Monthly Archives: January 2013

Can’t Find Money to Fund the Reserve Fund!

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J.D. from Fairfield County writes:

Dear Mister Condo,

We seldom have enough money left over for a reserve fund. We are approaching a large capital expenditure. Is it true the reserve fund can only be a certain % of a condos annual income? If so, how does one save for capital expenditures? We are less than 10 units in size. Owners do not want to raise common charges or fund a reserve fund. I am president. What should I do?

Mister Condo replies:

J.D., heavy is the head that wears the crown, my friend. As president of your small condominium association, it is your job to guide the Board to making prudent fiscal decisions for current and future residents of your condominium. However, you do need to respect their wishes with regards to how much they are willing and/or able to spend each month on common fees with regard to future repairs and reserve fund contributions. My advice is to encourage residents to being contributing to the reserve fund each and every year your budget is approved. There is no money “left over” for a reserve fund contribution. It is a line item in your budget each year and it gets funded just like the trash removal and lawn maintenance line items are paid. If you continue to rely on “left over” money to fund your reserve, you will be sadly disappointed year after year.

In the past, FHA has required that at least 10% of the annual budget be set aside for the reserve fund. FHA didn’t want to guarantee mortgages for condos like yours where special assessments were likely to cause defaults and foreclosures. That is one way to sell your current residents on the value of contributing to the reserve fund today. The investment they are protecting is their own. All the best!

Delinquent Board Member Must Step Down or Be Removed

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M.K. from Hartford County writes:

Dear Mister Condo,

Can we ask a board member to step down if he is delinquent on is condo fees?

Mister Condo replies:

M.K., not only can you ask a Board member to step down if he is delinquent in his common fees, your by-laws may require that you do so! Can you honestly tell me that a unit owner that has allowed his common fees to lapse to the point of delinquency is the best person to be serving on the Board and representing the best interests of the other unit owners who are paying their common fees on time? Delinquency is dealt with by the Board which may need to take legal action against a delinquent unit owner. Having a delinquent owner serve on the Board could create a serious conflict of interest and delay in proper collection procedures against the delinquent owner. That being said, the Board member should be given the same opportunity to get current as any other resident. If his service to the Board is to continue, he must keep his common fees current and make good on any arrears as soon as possible. Good luck!

Religious Meetings Conflict With Board Meetings

L.M. from Fairfield County writes:

Dear Mister Condo,

I was requested by certified letter to attend a board hearing. I have weekly religious meetings on the night scheduled. I informed my board that I would be willing to meet any other day or evening that wouldn’t conflict with my religious instruction meeting. Do I have any rights regarding this situation?

Mister Condo replies:

L.M., as far as I know, the Board is not under any legal requirement to adjust their regularly scheduled meeting time to accommodate for outside considerations such as your religious meeting. That being said, in this litigious world in which we live it is entirely possible that you have legal rights regarding this situation. To investigate those rights, you will most likely need to consult with an attorney. Have you inquired as to why or how long you will need to meet with the Board? It is not uncommon for the Board to meet with residents for as little as 5 or 10 minutes to discuss whatever business is before the Board. Perhaps you can simply ask that you be one of the first items on the Board’s agenda so that you can make a brief appearance before the Board and then head off to your religious meeting? That would allow the Board to conduct their business and for you to also attend your religious meeting. Best wishes.

How Long Must Condo Records Be Kept?

M.B. from Hartford County writes:

Dear Mister Condo,

How long do you hold financial reports and minutes of meetings?

Mister Condo replies:

M.B., there has been much debate on how much and how long various condominium association records should be kept. In a perfect situation, minutes from every meeting and all financial reports would be kept indefinitely. Realistically, that isn’t likely to happen due to the nature of change amongst Board members, management company personnel, residents, etc.. However, in Connecticut, three years is the requirement for all financial records and one year is the requirement for all minutes of meetings. All the best!

Can a Condo Owner Give Away an Assigned Parking Space to a Neighbor?

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R.W. from Illinois writes:

Dear Mister Condo,

I live in the SW suburbs of Oak Lawn, IL and wanted to know if you could help me. We have a resident who doesn’t drive and I was told she gave permission for the companion of a resident to park there. I don’t think this is fair since then they would have two spaces while everyone else has only one. I was wondering if this is allowed or if it depends on the specific condo bylaws. Thanks.

