Monthly Archives: December 2013

Special Assessments: Additional Consequence of a Rejected Budget

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W.C. from Hartford County writes:

Dear Mister Condo,

Our owners recently rejected the budget for 2014 presented by the Board.  The Board quickly closed the meeting with the acknowledgement that they will not submit a new budget, must now use the last (2013) budget approved by unit owners. Further, they informed us that upcoming expenses could exceed this budget and the Board will likely make special assessments of owners up to 15% before they had to ask owners for approval.

The State Statutes say that when the new budget is rejected, the Board uses the last approved budget until a new budget is approved by unit owners. It is not clear whether the Board must resubmit a new budget. If the Board can operate without an approved budget it seems to me that owners lose one of the few powers they have in condo management. It seems irresponsible to me that the Board intentionally intends to overspend a budget without repercussions. Is the Board right in this situation and what can owners do to correct it?

Mister Condo replies:

(Editor’s Note: This is a follow-up to a question from W.C. posted on Nov. 27, 2013. Since it deals with a slightly different issue it is being posted as a fresh question. The original post can be found at http://askmistercondo.com/consequences-of-a-rejected-condo-budget/)

W.C., since the annual budget was rejected by the membership, the Board had no choice but to use the previous year’s budget. If the known expenses for the upcoming year will not be covered from the expected revenue collected from common fees they may have no choice but to use a special assessment to make up the shortfall. This is very basic accounting where revenues must offset expenses. As long as they aren’t violating any of the association’s rules on special assessments and they are acting within state law, there is no wrongdoing and nothing for unit owners to be too upset about.

That being said, there is plenty that unit owners can do to prevent a Board from behaving in such a way that it does not represent the best interests of the unit owners. The simplest way to stop the Board is to vote them out of office. That happens at your next Annual Meeting during the election process. The most radical is to recall the Board via special election. Your by-laws will instruct you how to do that. Either way, you and like-minded folks need to be prepared to step up, volunteer to serve and be elected by your fellow unit owners.

The volunteers who currently serve on your Board are all volunteer community members just like yourself. During the election time of your association they were democratically elected by the unit owners to conduct the business of the association. If they are not fulfilling their duties to the satisfaction of the majority of unit owners, there is no reason they should be re-elected. Of course, if no one challenges them and they run for re-election unopposed, the community members can blame no one but themselves as they reach for their check books and write out the checks for the special assessment which is very likely heading their way.

The bottom line is that preparing an annual budget for a community association is challenging work. It takes a little math and a little guesswork to come up with a budget all unit owners can live with. Since you and your fellow unit owners were unhappy with the annual budget as presented it may be time to dig deeper and find out why more money is needed. If your elected representatives aren’t getting the job done you should vote them out. However, in these times of escalating costs and escalating loss of revenue due to foreclosures and delinquencies of common fee payments from unit owners, it may just be a harsh reality that your association needs more money to function. Best Wishes!

Cable TV, Internet, and Phone Bundling Thrust Upon NY Condo Owners

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L.Q. from New York writes:

Dear Mister Condo,

Although I am in NY, I would appreciate your wise opinion. We received a newsletter that the condo has been offered a deal by the cable company for bulk rates for cable TV, internet, and telephone but require 100% of the owners to participate to receive the bulk rates. The rates would be locked in for 2 years but increase 5% over the next three years. The common charges would be raised $60 per month to pay for cable TV and internet, and the rest of the bill, ($42.00 per month) must be paid directly to the cable company. Some neighbors don’t have a house phone and/or use another provider for years and would have to change their phone numbers. Many elderly neighbors do not use the internet. Many of us have a “triple play” package which gives us lower rates, and others have been able to negotiate certain rates on their own with their providers. Bottom line; can the condo force us into a 5 year contract with this cable provider? What if you already have a contract with another provider, such as satellite or a phone company? Each unit is individually owned and we should have the right to decide what services we want and by whom they are provided. Cable, internet, and nowadays home telephones are luxuries, not necessities. Any advice you can offer would be more than greatly appreciated.

