We have discussed the importance of both you and your lawyer looking over the board minutes when conducting due diligence. However, while the board discusses mundane matters, financial issues and other important items are also brought up. You can uncover clues regarding potential issues, providing you know what and where to look.
While your lawyer reads the minutes as part of his/her duty, we help prospective co-op and condo buyers in order for him/her to also understand the issues prior to making an offer. It can also assist existing owners to keep abreast of the building’s issues, and if there are any festering problems.
The board minutes may contain complaints about the quality of life issues. While a co-op and condo typically have house rules, these may not cover all issues or residents might push the boundaries. Additionally, as a general rule, condo boards are more lenient than their co-op counterparts.
For instance, you might uncover a resident that smokes a lot of complaints about a loud animal. Perhaps it is an isolated incident, or it is part of a larger problem. In any case, the minutes let you know how the board handled the matter and whether you found it satisfactory. The board minutes could also reveal a bug infestation problem.
The board also discusses major issues. These include disputes between shareholders/unit owners, lawsuits confronting the building, and major repairs. In the case of a large capital expenditure, you can find out how the board plans on funding it. You may see an increase in your monthly maintenance fees/common charges or the board could charge a special assessment. In extreme cases, the board may mismanage the finances, creating a bad situation down the line.
How far should you go back?
Boards generally keep a historical record of all the minutes from their meetings. We think it prudent that you go back at least a couple of years. If you want to review older minutes, you can since it provides historical context. You can see the issues confronting the board and how these were handled, and whether it remains a problem. We suggest weighing the more recent minutes more heavily, however.
Your lawyer can obtain the minutes from the managing agent in most situations, although not all buildings allow inspection. If there are minutes that you can review, generally, you are not permitted to take these off-site. Therefore, you have to accompany your attorney on the visit, which is typically made via an appointment.
While it is not the most convenient, we suggest making the effort. A board typically meets monthly, and none are usually scheduled in the summer. This provides you with a healthy dose of information to digest. It is important since the minutes provide insight into how the board operates and the living situation in the building. These issues, both financial and social, affect your life. While your lawyer is the expert, you should know the situation, too. You might discover neighbors you find intolerable or a board that you think is unreasonable, which you want to know prior to moving in.