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Condo association's generation gap: older owners and unfunded reserves

Posted on Tue, Sep 28, 2010 @ 08:47 AM
  
  
  
  
  
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hoa financeOur condo association is very small only has 13 town home units, we only have about $13,000 in our "reserve" fund and we only pay $160 per month for our dues. The condo association was created in 1975 with association dues at $75 per month. The dues have not been raised since 2004. At that time, it was only raised $10.

The majority of the residents are retired and do not want to raise the dues in order to build a healthy reserve for roof replacement, siding replacement, new driveway etc. because their argument is that why should they pay more money per month in dues when they may not or probably not going to be in the association in 10, 15 or 20 years and they would rather keep their money in their accounts and earn interest instead of paying more a month in dues. 

Historically, the condo association has not planned for the future needs and repairs, has no realistic or sufficient reserve fund and all residents pay ENORMOUS assessments anytime we need a major repair or replacement. A few years ago, every unit owner paid $4,000 in order to pay for the new siding and a few years before that $10,000 per unit for a new roof. My fear is that as the retired unit owners sell off and new residents move in, not everyone is going to have that much liquid cash readily accessible to pay for necessary repairs or replacements to keep up our common area or exterior surfaces on the units. Does anyone have any advice for me to share with all of the older retired unit owners who do not want to raise our dues?

My spouse and I are at least 30 years younger than the other unit owners and do plan on staying for at least 10 or more years and fear that the place will fall apart and look run down because historically and currently the association is not budgeting correctly to plan for future needs and proper reserve. I just want to strive to the retired owners that whether you plan on moving or not, while you are a unit owner it is your DUTY and responsibility as an association member to keep the place up and if it means raising its dues in order to have a proper reserve then so be it. Thanks in advance for your tips and/or advice.

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Comments

We're Americans. We like things to be "fair" (except, of course, when things are slightly unfair in our direction).  
 
Deterioration is ongoing. The cost of deterioration is ongoing. A Reserve Study identifies the cost to offset the physical deterioration at the property. It is fundamentally unfair for someone to be taking advantage of common area assets, "using them up", and not paying for their deterioration.  
 
Ongoing regular Reserve contributions are not onerous. They are the fair and responsible thing to do. And when paid on an ongoing basis, it is a remarkably small cost. Typically about half a Starbucks a day. That is a very small cost to maintain big, critical things like roofs, paint, asphalt, pools, etc. 
 
Posted @ Tuesday, September 28, 2010 9:22 AM by Robert M. Nordlund, P.E., R.S.
In our condo the older residents are the ones who want to suppress maintenance and reserve contributions.They are on limited, fixed incomes, while the newer, younger residents are more understanding of the building's needs. There is a push-pull. There is no question in my mind, that reserve funds should be healthy. Right now we have about $800K in our reserve, but we could easily spend that in a year or two. We take in about $280K per year for the reserve. Any older building is going to have plenty of upgrading or repair work on water towers, waterproofing, roofing, air conditioning, and so forth.  
- 
You must "sell" the owners on building a decent reserve.
Posted @ Tuesday, September 28, 2010 9:35 AM by Michael E.Katz
Why is it that the smaller associations (ours has 12 units) seem to think that running the association is based on how much money the homeowners make? ...and are we all being friends?  
 
Running an association is a BUSINESS and should be run as such. Wear and tear is normal and needs to be considered when planning for future replacement and repair of common elements. In most states it is mandatory to have a reserve account. How will these 'fixed-income' people feel when something needs repair and they get slapped with a $2000 or $3000 special assessment? 
 
Monthly assessments need to be increased as expenses increase. If done properly, it should never be more than 10% in any given year - especially if an adequate reserve amount is included. What percentage of your assessments are put into the reserve account each month? 
 