Mister Condo replies:

L.Q., everyone likes to save money and I am guessing that your Board took that into consideration when accepting this bundled services proposal from the cable provider wishing to provide all of these services to unit owners in your condo. However, as your question clearly points out, just because this bundle is good for SOME residents in your condo that clearly is not the case for ALL residents in your condo. Since your letter indicates that the condo has simply been offered this deal and not yet accepted it, I encourage you and your fellow condo unit owners to get in touch with Board members and tell them “NO”!

It is not so much a question of whether the Board can force unit owners into a 5 year agreement with this provider as it is a question of should they even consider it. In my opinion, they should not even consider it for all of the reasons you have stated. There are some condos that actually offer these services as part of their amenity package. In that case they should negotiate with service providers to get the best rates and packages from residents because the residents are expecting them to do so. In your case, these services were not offered as amenities and should be offered “a la carte”. If they can make an agreement that allows, not mandates, unit owners to take advantage of these bundled services and a reduced rate I have no problem with them doing so. But to make every unit owner obligated to spend money with this provider would be wrong and will likely end up with the Board being sued for overstepping their ability to obligate owners to expenses that are not part of the community association’s service offerings. All the best!

Condo Interest Tax Filing Query

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A.B. from New Haven County writes:

Dear Mister Condo,

If our 6 unit condo does not have enough interest income to require us to pay taxes, do we still have to file?

Mister Condo replies:

A.B., not having to pay taxes does not exclude one from having to file taxes. That being said, I assume your association as a non-profit corporation does, in fact, file a tax statement every year. Completing the interest income portion of that statement with your non-qualifying amount of interest really shouldn’t be that much of a big deal to your tax preparer. As you know, there can be penalties for not reporting interest income and you certainly wouldn’t want to incur a penalty on such a small amount of income. Best wishes!

Elevator Costs Bringing Unit Owners Down

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B.C. from New Haven County writes:

Dear Mister Condo,

Our condos are in four blocks; the first two built have elevators, second two don’t but we all have to share in costs. Are the elevators “common elements” or can we as owners without elevators do something about this?

Mister Condo replies:

B.C., pardon the pun, but there are always “ups and downs” with condo elevators. In your case, I am afraid that having to share in the common expense of an elevator that isn’t in your building but is a part of the community’s common elements is a real downer. Back when the condo was created the developer decided to install an elevator into two of the four buildings. Once the association took over control of the property from the developer they inherited all of the common elements and they became part and parcel of all future unit owners within the association. I suppose it could be argued that the elevators in the first two buildings are limited common elements in so much as they only benefit the unit owners on the floors above the first floor in those buildings. However, rewriting your condo documents to state such would require a super majority of unit owners to vote in favor of such a change and for the condo documents to be amended (at a fair expense to all unit owners). My guess is that such a measure would never pass but that doesn’t mean you can’t ask. Certainly all of the unit owners who do use the elevator would vote against it. They are on the “up” side of this transaction, if you’ll pardon a second pun. All the best!

Senior Abuse by Junior Resident at New Haven Condo

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W.G. from New Haven County writes:

Dear Mister Condo,

Who must supply the proof that an under 55 occupant is living full time in a condo he co-owns with his mother who is the over 55 owner not occupying the condo? I have reported this violation and the 43 year-old man is now vandalizing my car, letting air out of the tires, scratching it 10 times, nail under tire, cut the windshield wiper rubber all across on driver side, vandalized my air conditioner by shutting it off on the rooftop, and more. Police told me to put a video camera for proof. What can I do to get fines when there is not even a fining committee? This is making me sick.

Mister Condo replies:

W.G., it sounds like you have a criminal problem on your hands as well as a rules enforcement issue with your association. Let’s address the more serious issue of vandalism and your personal safety. Your Board has no legal authority to enforce laws. The activities of your neighbor that you have described are criminal. You did the right thing by contacting the local police but it would appear that they are not willing to press charges without you providing documented proof, which is unfortunate. I would continue to work with the police to have this neighbor arrested and brought to justice for his crimes against you. If you get no satisfaction from the local authorities, contact your local media (newspaper, radio, TV) and have them apply pressure to the police to take action. You may also wish to seek the assistance of an attorney. The illegal activities of your neighbor need to end and you need to feel safe in your own home. He sounds like a real sociopath. Please be careful.

