Condo Association Management Blog

Its painfully obvious that your Association has fiscal problems bu that is still not an excuse for being late or for telling the owners what is going on with the money in your community. Feel free to email me. 
 
How many units are there? 
How much are your monthly dues? 
Do you have a management company?

Normally, the prospectus requires a specific amount be set aside for capital improvements each year. Some states also have that same requirement. Most condos are 503(c) corporations and they are subject to review by the States Attorney General. You should check your prospectus and verify if your State has a requirement to set aside a specific amount for capital improvements. Faiure to save for tomorrow's capital repairs will ultimately result in assessments or force the HOA to borrow money to pay for capital repairs. Either way, every homeowner will feel that pain eventually. 
 
 
 
Marty Morris

It is always unfortunate to hear of such situation. However, you do options. If your Board is not meeting their fiduciary duties, you can gather a petition from majority of the other Homeowners and vote to replace the Board of Directors. Hopefully the new Directors will follow thru on their responsibilities.

35 years later... The same things are still happening nationwide. So sorry to hear that your board is: 
 
1) Ignorant 
 
2) In Breach of their CC&Rs 
 
3) Devaluing your Investment value and the overall value of the community 
 
4) Opening themselves up for personal lawsuits for Breach of their Fiduciary Obligations. 
 
 
 
Those HOAs that do not have both an annual and a long range plan are destined to die a painful and expensive death... OR open the door for speculators to cherry pick real estate at a bargain basement price. 
 
 
 
In certain states HOAs MUST do Reserve Replacement studies... 
 
 
 
Call an attorney before it's too late...

An updated reserve study will solve a huge amount of your problems. They are designed to fund maintenance of common assets. Lumping all of your money into a savings account is an ignorant way of funding and is not even based on the developments physical needs. You need a reserve study badly. What state are you in? I (or any) professional reserve specialist can help you out. Be prepared for a dues increase though. 
 
Mike Poirier 
mikep@westernarchitectural.com

I am the original poster. My state is Minnesota. We have two buildings which look like two-story apartment buildings with stairs and corridors. No frills. No pool inside or out. No club room. We have 32 units in all. Our dues are $165 a month x 32 units = $63,360 a year income. Five of the units are now rented out. We have no assessments in arrears, thank heavens. Recently I submitted to the Board the laws of Minnesota concerning community-owned property and reserve account requirements. Thus they will no longer have any excuse. No, we do not have a management company. The various Boards over the years have said they are too expensive, but no one has ever checked into it. I goggled long and hard to find a HOA that had a sample budget I liked that included reserves as expenses, not operating expenses, but expenses nevertheless. The best I found is dillonbayhoa.com. It is my opinion that most associations run by amateur owners do not understand how to put a budget together with reserve considerations in it. I gave our Board Dillon Bay's budget example, so maybe this August at the annual meeting, we will see things done right. Don't bet on it.

One day, and you can be sure that such a day will come, where this association will need a major repair. When that day comes your association will need to make a special assessment. You can pay it out over the years or all at one time. Its not rocket surgery.

Hi Nellie 
 
Your Association has a lot more problems than just the budget. 
 
(2 buildings, 32 units, $63,360 yearly, no management company.) 
 
Do you have a copy of the bylaws?  
 
How old are the buildings? Are there yearly board elections? 
Where does your board keep all the paper work? Do they do a yearly audit? Are there any outside fixtures that need to be maintained or grass to cut? Do the buildings have elevators? A basement for storage? 
 
I ask a lot of questions because I would like to understand the whole picture. 
 
I can say that your board is being lax in getting the budget out. They are not doing their job but if your the only one complaining then you might have a problem with the board changing their ways.  
 
Vic 
 
 
 
 

