Monthly Archives: January 2016

New Pavement Leads to Unfavorable Condo Parking Lot Reassignment

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O.S. from Georgia writes:

Dear Mister Condo,

My husband and I bought our townhouse in an Atlanta suburb 9 years ago. We had 2 assigned parking spaces. This year the association installed new asphalt in our subdivision and reassigned one of our parking spots to another owner and gave me a parking spot away from our house. Does the Board of the association have the right to do that?

Mister Condo replies:

O.S., in many condominiums, parking spaces are assigned and reassigned at the discretion of the Board. Unless your parking is deeded (part of the deed to the townhouse), then the Board is likely well within their rights to assign the association-owned parking as they see fit. I will say it is petty of them to move your space after 9 years for no apparent reason and you can certainly petition the Board to give you the space back but they are under no obligation to do so. One of the more common reasons parking lot spaces get reassigned is an increased request for handicapped spaces. While the Board does not have to grant each request, they must make reasonable accommodation when possible. If they decide they have a space, even several units away from yours that they need to reassign, that can lead to many spaces being reassigned. I don’t think that is what happened here from your story but there may be more to it than just showing favoritism to one unit owner over you. Write them a nice letter asking for your old space back and see how they react. All the best!

Condo Unit Owners Seek Reimbursement for Building Repairs

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C.N. from outside of Connecticut writes:

Dear Mister Condo,

7 years ago, the board claimed there was no money for window replacement. They further claimed that due to how the bylaws were written it was the owners responsibility. Now the time has passed I have spent $4000 of my money to replace windows and the siding to prevent leaking. The board announced a property undertaking of new siding and windows. Am I and others like me entitled to any reimbursement for the money we spent to improve and protect units?

Mister Condo replies:

C.N., the likely answer is “no” but you and your other unit owners who have already spent the money on windows and siding may be able to negotiate some type of agreement with the new Board by saving them the money of not having to address your units. It will depend on a few things and none of them are all that simple. Let me explain.

7 years ago, the association lacked a Reserve Fund adequate enough to handle needed repairs. The correct action for the Board at that time would have been to either levy a Special Assessment or seek an HOA loan to cover the repairs. For whatever reason, neither of those things happened. However, the Board apparently agreed that you and several other owners could make repairs to the association-owned portion of your own units at your own expense. That was improper and both you and the Board should have sought counsel at that time to guide you through the proper procedure. You basically gave yourself a Special Assessment for repairs that the Association was responsible to make.

I am assuming that in the seven years that have past, there has been turnover on your Board and there are new leaders at the helm. This Board is handling the repairs properly by having the Association pay for the repairs out of association money. While you can argue that you and others have already paid for these repairs to your individual units you will not likely find any documentation in your governing by-laws that allude to reimbursement for those repairs as, technically, you shouldn’t have made them in the first place. Like I said, a community association attorney would have advised against this practice 7 years ago for this very reason.

This is where some negotiation with your new Board may come into play. The reality is that you and your fellow unit owners took matters into your own hands when the association failed you by not keeping it covenant to maintain and protect the units. However, the reason they did this was for a lack of funds, which you and all other unit owners failed to contribute over time in the form of higher common fees and/or Special Assessments. It wasn’t your fault, mind you. It was just the Boards that preceded that Board didn’t do a good job preparing the annual budget and decided that keeping fees low was more important than keeping the Reserve Fund properly funded. Unfortunately, that is a common occurrence.

If your units are overlooked for new windows and siding, you might be able to ask for a “rebate” of your original investment, which was basically an undocumented loan to the association to make necessary repairs. I wouldn’t expect too much from this tactic and the current Board is under no obligation to offer any of that money back to you. It would basically be a peace offering for the money and effort you invested 7 years ago when the association was in dire financial times. If your units receive the same new windows and siding that all of the other units are now getting, you have no argument for any compensation, in my opinion. You will have enjoyed your previously new windows and siding for 7 years and you will now have the same new windows and siding as all other unit owners. Honestly, that is the ideal solution. Good luck!

Seeking Condo Development Funds

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D.M. from outside of Connecticut writes:

Dear Mister Condo,

What are the best options to build more capital on 22 units, townhouses?

Mister Condo replies:

D.M., I am not completely sure what you mean by “building capital” but I assume you mean how can an association fund a new phase of development. Banks and investors are the only ways I am aware of at this time. Banks will evaluate the plans for development and either approve or deny the loan request. If they approve, they will offer loan terms and along with interest to be paid back over time. Investors don’t have to behave as conservatively as most banks so if the project isn’t right for a traditional bank loan, you might look to investors with track record in condo development. Investors usually seek a higher return based on the amount of risk they feel the project offers. So, if your development is in a particularly hot condo market right now (Boston, for instance), you might find it easier to attract an investor who might see the risk as lower because of the current demand. All the best!

Resident Condo Manager and Board President Not Communicating

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K.H. from outside of Connecticut writes:

Dear Mister Condo,

If our resident manager is an at will employee and he does not respond and work well with the Board President, can he be terminated without a lawsuit? The building is not functioning properly because of this non-communication issue.