Mister Condo replies:

R.W., as your question implies, parking at condominiums is a challenge clear across the nation. That’s not surprising given our propensity for multiple vehicles and the relative few parking spaces that condo developments usually afford. Unless there is a specific rule in your condo docs that forbids a unit owner from allowing another unit owner from using their assigned parking space there is no issue with the unit owner who granted use of their space to your fellow resident’s companion. Residents who don’t drive still have the use of their assigned parking space to with as they see fit, provided they aren’t violating any of the condo rules. From what you’ve told me, I don’t see anything wrong with the situation as described. All the best!

Condo Owner Assessed While Selling… Who Pays?

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S.A. from New Haven County writes:

Dear Mister Condo,

I have a question about assessments for major repairs. I am in the process of selling my condo unit. The association has just levied an assessment for paving. Am I responsible for this or is the new owner?

Mister Condo replies:

S.A., the short answer is that you are responsible for the payment of the special assessment as you are the owner of record when the special assessment was levied. You don’t mention how far along in the process of selling your condo you are but as long as you are still the owner, the assessment is yours. However, if you haven’t actually sold your condo yet, you may wish to reconsider your asking price as the fresh pavement may increase your unit’s value. Best wishes!

Late Fees On Top Of Assessments!

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K.G. from Hartford County writes:

Dear Mister Condo,

Hello! 2 years ago new roofs were installed on our units and we were naturally charged an assessment. However, the management company gave us less than 10 days notice of the due date of the first payment demanding it be paid at the same time as the regular fee. Some unit owners including myself were short since mortgage payments were due on that date (the first) as well. Now the association is trying to slam us with excessive late fees. What is CT state law regarding notice for fee increases/additional assessment charges? I would think it should be at least 30 days. Thank you.

Mister Condo replies:

K.G., I am sorry to learn that you and your fellow unit owners were not given more time to make good on your special assessment. From what I understand, there is not a legal requirement as to how many days’ notice must be given when a special assessment is levied. The addition of late fees on top of the short notice is salt in the wounds and really poor policy on the part of the Board. Levying special assessments for something as common as roof replacement concerns me on a far greater level. If your association isn’t building adequate reserves for common elements in your condo association, you might want to ask the Board what the long term plan is for other major expense common elements, like siding and parking lots and sidewalks. If the Board needs to levy special assessments every time maintenance needs to occur, you will likely see a repeat of what had just happened. A better strategy would be to raise common fees and build a reserve fund to handle these know, upcoming expenses. Special assessments should only be used for major, unforeseeable expenses. That avoids this whole nastiness of late fees on top of special assessments, which, technically, the association is entitled to collect. However, if the Board isn’t properly representing the best interests of the unit owners, consider nominating candidates to the Board who will do a better job of managing the common elements and create a fiscal strategy that addresses these financial shortcomings. We all know we need to pay to keep our condos in top shape. We shouldn’t have to be hit with surprise assessments and late fees to boot.

Floored by Condo Flooring

R.C. from Fairfield County writes:

Dear Mister Condo,

I just purchased my condo a few months ago. There were laminate floors already installed by the previous owner on the first floor. I live alone and I am only there on nights and weekends.  The neighbor below me complains about everything from the slightest noise, even walking and closing exterior doors.  He reported me to the condo board for being in violation by having the laminate floors.  The condo rules state that you need approval to install wood floors on the first floor. What are my rights seeing that the floors were already installed by the previous owner?

Mister Condo replies:

R.C., I can imagine your surprise to find out that the existing floors in your new condo were installed against condo rules. The condo Board is right to seek remedy and bring your unit into compliance with architectural building standards. However, you may have recourse against the previous owner since they created a defective product when they improperly installed the laminate flooring. You should seek legal counsel at once to help guide you through this process although I am quite certain that you will need to replace the laminate flooring with carpet or whatever flooring material deemed acceptable in the condo documents that detail your flooring choices. Alternatively, if you, your neighbor, and the Board were in agreement, you might be able to solve the problem by installing area rugs atop the laminate. That would offer noise protection for your neighbor and save you the cost of floor replacement. However, I wouldn’t be too hopeful for that outcome. The condo Board’s primary responsibility in this situation is to maintain building standards. Allowing one unit to deviate creates a slippery slope for future compliance issues. I am sorry for your problems and wish you all the best in a satisfactory recovery.

Can My Condo Association Ask For My Car’s Registration?

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D.F. from New Haven County writes:

Dear Mister Condo,

Does my condo association have the right to ask for a copy of my car registration? They want the license plate number which is ok, but I don’t think they should have the right to a copy of my car registration. Thanks.

