Condo Association Management Blog

As always, depending upon entity, either the State condo or HOA Act is the place to start.  
This project is described as an HOA. In almost all circumstances for an HOA, only the Declaration provides language regarding assessments and clarifies the obligation of members to pay. Therefore, the authority for a capital contribution (which fits this initial fee) and the ability to assess it against a purchaser (usually only the initial purchaser in a homeowners association) will be included in the Declaration. 
The purpose of reserves is to fund long-term maintenance, repair, and replacement of common elements - property owned by the HOA for which the HOA is obligated - again described in the Declaration and on the plats for the property (plats or drawings by some other name in some states) are prepared by an engineering firm as part of the development process.  
Many condo and HOA boards and members have never seen the plats which are approved by the local jurisdiction reviewing the development process. Plats in most states are recorded in Land Records. Not all developers provide the plats to the board and many management companies in the past did not require a set of plats in managing the property. These are essential documents. 
 
RESERVES - today the financial standard for mortgage approval is a requirement that the budget show at least a 10% line item for reserves. In most circumstances, this amount may be insufficient to meet the association needs. Only a reserve study can provide detailed engineering and architectural information as a basis for the actual reserve fund. Boards and members should not be lulled into a false sense of security by the lending industry guideline of 10%.  
In some HOAs, the need for reserves is very minimal due to the lack of property owned by the HOA itself. For example, if roads and sidewalks are maintained by a governmental agency, if only limited landscaped areas are owned by the HOA, then a reserve fund may not be necessary. However, the association needs to document this, even with a letter from the local planning board, as evidence for not maintaining reserves.  
 
As to this specific decision by the board to assess new homeowners a "move-in" fee to be applied to reserves, a new member who has settled on the property needs to seek legal counsel. For existing members, after reviewing the legal recorded documents, a carefully worded letter could be sent to the board pointing out the restrictions for assessment collection, with a request that the board have this action reviewed by the association's legal counsel. An auditor may notice this and also address it in the yearly audit report - where the provision for reserves must also be addressed under the professional standards governing the CPA doing association audits. 
If the association needs to establish or further fund reserves, concerned members need to support and assist the board in properly presenting this to the membership for approval. There are many sources for information regarding reserves, beginning with Community Associations Institute publications. The board appears to be searching for answers in the description provided.

Let me back up and explain all this, this is a HOA and not a CONDO. 
 
 
 
There are no HOA laws for our state Michigan. 
 
 
 
Walton Meadows has no right to charge FEES for new homeowners only, the bylaws are clear and dont even mention a reserve. 
 
 
 
You cant charge fees for something that dont cost you. 
 
 
 
You are allowed to have a reserve if your bylaws say you can have one 
 
 
 
In my opinion, this is an illegal tactic to burden down new home owners. 
 
 
 
When I questioned the authority of this and asked where in the bylaws this is allowed, I get no response. 
 
 
 
I need legal counsel to help correct this issue.  
 
 
 
The bylaws are available on the website, and so are the minutes. 
 
 
 
the website is:  
 
http://parkside-preserve.com/documents.html 
 
 
 
please also see minutes of meetings on these 2 dates, april 28, 2010 and april 21, 2010. 
 
 
 
Do I file a small claims suit or first request in writing a refund of paid fees? 
 

It's not uncommon for assn's to charge a fee to new h/o's as a means of supplementing or funding the reserve account. I don't know that it must be stated in the bylaws or covenants that this fee may be charged. Frankly, I personally object to this type fee. IMO, the only fee that should be levied on a new h/o would be a disclosure fee -- the cost to copy the required disclosure info. 
 
A reserve account is something that every assn should have. The purpose is to have $$$ available to pay for long-term renovations, repairs of fixed assets. Most assn's will have a reserve study performed by a company specializing in reserve studies. The reserve study will name all the fixed assets to be included in the reserve fund, their life and the $$$ required to maintain. Monies should be deposited into the reserve account each month. The yearly amount required will be designated in the reserve study. The monies to fund the reserve account are taken from the operating fund meaning it should be shown on the budget as a "Transfer to Reserves" -- a credit in the income portion of the budget.

Jeff, review the covenants. That is where the right to assess and collect funds normally will be found.  
(Need to and will read your docs from another computer, MAC doesn't like this pdf.)  
In most states, the bylaws govern the action of the HOA and are third behind the Articles and the Covenants (Declaration) for enforcement efforts. I will have more information tomorrow in response to your inquiry, including some MI attorneys and the contact for CAI's Michigan chapter. The administrator, Vicki, email address is ced@caimichigan.org. If you google Michigan HOA law, will get several helpful sites.  

The Michigan chapter Exec Dir, Vicki Hancock, returned my tel call today. There is no HOA Act in Michigan due in part to opposition by the real estate agents and the financial conditions of the State add to their concerns. There are two pieces of legislation being considered - one addresses manager standards, the other a serious problem for condo owners as the State currently taxes condo associations for all "income" including assessments. This is not the norm nationally. The problem for HOA members and associations is not understood by the legislators. 
Jeff - let your legislators know about this problem as a good HOA Act would be of assistance for every member.  
Ms. Hancock provided their web address "CAI-Michigan.org" which includes a list of attorney members and invites you to check it out. If you had a real estate agent assisting you in your purchase, contact that person and stress the need for support for an HOA Act. Also, contact the settlement attorney for possible assistance. If that person is not familiar with HOA issues, ask for a referral.  
I will follow up after reading your Covenants and reviewing the other docs.