I am on the board of directors of a 50-unit condominium. We are concerned about potential liability. The board is concerned about its authority to take action in an emergency.
There are times when we do not have the time to go to the membership for their approval.
Can you discuss the power of the board in such emergency situations? You are correct to be concerned about litigation.
Dissident unit owners in condominiums and cooperatives often threaten to take their board of directors to court if they cannot get satisfaction.
Certainly, not all boards of directors act properly. Some directors are engaged in what I would call a clear breach of their fiduciary responsibilities.
But in most instances, I am convinced that boards of directors are acting honestly, properly and are sincerely concerned about the welfare of their own project.
After all, serving on a board of directors of a condominium or a cooperative is a thankless job; the hours are long and pay is nonexistent.
A recent South Carolina case is instructive in this area.
The condominium association was authorized to make assessments for improvements to the common elements with the approval of 60 percent of the co-owners. However, assessments for emergency repairs required approval by only 51 percent of the co-owners.
The association levied an emergency assessment that was approved by 57 percent of the co-owners.
Two of the co-owners refused to pay the assessment, contending that it was not an emergency and thus that it needed 60 percent approval. The two co-owners filed a lawsuit challenging the board's authority.
The court decided that the assessments were invalid and held that the board of directors failed to establish that an emergency existed.
The association appealed, and the appeals court reversed that decision and sent the case back to the lower court for a new trial.
The appellate court applied what lawyers referred to as the "business judgment rule."
Under this rule, a court will not review the business judgment of a governing board when it acts within its authority, and when it acts without corrupt motives and in good faith.
The most important aspect of this case is the finding by the appellate court that the burden to demonstrate a lack of good faith falls on those who challenge the decision of the board.
The board is not required to justify its actions; those who are concerned about the board's actions have the burden to show that the board was not acting in good faith.
This case is consistent with other cases around the nation that have given condominium and cooperative boards of directors broad leeway in how they govern their association.
To do otherwise would make the already difficult task of voluntary boards of directors almost impossible. Benny L. Kass is a Washington attorney. 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, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.