Vic, we have two buildings like apartment buildings with hallways - stairs, no elevators. No basement. Built 1985 - 25 years ago. There is a parking lot between the two buildings and otherwise some grassy areas on the sides and the back of the buildings, not much. There are four unattached garage structures that have 40 stalls in all plus 2 more for trash and recycling. Yes, we have yearly elections. Yes, we have a yearly audit. The association papers are kept in a file cabinet in one of the utility closets. Yes, all owners have the Bylaws. Several years ago I created the Bylaws Committee, and four of us went through every single page of them (71 pages). I am more familiar with them than anyone else (two have now moved away, and the other one is elderly and doesn't care.) I don't think any of the five board members has ever read the Bylaws. Every month the board puts their monthly meeting minutes on the bulletin board, and they include the monthly treasurer's report. I do not question possible theft of the money, but lack of planning, lack of maintenance. Sometimes I take pictures of things that look run-down and submit them to the board. In writing in return, they have said I am invading people's privacy. (It is just common property that I own -I don't take pictures facing their units.) One area was in front of my building that went from the door to the parking lot. It was not kept watered. The grass died, and the ground was rock-hard. I took a picture of it, and one year later, we now have mulch covering that whole area (which actually looks better that rock-hard ground.) The old wooden split-up decorative railroad ties they said would be replaced - didn't happen. We have one owner who has dug up the common elements for three years in a row for her own private gardening in spite of having received a letter drafted by the association attorney three years ago that she cannot do this, has put in her own private sidewalk from her patio to the property back-sidewalk, charcoal barbecues in the parking lot (not allowed), boyfriend does continual car maintenance in the parking lot (not allowed and is a violation of fire lanes.) It looks like a combination camping area / car maintenance/body shop over there. She is a board member. When I complain about her actions, in return I get in writing a letter saying that I appear to have a vendetta against this person that is troublesome. What is troublesome is that the board doesn't enforce the Bylaws! I was on the board a few years ago and resigned because I considered the others to be unethical by making up their own rules or ignoring the legal ones. Last year at the annual meeting they said all roofing would need to be replaced in five years. I said we need to set up a reserve account for that. They said, no, that they didn't want to tie up the money in case they needed it for something else. Just last week one of the building roofs was replaced, so their five-year estimate was a bit off. They allow birdfeeders on the decks. I am on second floor. Last year my next-door neighbor thus had mice. I complained. The board said mice were not an association problem. We have four wooden balconies that are visibly pulling away from the second floor. One is mine. The board has known about this for four years and done nothing. We have shrubs along a back sidewalk which are overgrown by 1/3 across the sidewalk. The City said associations are private mini-democracies, and they cannot intervene, but cautioned that we could be sued for violating handicapped accessibility laws if someone were to fall. We have an 84-year-old woman who uses that back entrance (also other elderly.) She just had a hip replacement due to a fall elsewhere. The board says they cannot afford to fix the shrubs this year. We have a corridor ventilation system consisting of a fan in the attic connected to a timer. A heater heats the corridors in winter. No air conditioning. The fan draws in outside air through vents in the attic. In the summer it draws in the warmer air. Thus the board will not run the corridor fan during the day because it gets too warm. However, there are a lot of smokers in the building. The cigarette smell seeps out into the hallways around the unit doors. When the fan doesn't run during the time the smokers smoke (morning, afternoon, evening,) the hallways reek of cigarette smoke (and cooking smells.) I have told the board this is exposing all occupants to secondhand smoke. They don't care. The Minnesota Department of Health cannot do anything because associations are mini-democracies. Yes, the grass gets cut, and the snow gets shoveled. Yes, the hallways are kept vacuumed, and the front and back windows are kept spotless by an owner, inside caretaker, so everyone is satisfied, I guess. Three years ago we had the parking lot resurfaced, and two years ago we had the buildings and garage structures painted, so at least those big-ticket items have been taken care of for a while. 
 
I am emotionally worn out from my battles with the board. All I am trying to do is to assert my property and owner's rights and keep the property looking presentable. I have applied for senior housing elsewhere, and when something that I like comes up, I am out of here even though condo sales' prices are low like everywhere else. I desperately want to live in a professionally managed property!!!

Your problem is not legal or accounting issues, it's a lack of cooperation among the homeowners. You can hire attorneys and have audits performed, but none of this will attack the root of the problem: no one wants to pull together. 
 
 
 
I've served as the treasurer of two different HOAs, and the most important task is to separate the accounting for operating expenses from reserve expenses. I tell my homeowners that these are two different "businesses" and the accounting for each activity must be separated. 
 
 
 
I'm not sure that many HOAs prepare their annual budget too far in advance of the new fiscal year. In California, the proposed budget is supposed to be distributed to the homeowners betwen 45 and 60 days prior to the end of the fiscal year, but I don't think too many arrests have been made for failure to follow this law! Even if you received your budget after the start of the new fiscal year, you can still give it a thorough review and suggest revisions in mid-year if certain expenses are not forecasted properly.  
 
 
 
Not sure what you mean by getting more renters into the condo association. Renters may live in your complex, but they should not be part of any meetings or decision making.

I’m a recently elected board member to 60 unit, 40 year old townhomes in Texas. Current President/Manager has positioned herself through proxies and intimidation to stay in this position for the last 10 years. She has family members in other positions and all draw an incredibly salary for their minimal duties. Many of our homeowners are seniors and don’t know how or are fearful to state their opinions. We are constantly bombarded with assessments that are generally generated due to poor management. The president/manager uses vendors that she feels she doesn’t have to manage to do our landscaping, plumbing, etc…..and never get any bids on any work due to her heath and lack of energy to deal with it…..did I mention that are manager is 80 and in poor health, the rest of the board are seniors and can barely make to our monthly meetings..Our townhomes look awful, rotting wood, needs exterior painted, dead grass, mud, erosion everywhere, sprinkler not allowed to operate normally because association must pay water bill and we pay $21,000.00 per month in dues and so far this year we’ve paid  
 
About 25k in assessments…tree removal, pool repair due to negligence, over paying vendors for emergency work, etc. CAN ANYONE SUGGEST ANYTHING WE CAN DO TO REMOVE THE CURRENT PRESIDENT MANAGER AND SAVE OUR ASSOCIATION FROM BANRUPTSY?  
 