Mister Condo replies:

K.H., the short answer is “yes, but it depends”. Different states have different laws on employment practices but, generally speaking, any employee of any business can be terminated for just about whatever reason the business sees fit. However, there are a slew of federal employment laws which must be observed as well as state and local laws. If your association employs legal counsel, it would be wise to speak with the association attorney before making a decision. If the communication issue has to do with ethnicity or any other trait that could lead to discrimination charges, my advice would be to tread lightly. Lack of communication aside, if the employee is performing poorly, the association is likely well within its right to terminate the employee. However, speaking with an attorney before making the decision to terminate could save the association a great deal of money if the employee decides to sue after termination, especially if there is the appearance of discrimination. Good luck!

Condo Insurance Claim Yields Extra Money for Association

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S.B. from New Haven County writes:

Dear Mister Condo,

Dear Mr. Condo, our management company received an insurance check due to a water damage claim for one unit, which has been repaired for the most part. However, at least 40+ items on the insurance adjuster’s report were not repaired according to the unit owner. Is our Association supposed to get the unused money from the insurance payout if these repairs don’t need to be done?

Mister Condo replies:

S.B., thank you for writing. You have a few different things going on here so let me try to make some general sense of what happened and what should happen. It sounds like a unit owner suffered water damage and a claim was placed against the association’s insurance policy. That claim yielded a check for an amount of money that was greater than the amount of money needed to make the repair as ordered by the associations. However, the unit owner has had an insurance adjuster evaluate the damage and is now claiming that there is much more repair work needed than what the association had ordered. Further, the insurance money that was received went to the management company, who is still holding the excess funds for the repair until this matter of further repairs needed (according to the unit owner’s adjuster) is settled. Your final questions are about who gets the excess funds if they are not used for any further repair.

First off, I am not an attorney so please consider my advice as friendly. You may well need to get a legal opinion about how to deal with the unit owner’s claim that the association has not made adequate repairs based on the insurance adjuster hired by the unit owner. It is possible that the association has fulfilled its duty to repair as outlined in the documents and that the further damage is the unit owner’s responsibility and that those repairs should be covered by the unit owner’s homeowner’s insurance. It is also possible that the association is on the hook for further repairs, in which case the excess funds from the claim will be sued to make those repairs.

Regardless of the outcome, the money received by the management company is the possession of the association. It should be in an account owned by the association. Is that not the case? If not, it’s time to take a look at how your management company is handling the association’s money.

Are Condo Special Assessments Public Records?

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B.R. from New York writes:

Dear Mister Condo,

Hi, Mr. Condo! Do you know if condo special assessment fees are matters of public records? I live in and am trying to narrow my search for a new condo to 3 different condo buildings. I want to know if these 3 condos have assessments in addition to their monthly maintenance charges. If I went to town hall, would I be able to research these fees? Thanks so much for your help with this issue.

Mister Condo replies:

Hi, B.R.! My answer is “yes and no”. I doubt your search of town hall records will reveal current special assessments. However, such assessments must be revealed at the time of sale and should be part of the resale package and/or purchase and sale agreement. Simply asking the question of the seller should give you a straight answer about current special assessments. However, you still need to beware as special assessments that are looming may not be revealed and the seller is not under any obligation to reveal what “might” happen a year or two (or even a month or two) down the road when the 15-year old roof needs replacing and there isn’t enough money in the Reserve Fund to cover the repair. Special assessments issued before you take possession of the unit are the responsibility of the current owner. Once you take possession of the unit, any special assessments levied are your responsibility.

Your best bet is to ask to see a copy of the current budget and a balance amount for the Reserve Fund. A healthy Reserve Fund is a generally good indicator that a special assessment isn’t likely any time soon. However, any condo association can find itself needing to raise cash for a variety of reasons and that cash only comes from one place – the unit owners. Either the money was collected and held in Reserve over time or unit owners will be asked to pony up when it is needed. One final consideration is that the association may even take out a HOA loan to pay for repairs. If so, those common fees that look enticing today may ned up increasing substantially to cove the debt service for the HOA loan. Ask the right questions and you’ll likely find the answers you are looking for. Good luck!

Good Governance by the Condo Board Does Not Include Yelling!

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J.D. from Litchfield County writes:

Dear Mister Condo,

How long before a board has to have a special meeting when the president/manager has been removed for being unregistered with the state of Connecticut? Also, we are being forced to endure unjust insults and accusations because the board is all friends. Do we have recourse under the D&O Policy? My wife ‘s health is diminishing due to the direct yelling from the board at all meetings. Thank you for all your help.

Mister Condo replies:

J.D., I apologize for the backlog of questions that has prevented me from getting to your question sooner. I hope this situation has resolved itself by now but let’s take a closer look at the problem and the remedy. It sounds like you have a rather contentious Board and a Property Manager registration matter to boot. Of course, I am sorry for your wife’s diminished health. Even in good health, no one should be subjected to insults and accusations because of association governance issues. Sounds like everyone needs to stand back and take a deep breath.

