CAI-NJ Aug.2016

TRANSITION: Evaluate, Communicate & Negotiate but…should we litigate? By Fran McGovern, Esq. McGovern Legal Services, LLC

“Transition” is the due diligence process required by the board members’ fiduciary duty. In sum, the homeowner-elected board members must deter- mine if the sponsor did what it was supposed to do and, if not, take action to get the deficiencies corrected. Upon assuming board control homeowner-elected board members must: 1) evaluate the association’s physical and financial condition; 2) communicate the findings to the members and the sponsor; 3) negotiate for repairs, money or a combination of repairs and money. Evaluate. Due diligence begins with evaluating the association’s physical and financial conditions. These eval- uations must be undertaken promptly. Delay may result in losing some or all claims due to expiration of warranties, statutes of limitation and/or the statute of repose.

Engineers, architects, accountants and other experts are enlisted by the board and the association’s attorney to ferret out deficiencies and “con- nect the dots”. “Connecting the dots” requires experts to: 1) Identify the duty – statutes, architectural drawings and speci- fications, building codes, industry standards, manufacturer’s specifica- tions, etc.; 2) Specify how the duty was breached– for example, required building wrap was not

installed; 3) Specify the damage – for example, moisture got behind the siding and was not shed down and out; instead the moisture damaged the substrate and structural members; 4) Specify how the breach caused the damage – for example, if the required building wrap had been properly installed, water that got behind the siding would have been shed down and out of the building envelope without damage to the substrate and structural members. Instead, the water was absorbed by the substrate

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