Housing company decision-making: the board's most common mistakes
In this article
The board’s decisions affect the condition of the building, the finances and the value of the apartments for far longer than a single board term. Yet the same mistakes are repeated from one board to the next, and most of them stem not from a lack of skill but from haste, missing information or nobody following up on whether decisions have actually been carried out.
Who decides what
Shareholders exercise their decision-making power at the general meeting. The board is responsible for the administration of the company and for organising property management, and the property manager handles day-to-day administration in line with the board’s instructions. The board needs a decision of the general meeting for measures that are unusual or far-reaching given the company’s size and activities, or that significantly affect the use of the apartments or shareholders’ payment obligations. So the first question is always whether the matter is being dealt with by the right body.
What the law requires of decisions
The Limited Liability Housing Companies Act (opens in a new tab) (asunto-osakeyhtiölaki, 1599/2009; in Finnish) does not tell the board what decisions to make, but it does set the principles by which they are made:
- Due care. The board and the property manager must act with due care to promote the company’s interests. The law does not require decisions to turn out well, only that they are prepared with due care.
- Equal treatment. A decision must not give a shareholder or anyone else an unjustified advantage at the expense of the company or another shareholder. Not every decision benefits everyone equally, but there must be an acceptable reason for any difference.
- Conflicts of interest. A member may not take part in dealing with a matter such as their own contract with the company.
- Minutes. Minutes are kept of board meetings, numbered consecutively and stored securely.
These principles and personal liability for damages are explained in more detail in the article on the responsibilities of a board member.
Seven common mistakes
1. Reacting too late to a minor fault
A small leak, a loose piece of roof flashing or an unusual smell in the basement is left to be dealt with later. But water from an unnoticed leak can spread into the structure within a few months, and the repair then costs many times more than fixing the original fault would have.
2. Deciding on the basis of assumptions
Before a major project, it is worth establishing the current condition of the building, the repair options, the long-term costs and the impact on residents. Condition assessments, condition surveys and the long-term maintenance plan (PTS) can all support the decision. Postponing is also a decision: it is justified when the condition and risks have been assessed, but if the condition of the roof or the foundation drains is unknown, the consequences of postponing are impossible to judge.
3. Choosing the cheapest quote without looking at what it includes
Several quotes make it possible to compare the scope of work, materials, schedule, responsibilities, warranty terms and the contractor’s experience. The cheapest quote can turn out expensive if essential work is missing from it. See the guide to competitive tendering.
4. Information does not get through
The caretaker spots damage starting to develop, but the information never reaches the board. A shareholder reports a problem, but it is not recorded. When every observation is recorded and dealt with, the board can also see recurring problems.
5. The reasoning is not recorded
Often only the decision itself goes into the minutes. A few years later, a new board does not know what investigations were done, what options were considered and why that solution was chosen. For significant matters, record the reasoning and the investigations the decision was based on as well.
6. Shareholders are told too little
If a major renovation begins without its aims and impact being explained, rumours and distrust can easily follow. Shareholders need to understand why the decision was made, what alternatives were considered and how the project will proceed.
7. Nobody follows up on decisions
Surprisingly often, the board decides on a project but nobody keeps track of how it is progressing. At the start of every meeting, go through what has been decided, what has been done and whether a new decision is needed. It takes a few minutes.
Example: the roof is being replaced “soon anyway”
The board decides to replace the roof in five years’ time. In the meantime, a small leak is found in the roof, but the repair is put off because the roof is going to be replaced soon in any case. The leak gets worse and causes moisture damage to the structure. In the end, part of the roof structure and loft insulation has to be renewed as well as the roof covering, and the costs rise considerably. The mistake was not the timing of the roof replacement but the failure to react to the small leak.
Expensive situations typically arise from chains like this: a repair is put off for a year, an inspection is not carried out, a moisture observation is left to be looked at later, and the maintenance needs report is not updated. None of these alone causes a problem, but together they can lead to urgent repairs that could have been carried out as planned.
Ten questions before a significant decision
- Do we know the actual condition of the building, or is our view based on assumptions?
- Do we have sufficient investigations, such as a condition survey?
- Have the alternatives been compared?
- What will the impact be over the coming years, not just in next year’s budget?
- What happens if we do nothing?
- Is the decision in the interests of the company as a whole?
- Do we need an outside expert?
- Is this a matter for the board or for the general meeting?
- Does any member have a conflict of interest?
- Will we still be able to justify the decision in five years’ time?
Frequently asked questions
Does a good decision mean the most expensive solution?
No. Sometimes the cheapest solution is also the best; at other times a larger initial investment reduces long-term costs. What matters is that the options have been weighed up.
Can poor decision-making increase repair costs?
Yes. If decisions are made without sufficient investigation, or essential repairs are postponed without good reason, problems can spread. The indicators and annual rhythm that help prevent this are covered in the article on running a housing company.
This article provides general information and does not replace case-specific legal or technical advice.