As for what your Board can do about someone under the minimum age residing in your complex it really comes down to what your condo documents state about ownership and residency. From what you have stated, the owner is of the correct age but the family member living there is not. That may be perfectly legal under your association’s rules but I can see where it strikes a sour note with you and the other residents who are of the appropriate age.

CAI-CT attorney law firm members Perlstein, Sandler, & McCracken, LLC have published an excellent article on 55+ community governance for our state. You can find it, in its entirety, at http://www.ctcondolaw.com/Spring08400dpi.pdf. In this article they cover the “do’s” and “don’ts” of how best to enforce the rules and maintain compliance with state and federal housing laws. I strongly recommend that you download a copy for yourself and your Board members to see if it sheds any light on how your community can comply and enforce its 55+ membership provisions. Of course, if the association needs legal advice I strongly advise consulting with an attorney that specializes in this field of law. Best wishes!

Is the Condo Master Association Subject to CIOA?

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A.D. from Hartford County writes:

Dear Mister Condo,

I live in a large condo complex which is comprised of three separate Condo Associations. The three associations jointly own a recreation complex. The complex is managed by a separate board which operates under a set of rules agreed to by the three associations. Does the management board also have to follow the requirements of the Common Interest Ownership Act and the Condominium Act? Thanks!

Mister Condo replies:

A.D., that is a great question. Since I am not an attorney I can only offer my opinion on the matter and that opinion is that it depends on what the duties and responsibilities are of the Master Association versus the three associations under it and the folks who own units within the association. Certainly, the three associations in question need to comply with Common Interest Ownership Act (CIOA), which makes perfect sense as the unit owners have entitled rights and representation which the Act codifies and protects. However, the Master Association may not be subject to the Act if it is strictly a business entity dealing with accounting and maintenance issues. I would think a very simple acid test would be to look at what powers the Master Association has to determine if CIOA applies. Does the Master Association determine and assess common fees and special assessments? Does it enforce rules and regulations, including issuing of warnings and fines? Are the members of the Master Board elected by the majority of all unit owners? Does the Master Association modify the rules and regulations of unit owners within the three associations it oversees? If any of these answers are “yes”, then I think the spirit of the law should apply and CIOA should be followed. If the answer to these questions is “no”, then there may be no need for the Master Association to observe CIOA in its strictest sense.

There is also a question of when the Master Association was founded. January 1, 1984 is an important date as it effects which set of condo governing rules the association was founded upon. Associations founded before then are subject to slightly different rules than those founded after.

The bottom line is that the association’s attorney is probably the right person to ask about the Master Association’s need to follow the CIOA requirements. I am a big fan of associations operating in the light of day so that all association members have access to records and attend meetings when allowed. I think a transparent association is a generally healthy association. All the best!

Nevada Condo Parking Woes

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V.E. from Nevada writes:

Dear Mister Condo,

I live in a Condo unit in Northern Nevada. The H.O.A. is trying to get residents to park in their garage and driveway instead of the visitor parking area. This has become a problem as we have many renters here that use their garage for storage instead of parking. I believe we could solve the problem by using a sticker system and verification of registration and insurance. All units have at least 2 parking spaces. Some residents have more than 2 cars. I am thinking that if you have more than 2 cars you would get a sticker for the third or fourth and the stickered cars could park in the visitor parking area. Any idea on how to implement this system or a better one? Any information would be very helpful and appreciated. Thank You.

Mister Condo replies:

V.E., parking issues plague condos and HOAs all across the country. It is usually caused by too many people living in a relatively small area with regards to parking. Of course, as you point out, the problem is really complicated when individual units are responsible for 3 or 4 cars on the common grounds at one time. Not to mention the fact that many units also have visitors who come and go on a regular basis.

Many HOAs forbid anything other than cars being stored in garages. Check your rules and regulations, Chances are there are rules against using the garage for anything other than parking. There is good reason for this. Garages can be real fire hazards and if folks are storing all kinds of junk in their garages they may be creating a potential hazard. I am sure there are plenty of local storage rental companies where people could relocate their garage junk to free up the spaces in the garages which were designed to house cars.

