Preventive Maintenance … Prevents Death and Disaster. For Real

It's always tempting to make the public areas attractive or keep the unit-owners monthly payments low instead of making repairs and capital improvements. But maintaining your property is not only prudent management, it can save lives and money, avert lengthy litigation with your insurance company, and keep the board out of court — or even jail.

Let's walk through some scenarios. Your roof, which is five years past its useful life and its warranty, occasionally leaks. The managing agent and the super both say you should get a new roof, costing $30,000. But you want to redo the lobby, so you have the roof patched instead. You proceed to have your lobby redone — hey, lookin' good! — and whenever anyone complains about a leak from the roof, you patch it.

Two or three years go by. Now a shareholder on a lower floor starts complaining about water damage and mold. After much investigation, you determined that for years the roof has been a sieve leaking into the building infrastructure, causing water damage to the wood supports and several apartments, and creating mold in the walls and the venting systems. The building now not only must replace the entire roof but has to face the expenses of mold remediation and structural repairs as wel

In addition to those extra costs, you've got hysterical residents claiming mold-related illnesses, and the building has been tainted in the marketplace, so owners can't sell. Meanwhile, the owners are threatening a lawsuit against the individual board members for failing to maintain the building. So, instead of spending $30,000 for a new roof and postponing the lobby renovation for a year or so, the building has spent $500,000 – and it's not over. The bank holding the underlying mortgage on the building is threatening foreclosure for your failure to maintain the building, something a lender has the right to do.

Terror Cotta

Local Law 11, as most every board member knows, mandates exterior-wall inspection reports ever five years — for buildings taller than six stories. That means shorter buildings have to have self-disciplined boards who'll maintain the exterior walls, the parapets and the copings. So, just like what actually happened to a Barnard College freshman, a chunk of decorative masonry falls off, lands on a stroller and kills a baby.

You now face reams of negative publicity and a multimillion-dollar wrongful-death suit. If evidence suggests that had been pieces had been falling off for years and you took no steps to repair, your insurance carrier could disclaim coverage and defense. So, after you spend $1 million from your reserve fund on legal fees, a court finds against you and awards the plaintiff $15 million – money your building must pay from its own pocket. Since the building is only worth $5 million, you can't raise it through mortgage refinancing. You may have no choice but to have the building declare bankruptcy — and there still could personal liability imputed to the board members.

Then there's the failure to oversee owners' renovations and alterations. You've let them subdivide rooms, combine units and do electrical work and plumbing without requiring they submit more than a general description of the work to you. You never reviewed plans, specifications, licenses or contracts, nor had an engineer or architect do so on your behalf.

One day comes a catastrophic fire. In fighting the blaze, a number of firefighters are critically injured when they become trapped in one of the apartments. One of them dies. The subsequent investigation traces the cause of the fire to recently installed electrical wiring that was not done to code, and traces the firefighter injuries to fire exits blocked by partitioning.

Think we're alarmist? This scenario just happened for real. In 2006, the owner of a building on East 178th Street in The Bronx was arrested and charged with manslaughter, criminally negligent homicide and reckless endangerment when firefighters were injured and one died because they couldn't find their way to the fire escape around the tenant-built partitions.

Proactive Agenda

Does this sound scary? Absolutely. Should you resign from the board immediately and never serve again? No. You simply need to adopt a monthly-meeting preventive-maintenance agenda made up of these elements:

• Regular reports of building condition

• Timelines for repairs

• Short- and long-term financial planning in order to have sufficient income / reserves for repairs and capital improvements as needed.

This means that creating that playroom in the basement or changing the hall carpeting might have to be postponed. But if you don't have a preventive maintenance agenda, it could be you in one of those terrible scenarios.

Theresa Racht is a partner in the law firm of Racht & Taffae .

Illustration by Dave Bamundo

Adapted from Habitat February 2007. For the complete article and more, join our Archive >>