As a nonprofit entity, your condo, homeowner, community or apartment association must meet relevant state laws. What’s more, association board members who aren’t often familiar with the legalese of association practice may not understand the bylaws, covenants, or other legal documents that the association has adopted. Worse, if your board has no standing experience with writing, amending, or interpreting your bylaws, any move by the board could open your association up to legal entanglements.

Suppose your apartment association bylaws do not allow pets. However, several unit owners have aquarium fish, guinea pigs, or reptiles. How is your regulation being enforced? Is that enforcement opening your association up to debate or legal action? As for noise levels, do you address specifics in your bylaws as to what constitutes disruptive levels of noise? Do crying babies receive the same treatment under your bylaws as revving car engines? And are you sure your board members are able to make such determinations?

 That’s why directors and officers insurance coverage (D&O) is a must for any association board. While well-meaning board members may act in what they think is the best interest of their association members, their actions, or lack thereof, could expose your association to a number of potential losses.

 Take your bylaws to your condo or apartment association insurance broker. A broker specializing in association coverage will be able to determine if your bylaws are conforming to state statutes, and can discuss with you any potential loss areas that may be covered by a sound insurance program. Consider also having a risk assessment done on your board’s bylaws and practices. Make sure your association board’s attempts to serve aren’t leading you down a risky path.

Flickr photo credit: mbgrigby

I mean we’ve all heard stories about the waiters and waitresses at our favorite restaurant swiping our credit card numbers on a little theft gizmo before running the charge through for the meal.  I’ve actually been a victim of something similar.  Although I love the restaurant dearly (it serves the best Mexican food) I only pay with cash. period. 

Every month large sums of money moves through your books.  Rents come in as income, and then there are expenses – utilities, maintenance, staff, supplies, insurance, taxes, advertising, legal fees, tenant damage, etc.  Do you have safeguards in place to deter sticky fingers?

Do you have one person write checks and another person sign them?  Who reconciles the bank statement each month?  Direct theft is one form of employee dishonesty. 

Another form would be when an employee uses tenant information – credit card numbers, social security numbers, birthdates, etc. to make fraudulent purchases for personal gain.  This form of theft is more difficult to identify.  And yet, you could be named as a party in the lawsuit.

All forms of theft are damaging – not only to the Apartment owner but to the reputation of the property and the ability to keep maximum occupancy. So, what’s the remedy?  Aside from the obvious of doing everything yourself, which assumes you’re an honest person, is to have certain policies in place.

1.  Bond your employees.   Fidelity bonds protect you (the policyholder) for losses incurred as a result of theft or dishonesty by the bonded employee.

2.  If your business is a corporation, LLC, etc. you should have Directors and Officers (D&O) liability insurance in place.  This coverage will protect the organization from legal/litigation costs resulting from mistakes (yes, that’s a broad term) for which they are liable.

3.  Is it a standard part of your application process for prospective tenants to provide proof of tenant/renter’s insurance?  What about the maintenance person or exterminator who likes bright shiny objects?  Proof of tenant/renter’s insurance should be standard for all approved applications.

When you protect your business, you’re protecting others from losses that can and will occur.  Legal fees and shattered reputations can ruin a business.  Be proactive and have policies (employer and insurance) in place to deter dishonesty and prevent holes in your office.