Monthly Archives: May 2012

Proxy Moxie!

R.S. from Hartford County writes:

Dear Mister Condo,

Is a proxy form required to be included in materials sent providing information on those seeking election to an association board?

Mister Condo replies:

Answer

R.S., that’s a loaded question. Here’s a fairly simple answer. Proxy forms need to be readily available to all unit owners prior to the Annual Meeting, where the important business of electing officers and adoption of the Annual Budget will occur. Voting is the most basic of rights possessed by unit owners and voting by proxy is allowed and encouraged when it is not possible for a unit owner to cast a vote in person. Ideally, the proxy form should be mailed to the unit owner of record when the notice of the Annual Meeting is mailed out. That notice may or may not provide information on those seeking election to the association Board. As a general rule, interested unit owners should be notified that they may seek election to the Board but I am unaware of any requirement that they be provided information on how to do so.

There are other rules about proxies which also need to be taken into consideration. For instance, who will cast the vote on behalf of the proxy voter. In most communities, no one member may cast more than 15% of the total votes. For instance, if 25% of the association members simply sent their proxy forms to the President, that president could only cast votes totaling 15%. It is best to entrust a proxy vote to a fellow unit owner who will be attending the meeting and will cast the proxy vote as per the desire of the proxy voter.

Due Process and FHA Recertification

M.B. from Hartford County writes:

Dear Mister Condo,

Our condo’s FHA certification has expired. I asked the Board President about our recertification. He stated to me that he and the Vice President decided the Board did not want to seek FHA recertification because “people that are FHA are the ones that don’t pay their condo fees on time”. I stated to him that I have a FHA mortgage and he said “you are the exception”. I actually serve on the board and never heard any mention of FHA recertification or the decision to let it lapse. How can I get this Board to reconsider FHA recertification?

Mister Condo replies:

M.B., FHA certification and recertification is a hot topic in many condo communities across the nation. With Fannie Mae and Freddie Mac out of the mortgage insurance business, most communities will choose to keep their communities FHA certified in order that current and future unit owners can more easily obtain mortgages that are offered by lenders following FHA guidelines.

The decision whether or not to pursue FHA approval is up to the association, and, therefore, business before the Board. It is no different than any other business matter the Board faces. It should be an agenda item on an upcoming meeting. It should be discussed and voted upon. The President and Vice-President will both have votes on that decision so unless you can garner some more support for FHA recertification, you may be out of luck. However, I suggest you arm yourself with the latest information on the subject. You’ll find everything you need at the CAI website- http://www.caionline.org/govt/MortgageMatters/FHA/Pages/default.aspx.

* A word of caution to you and your fellow BOD members. Be very careful how you choose your words when describing unit owners who finance with FHA certified loans. The federal government does not take kindly to any form of discrimination. Your association Board could find itself on the wrong side of a lawsuit. Financial discrimination would not be looked at kindly if a disgruntled owner found themselves at odds with the Board over a policy designed to keep someone out of your condo.

Nowhere to Park!

H.F. from Fairfield County writes:

Dear Mister Condo,

I live in a high rise condominium where parking is a nightmare. Each unit has an assigned parking space and there are maybe 50 parking spaces reserved for Visitors. The problem is that there are more than 100 condos here and many folks have two, even three vehicles. Visitor parking is always full but not with visitors. It is usually the second or third car owned by folks who already live here. Our bylaws state that Visitor Parking is expressly for use by visitors. I’ve given up on having anyone come visit as I know they won’t be able to find a parking space if they come here. What can I do?

Mister Condo replies:

H.F., overcrowded parking lots are one of the top complaints that condo residents cite when asked about their satisfaction of living in a common interest community. At least you have an assigned parking space that you can use for yourself. I actually have a similar problem at the condo where I live. While there isn’t a tremendous amount you can do about overcrowded parking, I have a few ideas on how you can help yourself.

First, if you are expecting a visitor, move your own car into a visitor space and tell your visitor to park in your space. That seems like a simple solution but many people overlook it. As long as your space is open, you’ll always have one space for a visitor.

Second, send a letter of complaint to the Property Manager or the Board of Directors. It is very likely that they are aware of the problem but your letter may move them to action. Hopefully, they will step up their vigilance about enforcing the Visitor parking rule. At the very least, they should mention it in an upcoming newsletter. I find that, over the years, there are enough new residents entering a community that a fresh announcement about parking rules goes a long way in helping to spread the word on how to park correctly. Best wishes!

Developer Went Bankrupt! Who Pays?

