Condo Media - May 2020 - 40

DEALING WITH THE CORONAVIRUS

Q:
A:

Should we close our
on-site management office
temporarily and instruct
owners to contact the
manager by email or phone only?

Boards have the authority
to close their management
office and that's an option
many communities may
consider in order to limit exposure
risks for staff and board members.
Jared McNabb, PCAM, general manager at Brook House Condominium
Trust in Brookline, hasn't closed his
on-site office, but he has posted a sign
on the door and placed a sandwich
board on the sidewalk "requesting politely" that owners practice social distancing and communicate via phone
or email. Despite that, McNabb says,
some owners have "dropped by" just
to say hello or in some cases to deliver
food. "We appreciate the thought,"
he says. "But we've locked the door."

Our maintenance
supervisor doesn't
want to enter owners'
units for fear of being
exposed to the virus. How do
we handle this?

Brook House has handled
this by barring any nonemergency, in-unit work
by maintenance staff. "If
it's an extreme emergency, we'll deal
with it," McNabb says. But an extreme
emergency is defined as one that
affects the health and well-being of
other residents. "A backed up toilet
that has water flowing from the 15th
floor down" would qualify, he says;
a broken light switch would not.

Can the association
delay a planned common
area construction project
or halt a project already
under way in order to reduce
interactions with non-residents?
What about projects owners are
planning in their units?

CONDOMEDIA May 2020

Boards have
the authority to
restrict access to
the community
and good reasons for doing
so, McNabb says. But they should base
their decision on the nature of the
project and its potential impact on the
community. If the repair is essential-
a leaking roof, for example-the board
may have to complete it. But if the
work is "aesthetic," McNabb says,
then delay is probably advisable.
The board also has the authority to
impose a moratorium on work inside
owners' units, "to minimize the number
of people entering the community
who don't have to be there," McNabb
says. "It's a health and safety issue for
the community."

If the board cancels
or delays a project,
will the association be
liable for damages for
failing to honor the terms of the
construction contract?

That depends on the contract terms, John Shaffer, a
partner in Marcus, Errico,
Emmer & Brooks, responds.
Most contracts allow you to terminate
the work "for cause"-if the contractor
has failed to meet its obligations. Some
contracts also allow termination "for
convenience"-essentially, for any
reason. Both options have potential
risks and costs. If you simply cancel the
project, the contractor can sue you for
"wrongful termination," which could
entitle the contractor to recover the
cost of any work completed to date plus
damages, including the entire amount
the contractor would have earned had
he completed the project.
If you exercise a termination for
convenience provision, you can't be
sued for wrongful termination, but
these provisions typically entitle the
contractor to collect, at a minimum,
payment for work completed and costs
incurred to date, plus a specified early
termination fee. If you agree to suspend

the project rather than cancel it, the contractor could also pass on any increase in
costs that occurs in the interim, when the
project resumes, Shaffer explains.
You might be able to avoid liability
under the contract by arguing that an
"act of God"-a force majeure in legal
terms-required termination or delay.
You could raise this as a defense if the
contractor sues for breach of contract,
but it would not be a legal slam dunk
for the association, Shaffer emphasizes.
While a pandemic would qualify as an
unforeseeable event the association
couldn't control, he notes, you would also
have to demonstrate that there were no
alternatives to termination or delay-no
measures that would have mitigated the
risks of proceeding with the work. You
might prevail in court, Shaffer says, "but
this is a tough legal standard to meet."
Associations that are considering
delaying or suspending planned projects would be best served in most cases
by negotiating rather than litigating,
Shaffer suggests. "Talk to the contractor
and try to negotiate an agreement that
serves the interests of both parties.
That's the first step the board should
take," he says. "It is the easiest solution
and the least risky for the association."

Q:
A:

Will insurance cover
any component of the
liability or financial loss
associations may incur
due to the virus?

The short and far from reassuring answer is not necessarily. Gregory Pierce, CPA,
LIA, senior vice president at
NorthStar Insurance Services, Inc., is the
messenger delivering this unwelcome
news. Property insurance policies often
include "business interruption" insurance, which would cover losses resulting
from damage to the property that causes
the business to shut down or impedes its

Condo Media - May 2020

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