What to do when the Board wants (or needs) to upgrade the condo exterior

     Consider the situation where the Board of Directors has decided that they want to upgrade the appearance of an aging townhouse style condominium and they are talking about requiring all the unit owners to replace certain areas of vinyl siding with Hardiplank or similar high grade exterior product which is a much more expensive material. They are also going to require solid wood decorative shutters on some of the windows. The plan is to get bids, enter into a contract, and assess the owners because the association doesn’t have any money in reserve for this project. Some owners consider these improvements to be upgrades and say that the Board shouldn’t be able to require the owners to pay for upgrades as opposed to replacements.   This article can also apply to some degree to townhouse communities which are not condos but where the association has the responsibility to maintain the exteriors of dwelling units and common facilities.

 

          This is indeed an interesting scenario because it calls into question the powers of the Board versus the unit owners and the need to determine who is responsible for exterior maintenance or enhancement. The first place that we should look for an answer to the power issue is the documents. Frequently the Association documents do not address the power of the Board with respect to upgrades as distinguished from maintenance. Most documents address whether or not the board of directors has maintenance responsibility for the exterior of the units.  Maintenance would involve replacing a worn out component on the property with an equivalent material. If the governing documents to not prohibit upgrades, which some do, upgrading would be allowed as long as the difference in cost is not dramatic. Often this topic is addressed in the section on assessments in your documents. Maintenance responsibilities in condominiums are usually well defined in the documents. Usually the board has the responsibility for all common elements and usually the exteriors of the units are common elements; however, sometimes all or part of the exteriors are limited common elements with the unit owner having maintenance responsibility. If the documents do not address this topic, you would then look at the Virginia Condominium Act which does give the Association all powers and responsibilities, including financial responsibility, for maintenance, repair, renovation, restoration and replacement of the common elements. Then you must look at the board powers section of your documents to see if the decisions with regard to maintenance and upgrades is within the board’s powers and responsibilities, or, on the other hand, if they require a unit owner vote or written consent of the unit owners.

          Once you have resolved that issue, then you must determine who has the power to assess if the funds are not in the budget or reserves. If your documents do not address the question, then you need to again turn to the Virginia Condominium Act (“the Act”). The Act contains a provision regarding special assessments and allows the Board of Directors to impose a special assessment for common expenses when there are insufficient funds in the accounts of the Association. The premise for a special assessment (which is not stated in the Act) is that once a budget is approved, that budget should have taken into consideration the necessity for the maintenance of common elements and should include reserves sufficient to repair or replace them at the appropriate time. Sometimes an Association can be taken by surprise with regard to a significant common expense due to storm damage that may not be covered by insurance or is subject to a high deductible and requires a special assessment in order to meet the need for immediate repair. It does not contemplate a special assessment for upgrades that are unbudgeted, discretionary, and for which no money has been accrued. Unless your Declaration specifically states otherwise,   such an expense, in our opinion, should not be made without an affirmative vote of a majority of the unit owners. We wish to emphasize that the statute does not contain this requirement and the Board would have the power to make a special assessment for such common expenses as it deems appropriate in the exercise of its best judgment and fiduciary duty. However, the Act also contains a provision whereby the members of the Association can call for a meeting within 60 days of the delivery of a notice of a special assessment “to rescind or reduce the additional assessment”.

          It would seem that the more prudent way to approach the upgrades in a project which has no urgency would be to build some money into the budget for them when it becomes apparent that such a project is going to be required in the next couple of years; if the unit owners support it, then you can gather the money over a 1 or 2 year period so that the financial impact of the upgrade is spread out over a period of time. 

          Hopefully this article will help you think through the technical and funding aspects of making improvements to your community’s appearance. It may require a bank loan to assist in this process in order to spread the cost out over 5 – 10 years. There are banks willing to lend to associations for this purpose and we will be glad to make recommendations on funding your projects. We have done so many times and look forward to assisting our communities as needed.

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