F.S. from Tolland County writes:

Dear Mister Condo,

The original developer of our new condominium community has gone bankrupt before completing all of the work that was to be done to create the common elements of our community. A new developer has taken over the project and is continuing the work but looking for the current unit owners to pay for the newly constructed common elements. Shouldn’t the new developer be shouldering these costs or do the existing unit owners have to bear the expense?

Mister Condo replies:

F.S., purchasing into a new condominium association before the developer has fully finished constructing the development is not uncommon. Unfortunately, when a developer goes bankrupt prior to completing the necessary work, it is often the new community members that are left to shoulder the financial burden of completing the construction. However, that does not mean you and your fellow association members have no recourse.

As I have done in the past, let me first point out that I am not an attorney and my advice here is to be taken as friendly but not as legal expertise. Since the actual process of developer transition, especially when complicated with a developer bankruptcy, is of a particularly legal nature, I strongly urge you to consult with a qualified attorney. A great resource for finding experienced community association attorneys is available for your consideration at http://www.caict.org/?page=Directory#Attorney – Law Firms. I strongly recommend you speak with a qualified attorney regarding this matter soon.

For the most part, you entered into a purchase and sale agreement for your new condo with the understanding that the community would be constructed as planned. There are, no doubt, clauses in your purchase agreement that outline your responsibilities as well as the developer’s obligations to make the sale complete. If either you or the developer defaulted on the agreement, there may be a possible lawsuit involved in getting what is rightfully yours.

The developer’s bankruptcy provides legal and financial protection to the developer which is why you may need an attorney to help you bring suit against the developer and/or the developer’s insurer. These suits are routinely called construction defect suits and they are not uncommon in the Connecticut court system. The challenge can be weathering the storm of legal proceedings and court dates as you attempt to reach a settlement. In the meanwhile, it might make sense for the community’s Board of Directors to speak with a bank about obtaining a loan to help finish the construction of the common areas. Otherwise, these areas may be left unfinished or special assessments of the existing owners may be required to complete the work.

I am sorry you and your fellow new condo neighbors find yourselves in this bind. Rest assured, this problem will resolve itself with some patience and fortitude. It is an ugly side of the condo construction business that can certainly tarnish the reputation of condo living. I wish you all the success required to turn it around in your favor.

Fines, Fines, Everywhere a Fine!

P.P. from Hartford County writes:

Dear Mister Condo,

I have been fined numerous times this past year by my association. There is this one guy on the Board who thinks he is the “Condo Cop”. He spends his days looking for violations and sending fines to people he doesn’t like. He sends out fines for pet violations, parking violations, whatever. I’ve had it up to here with this guy. Why does he do this and what can I do to make him stop?

Mister Condo replies:

P.P., I am sorry you have been fined by your association. You didn’t mention whether or not you or the other people being fined actually broke any association rules which makes it hard for me to offer proper advice. Here goes my best shot.

First, people breaking rules of the association should stop breaking the rules. Rules are place to maintain order, keep the community vibrant, and keep property values high. They set the standard for how the community is to be enjoyed by all residents. Fines are the only method of compliance afforded to the association so I can’t fault them for practicing due diligence in rules enforcement. It’s a simple formula: no rules broken = no fines levied! As someone who’s been involved in levying fines against neighbors for years, I can tell you it’s not a fun job.

Second, if your so-called “Condo Cop” is going out of his way to fine residents and is especially tough on people he doesn’t like, you should strongly consider voting him out of office at your next annual election. Of course, you’ll have to assess if your feeling is shared by others or that method will not work. Also, if you vote him out, you should think about who you will vote in. Perhaps you’d consider volunteering your time to serve your community?

Finally, if the fines are truly egregious, you can seek relief in the form of a lawsuit. It is illegal for a Board member to fine people simply because he doesn’t like them. When a fine is issued to you, you have the right to appear before the Board to contest the fine and offer your side of the story. However, if you have broken rules and the fine is deemed correct, you will have to pay. If you find that living within the rules of the community is just something you cannot do, it may be time to consider moving out. As enjoyable as many find it, condo living isn’t for everyone. In fact, only 1 out of 6 people in the state of Connecticut live in community associations. Best wishes!

Reserve Fund Query

J.B. from Hartford County writes:

Dear Mister Condo,

We are in the process of reviewing the reserve fund. Is there a minimum reserve figure we should be establishing for a community 15-22 years of age? We will be reviewing roof and future roadway issues as part of this review.

