Monthly Archives: February 2018

Has the Property Management Company Breached Their Co-op Contract?

A.S. from Fairfield County writes:

Dear Mister Condo,

I moved into a co-op recently. The board hired a new management company. After being unsatisfied with the property manager in place (3 months) the management company suggested we take the receptionist with limited skills and no license/certification as the new property manager. The board agreed for some insane reason and this girl has made it her mission to drive off all of our contractors and service providers to bring in the people the management company uses. There is talk of kickbacks. They have done this on other properties. Every memo, directive, repair or task this girl executes is wrong, mismanaged and just turns out badly. She has offended and outraged a dozen usually nice normal shareholders with her behavior, demands, and stop work orders. She is also the management company owner’s new girlfriend and he obviously wants her on some property. Can she act as property manager with only 1 ten-hour online class and zero experience in construction, property management, facilities, etc.? The contract between the co-op and the management company states we have a property manager, a receptionist and an Acct Exec. They are in default of their contract, correct? Please let us know.

Mister Condo replies:

A.S., you have made a lot of accusations here and, if true, are certainly worth contacting the association’s attorney to discuss. Breaking a management company contract for an association of your size is no simple matter. Just because you claim the management company is in default does not mean that they are. You would need to be prepared to prove it, very likely in court, as the management company would be likely to sue for breaking of the contract. My best advice to you is to speak with the association attorney. As for the Board’s “insane reason” to agree with the management’s company proposal to use a secretary as the property manager, it is time to call them to task for making such a decision. The Board is comprised of elected members. They can be recalled or voted out of office at the next election cycle. People that use “insane reasoning” have no business representing the financial interests of co-op owners. This is very real money of the co-op owners they are spending and protecting. They need to behave like the Board of any business and make decisions that are in the best interest of all shareholders. It would appear to me that they have shown exceptionally poor judgment in this matter. Of course, that also means you need to be ready with a slate of new volunteers to serve on the Board. Without that, this Board may continue to serve the association poorly. In that case, putting the blame on the management company is only half correct. Good luck!

Validity of Condo Percentage of Unit Ownership Questioned

C.B. from Illinois writes:

Dear Mister Condo,

Hi, I live in a 48-unit building consisting of 24 2-bedrooms and 24 1-bedroom units. I understand that the 2-bedroom units owns a larger percentage than the one bedroom units and, of course, the assessment fees are more. We just had a new elevator upgrade which cost the 2-bedroom unit owners a percentage more, now we are able to have another special assessment to re-pave our parking lot, then next year will be our balconies. While I understand somewhat WHY a 2-bedroom unit owner would have to be pay more in assessments, I’m still baffled as to why they would be required to pay more toward some common areas that is equally used by everyone in the building. In this case, the elevator upgrade, the parking lot repavement. Building has 47 parking spaces that, in my opinion, are equally being used by each unit owner. Can you give me a simple straightforward answer as to WHY this is the case and, if this could be changed? Thank you!

Mister Condo replies:

C.B., the percentage of unit ownership formula is commonly used by HOAs and is the de facto standard for determining who owes what when it comes to common fees and special assessments. It is tried and proven and almost impossible to change. It certainly makes sense when thinking about the ownership ratio of the association. These owners physically own more space of their own and, in theory, use more of the common elements. A second bedroom is indicative of either more permanent residents or overnight guests. More occupants means more wear and tear on the common elements. What other formula is simple enough to take that into account when deciding when dealing with the financial responsibilities of the association. These units simply consume more of the association’s resources. While your analogy of the parking space is spot on, it is one of the few times that argument would hold water. Also, since the percentage of unit ownership was in place at the time the unit owners purchased their units, it is not a surprise or unfair to the unit owner when these assessments come due. It is quite simply the law of the land in the HOA world, has been since the beginning of common interest communities, and is likely to outlive us all. All the best!

Condo Landlord Thwarted by Pet Ownership for Renter Rules

J.C. from outside of Connecticut writes:

Dear Mister Condo,

Master Deed By-laws state only one pet per condo. House Rules state one pet per condo and then states no renters can have pets. Paragraph two speaks of renters having no pets. Paragraph three speaks of lessees needing to provide 2 references. Our lessee has one pet. POA wants to fine us because they say the House Rules say no pets for renters. I believe someone signing a lease for longer than 30 days is considered a lessee, not a renter. How do I fight this without an attorney? Thank you.

Mister Condo replies:

J.C., I am sorry you find yourself at odds with your association over the pet rental rules. The terms “renters” and “lessees” are generally interchangeable so it would appear that your documents are in conflict with themselves. This is actually not that uncommon as many associations simply use a boilerplate as a basis for their documents. If there were no verbiage about the pet restrictions on renters, I would say you are in the clear. However, even though it appears to be in conflict with an earlier statement on the subject, the fact that there is a restriction on pets for renters elsewhere in the document, I would say you will not be successful in challenging the association’s position. You can challenge the association by filing suit, seeking arbitration, or whatever other method of dispute settlement is available to you. However, if you do not wish to hire an attorney, you will do so on your own. The association on the other hand would likely use the services of an attorney to defend themselves. In my non-lelgal opinion, the association will prevail. Good luck!

