Choosing fight or flight in condo crisis
In the past, some would assume that the motivation for serving on a condominium board was to leverage a prime parking spot. The more recent reality is very different, with board members’ decision-making history now being put under the microscope for claims of mismanagement and breach of their fiduciary duty. The scrutiny is justified. After the Surfside condominium tragedy, safety measures were put in place to protect condo residents. Extensive building inspections are now required, and reserve accounts must be analyzed for adequate funding by way of a Structural Integrity Reserve Study (SIRS).
Although the new requirements were very necessary, these additional due diligence measures are also very expensive. For those on fixed incomes, the assessments levied to increase reserve funds are not just unaffordable, they are financially devastating.
If condo owners that don’t have the funds to continue to live comfortably in their buildings due to the increased assessments, it is always better to sell sooner than later to maximize profits, especially in a changing real estate market. Given that many individuals could potentially be listing their condos at the same time based on poor inspection results, the decision to sell now could be the best decision that you have ever made. One bad apple can spoil the barrel, and that saying holds true for a bad comparable sale in the same condo building.
Notwithstanding, many unit owners will choose to stay and ride out the storm. For those who decide to hunker down, don’t be afraid to fight back. If board members have shown a history of voting against vital increases in reserves, that behavior could be considered a conflict of interest or self-dealing. Furthermore, these patterns could subject the board members and the association to legal liability.
In egregious situations of condo association mismanagement, you could potentially get a group of current owners together and sue the association as well as the board members. If the association attempts to foreclose on your unit while you litigate, you may have some very strong defenses and counterclaims, all of which will give you more time for a judge to have the opportunity to rule on the totality of the evidence.
If you have proof of significant breaches of fiduciary duties, don’t be afraid to dig your heels in and stand up for yourself. For buildings that are currently getting hammered with assessments, the fire sale by some owners is going to negatively impact the value of the units of those that remain. It may even get to a point where fighting back isn’t necessarily that much of a risk because you could eventually owe more on your mortgage than your condo is actually worth. Always remember that you don’t have to take this lying down.
Use your time wisely and gather any documents available to prove your case. If the track record of your board members and condo association doesn’t smell right, trust your instincts and talk to an attorney.
David J. Miller is the managing partner of David Miller Law, PLLC (www.davidmillerlawpllc.com), which is located in Largo, and is of counsel with Lucas, Macyszyn & Dyer Law Firm (www.lmdlawfirm.com/attorneys/david-miller/).