Monthly Archives: November 2012

Condo Accounting Question

B.F. from New Haven County writes:

Dear Mister Condo,

What’s the difference between operating expense and non-operating expense?

Mister Condo replies:

B.F., I love a good condo accounting question but since I am not an accountant, I decided to ask Sam Tomasetti, CPA of Tomasetti, Kulas & Company, P.C. to give us a proper answer. Here’s what Sam had to say:

Since condominiums use fund accounting, the bookkeeping is laid out in such a way as to capture transactions in distinct “buckets” based upon the reason for the transaction.  The two most common of these are operating and reserve funds.  The operating items are transactions that allow an association to handle its day to day affairs.  The reserve items are transactions that help maintain the long term market value of an association by handling major repairs and improvements.

Upstairs Condo Unit Remodeling Nightmare

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E.S. from Middlesex County writes:

Dear Mister Condo,

The owner of the unit above mine installed defective sliding doors which leak into my unit like it is raining. I was told it was fixed but it is still happening. The condo association has said it is not responsible for the damage to my unit and it will not repair my unit. Also, the unit above mine is totally gutted with exposed wires. There is no sheetrock or ceiling installed. Can I sue the association as well as the owner? What recourse do I have?

Mister Condo replies:

E.S., that is a terrible situation you are describing. I am sorry for your loss and I hope that you have adequate homeowner’s insurance of your own which should also help protect you and cover your losses. Since your question was about your ability to sue, I consulted an attorney who specializes in community association law. Here’s the reply:

“A unit owner who changes the building in a way that damages another unit is probably liable to compensate for the damage, but whether the Association is also responsible would depend.  The Board is generally not required to get involved in a dispute between two owners, or to pay one owner for another’s wrongdoing.  But the Association may be obligated to repair damage to common elements (like the subflooring between your two units) and have the right to reimbursement of some or all of that expense from the upstairs owner for violating written maintenance standards.  You would need to talk to a lawyer and provide him or her with more details to get a better idea of exactly what your legal rights are.”

New Window Installation Proving to Be a Pane

J.J. from New Haven County writes:

Dear Mister Condo,

I would like to install a new window in my unit where one does not currently exist. While association approval is required, a member of the association is demanding a form stating that I, as the owner of the unit, will be solely responsible for any damages to his unit (not the master shared “all-in” master insurance.) Should I sign this in order to get his needed approval?

Mister Condo replies:

J.J., sounds to me like adding this window is proving to be a real pane, in more ways than one. I can appreciate your neighbor’s concern, but I don’t think you are obligated to sign any agreement with him in order to proceed. I asked one of my community association attorney friends for some help with your question. Here’s the reply:

“The other unit owner can’t legally force you to sign anything.  If installing the window causes any damage to his unit, his rights against you will be fixed under the existing law and declaration, which will turn on factors including whether you or your contractor was negligent.  The Board itself may have the right to make its approval conditional on any number of issues, such as your specific agreement to indemnify the Association and any affected unit owners if the work causes harm.”

Stalled Foreclosures Crippling Condo

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J.P. from New Haven County writes:

Dear Mister Condo,

Our HOA currently has 4 foreclosures and is on the road to as many as 8. The court system is slow moving and takes forever to judicate the current foreclosures. The other 4 heading down the same road have put a major strain on our current financial picture. Where can the association find the Notice-of-Lien form to send to the owners who are on the threshold of foreclosure?

Mister Condo replies:

J.P., first and foremost, I am sorry to learn of your community’s financial distress. Regardless of cause, foreclosures and lack of financial resources can cripple an entire community; not just those going through the actual foreclosure. I commend your forward thinking and interest in keeping your community fiscally viable.

The court system, for better or worse, is the only system we have for handling foreclosures. In Connecticut, the common interest community has an automatic lien in place for up to six months of common fees and reasonable attorney costs when the unit in foreclosure is finally liquidated. More information is available at the State of Connecticut website – http://ct.gov. I found one interesting article there covering the subject at http://www.cga.ct.gov/2012/rpt/2012-R-0196.htm

If your association can afford an attorney to assist with this process, I highly recommend it. Although your association may incur costs upfront for using the attorney, most of that money should be recovered when the unit is finally resold after foreclosure. Best wishes!

Feeling the Pane of New Windows!

K.J. from Hartford County writes:

Dear Mister Condo,

The property management company sent a letter in October of 2011 about window replacement. The letter details the price that the Board has negotiated and contracted with a company. The letter required unit owners to pay a down payment for window replacement to be scheduled and balance to be paid in full after work is done. The letter also says that the Board expects all windows to be replaced by December of 2012. The letter does not contain any “subject to change” info. After saving up quite the sizable amount, I sent in my check to the Property Management Company as instructed. The Property Management Company returned my check along with a letter saying that they are returning my check for 2 reasons. First, the windows now cost more – $150 additional. Second, full payment must be sent in before work is to start. No other letter or notice about window replacement has been sent from the first letter to this most recent one. If our board has indeed negotiated and contracted with a vendor, shouldn’t price remain the same and unit owners protected? If there are changes, shouldn’t there be a notice sent out first? What are my options? Thanks.

