Monthly Archives: March 2018

Can A Group of Condo Owners Lend Money to the Association?

G.H. from Middlesex County writes:

Dear Mister Condo,

Can an owner loan the association money?

We were in the midst of estimated $6k repairs to the exterior of the building when one of our Unit owners put their unit on the market. The contractor indicated the problem was more severe than they initially thought and advised us to contact insurance. Insurance sent an adjuster. Meanwhile, our unit owners got antsy and got a second contractor’s quote for $9k. Since we had $12k in the bank, the trustees agreed to proceed with the repairs figuring that if we got paid by insurance, great, if not we decided we would do a special assessment. The contractor removed some drywall from the interior of the “for sale” unit and wants to fix that and other areas in a phase 2 which he estimates at $6k. So, at this point we don’t have the money but the unit owners want the repairs made and have offered to loan the condo association money to just get it done now. Is there a way to do that? The repairs would likely need to be made down the road at any rate…

Mister Condo replies:

G.H., the association’s ability to borrow money from anyone – a bank, a group of owners, whatever, is defined in the condo’s governing documents. If the documents are silent on the subject (many are) then the Board needs to adopt a resolution that allows the association to borrow money. Further, the unit owners need to ratify that resolution with a vote that satisfied the requirement for amending the documents. Sometimes it requires more than a simple majority so take a look at your documents to determine if the Board has the authority to borrow money on behalf of the association. The next question becomes one of competitiveness and convenience. Let’s assume that the Board can borrow the money. Why would they go to a group of unit owners versus a bank? How much interest is involved? If it is such a low amount of money and a Special Assessment is planned any way, why not just levy the Special Assessment and be done with it? If the association can’t raise the money to pay back the unit owners, what then? Will they withhold their common fees until they are paid? Borrowing from unit owners may be convenient but it opens up the association to a lot of risk and a potential nightmare down the road. If it were me, I would simply issue the Special Assessment and be done with it. Also, the trustees getting antsy shouldn’t have triggered all of this confusion. They had already hired a contractor. Getting a second opinion after the fact may not have been such a good business practice. Is the first contractor suing the association for reneging on the contract? Then, you could end up paying twice for the work. Protecting the association from such liability is the primary role of the Board. Practicing good fiscal policy is equally important. I question some of the decisions they are making here and would suggest they would benefit from important Board Member training. “Condo Inc.”, offered by the local chapter of CAI, would be a great start. All the best!

Frequency of Condo Book Audit

L.L. from Litchfield County writes:

Dear Mister Condo,

How often should a condo complex’s books be audited? When they are audited, is the Board required to advise the owners that one has taken place and what the outcome was? Many thanks.

Mister Condo replies:

L.L., unless your condo documents require that the association conduct an annual or periodic audit, there is currently no legal requirement to have one performed in our state. That being said, many associations choose to have their records audited every three to five years or any time there is suspicion of funds gone missing. Larger associations are more vulnerable just because there is so much more money available to be pilfered. Many smaller associations will not take on the expense of having an outside CPA firm conduct an audit because there just enough money to be worth auditing. If the money coming in and the money going out look to be in good order, that is enough for most small and mid-sized associations. Larger associations almost always conduct annual or every other year audits because the cost of the audit far outweighs the risk of having a large amount of money stolen. One of the best people to ask is your Association Treasurer. In theory, this officer looks at the association’s cash on hand and savings and reconciles it with bank statements each month. They would be the first to see a problem. If money goes missing or the Treasurer suggest an audit, I would heed the call and get one done. There are several CPA firms here in Connecticut that specialize in auditing the books for condominiums and HOAs. I strongly recommend that use one of these firms with specific industry expertise to assist you in your audit. All the best!

Condo Board Members Vote by Email; Changes Vote After the Fact

D.L. from Fairfield County writes:

Dear Mister Condo,

Dear Mr. Condo – I am a unit owner in a 26-unit condominium. The Board of Directors voted unanimously via email to hire a contractor to perform emergency work due to the flooding of a unit by a renter.

Approximately two (2) days after the vote the Secretary notified the Management Company and the Board that she was changing her vote after speaking to the homeowner whose renter caused the water damage, as his contractor was the one not agreed to be hired.

As a result of the vote change, the President, one of only three (3) directors resigned and there are only two (2) directors (less than a quorum) remaining on the board.

