Condo Media - September 2013 - (Page 20)

ASKED & NAME COLUMN ANSWERED Repairs vs. Improvements Sometimes There’s no Bright Line Between Them Q A QUESTION: Our association board recently notified owners of a $250,000 special assessment to finance a major renovation of our lobby. The board characterizes the entire project as “repairs,” which the trustees are authorized to undertake on their own initiative, but I think some of the components constitute “improvements,” requiring a vote of the unit owners. (The Master Deed requires voters to approve “additions, alterations, or improvements.”) Can you recommend any authoritative guidance that would resolve this dispute? ANSWER: This is a common question, the answer to which is not nearly as clear as you might like. The general principle governing the distinction between repairs and improvements is this: The addition of any feature that was not there previously constitutes an improvement, requiring the approval of at least 75 percent of the owners (and sometimes more, depending on what the condominium documents say). Replacing or enhancing an existing feature would generally be considered repairs, but not always. The problem arises when the en- E ssex Management Group ... we listen to our clients and develop a strategy to support their needs and objectives. We combine personal communication, state-of-the art technology, courtesy and mutual respect to achieve optimum results for our client communities. Why Essex Management Group? Innovative Financial Reporting & Capital Planning “User Friendly” On Line Support Services 21 Years of Specialized Condominium Mgmnt. Commitment to Client Satisfaction Website Management Support Paperless Options Investor Supported Services 20 CONDO MEDIA • SEPTEMBER 2013 After going through two management companies, I was amazed to see the unit owners actually stand up and applaud the efforts of Essex Management Group. They are really the cream-of-the-crop when it comes to property management. —Joe Arone, Home Association Annual Meeting hancement or replacement changes the character of the building. Replacing the industrial grade carpeting and budget furniture in the lobby with carpeting and furniture of the same quality would be a repair, but substituting a plush, deep pile floor covering and antiques might be an improvement, because it could change the character of the condominium from moderate to luxury. While there is a point at which an upgrade becomes an improvement, accountants explain, there is no bright line between them, and no clear guidance from the courts to help associations make that determination. Cost is not the defining issue: Planting a $2 geranium might at least theoretically constitute an improvement in a community that did not previously have any flowers, while spending $40,000 to replace a leaking roof would represent an essential repair. Given the murkiness of the repair vs. improvement question, many association attorneys advise boards to obtain a unit owner vote if there is any question at all about how to characterize a particular project. The concern for association trustees, and the reason they often prefer to act on their own authority, when possible, is that owners are often more interested in reducing their individual costs than in preserving or enhancing the shared value of the condominium community. But the solution, to the extent that there is one, is to educate unit owners, making sure they understand that maintaining, repairing, and improving the common areas — or failing to do so — will affect the value of all condominium units, including theirs. CM

Table of Contents for the Digital Edition of Condo Media - September 2013

Condo Media - September 2013
From the CED’s Desk
Editorial Board
CAI News
CAI Regional News
Asked & Answered
Homeowner’s Corner
Vendor Spotlight
Volunteer Spotlight
Self-Managed Association Boards
Classified Service Directory
Advertisers Index

Condo Media - September 2013