Board Oversees Repairs to Units
QUESTION: My townhouse was damaged during an earthquake and is currently being repaired. The association has banned the owners from entering the grounds to inspect their units while the construction is going on. We have been asked to sign waivers to release the association from liability.
Many homeowners are paying for upgrades to their units. Don’t we have the right to see what we are getting and inspect the quality of the construction?
ANSWER: The association, through its board of directors, acts on behalf of all of the owners. This is especially true when disaster strikes. If you read your governing documents, you may find that the association or its board has power of attorney, which grants to the association the authority to file and settle the insurance claim, manage the reconstruction and pay out insurance proceeds to the individual owners. The board has the duty to protect everyone’s investment.
The board should communicate with the owners about every aspect of the reconstruction process. If there is a possibility that owners could be injured, they should be kept out of the complex. If the contractor is dealing strictly with the association, then you are not a party to the transaction and you must rely on the association board to see that your unit is reconstructed properly.
If you are paying for upgrades out of your own pocket and want to inspect the work while it is in progress, make your request to the board in writing. It seems that you should have the opportunity to see that the work that you are paying for is being completed to your satisfaction.
Who Pays When Faulty Construction Is Cited?
Q: I live in a condominium complex of nearly 300 units. Several of the units have water intrusion because of faulty construction. After three years of delay, the board is finally negotiating with the developer.
The developer wants to pay for only half of the cost of the corrective work. In addition, he is demanding that the association indemnify him and sign away any future claims. What are the consequences?
The association does not have enough money in the reserve funds to split the cost with the developer. Does the board have the right to approve a special assessment without a vote of the owners?
A: If the water intrusion problems are the result of poor design or construction defects, the developer is obligated to pay for all of the corrective work that is needed. The developer may not have the funds to do all of the work, but a competent construction defect attorney will seek out the insurance companies that insured the developer during the original construction.
I hope that the association board is being advised by legal counsel who is very knowledgeable about the statute of limitations and recent changes in the state law. New laws that took effect in January specify the steps that must be taken when an association is considering legal action because of construction defects.
Before settling with the developer, the board should be advised regarding its liability if latent defects become known after the settlement. All alternatives should be addressed and fully discussed with legal counsel in executive session with the board.
If the board decides that it is going to use reserve funds for work that the developer has an obligation to complete, it should have adequate documentation to back up its course of action. The board also must have a plan to replenish the reserve funds.
The board has the authority to approve a special assessment that is no more than 5% of the total budgeted expenses for the fiscal year. A larger special assessment requires a vote of the members at a meeting in which more than 50% of the members attend. Approval of the special assessment requires the affirmative vote of a majority of those members in attendance.
Hickenbottom is a past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually: “Condo Q&A;,” Box 5068, Thousand Oaks, CA 91360.