As you know, the Board is comprised of volunteer leaders from within the community. Your condo documents who is eligible to serve and what steps are needed to remove folks from office if they aren’t performing properly in their role as a volunteer leader. For the most part, community association volunteers mean well in their service. However, there are some that are never educated as to what they can and can’t do as volunteer leaders and that leads to problems like insults and accusations at Board meetings. Nowhere in your documents or in the Common Interest Ownership Act (CIOA) will you find a clause about using bullying techniques to conduct association business.

I am a little concerned about your use of the term “president/manager”. In most condos these are two different people. The president of the Board is the elected leader of the Board and does not require licensing with the state. The manager of the association is a paid professional who does require licensing. If your manager is the president of the Board, then licensing is not required. That would fall into the category of self-managed condominium. Is that your situation?

I am going to assume your association had hired a manager and later found out that manager was unlicensed and, therefore, removed by the Board. The Board does need to replace the manager in short order or the association’s day-to-day business will likely suffer. However, I am not aware of any requirement that they do it within a certain amount of time or at a special meeting of the Board. In fact, if the Board meets monthly (or even quarterly) it can be dealt with at the next regularly scheduled Board meeting. The Board can, at their discretion, hold a special meeting provided they follow the rules and proper noticing of the meeting to do so.

As for coverage under your Directors and Officers insurance plan (D&O), I don’t think that would apply. Insurance is usually in place to cover a loss or legal expense. You didn’t mention that the association suffered a financial loss over these issues so I wouldn’t think a claim would be in order. You can speak with your association’s insurer to confirm if you would like.

I certainly hope your Board can remove some of the dysfunction that seems to be occurring. I would recommend that they attend an upcoming training program from the local Chapter of the Community Associations Institute (CAI). There is an upcoming event this weekend in Glastonbury. You can read more at http://www.caict.org/events/EventDetails.aspx?id=744276

Good luck!

Who Can Serve on the Condo Master Association?

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N.S. from Hartford County writes:

Dear Mister Condo,

I am a unit owner in a condo that has both its own association and a master association. The master association is responsible for something like 7 different complexes. I heard another unit owner say that my complex’s association is entitled to representation on the master association. Is this true? I’m not sure if this is currently how things are set-up, so I might look into it. Thanks

Mister Condo replies:

N.S., master associations are not much different than individual associations with regards to their make-up and governance. Your condo documents outline the governance provisions of your association including your individual association and the Master Association. The relationship between the individual associations and the Master Association varies from development to development so you should carefully review your documents to better understand the relationship and the rules of governance. Once you have a handle on what the rules and regulations are, you can determine if you are eligible to serve and if service on the Master Association Board is of interest to you. Then you can determine how to get nominated and elected to serve on the Master Association Board. Thank you for your interest in volunteering to serve in your community associations. I wish you success in your endeavor.

In Search of… The Board Member Toolkit!

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L.B. from Michigan writes:

Dear Mister Condo,

I am looking for sample documents that will help our board understand the roles we have on the board…and ways we relate to the Management Association. Can you point me to any resources? I am in Michigan.

Mister Condo replies:

L.B., I sure can! One of my favorite parts of being involved in association governance for more than a decade now is taking advantage of some very fine tools that seem to be a secret to so many of my fellow volunteer leaders. If your association is not already a member of the Community Associations Institute (CAI), I strongly suggest you join. While there are many great reasons to do so, the single best reason, in my opinion is the answer to your question. The online resources that define the roles of the Board, the Property Manager, and all of the other players in a community association are all part of the CAI Board Member Toolkit. This toolkit is FREE to members but you can also purchase a hard copy if you don’t want to join. The link to do so is https://cai.caionline.org/eWeb/DynamicPage.aspx?site=CAI&WebCode=storeItemDetail&parentKey=0b859898-096b-4890-8293-c7256d54423b. This is by far the most comprehensive document I have seen detailing the roles of each of the Board members as well as covering just about every aspect of community association governance from the standpoint of a community association volunteer leader. I use it with all new Board Members at my community association and so should you. Trust me, it is the best investment you can make for your association. Good luck!

The Power of the Proxy at Condo Annual Meetings

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A.K. from New London County writes:

Dear Mister Condo,

At an association’s annual business meeting, can one person be the proxy for more than one other than his/her unit for the election of officers? Thank you.

Mister Condo replies:

A.K., unless the by-laws of the association prohibit it, proxy voting is allowable provided the rules for proxy voting were observed and that no one unit owner casts votes greater than 15% of the total votes. That is to say, in a condo with 100 units, no one unit owner could cast more than his own plus 14 proxy votes. Of course, proxies need to be specific as to their use so if all of these other unit owners wished to grant proxy power to one unit owner, their proxies should be specific as to intent – to vote in favor of a proposed budget, against a slate of proposed directors, etc… The proxy should not be as wide-sweeping as to allow the unit owner with the proxies to vote on any issue he wants with the added power of up to 15% of the vote in his pocket. That may not violate the association’s rules on proxy voting but it does violate the spirit of the proxy, which is to ensure quorum for the association to conduct its business. Hope that helps.