Monthly Archives: August 2014

Association’s Right to Know Who Is Living in the Condo

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R.W. from Hartford County writes:

Dear Mister Condo,

Does the association have the right to know who lives with me?

Mister Condo replies:

R.W., that is a very interesting question. My instinct is to say “Yes” but the part of me concerned with citizen privacy says “No”. And then there is part of me that says let’s ask an attorney. So that’s what I did. Here’s what the attorney had to say:

“Associations have the right to regulate the occupancy of units consistent with their declaration, bylaws, and rules.  This can include reasonable restrictions on tenants, borders, guests, and other people who occupy a unit to ensure compliance with the association’s rules as well as town ordinances and security policies.  If your board has determined that your unit may be occupied by a person whose residency violates a provision of the governing documents, the association does have the power to take action which can include monetary fines, litigation, or both.”

Hope that helps, R.W.!

Condo Reserve Fund Accounting Question

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J.J. from Hartford County writes:

Dear Mister Condo,

Why does our balance sheet show all assets but only current liabilities? We have a Reserve Fund for replacing items of about $150,000. Current liabilities are shown at $4,000. However, the roofs are halfway through their useful lives, and will need to redone in 10-12 years. Shouldn’t the fact that half the life of the roofs has been “consumed” be shown as a long-term liability? I estimate this liability (i.e., half the cost of replacement roofs) at about $400,000.

Mister Condo replies:

J.J., I am glad that your association has a Reserve Fund with a significant balance. I can’t tell you how many letters I have received lately where the Reserves were not nearly as substantial as yours. However, you make a great point that even with $150,000 in the Reserve Fund, the Fund may be significantly deficient. That generally leads to Special Assessments or an association loan when the time comes to actually make those repairs. But your question was about accounting practice, and for that, I turn to my friend and HOA accounting expert Sam Tomasetti, CPA of Tomasetti, Kulas & Company, P.C.. Here’s what Sam had to say:

“The nature of the general accepted accounting principles used to prepare your financial statements at this time is to reflect items based upon closed transactions:  fees earned as accounts receivable, funds collected, expenditures committed, or paid.  In addition, assets owned in common by all the unit owners like roofs are not the property of the association but are reflected in the individual unit owners’ personal assets.  As I apply this context to your question, the roofs are not the property of the condominium association, and so they will not be listed among the assets on the balance sheet.  Since they are not listed as assets, you will not see them being “consumed”.  The logic is the same as to the liability concern you have raised.  The analysis you are making is a good one as to being mindful of keeping your property in good condition, and I think it is something you should definitely keep track of in the context of monitoring your replacement reserve and whether or not funds will be available when needed.”

Hope that helps, J.J.!

A few of our LinkedIn followers asked for a bit more information. Sam goes on to clarify:

“Perhaps a check in with an attorney in CT would be appropriate.  My understanding of the law is as I have stated above.  I believe when someone buys a unit they are paying for their “walls in” plus their undivided interest in the common elements.  The purchase price of the unit reflects this.  This would be why the common elements are not reflected on the books of an association and maintaining common elements are the responsibility of the association.”

Condo Lawn Service Not Performing to Owner’s Expectations

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C.K. from Florida writes:

Dear Mister Condo,

I’m located in Florida. I ran across your site. I have a 1st floor unit which I installed a screen enclosure. The lawn service does not trim the grass well and it is difficult to open the door, to the point where the hinges get bent. They claim they can’t trim closer without killing the lawn and that I’m responsible if the door breaks. They told me to install pavers. I asked for a letter on condo letterhead signed by board members and get no response. Am I or the condo responsible for this breakage due to their refusal to maintain the property properly? I should point out that there are other issues as well.

Mister Condo replies:

C.K., greetings from Connecticut! I would say you have a bit of a sticky wicket here. Ideally, the lawn service folks would use a weed whacker or such around your door so that you could easily open and close it without the hinges breaking. If your association allows it, you could just buy an inexpensive one yourself and maintain that little patch of grass right at your door entryway and your problem would be solved. Clearly, the door is yours and is your responsibility. The lawn service people have suggested that pavers would solve your problem, and again, that certainly sounds like an inexpensive solution to me. No grass grown on the pavers so your entryway is unencumbered. Win/Win! You could make a complaint to the Board that the lawn service is not satisfactory and they may or may not take action. If you are the lone voice of dissent against the contractor, I wouldn’t expect any action from the Board.

