never revisits the question as to whether the amount of coverage remains adequate in light of current replacement costs. The association’s insurance policies should also be reviewed to determine whether increased replacement costs associated with changes in law, building codes, or local regulations are covered. For example, current building codes might require more substantial insulation than was required at the time of construction, and that may require wider walls or otherwise increase construction costs. Often such expenses are not covered by older policies. The board should invite the association’s insurance broker to attend a meeting every few years to discuss the association’s coverage.
ADA COMPLIANCE (AMERICANS WITH DISABILITIES ACT)
If your association is older, certain components may not be ADA compliant. For example, the pools may not have lifts, ramps may be missing, and restroom facilities may be non-compliant. Repair or replacement of such items may trigger a duty to make them ADA compliant, which might necessitate revisions to the capital reserve study to ensure there are adequate funds to cover any such additional costs.
It is worthwhile to compare recent sales to assessed property values every five years or so, especially for projects located in resort areas, where values can fluctuate significantly during times of economic change. If your project has five or more units change hands during a five-year period at prices that are less than the assessed value, that data may support lower valuations for the entire project. It is often possible to find attorneys prepared to take on condominium tax appeals on a contingency fee basis if the project has a substantial number of units.
Contact information should be updated annually to ensure the association has current email addresses, postal addresses, and phone numbers for all members, especially if the association is located in a resort and most members are not full-time residents.
If the owners association is incorporated, local laws may require the filing of an annual or biennial report. This should be checked annually to ensure compliance.
These are some of the items a project manager should bring to the attention of their board of directors on a regular basis to avoid unpleasant surprises and assure continued compliance with all relevant laws and regulations. A project manager’s anticipation of these items will be greatly appreciated by the board and, in almost all circumstances, the sooner a board learns of potential regulatory changes or cost increases, the cheaper and easier it will be to address them.