Are Condo and Co op Boards Banana Republics?

J Philip Faranda October 4, 2009

I recently closed on a co op purchase with a young couple that reminded me of the silliness that most co op board approvals really are. This couple had nothing to worry about- both were professionals and graduates of one of the most highly regarded universities in America, and believe me when I tell you that the co op needed them more than the other way around. Yet, several times a year I find myself on the sidelines watching a condo or co op board looking down its nose at anxious applicants and prospective purchasers who have to sweat out board approval before they can close and move in. 

I fully understand the need for planned communities to make sure prospective members are financially able to participate in their corporations and homeowner association. The irony, of course, is that most boards aren’t exactly models of competence themselves. I have a few modest, recent examples. 

 

  • Insurance. One closing is delayed because the condo is, shall we say, “in between” insurance companies. Not only is this blatantly contrary to the law governing condominiums, it places the condo owners at a severe risk. 
  • The same complex just assessed every owner $10,000 for a new roof. Assessments are controversial enough for the unforeseen, such as the 2007 spike in oil prices. But a roof? How could anyone not plan for a roof replacement in the general fund and monthly fees? 
  • The cherry on top for the same complex is that the pool was closed this past summer by the board of health. Gag me. Obviously, the management of this community is inept and should be sacked.  

 

A different complex had a double whammy: 

 

  • The parking garage was condemned, relegating half the community to street parking in a crowded village. 
  • The management company they hired embezzled hundreds of thousands in fees, putting the HOA on the brink of insolvency. Kind of rough when you need to spend millions to fix the garage. This is poor due diligence. 
These are just 2 examples, but I could go on with another half dozen complexes which can’t seem to find their own posteriors with both hands. It shouldn’t be a surprise, I suppose, because it is a fact that the residents of these places are there because they don’t want to shovel snow, mow lawns or maintain their own homes. Then you take the people with the most time on their hands from this leper colony already challenged group and voila! Behold your leadership! 
So what can you do about it? 
  • Prior to your purchase, be as choosy and inquisitive of the board as they are of you. Ask questions at your interview. If they don’t like that, or if the interview seems like a one way street, be on guard. 
  • VOTE. Don’t be en absentia for board elections. Put people on the board with a clue. If your lobby smells like mothballs and you keep the same ego maniacal slobs on the board as before, you have yourself to blame. 
  • Have your lawyer examine those financials, and if they don’t like what they see, bolt. Financial mismanagement is the calling card of a banana republic. 
Obviously, my characterization of condo & co op residents is tongue in cheek. My wife grew up in a co op, and many of my clients buy and sell both condo and co ops. They often share their frustration with me regarding their governing bodies, and that tells me that know what is going on. But I don’t have the same kind opinion of poorly run boards. Nor should you. 

 

 

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