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August 24, 2005
TO SIDE OR NOT TO SIDE - THAT IS THE QUESTION
How many times have I gone to board meeting, or been called by a board member, and found that the association is facing a major painting project, and has found itself in a dilemma. (Too many to count.) I'm talking about a planned unit development, not a condominium, because the dilemma I'm talking about involves what to do about deteriorated siding when its time to paint. The common scenario is that the board is looking at a major painting project. However, the painters have indicated that they cannot paint the buildings because the siding is failing. As for another complication, the Board has reviewed the governing documents and cannot figure out whether the association is responsible for the siding replacement and repair, or the owners are responsible. I can see the can of worms pop open. Without going into a 10 page dissertation on the subject, here's the benefit of my experience:
The first thing to do is contact a knowledgeable attorney to review the governing documents and give the board an opinion as to who actually is responsible for the siding. Sometimes it is very difficult to determine that, and other times the documents are written in legalese that only an attorney can understand. Whatever the case, the board may want to consider amending the CC&Rs (which requires a vote of the owners), either to clarify responsibilities or to shift responsibilities.
In this situation, as soon as the board notifies the owners that there's a shortfall in the reserves and will likely be a special assessment for the project, the complaints begin to roll in. Many owners are unhappy and have determined that the last paint job was worthless. They do not want a repeat performance. Sometimes that is because the last paint job was laid over deteriorating siding (maybe it could not be determined by a visual inspection), and sometimes it's just because people do not realize that 15 or 20 years have gone by and the siding and paint job have outlived their life expectancy.
Any Association Board of Directors that tries to take on a major siding/painting job requiring a major assessment is at a clear disadvantage without the assistance of a bright, responsible, and knowledgeable team. The team should consist of professional management, a knowledgeable attorney, an experienced contractor with HOA and building envelope expertise, and a banker representing a bank that gives loans to homeowner associations and has a specific division serving them. Without a team, a board can struggle, and struggle, and struggle, and struggle ... and struggle some more.
Here are some options to consider:
(1) Provide whatever ballot measure(s) are necessary for the owners to turn over the responsibility for the siding and paint job to the board, so that the board can proceed to have a scope of work prepared, have the matters put out to bid, arrange for an Association loan if that is needed, and have the ballots, voting requirements, contracts, and disclosure processes reviewed by the attorney. The advantage in having the association take over the entire job is that there is economy of scale, and benefit in the team knowledge, and assurance -- hopefully -- that licensed and bonded contractors will be used that know what they are doing, and that are properly insured for working in common interest developments. The job can be done quicker and more efficiently if one entity is in charge.
(2) If the owners are responsible for siding, another option is to approach the project in a fashion that will allow the board the opportunity to communicate with the owners about the responsibilities -- of course this involves having the buildings/dwellings separately analyzed for existing problems by a knowledgeable contractor -- and then taking whatever action is allowed under the governing documents to assure that the homeowners do the maintenance needed with regard to siding before the painters are paid to come in and apply paint. This method is laced with considerable additional administrative responsibilities and these factors may increase the costs and extend the time of the project significantly.
(3) If the owners are responsible for siding, the board could go ahead and pay for the painting contractor to apply paint regardless of the siding condition, but this is certainly not recommended. In fact, this is probably what happened in the prior painting cycle and you will soon find that has exacerbated all of the problems at hand.
The Board of Directors has a very difficult job in working its way through a major painting/siding project, and going it alone is a risky and (likely) frustrating thing. A town hall meeting (where no vote is taken but owners are invited to come and be informed) with all of the team members present to provide valuable information and answer questions can take a lot of pressure off of the Board and give the owners confidence that smart people are in charge and there is hope of a very good outcome if they ante up the necessary money. In any event, a board that is entering into a major painting/siding job that requires involvement of the owners in approving voting measures such as paying a large special assessment should make sure that the officers’ and directors’ liability insurance coverage is paid up. I don't say this to scare you, but in any pragmatic approach to a problem, it is wise to consider all potential avenues of stress, and eliminate those that you can at the outset.
Posted by Beth Grimm at August 24, 2005 1:09 PM