Representing A Community Association

Question: I am an owner in a mid-sized condominium complex, and we are having trouble with our Board of Directors and our management company. A number of us are convinced that the Board is not complying with our Association documents. Unfortunately, the Board refuses to recognize this. We want to obtain a legal opinion from the Association’s attorney, but have been advised that the law firm represents the Board and will not give the owner’s such an opinion. Please explain who the lawyer represents?

Answer: Although there is no doubt in my mind that the lawyer should represent the Association as a whole, this question is often hotly debated — both among Association attorneys and unit owners –throughout the country. This columnist has also received a large number of questions about this issue.

At the outset, I want to state my position: when a lawyer is retained by a community association, that lawyer must represent the entire association. It is true, however, that the lawyer takes his or her “marching orders” from the elected Board of Directors, but the client is the Association — and not the Board. But even before the lawyer is retained, the Board should be advised — in writing — as to whom the lawyer represents.

It should also be pointed out that the discussion relating to association lawyers is equally applicable to property managers.

This does not mean that an association lawyer must answer each and every question posed by individual unit owners. The lawyer’s fees are controlled by the Board of Directors. It would be clearly unfair for all owners to have to bear the cost of increased legal fees just because one or two owners constantly contact the lawyer with questions. Indeed, owners may even ask personal questions of the association lawyer — such as estate or employment issues — that have absolutely nothing to do with the nature of the lawyer-client relationship.

Furthermore, if an individual owner of the community brings legal action against the Association and/or the Board for whatever reason, the Association’s lawyer has the obligation to communicate — in private — with the Board without such privileged communication being open to all owners. A lawsuit against a Board or an Association directly impacts on the entire community. It can potentially affect the budget, and it can also have an impact on the ability of potential purchasers to obtain financing in the secondary mortgage market. Clearly, litigation can have an impact on the reputation — and thus the resale value — of community associations.

For this reason, the laws and legal condo documents permit the Association’s lawyer to strategize (in executive session) with the Board of Directors.

However, in general, an Association lawyer must represent the Association, and not just its Board or its management agent. For example, many years ago, a Board hired a construction engineer to conduct a “reserve analysis” of the condominium building. The purpose of this study was to assist the Board and management in determining how much money the association had to keep in reserves. Reserves are generally used to pay for such major improvements or repairs as elevator upgrades, roof replacement or air conditioning enhancements.

During the course of the reserve study, the engineer learned there was asbestos in the building. It was, however, encapsulated, and (according to the engineer) did not pose a threat to anyone in the building. The Board of Directors did not want to “scare” the owners and decided not to advise them of the situation. A legal opinion was sought, and the Board’s lawyer recommended that everyone be informed that although there was no immediate health hazard, there was asbestos in the building. The Board objected; it believed that such a notice would cause unnecessary panic and fear throughout the building, and since there was no health hazard, no such announcement should be made. Incidentally, the lawyer was terminated.

What should the lawyer do? In my opinion, he or she should advise the Board — in no uncertain terms — that it owes a fiduciary duty to the owners who elected them, and that this duty requires that everyone be informed of the situation. What happens if the Board still does not heed the lawyer’s advice? Does the lawyer withdraw as counsel for the Association? Or does he or she, without Board approval notify the owners of the asbestos?

This is but one illustration of the potential conflicts that a lawyer — and a property manager — often confront when dealing with a Board of Directors.

It is true that the Board has the responsibility of managing and operating the Association. But the Board — its lawyer and its management agent — obtain their basic powers from the people, and it is to the people that accountability is owed. Such situations clearly put the lawyer and property managers on the “hot” seat. Offend the Board, and you may lose a client. However, as professionals and as agents for the entire Community Association, should be strong enough to keep the best interests of the Association first and foremost.

This issue is highly controversial within the community association field. There are lawyers and property managers alike who claim they only represent the Board of Directors. Clearly they are entitled to their opinion, but this columnist believes that the loyalty and fidelity is owed to the Association as a whole.