Condo Repairs Come With an Ask

Case in point. A condominium on Central Park West was about to undertake a facade restoration, which also included replacing all the balcony railings, and was seeking to borrow $6 million for the project. According to the bylaws, the board was not allowed to spend more than $25,000 for any additions, alterations or improvements to the common elements, or borrow more than $50,000 for any purpose without unit-owner approval. The owners voted against the loan, but the board decided to proceed with the project anyway. To pay for it, the board increased an existing assessment, and there was talk of imposing new assessments after the current one expired.

A group of unit-owners sued the board and sought an injunction to stop the project, arguing that the railing replacement was actually an improvement that required their approval. But the board presented an engineer’s report that recommended replacing the railings in order to stop water infiltration and subsequent cracking in the balconies’ surface concrete. As a result, the court ruled that the replacement was a repair, and that the board’s decision was protected under the business judgment rule.

The takeaway. Before embarking on any major project, boards should have their attorneys review the bylaws to see if there are any spending restrictions or any specifics on what kind of work qualifies as maintenance as opposed to additions or improvements. You’ll need to determine in which category your project falls, and make sure you are on solid ground to support it. If the work requires unit-owner approval, explain how financing will be of benefit, since the costs of the loan will be spread over a 10-to-15-year period instead of an assessment that will be paid over a shorter time frame. And consider upgrading your documents to raise the spending and loan thresholds, as well as including adjustments to increase them each year to match inflation.