One of the greatest risks to a condo corporation is when the condo board abuses its authority. Board members, through intent or ignorance, can make choices inconsistent with the authority and power provided to them.
It may begin in small ways such that the board and owners may not initially recognize an abuse of authority. Board members may support initiatives or the spending of funds that benefit themselves. Expenses may be improperly allocated to the reserve fund as a way to balance the operations budget. Necessary expenditures may be delayed to keep condo fees down.
All this serves to kick problems further down the road, eventually requiring a new board to rectify past abuses of authority. In practice, it is not uncommon for the new board to be blamed for their efforts at rectifying abuses by prior boards. A cycle is created where it becomes easier to maintain these abuses. Eventually, there comes a time when this cycle is forced to end, perhaps in the form of a dramatic increase in condo fees or a substantial special assessment. When this time comes, the costs of doing things properly tend to be dramatically higher than if proper practices had been followed.
Curtailing this cycle of bad practices is possible when the board, and management, police their powers by adhering to a basic set of practices.
√ Award contracts fairly. Ensure that all contracts are awarded only as determined by a majority vote of the board and documented in the minutes.
√ Never waive fees or grant extensions unless requested in writing, agreed upon by a majority of the board and documented accordingly.
√ Never allow necessary work to be delayed as a way to keep condo fees low as this unfairly passes repair and replacement costs along to future owners.
√ Corporation employees, including condominium manager and superintendent, should be subject to an annual written performance review.
Immediate implementation of these four practices, while not comprehensive, can help alleviate many of the problems encountered by struggling condo corporations.