Where We May Be Going
Rather than describing the details of any specific new legislation or executive orders (which we will continue to do in our monthly Advisories and interim memoranda), we believe there is value in taking time to anticipate some issues that boards may face in the near future.
One such issue will be how to deal with unpaid maintenance or common charges during the crisis. Until this point, our anecdotal impression is that co-ops and condos generally have weathered the initial economic upheaval of the pandemic better than commercial landlords. However, some co-ops and condos have already suffered significant financial impacts predicated on, among other things, loss of commercial rents and construction shutdown expenses, and we believe that increasing numbers of shareholders and unit owners are likely to begin withholding maintenance and common charges soon absent additional governmental intervention. The entire situation will require boards to balance the very real human and economic problems created by the health and economic emergency with their fiduciary duties to enforce their owners’ financial obligations.
Delays and inefficiencies in governmental action will continue to be a big issue. We have been monitoring the implementation of all of the different relief programs enacted thus far, and we all anticipate more legislative activity in the coming weeks. However, as we have seen from the loan programs that were supposed to disburse cash almost immediately, it remains to be seen whether any new programs will be available to co-ops, condos, or their shareholders and owners and how comprehensive and efficient they will be.
Throughout all this, co-ops and condos are going to have to figure out ways to conduct business despite the problems caused by the coronavirus. Boards need to be especially cognizant of deadlines that cannot be postponed indefinitely. For example, most by-laws call for distribution of annual certified financial statements, usually in the first quarter of each year. Boards also are obligated to release annual conflict of interest reports. These types of disclosures should be finalized and distributed wherever possible, even during the pandemic.
Non-essential construction activity continues to be shut down and it is not yet known whether the duration of that shutdown will be measured in weeks or months. On a more positive note, the Governor’s emergency orders may help facilitate apartment closings by allowing steps such as notarization of legal documents to be accomplished, subject to specific regulations, electronically rather than in person.
Besides the virus itself, perhaps the greatest concern facing co-ops and condos (and all of us) is the increasing strain that mandates of public health will place on our economic and regulatory systems. The longer this goes on, the more these strains may impact decision-making at the co-op and condo level. The challenge will be for board members to continue to work collaboratively with their board colleagues – as well as with their shareholders or unit owners, residents, employees, managing agents, accountants, counsel, and other professionals – to make the best decisions that they can in unrelenting circumstances.
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It has become an instant cliché in coronavirus memos to say that “things are changing all the time,” but it does not make it any less true. So we will continue to update our clients and friends on the nuts and bolts of important legal developments as they happen. For as long as this ordeal continues, we also intend to send out mid-monthly communications like this one to remind our clients and friends that, not only are we learning with you, we are learning from you. As we all wait for a new “normal” to arrive, we will be here and happy to talk.