Mister Condo replies:

J.B., Kudos to your community for performing due diligence by conducting a Reserve Fund review. Fiscal prudence is an important virtue for any successful common interest community. As the old saying goes, “a failure to plan is a plan for failure”. I know that there is no “one size fits all” approach to determining a proper reserve figure so I asked my friend, Tim Wentzel, owner of Connecticut Property Engineering, for an expert opinion to your question. Here’s what Tim had to say:

This is an interesting question. Many years ago, before Reserve Studies were common, many property managers used to say that an association should have $1000 per unit in reserves. However, that really doesn’t tell a true story. For example, Association A may have just paved their roads and parking, replaced their roofs and replaced their siding. Association B may have done none of those tasks. The $1000 per unit may be sufficient for Association A but may be far short for Association B. The only real way to know is to have a professional reserve study done that evaluates the upcoming costs, when the money will be needed, and then calculate what should be set aside.

Guilty, With No Chance to Prove Innocence?

R.S. from Litchfield County writes:

Dear Mister Condo,

My condo association recently sent me a notice to attend a hearing about violations of association rules, namely allowing my dog to roam off her leash and failure to pick up her waste.  I was very confused by the notice as my dog is never off her leash and I always pick up after her, carrying special bags for that very purpose.  When I attended the hearing and told them this, they informed me that they had “reliable information that that’s not the case” but they declined to present any witness or evidence.  I persisted in my denials, and left the hearing in frustration with the promise that I would “be informed of the board’s decision within 30 days”. Can my condo association fine me without providing any evidence that the violation even occurred?  Do I not have the right to be presented with the evidence against me and respond to it?

Mister Condo replies:

R.S., first off, thank you for being a good neighbor and taking care to keep your pet on leash and cleaning up when nature calls. I am sure your neighbors and fellow condo community members are grateful for your efforts. Since your question is about due process, let’s talk about the process of deciding to fine a community member.

As a Board Member at my own condo, I can tell you that the process of levying fines is not enjoyable. It usually begins with a neighbor versus neighbor complaint. In your case, it sounds like a fellow resident is claiming to have seen something you say did not occur. The Board asked you to come in and explain your side of the story, which it sounds like you did more than capably. The Board did not issue a fine, they simply let you know that they will make a decision within 30 days, which is not uncommon. It is not a court room with sworn testimony and cross examinations. The only evidence is often “he said, she said” so the Board is in a very difficult position. They have to respond to the complaint and they have to make a decision.

You have the right to appeal the decision if you are not happy with the outcome. Of course, it is possible that the Board will not fine you but if they decide to pursue that avenue, you do have rights. Unfortunately, it is up to you to know your rights and how to make use of them. While you could go to the expense and trouble to hire an attorney, it is unlikely that it will come to that. Certainly, if you perceive a pattern of fines aimed at you for offenses you are not committing, I would advise you to hire an attorney and seek damages.

You have already taken the correct first step by speaking to the Board. It is possible that your testimony was all they needed to dismiss the complaint. If it is possible for you to walk your pet off property, that would be a good way to avoid this potential complaint in the future. Otherwise, stay vigilant in your clean-up duties. Hopefully, the complaint will go away and there will be no more talk of fines. Best Wishes!

Can the Board Garnish Rent to Pay for Delinquent Common Fees?

G.P. from New Haven County writes:

Dear Mister Condo,

There is a unit in my condo whose unit owner is about 7 months in arrears of common fees. Can a management company or condo board request a renter to send the rent directly to the management company to pay up the common fees?

Mister Condo replies:

G.P., you’ve touched on a common problem plaguing many condominium communities here in our state and across the nation as well. The basic premise lies in who is entitled to collect the rent on the unit when a condo is rented by an owner who falls behind in payment of common fees. Common sense would dictate that the portion of the rent being paid each month that covers the common fees should be paid to the association. By and large that is exactly what happens as most landlords don’t want to risk foreclosure on their units for non-payment of common fees. However, when a landlord doesn’t pay the association the common fees it is due, there are measures the association should take to collect its common fees.

The way it works in Connecticut is that the rent is collected by the landlord and the common fees are payable by the landlord, not the tenant. So the short answer is that there is no legal remedy that can force a tenant to pay the association in lieu of making payment to the landlord. That being said, the Board could negotiate a payment plan with the landlord whereby the landlord agrees to have the rent, or a portion thereof, sent directly to the association as payment for delinquent common fees. I am assuming that your Board is already using all of its other options to collect the common fees. That includes, but is not limited to, hiring a collection agency, placing a lien on the property, and even foreclosure. The law allows for all of those remedies and for the association to pass the expense of the collection efforts along to the delinquent unit owner. Unless the unit owner files for bankruptcy protection, the association has some tremendous tools at their disposal to collect the delinquent fees.

