Project contracts need to protect the association
Q: Our association enters into many contracts each year with different contractors. The contractors typically give the board its one or two page proposal that the board agrees to and signs. The proposals are also reviewed by our property manager before the board signs them. Occasionally, we have problems with the performance of contractors. However, the association seems to have little recourse under the contracts provided by these contractors. What can we do to avoid these issues in the future?
A: This is a frequent issue in associations and arises regardless of the amount of the contract. The relatively small amount the association would pay to have counsel review and revise a proposed contract is worth the thousands of dollars the association may spend to battle a contractor over an issue that should have been addressed in the contract. Moreover, the typical one- or two-page proposal submitted by a contractor does not address key issues that would offer protection to an association.
Detailed specifications, start dates and completion deadlines, contractor insurance requirements, delivery of lien waivers, termination in the case of a breach, a warranty on labor and materials, and recovery of attorney's fees by the association are among the important issues that need to be included in any contract. These protections are often absent in proposals submitted by contractors.
Q: The declaration for our townhouse-style condominium states that the windows in perimeter walls of units are limited common elements. The declaration then provides that the board is responsible for the maintenance, repair and replacement of the limited common elements, and that the cost is to be charged back to the owner of the unit served by the window. Skylights were installed in the roof of every unit, and many of the skylights are of an age that requires their replacement. However, the declaration does not mention the skylights. Who is responsible for the skylights?
A: A skylight is a window in the roof or ceiling of a unit. The language in the declaration concerning maintenance, repair and replacement of windows, and the responsibility for the cost, would apply to the skylights. This is an issue that could have been avoided with the more careful drafting of the original declaration.
Q: The 2019 budget for our association included a line item for certain utility payments. However, the actual cost for these utility payments in 2019 was about 30% more than the amount budgeted. Did the board have to obtain owner approval for this increase in expense?
A: Budgets are planning tools for the board. However, actual expenses can be higher or lower than contemplated for a particular budgeted category. In general, a board can spend more than is budgeted for a particular item like a utility payment.
To keep from operating at a deficit, the board will have to spend less in another category, unless it adopts a special assessment to make up the shortfall.
Q: The board of our association collected proxies over a year ago in connection with a meeting of the owners to be called to vote on an amendment to the association's declaration. A meeting of the owners was called to vote on the amendment, and ballots were cast using the by then year-old proxies. Was it proper to use proxies that were over 11 months old?
A: A proxy for a condominium or a common interest community association is valid for 11 months from the date it is signed by the owner, unless the association's declaration or the written proxy itself provides otherwise. Both the association's declaration and the proxy need to be reviewed to determine if they provide that the proxy is valid for more than 11 months. If they do not include this language, the proxies would not have been valid after 11 months from the date they were signed by the owner.
Note too that the board needs to make sure the person who gave the proxy was still an owner when the vote was taken; particularly given the significant passage of time here.
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.