You say you asked for a letter on condo letterhead signed by the Board but get no response. I am not sure what you are asking them for but the Board won’t routinely send written correspondence on an issue like this. If you truly feel you have been wronged and that a lawsuit is in order, I suppose you could take that action. However, if all you are dealing with is a patch of grass that needs cutting, I really don’t see how that will help anything. If you are allowed and able to install the pavers, that sounds like a reasonable solution. It probably should have been done when the screen enclosure was initially installed, which would have avoided this whole situation in the first place. All the best!

Condo Maintenance Responsibility Letter

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T.S. from New Haven County writes:

Dear Mister Condo,

I have to write a letter to a condo resident asking him to stop going to the Maintenance Department and bothering them about fixing little items for him. Can you help me out on the letter?

Mister Condo replies:

T.S., sure thing, glad to help.

“Dear Unit Owner,

It has come to the attention of the Board that you have been making direct requests of the Maintenance personnel to make personal repairs within your unit. You may not be aware that the Maintenance personnel work directly for the association and cannot make personal repairs to your unit as those repairs are your responsibility and not those of the association. If you need to make repairs to items within your unit that you are personally responsible for, kindly hire your own repair service to do so. Further, the Board has instructed the association Maintenance personnel to not make any repairs to items that are not the Association’s responsibility. Thank you for your attention in this matter.

Very Truly Yours,

XYZ Association”

Of course, for this course of action to be effective you need also notify the Maintenance personnel that they are NOT to make any non-Association repairs to any unit. I would have them keep a copy of this letter handy so that they could present it any time a unit owner made an inappropriate request. If you have a Property Manager, I might also suggest that all repair requests go through the Property Manager. That way, the Property Manager could weed out inappropriate requests before they ever made it to the Maintenance personnel. Good luck!

Whose Responsibility is Condo’s Sagging Floors and More?

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A.C. from CAI-CT’s Facebook page writes:

Dear Mister Condo,

I have a question about a condo in my complex. The ceilings, floors and doors are all sagging and are no longer square. It’s been like this for many years. Now, the unit owner wants it all fixed so it can be sold. Is the association responsible to hire an engineer and possibly gut the unit and have it reframed as may be necessary and then be responsible for new floors, carpet, etc.? Is there any way I could get a straight answer. And, yes, there are attorneys involved with this.

Mister Condo replies:

A.C., thanks for reaching out via Facebook. You have an age old problem facing most aged community associations across the country. Who is responsible for what inside the condo unit as the unit ages? I want to point out that I am not an attorney so please consider my advice as friendly. As you have noted, there are already attorneys involved so I have no doubt you will receive lots of qualified legal advice from your attorney as this situation develops further.

I will do my best to give you as straight an answer as I possibly can. For the most part, the condo association’s Covenants, Conditions, & Restrictions (CC&R’s) will spell out who is responsible for what. Further, it is typical that the unit owner is responsible for the maintenance and repair of those items inside their unit and for those items that are for the unit owner’s explicit use. In the case of sagging floors and walls that are out of square, there is some wiggle room as the unit may still be structurally sound even though it is not cosmetically perfect. The owner cannot repair the items causing the sag if it is the association’s property. This is where the attorneys will most likely argue on their client’s behalf against the other party. The unit owner will likely claim that the unit cannot be sold in its current state of repair; the association will argue that the current state of repair is perfectly acceptable from a structural engineering point of view. Both sides will likely present expert witnesses to support their views and a judge will likely rule in favor of whoever did a better job presenting their argument. Both sides will have expense in bringing and responding to the suit. Depending on the outcome, the association may, in fact, be on the hook for all of the expense. Alternatively, the association may be found completely devoid of any additional expense if the structure is deemed sound. The Structural Engineer’s report will be most telling. This is the legal way of the world.

I have a separate question for you, A.C.. If multiple units have fallen out of square over the years, do you, in fact have a structural problem? Even if the Structural Engineer’s report deems the buildings sound, it is possible that some preemptive measures should be taken to stop the buildings from further deteriorating and/or bring them back closer to square. Depending on the age of the buildings, Mother Nature may be the cause of settling. If the building was not properly designed back in the day and there is now damage to supporting walls and beams, the association might be well advised to hire a contractor to remedy the situation. This may be expensive and, as you have noted, may lead to other costs arising from the repair but the association should not let these warning signs go unchecked. Heaven forbid a building was to fail and cause death or injury and there is record that the Board knew of the potential failure and took no corrective action. That would be truly tragic for all involved.