Antiquated Condo Parking Lot System Ineffective and Unenforceable

C.S. from outside of Connecticut writes:

Dear Mister Condo,

The Manager of my Condominium does not exercise any control about the occupancy of the scarce parking lots. All these spots are numbered and some others (each for one each) and others are for visitors (without numbers), that is for the first that arrive. Can the owners know the parking spot numbers belonging to all others owners? Then we (the owners) can make a match to them and find abusive neighbors. There are many people that duplicate the hang tags or recycle from the former tenants and even have numbers that not matching with the numbers on the parking lots. The manager has mentioned that the number of each parking lot belong to the “privacy information”. Is this true?

Mister Condo replies:

C.S., it sounds like your association is using a very poor system of parking lot management. While it may fall to the Property Manager to enforce this system, I would complain to the Board that their system is ineffective and being rampantly abused by residents. All the Board needs to do is adopt a modern parking lot solution to get the problem under control. If they refuse to do that then the chaos will continue. Privacy issues are a legitimate concern and many people are not fond of outsiders (burglars, for instance) entering a property and inspecting vacant parking lot numbers to determine who is and isn’t at home. Vacant space equals a vacant unit. That might encourage a burglar to attempt a break-in. Many associations use alternate parking space assignments for just this reason. My advice is for you to write to the Board and ask them to modernize the parking lot assignment system. Then, the Property Manager is far more likely to be successful in enforcing the rules of the new system. All the best!

New Condo Owner Asks to See Association Records

J.S. from outside of Connecticut writes:

Dear Mister Condo,

Does a new owner, 7 days, have the right to see minutes and running balance sheets from previous years? She did not ask for any of this before she bought. If so, is there a time limit to which I have to get her this information? Thanks!

Mister Condo replies:

J.S., all unit owners, regardless of how long they have owned, have a right to inspect association records. That certainly includes bank statements and Minutes of meetings as these are official records of the association. Unless the association has something to hide, this should be a request that is simply honored. Failure to do so, on the other hand, could lead to a lawsuit from this new owner as you would be violating the unit owner’s rights by withholding this information. There may or may not be a time limit on honoring this request depending on your by-laws and your state law. My advice is to offer it forthwith. All the best!

Condo Board Refuses to Hold Annual Meeting!

J.W. from outside of Connecticut writes:

Dear Mister Condo,

Our condo association elects board members at the annual association meeting. The current board will not schedule the annual election. The current board just keeps making decisions. How can a non-board member force the board to schedule an annual meeting so that new board members can be elected? The By-Laws call for the annual meeting to be held in April and they must give a minimum of 21 days’ notice.

Mister Condo replies:

J.W., if your Board is operating outside of the governing documents (it sure sounds like they are), you can do a few things to correct the situation. First, you can speak with other unit owners and call a Special Meeting of the unit owners following the method to do so outlined in your governing documents. This requires some organizational skills on your part and you do need to follow the proper procedures to do so. Your goal in this meeting would be to recall the current Board (essentially remove them from office) and replace them with better volunteer leaders who will follow the rules of governance for the association. This is serious business and I would even recommend that you speak with an attorney who specializes in community association law to guide you. This will cost money but is worth every penny, in my opinion. Your second option is to sue the Board for not following the governance rules of the association. This option may force the annual meeting but will do little to remove the Board members who are not following the rules. Your third option is to leave this community. That is a drastic measure but if you can’t find better volunteer leaders to run this association, you can either live with the out of rule-breaking Board or sell your unit. Communities get the Boards they deserve. If your fellow unit owners aren’t outraged that this Board isn’t operating by the rules, it is time to leave. It is only a matter of time before more than missed meetings are unearthed. Boards that operate in this renegade fashion are usually breaking multiple rules. This can cost every member of the association dearly in their pocketbook if left unchecked. You have your work carved out for you. Good luck!

Who Pays for Storm-Damaged Gutters Installed by HOA Home’s Previous Owner?

J.D. from outside of Connecticut writes:

Dear Mister Condo,

Gutters were installed by previous owner and we’re damaged by a common area tree from a storm. Who is responsible for replacement and costs?

Mister Condo replies:

J.D., since the gutters were installed by a previous owner it is likely the current owner (you) who is responsible. However, it is certainly worth a call or letter to the Board to report the damage and inquire of the HOA’s insurance will cover the damage, especially if it is particularly expensive. If there is a deductible or the repair doesn’t meet the insurance threshold, you will likely be told it is your expense. Finally, check your by-laws. If there is wording that indicates such damage is association responsibility, you may wish to highlight the language and send it along to the Board along with your request for the repair to be paid for by them. If they refuse and you strongly feel you are right, you might wish to speak to an attorney to get a clarification on the rules. If the Board has refused to pay and the dollar amount is not significant enough to seek further remedy, I would suggest you simply make the reapir yourself and continue to enjoy your gutters. Good luck!

