Publications

When to call your lawyer . . . and when not to

Published December 6, 2003 as
Board needs a good game plan to resolve issues

The newly elected board faces its first crisis, but having received little orientation, they have no idea who to talk to for help to solve it. They try and fix the problem themselves, botch it and get sued by an unhappy owner.

I have always subscribed to the theory that people should do what they do best. People should also confine their opinions to areas in which they are knowledgeable or have expertise. Otherwise, you wind up with someone’s best guess, or half-hearted effort.

Here are some typical scenarios in “CondoWorld” where an association needs to learn how to identify the correct “problem” solver:

An association hires a new property manager and the board wants the attorney to review all of the contract terms, including the fees charged by the manager for various services.
The association attorney should review all major contracts, but for “legal content only.” This is no different than buying a home; the attorney should not be interfering in what a willing seller and willing buyer agree to pay. The price terms, whether per unit, extra meetings, faxes, among other items, are a business decision the board needs to make, taking into consideration market price, experience, references and competitive bids, etc. When bidding out contracts, the board should have specifications and the contractor (even a property manager), should be able to quote a price for the specific services they are going to provide. It is not legal counsel’s job to decide whether the price is fair, but should only review the contract to ensure the association is protected throughout the relationship. Likewise, the manager should not be advising the board whether the costs for legal services are appropriate, if the board has decided on a legal representative after reviewing credentials and fee schedules and the board is satisfied with the charges.
An association finishes its fiscal year under budget which has now generated a surplus, and the board asks the manager or the attorney what to do with the extra money.
Every association, from 4 to 4000 units, should have an ongoing working relationship with a certified public accounting firm. A professional with expertise and experience should provide an independent set of eyes to review the books and records prepared by the management company and/or the treasurer. The accountant should be familiar with the peculiarities of the property, its history, review the reserve study, prepare the tax return, review the financial records periodically and perform the audit each year. The manager should not be advising the board how much money it can set aside each year for reserves for capital expenditures unless the manager is a CPA. The lawyer should not be advising the board what to do with the surplus unless the lawyer also practices tax law. Also, just like all other professional relationships, this should continue from year to year, not changing accountants because someone else bid $100 less to do the audit.
A roof is leaking every time it rains and the board directs the maintenance man to go up on the roof, identify the leak and tell him where and how to fix it.
Every association has a relationship with a handyman or maintenance service. These individuals help keep the association running and the grateful residents off the collective backs of the manager and the board. But, a roof is a complex system and sometimes a simple leak is an indication of a far more serious problem. Water can be seeping in one part of the property but actually traveled from a different part of the roof. If the first or second effort to locate a problem and find a permanent solution is unsuccessful, you need to call in a specialist. Just like a legal opinion, it is far more economical to ask the question or fix the problem by having the proper specialist advising the board rather than calling them for the very first time, after the board has messed everything up and further damaged the roof, just to save a few dollars.
A board of directors needs to hire a contractor to provide certain services so they ask him what he charges and what services he provides for that price.
You never solicit a bid for work to be performed from the person who has an economic interest in telling you what you need. That is like saying “How much money will you need to put your daughter through college; here’s a check!” Any reputable contractor knows how to price specifications for a job. Rather than asking an open ended question which is then compared to other bids and hiring whoever is the cheapest, the old axiom of “you get what you pay for” comes into play. A uniform set of job specifications should be prepared to have the potential bidders bid “apples to apples.” As I said earlier, you do not ask the manager what somebody else should be charging.
The board directs the lawyer to send a “nasty” letter to an owner for storing personal items in the hallway in violation of the rules.
This is like trying to kill a fly with a hammer. This is usually overkill. A resident who is violating the rules of the association should receive their first communication from either the manager or the board. There is no law against knocking on the door or making a telephone call. It is too easy to bring out the big guns first, but conversely, it is also easy to wait too long to call the lawyer when the association has lost some of its right of enforcement due to passage of time.

What is important is to strike a balance. Have a game plan on how to deal with all different types of scenarios. Prepare this with the help of your manager, attorney and other consultants. Also, every association needs an emergency plan, but emergencies happen so seldom, it is just as important to have an action plan for dealing with routine day-to-day problems and whom to call first. This can be passed on to the next board and even circulated to owners.

By having a strategic plan in place which includes assorted maintenance examples, the correct person will provide the appropriate service. You will be in the correct church and the right pew.