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Warning Signs: Beware of the Failed Fix

In my many years as an attorney, I have seen a number of frustrated boards that come back to the same problem year after year. Indeed, some construction jobs and building alterations seem to be done over and over again – costing the hapless residents time and money. Is this just bad luck or something more that should be viewed as a warning sign of potential trouble?

Here are four examples of warning signs from my experience:

 

Warning Sign: You can’t find the problem. In one instance, the roof of a prewar building continued to leak after it was repaired, so the board brought in an expert to assess the problem. The board made repairs based on the expert’s suggestions, but it continued to leak. This went on for months until the board, thinking that rain was falling between the parapet and the roof, had the flashing replaced. The leaks continued. So they finally replaced the roof – to no avail. After all that effort, they found the simple answer: there were nails poking into the roof membrane under the stairs.

What It Means: In a word, incompetence (by the contractors and/or the board).

 

Warning Sign: Never-ending work (on the same problem). A board had façade work done on its co-op. No sooner had it been finished, however, than it had to be redone. Year after year there were façade problems that appeared with irksome regularity. The board fired engineer after engineer until it realized the one fixed point in the façade follies: the contractor was the same each time. Upon closer investigation, it turned out that the contractor had an ongoing business relationship with the board president.

What It Means: Possible self-dealing by a board member.

 

Warning Sign: The board ignores professional advice and/or does not correct problems that do not have a direct bearing on its members. There was a building with numerous leaks and a 100-year-old deteriorating façade. The board ignored an engineer’s advice to replace much of it, preferring instead to put in pumps and buckets at different locations to try to catch the water before it could penetrate the fragile exterior. It would have cost as much as one of the apartments to replace the façade, but the board didn’t want to spend the money. The leaks got so bad residents were unable to obtain insurance at a reasonable cost. That apparently did not bother the board members, however, because they lived on the lower floors and the water didn’t affect them.

What It Means: Possible breach of fiduciary duty by board members for failing to treat everyone the same and protect the value/living conditions of the residents.

 

Warning Sign: Citing a bylaw loophole, the board does not correct problems that do not have a direct bearing on the majority of residents. There was a condominium with a roof that leaked so badly the unit-owners living in the top-floor apartments were forced to abandon their homes. Upon reviewing the condo’s bylaws, the building’s counsel said that a supermajority was needed before the board could spend the money needed to fix the problem. Since a majority of unit-owners were not affected, they saw no reason to spend the money. Fortunately for the residents of the top floor, the board then hired a lawyer who interpreted the bylaws in a way that permitted the work to proceed without a unit-owner vote.

What It Means: Possible breach of fiduciary duty by board members for failing to treat everyone the same and protect the value/living conditions of the residents.

 

We have four stories of continuous water infiltration, each presenting reasons a repeated problem could be a warning sign. Even if you fix a leak, you may not find out there is still a problem until the next rainstorm. Wouldn’t a flood test demonstrate that a leak has been fixed properly so you do not have to wait for the next storm? Unfortunately, even a flood test may not help because wind-driven rain can cause water to flow in different directions.

What Steps Should You Take: So what do you do if leaks persist despite repeated fixes? You must ask questions and try different solutions. In each of the examples, the boards had to explore various courses of action. If you are on the board and a leak is affecting one of the residents, think about how you would feel if you were that resident. Every board member has a fiduciary duty to every owner to make sure the owner’s interests are protected. That means if you do not like the answers you are hearing from your engineer, contractor, lawyer, accountant, manager, or board president, perhaps it is time for a change.

However, do not overlook that sometimes it takes time to solve a problem. Remember, a warning sign only means that you need to ask questions; it does not mean that the building is about to collapse or that you are about to lose your home and investment. Always ask questions of your professionals and keep in mind the old advertising slogan: “An educated consumer is our best customer.”

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