My advice is to work closely with your attorney. I hope you have hired one that specializes in community association law as can be found at http://www.caict.org/?page=Directory#Attorney – Law Firms. These folks have seen it all in Connecticut’s community associations and can give you real world advice on similar situations. I assure you that yours is neither the first nor the last of our state’s aging condominiums that is facing this problem. I wish you good luck and a satisfactory outcome for all involved. All the best!

Not Renting the Condo by the Rules

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F.K. from New Haven County writes:

Dear Mister Condo,

Owners are renting for less than the required time period. How can we enforce the condo rules?

Mister Condo replies:

F.K., well this one might seem kind of obvious but your by-laws and rules should spell out what happens when a unit owner doesn’t follow the rules. There is usually a summons to appear before the Board, followed by a fine, followed by legal action for repeated offenses. This is where your association attorney can step in and be a real help to the Board. Once the attorney reviews the case, a lawsuit against the offending owner will likely be drawn up and filed with the courts. The association will seek a cease and desist order against the unit owner making the improper rental agreements and the Board should seek legal damages from the unit owner who isn’t following the rules. The underlying question is what is the Association’s goal in bringing this action? It should be to halt the improper rental of the unit. If you go into the suit just seeking damages without trying to halt the improper rental of the unit, you are likely to see this offense repeated again. My advice is to consult with a community association attorney and take action against the offending unit owner. My guess is the association will prevail and the unit owner will play fairly moving forward. Good luck!

AirBnB? Not at this Condo!

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D.W. from New Haven County writes:

Dear Mister Condo,

I recently heard about the website airbnb.com which allows people to rent out their condo or apartment unit for short periods of time, usually a few days. I had not yet rented out my condo unit when I was notified by the condo board that I was in violation of the by-laws. I have since removed my listing on the website, but I still have a reservation pending for later in the month. What actions could the board take against me if I decide to allow my reservation to go through? Thanks!

Mister Condo replies:

D.W., your condo is not alone in banning the use of AirBnB and similar services. There are a variety of reasons why they ban this activity but it usually boils down to wear and tear on the common elements and too many temporary users unfamiliar with the rules of the community who may also place an extra burden on the use of common elements like swimming pools, tennis courts, parking lots, etc.. It is unfortunate that you were not aware of these rules before you offered your unit for rent using one of these services. I am not an attorney so please take the following advice as friendly and not legal. For legal advice, I strongly recommend that you consult with an attorney.

There are a variety of actions the Board can take against you, and just as importantly, your AirBnB renters (who, in turn, would likely also take action against you). They can ban the AirBnB renters from the property. They can get the local police involved if they are deemed trespassers (they do not hold a legitimate lease or rental agreement). They can come after you for violating your use of the property as outlined in the condo documents. They may hit you with fines, legal fees, and whatever else the association attorney is likely to implement on their behalf. Most Boards will not be sympathetic to your cause in the least as you have violated the most basic principle of common interest ownership and that is to “play by the rules”. Of course, it could be that no one will even notice they are there but is it really worth the potential downside for a few days of rental income? My advice is to withdraw your property from the AirBnB rental service and hope these short-term renters find someplace else to stay. All the best!

No Money to Replace Shot Shingles at this Condo

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R.P. from Cleveland, Ohio writes:

Dear Mister Condo,

I have been fighting with the association for 5 years to fix my roof. The shingles are shot. They say there is no money. What recourse can I take?

Mister Condo replies:

R.P., greetings to you in Ohio! Unfortunately, associations without the proper amount of funds to properly maintain their common elements are not uncommon these days. Association Reserves, a company that prepares Reserve Studies all across the country, has documented as many as 3 out of 10 associations are inadequately funded (sounds like yours) and that an additional 4 out of 10 don’t have a large enough Reserve Fund. And so the cries of disgruntled unit owners like you are being heard all around the country. There is hope and all is not lost.

You have already begun a conversation with your Board and that is a good place to start. Have they received an estimate on your repair job? Is yours the only unit with damages shingles? Most likely, all of the unit are in need of a new roof so the Board may need to either borrow the money to complete the repair (if they are eligible to do so; many are not) or they can levy a special assessment against all of the units so that the roof replacement can move forward. You and your fellow unit owners may not like that as a special assessment could cost you thousands but the Board will have no choice if adequate Reserve Funds have not been collected over the years.

