Removal of a Community Amenity – What Associations Need to Know
Unquestionably, among the primary functions of condominium and homeowners associations is the “maintenance, repair and replacement” of common elements. Included among these common element components are association amenities such as tennis courts, swimming pools and play areas. The manner, timing and extent to which maintenance responsibilities are performed is ordinarily set forth in the declaration and bylaws (“Governing Documents”). While Governing Documents generally require boards to preserve components in perpetuity, they offer little direction or guidance in circumstances when a component is no longer useful or too expensive to maintain. The broad discretion ordinarily vested in boards to maintain, repair and replace common elements MAY NOT, therefore, apply to decisions to remove or delete common elements. Assuring that associations do not exceed the scope of their authority in making such decisions thus requires a thorough review of the Governing Documents, and of course, the exercise of reasonable business judgment.
The extent to which boards are vested with authority to govern is typically set forth in the declaration or bylaws. An example is as follows:
Section 1. The Executive Board shall have and exercise all lawful powers, authority and duties necessary for the proper conduct and the administration, management and operation of affairs of the Association, and may do or cause to be done all such other lawful acts and things as are not by law, by this Declaration, by the Bylaws or otherwise, directed or required to be done or exercised by the Unit Owners, or by others. … including the following.
A. The maintenance, repair, replacement, cleaning, sanitation, management, operation and use of the Common Elements and the making of any additions or improvements thereon shall be the responsibility of the Executive Board and shall be carried out as provided in this Declaration and the Bylaws …
This is consistent with Sections 3302(a)(6) and (7) of the Uniform Condominium Act (68 Pa.C.S.A Section 3101 et seq – the “Act”), which empower associations to regulate the use, maintenance, repair, and replacement of the common elements, and the making of additional improvements as part of the common elements. The Act specifically contemplates these functions to be performed by an elected board. In relevant part, Section 3303 of the Act provides as follows:
(a) Powers and fiduciary status.–Except as provided in the declaration, the bylaws, in subsection (b) or other provisions of this subpart, the executive board may act in all instances on behalf of the association.
Essentially, this means that unless certain action requires vote or approval of the unit owners, boards are empowered to act. When considering removal of common elements, care must thus be taken to review the Governing Documents for specific limitation on board authority. Classic examples of actions that require unit owner vote are declaration amendments and annual election of board members.
In some cases, drafters of the Governing Documents have anticipated the removal/deletion dilemma by including provisions similar to the following:
Obsolescence. In the event that the Board of Directors shall determine that any Common Element or any other real or personal property of the Association is obsolete, the Board of Directors may call for a vote of the Members to determine whether or not the property should be demolished or replaced. In the event eighty (80%) percent of each class of the Members and at least two-thirds (2/3) of the Eligible Mortgagees shall determine that the property should be demolished and/or replaced, the costs thereof shall be assessed against all of the Owners according to their Common Expense Percentages.
After the board determines that a component is “obsolete”, this paragraph requires approval from 80% of owners to remove or rebuild it. [While the foregoing example directly answers the question of board authority, it likely (and unfortunately) ends the inquiry. Obtaining the required 80% vote (the same burden imposed for termination of a condominium pursuant to Section 3320 of the Act) is generally a hurdle too large to overcome.] Limitations on authority may also be contained in the list of express duties imposed on the board:
The duty to provide for the maintenance and repair of the Common Elements. The Executive Board shall maintain the Common Elements at a condition at least equal to that which existed at the time of the conveyance of seventy-five (75%) of the Units to Owners other than the Declarant.
This provision would appear to require unit owner vote to remove any common element that existed at the 75% conveyance mark. (How this can be determined in a 30 year old association, or if the swimming pool that was installed at the 90% conveyance mark can be removed, is not clear). However, even absent express limitation, unit owner vote may nonetheless be required. For example, the declaration may specifically refer to a swimming pool or putting green as a common element. Similarly, the recorded plan may depict the component sought to be deleted. In those cases, the declaration or plan must be amended – ordinarily by a vote of at least 67% of the owners. Expenditure limitations could similarly impact deletion of a common element:
There shall be no structural alterations or capital additions to the Common Elements (other than for purposes of repairing, replacing and restoring portions of the Common Elements) requiring an expenditure in excess of $5,000.00 without the prior approval of the Unit Owners entitled to cast 66-2/3% of the votes of all Unit Owners.
Here, while expenditures to repair or replace a common element do not require unit owner approval, “structural alterations or capital additions” that exceed a cost of $5,000.00 do. Removal of an existing tennis court would thus require unit owner approval.
As illustrated above, with limited exception, property maintenance decisions are ordinarily made by the board. This is arguably the board’s most important function – substantial portions of Governing Documents are dedicated to assigning responsibilities and financial resources for upkeep and preservation of communities. Whether removal or deletion of a common element is “authorized” may also be a matter of degree. Surely, a board may properly remove a dead tree or discard a VCR without a vote of the unit owners. And, if replacement of the tree and purchase of a blue ray player is not practicable or too expensive, the board should likewise be authorized not to replace them. These types of decisions are intended to be within the powers of the board. Boards should also vested with authority to replace a paver walkway with macadam, or remove signs or speed bumps, and the like. The same would be true for a change in roofing materials for the clubhouse, or color for a fence. Aesthetic variances do not constitute “obsolescence” of the common element.
Of course, the line begins to blur for more substantial components. Demolishing and replacing a portion of sidewalk may constitute proper maintenance and repair. Surely the drafters of Governing Documents did not intend to deny boards the ability and freedom to make normal every-day maintenance and repair decisions. Sometimes proper maintenance IS removal. Governing Documents assure that major association components are preserved, and that the character of communities is not altered without a vote of the unit owners. While there is no case law to shed light on what constitutes such a major common element, it clearly applies to those components likely to influence the purchasing decision. Examples might include the clubhouse, swimming pool, tennis court, walking trail and perhaps automatic gates.
The decision of whether to deem a component obsolete, and the decision of whether to deem that obsolete component of the type that requires unit owner vote, require the board to exercise its reasonable business judgment. The standard by which board action is measured is set forth in Section 3303 of the Act:
In the performance of their duties, the officers and members of the executive board shall stand in a fiduciary relation to the association and shall perform their duties, … in good faith in a manner they reasonably believe to be in the best interests of the association and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. …In performing his duties, an officer or executive board member shall be entitled to rely in good faith on information, opinions, reports or statements, … in each case prepared or presented by any of the following:
(1) One or more other officers or employees of the association whom the officer or executive board member reasonably believes to be reliable and competent in the matters presented.
(2) Counsel, public accountants or other persons as to matters which the officer or executive board member reasonably believes to be within the professional or expert competence of such person.
(3) A committee of the executive board upon which he does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the officer or executive board member reasonably believes to merit confidence.
This standard requires that boards act within the scope of their given authority (Governing Documents), in good faith and in a manner reasonably believed to be in the best interest of the association. Following this process, and when necessary relying on experts, will assure that the decision to remove a common element will not be subject to protest or legal challenge.
*STEFAN RICHTER, ESQ. is the firm’s lead attorney on Homeowner and Community Association matters. Stefan is a member of the College of Community Association Lawyers and is a Past President of the Board of Directors of the Pennsylvania and Delaware Chapter of the Community Associations Institute.