Hopefully, the delinquent unit owner will get the message that the association requires all unit owners to make timely payment of their common fees in order for the association to meet its financial obligations. That concept is at the very core of common interest communities and what makes it possible for all of us to enjoy our condominium amenities and experience. Good luck!

Pros and Cons of FHA Certification

J.P. from New Haven County writes:

Dear Mister Condo,

What are the advantages and disadvantages to a condo complex for being FHA certified?

Mister Condo replies:

J.P., back when mortgage monies were freely available from most banks and lending institutions, FHA certification was rarely discussed among condominium associations. Now that the banking industry has seen a tremendous amount of failures, due in part to poor mortgage lending practices, FHA certification for condominiums is widely discussed. The reason is simple. FHA insures the monies that the lenders offer for mortgages but only if the properties they mortgage are FHA certified. FHA is the single largest insurer of mortgages in the country.

The primary advantage of FHA certification to a condominium association is that it allows buyers and sellers far more financial options and flexibility when it comes to obtaining mortgage or loans for refinancing. Quite frankly, it can be the difference between success and failure when it comes to the likelihood of individual unit owners being able to sell or refinance their individual units. There are several advantages to the individual unit owner as well but that really doesn’t factor into whether or not the association should seek certification.

The primary disadvantage of FHA certification is the paperwork and the due diligence that must be performed by the condominium association to achieve and maintain certification. The rules have changed greatly in the past few years, causing confusion and frustration to many condominium associations. There are third-party firms who will handle the certification but that can come with a cost which may be a detriment to the condominium. More information on the FHA changes is available at the CAI website at http://www.caionline.org/govt/MortgageMatters/FHA/Pages/default.aspx

Those are just a few of the pros and cons of FHA certification. I trust your condo association will strongly consider the big picture when they decide whether or not to pursue or maintain their certification.

HOA Challenges in the Garden State

R.B. from New Jersey writes:

Dear Mister Condo,

I am not a resident of Connecticut but I stumbled across your website and thought I’d ask a question. Are there any Federal Guidelines for HOAs Policies and procedures? I’m in New Jersey. My fellow condo owners and I are going through some serious problems with our HOA, which isn’t representing our best interest. And they keep electing themselves back into position against the owner’s wishes. We have formed an Owner’s committee to address our HOA but they will not let us have our say. Is there an agency that can assist us with some advice for a condo complex in NJ?

Mister Condo replies:

R.B., thanks for stopping by and asking a great question. Your neighbors in Connecticut are always willing to help out. Since you live in a larger condominium association (more than 100 units) and seem to already have the support of other condo owners, it seems you are well on your way to solving your problem.

First off, I am not aware of any federal guidelines regarding HOA policies and procedures. There are federal laws regarding taxation but governance issues are left up to the states. In New Jersey, the Department of Community Affairs would be your likely advocate at the state level if it is required. I would encourage you to seek them out only if all else failed. There are an abundance of state laws in New Jersey that should protect you and your fellow unit owners from a Board that isn’t behaving properly.

Boards cannot elect themselves back into position against the owner’s wishes. Elections must be held in an open meeting format and all homeowners must be informed of the meeting and allowed to participate. This is most likely spelled out in your condo documents. My advice is to vote out the problem Board members at your next Election. Of course, you should be prepared to replace these Board members with folks that are sympathetic to your cause. Perhaps you should consider running and serving on the Board.

If your Board refuses to hold open elections and follow the rules of the HOA as outlined in your documents, you have options available to you through the courts. Quite simply, you will sue the Board for not following the rules of the association. You may need to hire an attorney to help you but you should be able to recoup those costs as part of the settlement. However, suing your association is a double-edged sword as the association will likely hire counsel to defend against the suit and will do so at the expense of the association.

If you are not aware of your local chapter of the Community Associations Institute, I encourage you to get to know them by visiting their website at http://www.cainj.org. CAI-NJ is a volunteer organization that can provide you with many helpful resources, including education and networking events. It is quite possible you will encounter other condo associations who have suffered similar fates and learn how they corrected their problems.

The bottom line is that HOA governance is conducted by volunteers. Even the best intentioned can make mistakes. However, correcting those mistakes and creating a better community is in everyone’s best interests. Good luck!