In last week’s email we warned of the perils facing older condominium associations who fail to perform proper maintenance or major rehabilitation. Some of these associations are now having difficulty renewing or obtaining liability and property insurance. Additionally, many homeowners within these associations cannot refinance or sell their units because bank underwriting is flagging these projects. In the email, we highlighted four reasons why the time is right for condo associations to plan and perform major rehabilitation now.

In response to our email, several managers sent questions inquiring how much responsibility or liability does a condominium board of directors have if they fail to act when facing major underfunded construction projects? This is a question our team hears quite often.

Generally, a board of directors of a condominium association in Oregon and Washington is held under the business judgment rule standard of care, which means, the board members should be immune from liability if they act in good faith and with reasonable skill and prudence. Additional protection is provided to community association board members who rely upon the advice or guidance of professionals, such as attorneys, accountants, managers, architects or other industry consultants and professionals.

In the context of handling major rehabilitation or construction projects, a board should be responsive and proactive. There may be a tendency for some boards to want to ignore reports from owners or contractors by rationalizing that, “It doesn’t look that bad;” or, “We can get by for another couple of years;” or, “Once the economy turns and foreclosures stop, the next board will be able to handle it.” These are not reasonable or responsible responses. A board should not ignore or delay responding to information on the condition of association property.

The bottom line is the officers and board members of a condominium association are charged with the legal responsibility to preserve the assets of the association. In many instances, the common elements of these condominiums are worth multi-millions of dollars. A board of directors who has knowledge or information of building defects or problems must act prudently and reasonably, and should not ignore or stall maintenance, repairs or renovation. Last week’s email provides six steps a condominium association board should take when facing underfunded capital improvements or major repairs to ensure they are meeting their legal standard of care.

To assist boards understand their legal obligations and to help inform homeowners and managers on how best to confront this predicament, we have teamed with a lender and insurer to provide a 60-minute webinar. For more information about the webinar and to sign up, click here.