Mister Condo replies:

K.J., it sounds like your community is suffering from poor communications between Board, Property Manager, and unit owners. That can really sour the condo living experience. I am not an attorney so I cannot comment on your true legal rights here but I can offer some common sense.

You have the right to request a copy of the negotiated agreement between the condo association and the window replacement vendor. Contact the Property Manager and request a copy of the agreement. My guess is that you’ll see what the proposed pricing was back in October of 2011. More than a year later, it is not uncommon for prices to have increased but if the contractor committed to a firm price that would not change until the job is completed, you may have a legal leg to challenge the new price. Unfortunately, the only damage to you is $150. I don’t know of too many lawsuits for such a small sum. I would ask politely that the price be honored. The same holds true for the deposit up front versus paying in full at the time of order. It is unusual to pay 100% of the job upfront as it gives the buyer no recourse if the work is performed unsatisfactorily.

As for the communication issue between all of the players involved – Board, Property Manager, Unit owners, Contractor – I have a suggestion. All of this confusion could have been avoided by simply keeping all parties informed. You did what you were told to the best of your abilities. The Board and the Property Manager failed to inform you of changes that the Contractor made to the initial agreement. A simple update letter or mention of this issue in a community newsletter could have cleared up all of this confusion in advance. Instead, you are left with a bad feeling about the contractor and your community before your new windows are even installed. That’s too bad because I believe everyone involved in this project had the best intentions in mind when the project began. New windows can save you money in fuel costs and will definitely improve your condo’s appearance. I hope you can get past the bitterness of how the purchase went down so that you can enjoy the sweetness of how awesome your new windows will look and perform. Hopefully, your Board and Property Manager will learn from this experience and do a better job communicating future projects with residents.

Feeling Intimidated by the Board

P.B. from Hartford County writes:

Dear Mister Condo,

Can the Executive Board demand that we set up an appointment to make comments at the executive board meeting or should a time be set up for unit owners’ comments? I feel that if I go by myself it would be 6 against one. Can I go together with other owners?

Mister Condo replies:

P.B., I can understand you feeling overwhelmed by being the lone voice speaking to 6 people but the Executive Board is comprised of volunteer unit owners from within your condo. They are residents just like you and you needn’t fear them. When the Board invites unit owner(s) to speak at a meeting, it is a good thing. It means you get to voice your concerns directly to the decision makers of your community. Whether the Board chooses to meet with select individuals or an entire group of homeowners is generally at their discretion. Remember, these Board members were elected by the entirety of your community to conduct the business of the association. Inviting numerous unit owners to speak on the same subject could take a great deal of time. My advice is to go in to the meeting well prepared so that you can present the facts to the Board. Make your comments politely and professionally. Make eye contact with each Board member and remember that they are simply volunteers doing their best to serve their community. Perhaps this experience will even inspire you to seek election to the Board at some point. Concerned residents make the best Board members. Good luck!

Concerned with the HOA Board Before Condo Purchase

E.P. from New Haven County writes:

Dear Mister Condo,

Hi, Mr. Condo! I am trying to purchase a condo, but I cannot get any of the board members of the HOA to speak with me. The unit has some water damage on the ceiling that the HOA is supposed to repair. Is this unwillingness to communicate normal?

Mister Condo replies:

E.P., congratulations on your condo purchase attempt! An unwillingness to communicate with a potential unit owner is a cause for concern but does not completely surprise me. Board members are volunteers from within the community and are not involved in the resale process. Additionally, it is possible that the repair is being overseen by the Property Manager if the condo has one. Your primary point of contact should be the realtor(s) involved, unless you are dealing directly with the current owner. There really isn’t too much a Board member could tell you that the realtor wouldn’t be able to find out, namely, if and when the water-damaged ceiling would be repaired and whether or not the association will be handling the repair or if it is the responsibility of the current unit owner. If the damaged ceiling is a deal-breaker for you, I would ask the realtor for the information and I would want the repair clause included in the purchase and sale agreement. Otherwise, you could find yourself on the short end of the stick after the sale. Also, in this current market, you have many condos to choose from, you might wish to consider one that doesn’t have any damage. I know I would. All the Best!

Condo Parking Problem

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Anonymous from Fairfield County writes:

Dear Mister Condo,

Our condo has several parking spaces reserved for visitors. One of those spaces is next to my space, and it is much easier to maneuver my vehicle into that visitor space than it is for me to get into my designated space. I called to ask to switch spots, but the administrator for our condominium said that she does not know how to do it and that it would have to be brought up in front of the board but can take years (don’t know why). Seeing no reason why the visitor should have a better parking spot than a tenant, I simply relabeled the spots myself with a little spray paint.

