Operation and Control Of Condominiums

Normally, the operations of a condominium are conducted by a management association created to run the common affairs of the condominium owners[i].  A condominium association is required to act consistently with the condominium act and its governing documents.  Its actions must be free of fraud, self-dealing, or unconscionability[ii].

A condominium project may be administered or managed in one of several ways, such as by:

  • the unit owners, a board of governors elected by the owners; or
  • a management agent elected by the owners or the board when named in the declaration[iii].

The applicable condominium act, its bylaws, and the declaration authorize a condominium association’s acts [iv].  A condominium association is controlled by a governing body, acts through designated agents, and functions under the authority of bylaws[v].

The management, whether a board of governors or directors elected by the unit owners, or an elected or appointed agent, may:

  • acquire property;
  • enforce restrictions;
  • maintain the common areas;
  • engage in litigation;
  • insure the property;
  • promulgate and enforce house rules; and
  • make reasonable assessments[vi]

The decisions made by a condominium association board should be reviewed by a court using the same business judgment rule that governs decisions made by other types of corporate directors[vii].  The business judgment rule limits the judicial review of decisions made by a condominium’s board of managers to whether:

  • the board’s actions are authorized, and
  • the actions were taken in good faith and in furtherance of the legitimate interests of the condominium[viii].

Thus, under the business judgment rule, in the absence ofevidence of bad faith, fraud, self-dealing, or other misconduct on the part of a condominium board, judicial review of the reasonableness of the board’s action is foreclosed[ix].

Most condominiums are insured by a master policy, covering the entire project, along with policies covering the individual units[x].  The master policy protects the overall needs of the project and guards against gaps in the individual insurance contracts caused by lapsed policies or limited coverage.  Some states specifically authorize a condominium declaration to require its board of managers to insure the project[xi].  In other states the statute requiring insurance for condominiums provides that alternative arrangements may be provided for in the declaration or bylaws for insurance.  Where there is such a provision in the declaration or bylaws, the board of managers does not have a clear legal duty to follow the statutory procedure[xii].  Some states require the master policy to contain a waiver of subrogation against any unit owner to protect the unit owners[xiii].

The authority of a condominium association necessarily includes the power to issue reasonable regulations governing an owner’s use of the unit[xiv].  Such rules will not be invalidated without showing that they are wholly arbitrary in their application, in violation of public policy, or that they abrogate some fundamental constitutional right[xv].

The Uniform Common Interest Ownership Act provides that any person or class of persons adversely affected by a failure to comply has a claim for appropriate relief, if a declarant or any other person subject to the act fails to comply with any of its provisions or any provision of the declaration or bylaws.

[i] White v. Cox, 17 Cal. App. 3d 824, 95 Cal. Rptr. 259, 45 A.L.R.3d 1161 (2d Dist. 1971)

[ii] Billig v. Buckingham Towers Condominium Ass’n I, Inc., 287 N.J. Super. 551, 671 A.2d 623 (App. Div. 1996)

[iii] White v. Cox, 17 Cal. App. 3d 824, 95 Cal. Rptr. 259, 45 A.L.R.3d 1161 (2d Dist. 1971)

[iv] Holbert v. Great Gorge Village South Condominium Council, Inc., 281 N.J. Super. 222, 656 A.2d 1315 (Ch. Div. 1994); Eagan v. Mueller, 809 S.W.2d 411 (Mo. Ct. App. W.D. 1991).

[v] White v. Cox, 17 Cal. App. 3d 824, 95 Cal. Rptr. 259, 45 A.L.R.3d 1161 (2d Dist. 1971)

[vi] Billig v. Buckingham Towers Condominium Ass’n I, Inc., 287 N.J. Super. 551, 671 A.2d 623 (App. Div. 1996).

[vii] Walker v. Briarwood Condo Ass’n, 274 N.J. Super. 422, 644 A.2d 634 (App. Div. 1994)

[viii] Quinones v. Board of Managers of Regalwalk Condominium I, 242 A.D.2d 52, 673 N.Y.S.2d 450

[ix] Vacca v. Board of Managers of Primrose Lane Condominium, 251 A.D.2d 674, 676 N.Y.S.2d 188 (2d Dep’t 1998)

[x] Schiller v. Community Technology, Inc., 78 A.D.2d 762, 433 N.Y.S.2d 640 (4th Dep’t 1980)

[xi] Schiller v. Community Technology, Inc., 78 A.D.2d 762, 433 N.Y.S.2d 640 (4th Dep’t 1980)

[xii] State ex rel. Curd v. Backhaus, 56 Ohio App. 2d 79, 10 Ohio Op. 3d 101, 381 N.E.2d 646 (8th Dist. Cuyahoga County 1977)

[xiii] Schiller v. Community Technology, Inc., 78 A.D.2d 762, 433 N.Y.S.2d 640 (4th Dep’t 1980)

[xiv] Ritchey v. Villa Nueva Condominium Assn., 81 Cal. App. 3d 688, 146 Cal. Rptr. 695, 100 A.L.R.3d 231 (1st Dist. 1978)

[xv] Apple II Condominium Ass’n v. Worth Bank and Trust Co., 277 Ill. App. 3d 345, 213 Ill. Dec. 463, 659 N.E.2d 93 (1st Dist. 1995)


Inside Operation and Control Of Condominiums