The next step is building a proper Reserve Fund so you aren’t having this same conversation in 7 years when the siding needs to be replaced or in 10 years when the parking lot needs to be replaced. The association should consider investing in a professional Reserve Study and then following the recommendations which are very likely going to include a significant increase to the monthly common fees. Again, unit owners are not likely to be happy with this solution but there is only one place that the necessary money can come from and that is the unit owners.

Of course, if this is just a case of them not repairing your unit and other units are in good order, consult an attorney and consider bringing suit against the Board for failing to maintain the common elements as called for in the association’s governance documents. 5 years is too long to wait for this type of repair; a lawsuit will get their attention and cause them to take action. Good luck!

Board Mandating Downstairs Unit Flooding Coverage for Upstairs Units

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T.J. from New Haven County writes:

Dear Mister Condo,

Can a board require owners and renters to have insurance against overflowing toilets and bathtubs leaking to the units below?

Mister Condo replies:

T.J., seems I am getting a lot of questions about upstairs neighbors flooding downstairs units this week. Must be a trend and a soggy one at that! The Board can require that each unit owner maintain adequate homeowner’s insurance (HO-6 here in Connecticut). They can further require that the policy include a provision for damage to neighboring units and that unit owners will be held responsible for subsequent damage caused by inadequately maintained items within the unit. This is called maintenance standards and they can and should publish a list of all of the items that are likely to fail within a unit such as water heaters, water supply lines to washing machines and toilets, pipes that can freeze and burst, and more. As a unit owner, you want your HO-6 policy to cover these things in the event they do fail. Also, if you don’t properly maintain these items, insurers are very likely to deny your claim, leaving you and your downstairs neighbor with water-damaged units and you footing the bill for the repairs. Yikes!

My advice is to work closely with your insurance professional to purchase the correct policy and coverage that not only protects you but also satisfies the requirements of your association as spelled out by the Board and your condo docs. All the best!

Homeowners Insurance Won’t Cover Damage to Downstairs Condo

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K.D. from New Haven County writes:

Dear Mister Condo,

A second floor unit owner had a toilet overflow. This created extensive ceiling damage to the unit directly below. The upstairs unit’s personal insurance said they will not pay for the downstairs damage and that her Condo Association is responsible. We have no issue with her filing a claim with our Condo Insurance, but we have a $2,500 deductible. My understanding was that the person filing the claim is responsible for that deductible, and the insurance would pay for anything above that. However, this owner is saying that the damage was not created by her and that the Association is responsible from the 1st dollar, therefore the Association is responsible for the deductible.

Is it true that we are responsible for the deductible? If so, where do I find this in writing? (I cannot get a straight answer from our Insurance Company because the damages do not exceed the deductible, so there is no claim being processed by them) I find it difficult to swallow that we would have no protection from negligence of owners that create damages to other’s property.

Mister Condo replies:

K.D., you raise several interesting liability and insurance questions with this example. My gut instinct is to suggest that you speak with your association attorney before you obligate the association to pay even one penny for this owner-caused damage. Just because the unit owner’s insurance doesn’t cover the damage outside of the unit owner’s unit, the unit owner is not necessarily relieved from the resulting damage to neighboring units.

One of the clauses in the latest iteration of the Common Interest Ownership Act (also known as CIOA) includes protection for associations that adopt maintenance standards on items that are likely to fail over time. When it comes to water damage, there are many culprits. Water heaters, water supply lines to washing machines and toilets, pipes that can freeze and burst; all of these should be addressed in your list of maintenance standards and shared with your unit owners who are obligated to follow the maintenance of these items OR be held responsible if and when they fail. Now if your association took no previous action in developing and publishing maintenance standards this may be a lesson in why you need to do so before anything like this happens again. Your insurance professional should be able to help you with this so be sure to ask for a straight answer and settle for nothing less.

Once you speak with your association’s attorney you will get a better answer as to what is and isn’t the association’s responsibility in this matter. The attorney may advise you that the downstairs unit owner will need to bring suit against the upstairs unit owner that caused the damage, regardless of what that unit owner’s insurance company is willing to claim. Or, the attorney may advise you that the responsibility is, in fact, the association’s at which point the fact that it didn’t meet your deductible requirement is moot. All the best!