TOP 10 WARNING SIGNS OF CO-OP / CONDO TROUBLE

1)  Has your co-op or condo been involved in multiple lawsuits? Multiple suits could represent an overly aggressive board, disturbed owners, a fee-hungry lawyer, or a building having multiple problems. A positive answer to any one of the questions would indicate a problem. However, it could also be bad luck, because litigation is frequently expensive and time-consuming and should be limited to when it is essential.

2) Have you had your proprietary lease and bylaws updated? As a result of the huge increase in co-ops and condos, there has been an increase in litigation and legislation, all of which has to be factored into the co-op or condo’s organizational documents or the board risks judgments or fines against it. If it has not been done in a decade, do it now. This is not so much a warning sign as a warning that updating your documents could avert a disaster waiting to happen. In addition, the sponsor’s attorney did not really consider your operating issues when he attached the documents to the offering plan, and now you have to live with them.

3)  Do your board meetings take more than two hours a month? A well-run building should not have regular long meetings, which are debilitating for the board and management. If the meetings are dragging, either the board is dealing with too many issues or nothing is being accomplished – or there are other serious problems. If you find that you tackle the same issues meeting after meeting, the problem could also be lack of follow-up. It is one thing for a specific meeting (e.g., the budget meeting) to take longer, but a monthly board meeting should not take more than two hours.

4) Are your annual meetings disrupted by angry owners? Having an occasional proxy fight at the annual meeting or arguing among the owners is not a concern, but if it occurs every year or the meeting becomes a war zone, then it could indicate a problem. Although there are unhappy people everywhere, it might help to survey your residents and find out what is bothering them. I have learned from my years off the board that frequently the staff treats the board members differently than the other residents, so there could be problems about which even the most proactive board does not have knowledge.

5) Do you receive your audited financial statements within four months of the year’s end? Accountants are all very busy in the first quarter getting the tax returns filed and the financial statements completed, but if year after year the financial statements are delayed, then the problem may be more serious than overwhelmed accountants. By the way, the problem may not be your accountants completing the audit but their concerns over what they found or their inability to have their questions answered. Of course, the problem could be understaffed accountants, which also needs to be rectified.

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