CAI-NJ August 2021

FIDUCIARY DUTY... from page 21.

acting outside of its fiduciary duty if the work is vital and cannot wait. The best way to resolve this tension between the need for repairs and finan- cial considerations is to rely on advice from professionals. If a building’s exteri- or cladding system is failing and caus- ing leaks, the board cannot ignore this;

boards can explore certain loan options as an alternative to depleting all associ- ation funds or issuing a crippling special assessment to unit owners. Lastly, if the building systems in need of repair are aging prematurely because of improper construction or initial design, boards should speak to their association’s counsel to explore whether it is possible to assert a legal claim against the parties responsible for the defects. In New Jersey, the stat- ute of limitation for construction defect claims is generally the earlier of 6 years from when the defect was initially dis- covered and 10 years after substantial completion of the system’s installation. However, these are only very general guidelines and the deadline to file a legal claim involves a very fact intensive analysis and legal opinion that only a New Jersey licensed attorney can provide. Conclusion Although it might be tempting for a community association board that is faced with aging infrastructure to “punt” to future boards in order to avoid making tough, costly and unpopular decisions, doing so might be seen by a judge or jury as a violation of the fiduciary duty and expose the board to personal liability. Rather, boards acting within their fiduciary duty will step up, acknowledge the problem and use their best judgment (which is almost certainly informed by the recommendations of professionals) to determine what the scope of work will be, who will perform it and how the association will pay for it. Had Benjamin Franklin sat on a community association board, this is the course of action that he, in all of his wisdom, surely would have taken. n

be facing competing pressure and tension between engineers, property managers and attorneys counseling the board that certain work is neces- sary and unit owners and accountants who warn boards that funds are lim- ited and the association might not be able to afford the work. A board that ignores all financial con- siderations and constraints and gives a “green light” to all possible work despite its expense might be breaching its fiduciary duty to be a good steward of association finances if the work is not necessary or can be restrained. Likewise, a board that ignores nec- essary repairs/replacement of aging infrastructure simply because the repairs will be expensive will also likely be

“The best way to resolve this tension between the need for repairs and financial considerations is to rely on advice from professionals.”

however, there might be certain options, such as value engineering a possible alternative cladding system, that could keep costs lower. Likewise, association

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