When they look to sell their unit, interested buyers will have an inspector look at the building. If the place will need a new roof in three years and there are no reserves to pay for it, the buyers will want compensation for the upcoming expense - or they'll look elsewhere.
Posted @ Tuesday, September 28, 2010 10:04 AM by csl
They are very short sighted on this matter. They will be lowering property values which will affect their selling price. Word gets around between realtors. The worst thing to have happen is to have a realtor say to someone looking that they don't even want to look at the places because they are not kept up.
Posted @ Tuesday, September 28, 2010 10:41 AM by will
In my state, Maryland, you must provide the potential condo buyer with a statement about your reserve fund. Sale cannot be completed without this information being made available. In my condo we assess the new buyer for a proprtionate share of the reserve fund asn it exists when he took title.
Posted @ Tuesday, September 28, 2010 11:10 AM by Charles Adler
It's ok to keep your money in your own account for that rainy day fix if this what you want to do. What most residents fail to realize is that there are many other expenses like grass, snow, elctric in the walkways and hallways, water for the washer and dryers if you have a laudry room. And don't forget those pesky little light bulbs that blow or the security lights in the parking lots that need fixing and the pumps when they fail. Now who pays for this stuff when the rates go up and the kickback is on you. With 13 units and paying only $160.00 per month does not give alot of reserves left for other little things to get fixed. There is much to running an association/HOA and the older people fail to realize this. What happens if one dies and sells out to someone younger is a real problem. I know I was a younger person who bought into my association and WAMO I got caught with an assessment 2 months later for the roof. Yes the former owner knew this was coming and failed to tell me about it, of which I do believe I could have gone after him for the amount, but I didn't (Lesson to be learned) for not asking questions at the sale! I am fighting with the association right now and waiting for management to get that contract written. I hate my association and will never ever buy into another one. But then again (Lesson learned) when we were told we were $17,000 in the hole to people not paying their dues cause they figured that wasn't their responsibility to the others. So if you don't raise those dues at least 30.00 more per month you will be getting caught in the Association WEB! Good luck and go for the rate hike young or old. But you must vote on it and if they fail to vote yes, then maybe you can find out if they will sign a letter of promise to pay when the time comes. Have a nice day 
 
Posted @ Tuesday, September 28, 2010 11:45 AM by s
Forget any letter of promise. Most states allow a certain percentage of increase before a vote is needed. In Illinois, it's 15% so those in Illinois with this problem can raise assessments by 15% each year until they are where they need to be. Check with your individual state to see what your limit is and go for it! If everyone agrees to make it more, all the better, but don't wait for that to happen to increase your reserves. The time is NOW to put it into the budget so the assessments can go up the fist of the year. Most places require that homeowners have proposed budgets 30days in advance; then the board approves it and it's a done deal.
Posted @ Tuesday, September 28, 2010 1:26 PM by csl
In most states the approval of a budget is mby majority vote of the association at an open meeting. It is not approved by the Board Of Directors in most states. Just think what you have said. The budget is adopted by the Board of Directors. That means you as a unit owner and member of the council of unit owners don't have a right to voate on this most important document which when it takes effect will affect your life in your condo for the next year.Democracy or Distatorship. Take youre choice.
Posted @ Tuesday, September 28, 2010 4:30 PM by Charles Adler
Thanks so much everyone who gave me advice about this! Right now it is a dictatorship for sure. Wish me luck for trying to raise the dues!!! I will use all of your comments and advice as "ammunition".
Posted @ Tuesday, October 05, 2010 9:23 AM by Sara
Most mortgage lenders check the adequacy of the resrve before issuing a mortgage, Fuerther, most reliable real estate salespeople always check the status of the reserve fund. If the reserves are judged to be too low your or your heirs selling price will be negatively affected. A Condominium Association is a business and needs to be managed as such. Many condos require a new owner to make a one time contribution to the reserve fund in an attempt to being fair to the older members.
Posted @ Tuesday, October 05, 2010 7:16 PM by Charles Adler
RUN!!!!!!!!!!!!!!!! I AM HAVING THE EXACT SAME ISSUES IN TEXAS AND BE BY THE TIME YOU CAN TURN IT AROUND THE HOA 
 
WILL BE OUT OF BUSINESS.
Posted @ Monday, November 01, 2010 12:35 AM by BOB
Well you're not alone. This is a very common issue and is expected to be even more of a problem as communities continue to age.  
 
My recommendation is to continually and clearly communicate with the community members. Attend all board meetings and show the reasons for your concern. Make visual aids showing the cost of deterioration, the future expenses and needs, current and future reserve fund levels. You cannot argue with facts. Additionally, unit values increase, community moral increases, curb appeal and the overall community culture is better with healthy reserve fund levels.  
 
Constant communication... Good luck!
Posted @ Wednesday, November 24, 2010 1:56 PM by Ray Myers
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