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A Family Business

Work to Keep Issues In-House

 
One of my most unpleasant tasks is to tell a board of condominium directors or a general assembly of unit owners my analysis of their reserve fund needs indicates they need to raise a great deal of money in the very near future. This is normally due to some significant capital repair issue that has come up unexpectantly or has been ignored for years.

It is then I have to remind the group of two things. First, all organizations managing facilities need to face the face the fact of buildings aging; things rust; and obsolescence eventually catches up to all. This is natural and a capital repair plan in place is the best first step to confront this problem.

The second point I normally bring up is to remind the group that whether they admit it to themselves for not, they are one, big, happy family. Sure, condos are often described as a quasi-government which raises taxes; passes laws; and has political intrigue but in many respects condo living is a form of family or communal lifestyle whose dynamics can be learned from our own family experiences.

The Condo Family

As a family, condo unit owners should recognize the need for tribal conformance; protection; and cooperation. With regard to the matter of an unexpected financial problem I often point out the problem is a ‘family problem’ and as such it is family business not to be shared with others. That is if you are a unit owner at a condo meeting and hear some roofs are allowing ice dams or other some other problem feel free to discuss the issue amongst your fellow unit owners but no one else.

Don’t tell the problem to your hairdresser; or to your sports club attendant; or your cousin Freddie. And why? Because by the time your problem is spread to the next and the next person you won’t recognize it. The problem will be exaggerated; embellished; and twisted inside and out. What was an isolated roof problem affecting two or three units now has become a global problem concerning the entire complex.

This kind of rumor may not have been such a big deal a few years ago but today the world has changed. Communications have changed; condo law has changed; and real estate brokers’ regard toward the selling condominium units has changed.  A lot.

Unintended Consequences

It wasn’t too long ago broker sold condo units like they were selling apartments. Not complicated. Just selling the space between the unit’s drywall and the curb appeal of the grounds and exterior façade. Not today. Today’s brokers are being reminded by lawyers and insurance companies of the perils of selling a condo without good disclosure and due diligence. Gone are the days of just selling the unit. Now brokers are also selling the village.

The condo village, whether it be a high rise or a suburban duplex or a brown stone on the West End, is much more.  It is an entity with maintenance history; financial stability; and competent board management, or not. Brokers are now asking to see the last three board meeting minutes; the reserve fund report; the short and mid-term capital repair plan; types of insurance; occupancy rate; renters’ role; FHA certification; and a host of other things condo officers and their property manager were never asked before.

This is why condo business is family business. The real estate industry has its ear to the ground. No broker wants to discover they sold their client a condo unit with a nightmare of association troubles including looming special assessments and sink holes of deferred maintenance. It is not unknown for a brokerage firm to red line a condo complex and make a group decision to not show any units in that condo. This can be based on unsubstantiated rumors from loose lips from the condo itself.

Modern technology has introduced even more sources of trouble. In the name of communication and openness condo boards are turning to social media.  Some of the problems arise when a condo uses a media platform not restricted to only deeded members.  When financial and condo business is posted on these unrestricted sites the HOA loses control of the message.

So the bottom line is board members and property managers should remind their community of the need to treat condo business as family business. As I have titled one of the CAI case studies: “Don’t hang out your dirty laundry.”

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Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers

Published in Condo Media, November, 2015

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