You mention that you have many renters in your condo. That is fine but there is no reason for renters to be allowed more parking spaces than anyone else. Their landlords knew when they rented their units what the parking arrangements were. If you don’t already have rules in place to limit the number of vehicles renters are allowed to have on your property, I would do so at your earliest convenience. I would require that rental units use their garage and their assigned space. Period.

Finally, you have proposed a sticker system that may work just fine for your community. Of course, someone needs to issue those stickers and someone needs to then enforce the system. If you are going to ask your property management company to do that, I would work with them to figure out what is the most economical and practical solution. Chances are they have experience with this very situation in one of the other properties they manage. I also want to point out a website that you may find useful. SpotShare is in the business of helping associations make the most of their available parking spaces. You can learn all about their innovative parking solutions at http://SpotShare.com/. Good luck!

Is Gifting Condo Residents Who Volunteer a Good Idea?

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A.C. from Hartford County writes:

Dear Mister Condo,

Can a condo association board use association funds to “gift” residents who volunteer? (i.e. the garden committee did a great job this year so let’s vote to give them a gift card to Max Downtown this Christmas) It doesn’t seem like it would be appropriate for a board to use residents’ condo fees to give “gifts” to other residents. But for some reason I think this may be legal. Would love to know. Thanks!

Mister Condo replies:

A.C., I am not an attorney so I cannot give you a legal opinion. However, I do have very strong feelings on this matter and I can certainly share those with you. From an ethical standpoint, it is a wrong and dangerous practice for any association to use common funds for anything other than common expenses of the association. Associations are run by volunteers. This is true of the volunteers that serve on the Board to the unit owners who volunteer their time to come to the Annual Meeting. Committees are comprised of volunteers. No one should ever be paid or compensated in any way for the volunteer service they provide to their community association. The reward is the work itself and knowing that you have made a positive impact on the community in which you live.

That being said, I do not have a problem with an association sponsoring a party of other event that the entire community is invited to celebrate the work of the community throughout the year. I prefer modest events like pot luck dinners or cookouts over fine dining in one of the area’s more prestigious restaurants but if the event is open to all community members I would feel better about it. I do know of a few condo associations who offer holiday parties for their residents. It is a nice touch and can certainly help build a harmonious community. Harmonious communities tend to be the better places to live with less “neighbor versus neighbor” issues so a party like that can be well worth the investment.

Compensating volunteers with anything more than thanks opens the relationship of the volunteers with their fellow community members to compromise and suspicion. Where do you draw the line on rewards? Board members may give up hours of their time every month to attend to their functions. Will you offer them a reward as well? It is a dangerous precedent to set and would I would avoid like the plague. How about an extra round of applause or praise offered in the next issue of the community newsletter. These are the rewards these volunteers deserve as well as the thanks from their fellow community members. Best wishes!

Can the Association Foreclose on my Condo if there is no Mortgage?

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J.R. from Hartford County writes:

Dear Mister Condo,

I own my condo outright; no mortgage. I owe condo fees. Can the association foreclose on my condo if there is no mortgage?

Mister Condo replies:

J.R., you bet ya! Non-payment of common fees is a big no-no in the world of community association living and for good reason. Your association is a non-profit corporation that pays for many services that you and each and every one of your fellow unit owners consume every day. Insurance, property management, trash and snow removal, upkeep on the common grounds, common utilities, and so much more are paid from the association’s general fund. Common fees and assessments are the lifeblood of the association and the law guarantees that those fees will be collected. Of course, like any other legal procedure, there is due process. If you are being threatened with foreclosure you have most likely already been served with warning letters, collection letters, letters of demand and more from the association or their collections agent and/or attorney. The next step would be for them to file a formal foreclosure action against you. Unless you have some very strong reasons for non-payment of common fees you will very likely lose and your unit will be foreclosed upon.

My advice to you is to pay your common fees and be a good neighbor. After all, common fees represent your contribution to the association for your portion of the services you consume. It is a fair and equitable system that has withstood the test of time. All the best!