Housing Counsel: D.C. legislation would boost power of condo boards
By Benny L. Kass , Published: March 29, 2014
Addressing a large incidence of condo battles across the city, the D.C. Council has passed legislation that would give deference to the decisions of association boards when they are engaged in lawsuits with owners.
The council this month amended the Condominium Act, giving boards more power to require owners to pay part of the cost of fixing damage to the building from problems that originated in their units. Moreover, the measure would require the losing party in a lawsuit to pay the winner's legal fees.
The rules, similar to ones already in effect in Maryland and Virginia, are awaiting Mayor Vincent C. Gray's signature and congressional approval.
An estimated 50,000 condo units are registered in the District, with more to come.
The fear of being sued has discouraged many people from serving on boards.
The aim of the amendments is to give more legal backing to associations and boards so they will have the "confidence to govern without fear of second guessing by courts, thus encouraging the best possible officers and encouraging those officers to make important and sometimes difficult decisions."
The council, though, made it clear that these rules do not absolve board members from their fiduciary duties.
Here's a summary of what the amendments call for:
Condo boards must be more transparent. The measure was not one-sided in favor of the boards. One purpose of the amendments is to "foster a more participatory environment for unit owners, give them confidence that their interests are being served, and to allow them to take informed action when those interests are not being served."
The legislation would require that all board meetings be open to all owners who are in good standing, and would create an open forum giving owners the opportunity to raise questions, vent their concerns and make suggestions. The board can go into closed executive session only for specific reasons, such as discussing personnel matters or litigation.
Books and records as well as board minutes must be made available for owners’ examination, subject to certain privacy restrictions. And electronic voting has been authorized.
The losing party must pay the winner's attorney fees. According to the council, this should "discourage the filing of meritless lawsuits given the risks entailed in losing. But it should also help make parties whole when they are forced to bring legitimate claims in court."
Owners may be required to pay part of the bill for fixing building damage from problems that originate in their units. Currently, if a pipe in one unit freezes and floods other units in the complex, the association's insurance will pay for most of the repairs, but the association will have to pay the insurance deductible. This can be as high as $10,000 or $20,000 per occurrence. It is a significant financial burden on the association to have to pay the deductible each and every time there is damage.
The amendments would address this in two ways. First, if the cause of damage originates in a unit — unless it is determined to be a common element problem, and unless there are different requirements in the condo legal documents — the owner is responsible to pay up to $5,000 of the association’s deductible. "Although this is a burden on owners,” the council wrote, “it serves to protect their neighbors and the overall financial health and condition of the association."
Second, all owners are required to obtain their own condominium owner’s insurance (called an HO-6 policy) with property coverage at a minimum of $10,000 and personal liability at a minimum of $300,000. Currently, most association documents merely encourage such insurance. This coverage should cover most of the cost of the deductible that the owner will have to pay to the association. Typically, the deductible for the owner’s insurance will be $500. So the HO-6 policy will reimburse up to $4,500 of the $5,000 the owner has to pay to the association.
The council recognizes that special steps are needed to maintain a peaceful and orderly ownership in a condominium.
Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.