Now the association is complaining. There is no explicit rule that this violates, so I am just curious what they can do to me for this. No permanent damage of any sort was done and the parking spaces can be relabeled back to the original. Thanks.

Mister Condo replies:

Anonymous, parking at condominiums is one of the top complaints most condo dwellers have. Quite simply, there are just a lot of people living in a relatively small place which necessitates careful planning and rigorous rules enforcement to maintain the peace. While I can appreciate your common sense approach to solving your problem, you did attempt an end run around the proper procedure and I am not surprised to hear the association is calling a foul on the play. Let’s see if we can reach a win/win solution to your parking dilemma.

Let’s begin with who runs the association and how you interact with the leaders. The Property Manager follows orders from the Board. The Property Manager cannot make policy changes so she was correct in telling you that the issue needs to be taken up before the Board. However, no unit owner should need to wait “years” before bringing an issue to their Board. You have the right to be heard at the next Board meeting and you have the right to write to the Board to make your request. It sounds to me like that important step was missed.

The Board is correct in keeping the parking lot in the order it was originally in. That may mean relabeling the visitor space and you going back to using your assigned space. If they ask you to do that, please comply. As for what they can do to you if you don’t, that depends on your bylaws and the steadfastness of their resolution. Technically, you vandalized association property when you repainted the parking spaces. They may be able to fine you for that and no one wants that.

Ask to have your parking issue discussed at an upcoming Board meeting. The Board may ask you to present your case. If they do, be prepared to speak for a short period of time (under 2 minutes) to explain the situation. At that time they may dismiss you while they discuss the merits of your request or they may simply table the matter until another time. If they rule in your favor, you can start enjoying your new parking space. However, if they decide against it, I’m afraid you’ll have to try again. Consider running for the Board yourself or voting for candidates that may be more agreeable to your agenda. I haven’t heard the other side of the story but your request does not sound unreasonable as you’ve presented it here. Good luck!

Common Fees – Too Much or Too Little?

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M.L. from Connecticut writes:

Dear Mister Condo,

When I purchased my condo, it was HUD owned. It was purchased for a very good price. Soon after my purchase, the HUD contract expired and the committee decided to go co-op. Our common fees are between $600 and $800 per month depending on whether you have a two or three bedroom unit. My unit is paid for with no mortgage attached. However, my common fee is over $600.00 monthly with no amenity except for heat and hot water. Is this average for a co-op? I have friends with co-ops with pools, gyms, newly structured flooring and kitchens who pay only about $300 monthly in common fees with tax included. Can you think of why there should be such a discrepancy?

Mister Condo replies:

M.L., every condo, co-op, timeshare, or other common interest community is different in what they pay for common fees. There is no “normal” for common fees as the association sets the fees based on their interpretation of the common interest community’s documents and their own fiscal planning. While $600 per month does sound high for a condo with no amenities other than heat and hot water, it is quite possible that the association has other expenses that are not so readily apparent. These could range from items like long-term funding for major capital improvements (a new roof, a new elevator, a new parking lot) to legal obligations (an ongoing lawsuit, a high rate of delinquency within the association) to just plain old frugality. The bottom line is that you, as a unit owner within the common interest community, have every right to request a copy of the association’s financial statements to see how your money is saved and spent by the association. If you have questions about where your money goes, by all means, ask for an explanation. I would encourage you to have your friends do the same with their co-op. At $300 per month, it sounds like they are getting an awful lot of amenities. Hopefully, their community is also properly funding their reserve fund for those repairs that will be necessary down the road. Otherwise, they may find themselves hit with a special assessment for thousands of dollars to handle those repairs, whereas your association may already have the money. As a friend of mine often says “pay it now or pay it later”. I’d rather pay it in smaller portions now instead of being hit with a surprise down the road. Best wishes!

Effects of Multiple Assessments on Condo Mortgage

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E.B. from Litchfield County writes:

Dear Mister Condo,

I am trying to sell my condo in a complex that just recently had a second assessment levied. I have been told that a potential buyer would now be unable to purchase my unit with a conventional mortgage. Is our complex now ineligible for a conventional, non-FHA mortgage buyer because of the simultaneous assessments?

Mister Condo replies:

E.B., the short answer is “it depends”. Unfortunately, that is not going to help you too much while you are trying to attract a purchaser who may require a mortgage, either FHA-approved or other. Levied assessments against individual condo units act as liens until they are paid. A potential buyer may face a mortgage hurdle if a lien shows on the property. I assume you are looking to transfer this assessment to the new buyer. Otherwise, you could simply pay off the assessment and there would be no issue. Depending on the size of the assessments you may wish to simply pay off one or both of them and remove the encumbrance to the mortgage. If there is enough money left after the sale, you could them reimburse yourself for the assessment payoff. However, if there is a delinquency (much more common these days I’m afraid), then you may not be able to pay off the assessments and find that no bank will mortgage the property with two assessments. If that is the case, you may be better off holding the property until the assessments are paid or market conditions improve. Good luck!