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Im the board president of a 30 unit condo complex in Queens. I am also one of the newest residents in the complex. The complex is only 14 years old but has been plagued by multiple recurring water leaks that are causing interior damage to about 10 units. After years of hiring contractors and spending tens of thousands of dollars for ineffective repairs, I convinced the board to hire an engineer to evaluate the problem. We received a full report outlining a number of problems to the common element including replacing flat roofs, repairs to the exterior facade and foundation work. The estimated cost of repairs was $500,000. The costs would require an assessment. To be reasonable we decided to break up the work in phases. With the first phase covering $200,000 of work. An assessment of roughly $6000/unit owner to be paid over 18 months was proposed. The owners are outraged and do not want to pay since only 1/3 of the units are directly affected (despite this being repairs of the common element which is a common expense per our by-laws).
Am I crazy for thinking that the proposed assessment is very reasonable and that the condo has no choice but to follow the engineer's report and do the repairs? How do i convince the angry masses that this is the condo's responsibility and failure to do the repairs will likely lead to lawsuits that we can not possibly win? There has only been one other prior major assessment since the development opened 14 years ago and the owners are used to not following up on repairs or paying for assessments to cover the costs of repairs.
Thanks for the advise. It was very helpful. We have a meeting planned where the management, lawyer, and engineer will be present.
As you mentioned in the last paragraph, a big problem is that the previous boards have not prepared for these repairs. Unfortunately, in the past, unit owners were told that it "would be nice to run the condo in an optimal manner but we just cant afford to do so". Now that these problems are causing damage to the interior of the units we no longer can ignore them. Its tough to convince owners who are not used to such maintenance and having only 1 assessment in 14 years that we all have to pitch in to fix our problems.
Having the meeting with all your key players is a very good start. I bet some novel ideas come out of it.
Trying to convince your shareholders that they are facing major maintenance increases and assessments will be a horrendous task. If your shareholders do not grasp the beneficial value of doing what they need to now, you will probably have to use legal and regulatory liability as the stick to get them to cooperate. I think it would be best if your attorney delivers the bad news, so you are not the messenger who gets killed. :-)
Do you know if there are any shareholders who are more vocal or more entrenched than most? You might try to approach them personally before the meeting so they are not as disruptive as they could be. Once you have all the facts and figures and liabilities, go over it with them. Try to get them to be at least neutral if you can't get their support. Things will go smoother, especially if they feel you are reaching out to them in earnest.
Above all else, keep your cool. Emotions will run very high. No matter what is said and what you are called, you and the board are the voice of authority, and you have to be perceived at all times as being capable to lead the co-op out of this morass. Never take what is said personally, even if you know it is intended to be. Take plenty of Valium before meeting with your shareholders.
Once again, good luck with what you need to accomplish.
Was this building built by the city? A HPD project? It seems that numerous buildings built over the past 14 years have these kind of construction issues. Has the sponsor been notified? Has the city been notified and buildings dept. and consumer affairs, attorney generals office? It seems the same bad contractors/builders continue to get contracts and they leave a trail of bad construction problems all around the boros.
This has been quite well covered, just a couple of extra points:
1). you need to hold an initial, and probably a follow-up Town Hall Mtg specifically on this issue to address it properly.
2). You need the Engineer to present the Engineering report, but do it after the Coop Lawyer delivers an obligation and legal responsibility talk.
3). Request that your Engineer as part of his study, to prepare (at no additional cost) a 'downside' report on the cost of deferring or not doing this work. and calendar it. As in the increase of damage and related cost over time as they refuse to move forward.
4). Prepare an upside plan as to how yo will fund and schedule the repair program and any others so the property is made whole and the shareholders are financially protected.
5). If you are not doing so already, then when you plan next year's budget build in an additional fixed % that gets swept off the top of the monthly maintenance collections/operating fund and put directly into the reserves for capital projects. untouchable.
6). if you are not doing that already for Real Estate Taxes and Insurance they should go into segregated savings accounts for quarterly payouts as well, otherwise they look like available capital instead of earmarked capital and get spent.
No this was not built by the city or an HPD project. The sponsor was not notified. Should they be? They have no dealings with the condo in years. Not sure they are even based out of this country anymore.
You might consider a second opinion from a different engineer. Certainly, the projected project cost is rather significant. Another opinion might suggest other courses of action. What did the engineer find that all the contractors didn't?
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I'm on the board of my Co-op. We've found that communications is the key to building a consensus when something like this needs to be done. My suggestions for how to approach this (and remember, Your Mileage Will Vary!) are:
1) Have a long conversation with the Co-op's attorney so you know exactly what the Co-op's legal requirements are to remedy the defects. More important, discuss what your vulnerabilities are to affected shareholder actions, like lawsuits and individual shareholer referrals to City governmental organizations.
2) You have an engineer's report. Good! Publish it to all your shareholders. Add a cover letter if there is any spin you want as part of the publication.
3) The entirety of what needs to be done requires everyone's buy-in. I would schedule a special shareholder meeting. Have your attorney and a rep from the engineering company present at the meeting to make small presentations and to field questions. Have discussions with them beforehand so they know what you are trying to accomplish at the meeting and what your goals are. They will probably offer their own suggestions. It is important that the board and your experts present a unified message and direction to the shareholders. Publish an agenda well before the meeting (a month or more) with the topics you intend to cover. Solicit shareholder suggestions for other topics, but stick to building maintenance and repair issues for this meeting. Make sure your attorney and engineer know what any other shareholder topics are so they can be prepared. Find out ahead of time from your attorney if a shareholder proposes a vote and it is seconded, how binding such a vote is on the actions of your board. I don't think it is, but best to find out.
4) Have the meeting, and plan for a *long* one. If it goes as planned (fingers crossed), the shareholders will come away with a sense that they are all in this together, even though only some units are affected. They may even be less aggravated about paying what will be an onerous assessment.
5) Have post-meeting discussions with your attorney and engineer to get an idea of what you need to do next, based on the discussions at the meeting.
6) Keep the lines of communications wide open with your shareholders, especially about financial matters. The more they know (and there should be very little about this that you should keep proprietary), the easier it will be to get what cooperation you can from your community.
This is definitely *not* a definitive list, but general suggestions which may provide some direction. Make sure your board knows about and is involved with all aspects of this project. Don't keep it to yourself.
Long term, I think you need to evaluate how much your monthly maintenance is and how much is in your reserve fund. Work with your accountant on this. It sounds like the board has known for a long time that these repairs will be needed, but monthly maintenance has not been increased enough to cover the projected costs. Your shareholders have gotten used to low-ball maintenance, and it is not going to be easy to re-introduce reality. But if they can be made to see that pain now will prevent much greater pain in the future (much more invasive repairs and/or shareholder lawsuits), you'll be a good part of the way there.
Good luck!
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