Is Your Condo Corporation a Sinking Ship

Some Condo Corporations cannot be Saved

August 2017

Signs of struggling condo corporations are evident for those who want to see them.

Condo boards may defer maintenance that needs to be done. They may spend recklessly without regard to the future, their reserve fund or reserve fund study, or the lifestyle desires of owners.

Such problems may become evident after a new owner becomes a board member. That individual likely joined to provide a contribution to the community or they may have been alarmed about board actions. In some cases they may have been appointed by existing board members to fill a vacancy until the next election. Current board members lobbied on their behalf and solicited proxies. Regardless of the reason, this new owner likely finds themself in opposition to many board decisions.

This is when reality sets in. Cash inflows (condo fees) are exceeded by cash outflows (maintenance, repairs, upgrades, staffing, utilities). Bank balances dwindle. Maintenance is deferred. Accounting adjustments use money from the reserve fund rather than the operations account as a means of making budgets look good.

Some boards choose not to disclose internal opposition by recording in meeting minutes that a motion was passed without documenting dissenting opinion, concerns or discussion. This leaves condo owners with the mistaken impression that a board is unanimous in its decisions. This approach fails to educate owners on complex matters being discussed and is supported by condo elections decided by minor matters or misinformation.

The condo corporation may have a stubborn majority of directors lacking the expertise, interest or commitment to deal with a bad situation. It may be impossible to replace board members who may be supported by owners disinterested in any solution that may increase condo fees.

The director, who never intended to be a lone wolf fighting the board, has few options. They could remain on the board with growing frustration as problems continue to mount. Resignation means to ignore the existence of problems. Selling and moving is also an option.

Condo owners often prefer to be uninformed and unconcerned despite growing personal risk. There is a reluctance to acknowledge problems when resolution requires higher condo fees or special assessments. Directors supporting higher condo fees may be resented by those they represent.

At times like this a condo director must choose between continuing to do what they believe is right, their fiduciary responsibility as a director, or abandoning ship. Experience suggests that most will quietly resign. Some may sell and move as problems worsen.

Some condo corporations have no desire to change for the betterment of all. Perhaps this results from a combination of fear of change, greed and laziness.

Sometimes it may be best to simply move on.