Mister Condo replies:

D.F., yes, your condo association is well within their rights to request a copy of your registration as long as the condo’s by-laws require that all vehicles on the property be registered. There are a couple of reasons for this. The association wants to make sure that all vehicles are registered and insured so as to limit the association’s liability in the event of a mishap. Also, unregistered vehicles can become real eyesores as they are likely to be left uncared for and parked on association grounds for long periods of time. Happy motoring!

Reduced Common Fees After A Fire?

J.S. from Pennsylvania writes:

Dear Mister Condo,

On October 5, 2012 in Wyncote, Pennsylvania the condo building where I was an owner and resident for the past 12 years had a 4 alarm fire and the building was condemned and deemed uninhabitable by the township. Luckily, I had homeowners insurance which covered the contents. The township reassessed and lowered the taxes drastically. However, all 55 owners of the building are upset because we did not get a reduction in condo fees. The fee includes heat, cooking gas, hot water, common use, snow removal, grounds, management salaries and insurance. They are saying it will take 2 years to rebuild. There are 3 other buildings in the complex that were unharmed. The management company is making a small fortune collecting all of these condo fees from displaced homeowners. As long as they collect these fees they seem to be in no hurry to have the building rebuilt. What can the 55 displaced homeowners do to obtain a reduction in our condo fees? We will gladly pay for the portion of the fees that we are using but should not have to pay fees where we get no benefit because we no longer live there. We do not want to wait for an abatement of funds 2 years from now because if they decide not to rebuild we will all be out of a lot of money.  How do we get the abatement now?

Mister Condo replies:

J.S., greetings to you, our Quaker State neighbor. I read about your disaster and watched the video at http://abclocal.go.com/wpvi/story?section=news/local&id=8837671. That was a horrific incident to be sure. It is a miracle that there weren’t more injuries or death from the fire. I am thankful that so many survived. I hope your neighbors were as wise as you as to have homeowner’s insurance in place to protect their belongings. Let me try to offer an explanation of the finances of your situation and explain why the abatement at problem resolution might be the best solution.

First off, common fees are the basis for the community’s annual budget which includes all of the amenities you describe and more. Common fees are generally arrived at by using the “Per Centage of Unit Ownership Rule” meaning that portions of the association’s debt are divided by per centage of square footage owned by the individual unit owners as described in the declaration that was filed when the condominium was built or declared. This formula is used as the basis for determining common fees, special assessments, and any other fees levied upon unit owners.

The money is collected by the management company but not owned by the management company. The money is owned by the association. More specifically, the money is in a bank account that the association controls but the management company likely administers. The management company is not making any additional money because of the fire. They likely have a contract in place with the association that states their fees per unit per month or per year. That is the only money they make off of the association, except for other fees as called for in the contract, such as managing a building improvement or providing landscaping or snow removal services if they offer such.

The association, on the other hand, may be able to renegotiate their contracts with the various service providers to provide displaced unit owners with some relief. However, that may prove challenging due to the nature of service contracts. Utilities that are billed monthly will undoubtedly see a decrease in cost. The damaged and unoccupied units won’t use things like heat, gas, or hot water which were previously budgeted for. The Board might consider a plan that would temporarily remove the responsibility for paying for these items from the fees of those affected. Keep in mind this is no easy task and might even require a rewriting of your condo’s documents or a change over to a metered utility distribution system to implement.

Other services that are paid for in common will continue. The snow will still be removed; the lawns will still be maintained; and so on. The insurance premiums will still need to be paid and the management company’s contract still needs to be honored. I am sure they are still providing service to all of the residents still in place and displaced. From the perspective of most of your service providers, nothing has changed. In fact, in the case of your management company, their work load may have increased because of this disaster. It is just an unfortunate series of events that has caused this debacle.

So, realistically, an abatement at the end of this process is the most logical choice. At that time, there would be enough historical data to show how much money the association “saved” by not providing utility service to the effected units. Using the “Per Centage of Unit Ownership” rule, an abatement could be offered for the monies saved. While I am not certain of how much that abatement would be, I’ll bet it would cover several months’ common fees for every owner. While it is possible for the association to estimate what the approximate savings would be, there is no mechanism in place for them to simply grant the abatement in advance. It would require a vote of the Board and/or association. It is a dangerous precedent for them to set and I would advise them to speak with association counsel before doing so.

Of course, all of this conjecture assumes the condo association will rebuild the damaged units. If, on the other hand, the decision is made to not rebuild, owners should immediately consult with an attorney to make sure they are made whole from the insurance proceeds. My guess is that once a decision is made to not rebuild, the displaced unit owners would stop paying their common fees altogether and that the Board would have to reassess the remaining owners using a new “Per Centage of Unit Ownership” formula based on the remaining units.