By Lee Freedman, PWF Legal
It began about 40 years ago when the Champlain Towers South condominiums, the Surfside, Florida condominium complex that became a news story in June, was first developed. Internal documents apparently contend that the driveway on the top of the building’s garage had “very poor drainage (design flaws) which exposed the garage to water intrusion for 40 years.”
The Chaplain Towers South community association grappled with what many Colorado community associations grapple with – members fighting over deferred maintenance, increases of assessments, and the levying of a special assessment. At least since 2018, the members were advised of the need to remediate the poor drainage, which was likely to cost approximately $7 million, which started infighting among the members and the Board.
What many members in community associations fail to acknowledge is that assessments are the lifeblood of community associations. This is why Colorado law, along with statutes in many other jurisdictions, provide that members must pay assessments and may not withhold such payments just because they have a dispute against their association. The levying of general assessments, whether monthly, quarterly, or annually, is a necessity for community associations to raise sufficient capital in which to operate. Assessments are used to pay for the general expenses of community associations and to provide sufficient funds in reserve accounts in order to help pay for deferred or emergency maintenance.
However, assessments are often used as political fodder for those running for director positions on the executive board, whether it is argued that the current board is levying too much in assessments, which is harming the members financially, or is charging too little which is causing harm to the components of the common elements and the values in the community.
Those boards that fall in the “board is charging too much” category tend to care about appeasing the members by keeping assessments low. Many times, these types of boards will refuse to increase assessments for many years and argue that is what the membership wants as they continue to re-elect the same board members.
However, failing to increase assessments, especially for a lengthy period of time, can impact an association in several very troubling ways including not having sufficient funds to provide additional benefits to members such as community events, to pay for the expenses related to the provision of recreational facilities, to perform necessary or recommended maintenance on components for which the association has the responsibility, or to provide sufficient reserves to cover expenses for future anticipated reserves.
These Boards generally prefer to push the maintenance responsibility or costs upon future boards – basically taking the position that “it is their problem, not ours.” They tend to look at the immediate financial benefit of the community, while ignoring the future consequences of their reckless financial decisions, disregarding contractors’ or reserve specialists’ recommendations, and ignoring their own potential legal liability for such future consequences.
Ultimately, such decisions may have serious, and even devastating, consequences. The lack of maintenance can result in the early failure of components or worsening damage of the components, which can also result in damage to persons or other property. These board decisions can invalidate insurance coverage for such injury or damage. If there are not sufficient reserves to cover the repairs, in whole or in substantial part, the association could end up having to immediately come up with thousands, to hundreds of thousands, to even, as in the Champlain Towers South community situation, millions of dollars to perform the requisite repairs. This can result in the Board having to propose a special assessment. However, since many declarations require owner or member approval of the levying of a special assessment, there is not any guarantee that the association can raise the funds quickly or in a reasonable period of time, which can result in continued deterioration or threat of further injury and damage.
Basically, one boards’ decision to not raise assessments can create a slippery slope which can put persons and property at serious risk of harm. The Surfside, Florida condominium garage collapse, resulting in the destruction of at least 55 condominiums and counting, is an extreme example of what could happen in a common interest community should the board fail to levy reasonable assessments or stay on top of necessary or recommended maintenance. It is a strong lesson to all voluntary board members of the consequences of poor association maintenance.
Board members and community managers must take the financial needs of their communities seriously when determining budgets and the amount of general assessments to levy and learn from the mistakes of others.
Lee Freedman has been practicing HOA Community Law for over 20 years. Lee is an active volunteer in CAI and the Colorado Legislative Action Committee. His passion for education and productive community governance is a driving force in his firm.