 
 

Since you just had elections, your board is set for a while. Bylaws might say you can call a special meeting of all owners to present your case of why the president should be removed; however, if the owners are afraid to speak up on general things, I doubt if they would participate in this. Bylaws might say the other board members can vote another board member off for "misconduct" - I don't know about incompetence. Our Bylaws say committees can be formed to help the board. Can you form a Maintenance Committee (and/or a Finance Committee) with you as the head plus a few interested owners, and prioritize your many projects and present them to the board - short-term and long-term goals? It sounds like your present board is weary, and they just might appreciate the help. Good luck!

Nellie 
 
The association needs to save for a capital reserve. It seems like you have a lot of complaints. Have you tried talking to other condo owners about how you feel?

i live in 140 unit-condo. early part of year 2 members were removed and i was elected. before i could say anything i was made the treasurer. i want to know exactly what a treasurer's responsabilites are. can anyone help? 
 
 
 
thank you 
 
Chacha from San Diego

Chacha: 
 
 
 
First and foremost, your primary duty is to safeguard the assets of your HOA. Unless you live in a complex with significant amenities (pool, tennis courts, clubhouse, restaurant, etc), this means cash. I would start with bank statements for the past three months for both accounts (operating and reserve): have they been reconciled, are there any very old checks that haven't cleared the bank yet, who is authorized to sign checks, etc. Have you been provided with financial statements for 2009 and each month of 2010? How are expenses tracking against your budget? Investigate any large differences. Are all owners current on their payment of dues? If not, get them caught up by all legal and ethical means possible. Like most HOAs, yours will probably have difficulty meeting your monthly obligations if several owners haven't paid as agreed. Next, check vendors: who approves the addition of new ones, do they have any personal relationships with your property management company, do you have contracts in place for recurring services such as sanitation, landscaping, pest control, etc? In short, gain a solid understanding of all of the fees paid by your HOA. 
 
 
 
That should get you started!

I need resource info for dealing with HOA that is lacking directions in all area. We don't have a BOD/no buget/no reserves/no committees/ no audits/ no yearly reporting of financial tranactions and t6he list goes on

Barbara 
 
What State are you in?  
How many homes. Condos? Townhomes? 
How old are the homes? 
Are they still building homes on the property? 
 
Victor 

I bought a condo in 2008 in good faith. The building has 26 units. Since I been there, they have not put money into anything. The parking lot has large craters, the front exterior door lock has been broken for 1 month and no one fixed it. The board claims that after the end of each month, they have no money. I bought this unit for 160k and today is worth 100k. Some people in the building are trying to get out and selling it for 75k. I still owe the bank 130k. Sad how this is happening. Every few months the board asks for assessments to fix certain things, but the building seems that it is falling apart and no one to help. Is there something that can be done? I don't think the board is stealing the money becuase the common charges are 210 a month. At the end of the month, they claim they have only 24 dollars left. The elevator light is out, the ceiling grid is falling off, the lights in the common areas are half out. really sad. I threw 15k to fix my place only to have this. Anyone have any ideas?

First off, many states REQUIRE that HOA's have a reserve study. 13 of them to be exact. In those states which do not require them, it's just a good idea to have one. 
 
If the building is relatively new, or was recently converted into condominiums from apartments, the developer can be held responsible for such defects IF 1) it's a defect and not lack of maintenance, and 2) you are within the statute of limitation for construction defect. That varies by state anywhere from 1-10 years. 
 
Sounds like a lot of your damage is general repairs and any skillful handyman can take care of it. Has the HOA considered hiring a part-time maintenance man? Does the HOA have a maintenance plan in place? 
 
In most states, the folks on the board of directors are held personally responsible for not upholding the CC&R's. If this is the case here, they can be removed from the board and new members voted in.  
 
You need new leaders, more money, and a better organized fiscal plan. Start with a new board, then get a management company, then get a reserve study. At that point, you'll have short term and long term goals squared away and you can turn the place around.

Mortgage industry, esp FHA, now requiring reserve studies done & updated on a regular basis. Loans will be difficult to impossible to obtain.  
 
After years of no oversight by individual mortgage companies, the industry has tightened their requirements back closer to the 1990s standards. 
 
Also encouraged is a reserve operating (or contingency fund) for operating budget overages.  
 
Invite local mortgage company leaders to address community. This may be eye-opening for all members.