Condo Association Approaching 50% Rental Mark

H.W. from Fairfield County writes:

Dear Mister Condo,

Our 306-unit condo is now at 48% rentals. The Board relies on a manager to do this type of work. What will happen when we get to 50%?

Mister Condo replies:

H.W., thank you for writing. There are many challenges to managing and living in a community with a high rental rate. For starters, fewer owner occupied units usually means that fewer of the residents have a long-term concern for the well-being and stability of the community. After all, they have no investment in the property and are likely to leave when it suits them by simply not renewing their lease. Many associations with high rental rates also report difficulty in enforcing parking and other rules. Again, some renters (certainly not all) tend not to pay close attention to the rules of the association. The biggest challenge the community may face is qualification for FHA-backed mortgages, which dominate the mortgage world. Many condominiums will lose their eligibility for FHA-backed mortgages if the community becomes more than 50% rental units. FHA changes its rules from time to time so you should really check with a mortgage company that specializes in FHA-backed mortgages for an idea of the impact your association may face if/when the 50% rental threshold is surpassed. I found an excellent article on the subject at Housingwire.com. You can read it here: https://www.housingwire.com/articles/38374-fha-lowers-owner-occupancy-requirements-for-condos. All the best!

Condo Move In Fees Create Budget Excess!

J.G. from Illinois writes:

I’ve tried submitting this blog question online, but I keep getting an error message saying I didn’t enter the “recaptcha” correctly.  It’s just a check box, so I’m not sure what I’m doing wrong.  I hope you’ll consider this question for your blog. We’re trying to determine the proper treatment of fees collected that are outside the normal monthly assessments.  We have a move-in fee and occasionally collect late fees for monthly assessments.

Our condo rules state:

“There is a $500.00 fee for moving in that is non-refundable to cover cleaning and future rekeying of the building. ”

Our condo declaration states:

“…the Board shall supply to all unit owners an itemized accounting of the common expenses for the preceding year actually incurred and paid, together with a tabulation of the amounts collected pursuant to the budget or assessments, and showing the net excess or deficit of income over expenditures plus reserves.  Any amount accumulated in excess of the amount required for actual expenses and reserves shall be credited … to the next monthly installments due…”

The IL Condo Act gives the Board the right to determine how to distribute excess as long as it’s not prescribed in the condo documents.

We’re expecting an excess this year due to a large number of unit turnovers.   Are we obligated to credit this to the owners?  Or, can we move any excess to reserves since it wasn’t “collected pursuant to the budget” (i.e. not part of the budget that all owners paid assessments for)? Thanks for any advice, opinions, or references!

Mister Condo replies:

J.G., I am sorry if the “recaptcha” tripped you up and I am glad that you emailed me instead. The “recaptcha” is needed due to deter the large amount of attempted SPAM that used to flood the website. Thank you for your vigilance. I am neither and attorney nor an expert in Illinois condo law so please accept my advice as friendly and not legal. For a legal opinion, you should contact a local attorney who specializes in community association law. At face value, I would say that you should return any monies that were over-collected before simply depositing them to the Reserve Fund. This would be in keeping with the spirit and intention of the law which is to protect homeowners from paying more than needed or agreed to in their vote to approve the budget at the Annual Meeting. At the very least, I would offer the unit owners a vote on how to use those funds at next year’s Annual Meeting. Chances are, it isn’t such a large amount that you would get much pushback to moving the funds to the Reserve Fund where it can be used to protect all unit owners. I salute your thinking and commend you for increasing your Reserve Fund but my advice is to follow the spirit and intention of the law and even your own governing documents so that no init owner can cry foul and demand their money back. All the best!

Two for One: Condo Parking Space Rental

A.Z. from Brooklyn, NY writes:

Dear Mister Condo,

I have a condo in Brooklyn. The condo has parking spot. I believe it is in my deed. Do I have the right to rent my parking spot? Thank you.

AND

E.P. from outside of Connecticut writes:

Dear Mister Condo,

I need your help. I live in 3-unit condo. The condo is self-managed. I have a parking space, which belongs to me but I do not have a car. My neighbor, who doesn’t live in our condo, is parking his car in my parking space with my permission. One of our neighbors, who lives in our condo said, that this is an unauthorized car and it should be removed. May I allow to parking any car on my parking lot if it is a part of my property? Thank you!

Mister Condo replies:

A.Z. and E.P., unless your association governing documents prevent it (many do, especially in high-density urban markets, so be sure you check your governing documents), you may have the right to rent your space. The reason many associations ban parking space rental is that it can create a potential problem for the association who owns the parking lots. Technically, your parking space rental enterprise sets up business on the common grounds, which is generally prohibited. What happens if the renter decides to sue you if their car is damaged in the space. Who can you rent to? Will it be another owner or someone who is looking for long-term vehicle storage? Can the renter sue the association if there is a problem? Rather than set themselves up for possible problems like these, may associations simply deny the rental of parking spaces. Check your documents. Ask the Board or Property Manager if you aren’t sure. Don’t be surprised if the answer is “no”. Good luck!