I have the following three (3) questions:

1. Does the original internet vote stand?

2. The annual meeting is coming up on June 21st. Can that meeting take place without a quorum?

3. If the annual meeting cannot take place due to the lack of a quorum, what is the process by which the unit owners can call a meeting to elect a new board and adopt the annual budget?

Mister Condo replies:

D.L., Wow! You have a lot if issues at your condo, don’t you? If the internet vote was legal, meaning the association has allowed for the Board to vote by email, then the vote was valid. Unless your by-laws allow for Board members to change their vote after the fact (highly unlikely) then the vote should have stood, regardless of who resigned after the vote. That being said, there is the issue of practicality and what can actually be done now that the Board has fallen apart. The concept of quorum is an important one and you need to look at your governing documents and state law to determine when a quorum is achieved and what happens when the quorum is not achieved. Keep in mind that a quorum for an Annual Meeting is far different than a quorum for a Board meeting. As long as you achieve quorum at your Annual Meeting, you can simply elect new Board Members to fill the vacancies. With only 26 units, you have the added challenge of finding interested candidates. If quorum is not achieved, typically the previous year’s budget continues in place until next year’s Annual Meeting. The remaining Board members typically have the power to appoint directors to fill vacancies if warranted. If there is no quorum requirement for the Board, the existing members can serve out their terms and run for reelection when the time comes. Your question demonstrates some of the challenges faced by smaller associations. You have the same need for volunteers to serve on your Board but a much smaller pool of unit owners to choose from. I hope that you and few of your well-meaning neighbors will consider running for the Board at your next election. If it cannot wait until then, your condo documents very likely spell out the rules for calling a Special Meeting of Unit Owners. This is not that common but it can be done. My advice is to wait until your Annual Meeting and have a qualified and interested slate of candidates who will do a better job of running your association. Good luck!

Must the Landlord Furnish a Copy of the Lease to the Condo Board?

C.M. from New Haven County writes:

Dear Mister Condo,

Can a condo board ask for references from potential buyers or renters? Must a landlord furnish the lease to the board?

Mister Condo replies:

C.M., two very different topics there. Let’s start with the references from buyers or renters. Depending on what the by-laws say, the Board may be well within its right to ask for references, credit checks, and whatever else is in the by-laws. If the by-laws are silent, the Board may wish to pass some rules or new by-laws requiring these things if needed. Of course, the Board will need to follow the rules for adding such measures. The Board also needs to take care to make sure it isn’t using these rules to create a potential discrimination lawsuit from a buyer or renter who didn’t measure up in the Board’s opinion. I would certainly recommend any such rules be reviewed by the association’s attorney to make sure they are in compliance with any local, state, or federal housing laws.

The lease is a totally different matter. The Board certainly has a right (and a need) to know who is leasing a unit within the association. This is typically in most condo docs. It protects both the tenant and the landlord in the event there are any problems with the unit. Absentee landlords are common but the Board may need to communicate with the resident of the unit for a number of reasons. The landlord is typically obligated to provide a copy of the lease and can usually be fined or have their tenant removed if they don’t. Condo documents are legally binding on the landlord and enforcement of the association’s covenants is the duty of the Board. If a landlord refuses to provide a copy of the lease, there are several legal remedies available to the Board. Again, it is time to involve the association’s attorney if this happens. All the best!

Neighbor Damages Unit, Refuses to Pay for Repairs

L.W. from Fairfield County writes:

Dear Mister Condo,

A few months ago, a neighbor (a tenant – owner rents it out) attempted to make a change to the plumbing in his kitchen. It was done incorrectly, causing water to flow incessantly for several days into my garage which is below their kitchen. Water flowed all across the length of my ceiling (into the area where the air conditioning ducts are housed), and down the sides of the walls causing the sheet rock and insulation to be very soaked with water. I hired a painting and home improvement company who has done work for me and several others in this complex to get rid of all the water-soaked materials, and then to replace the materials once the area had time to dry out. It took them a several hours for several days to complete the work. It was done nicely, and I am satisfied with the work.

The problem is that the owner of the unit believes my contractor’s final price was too high – $750. I believe it was a fair and reasonable price. He is someone I trust, and he does good work. The owner paid half of that bill. I believe he should be the rest. He (by allowing his tenant to perform unlicensed plumbing work) endangered not only my unit, but those nearby. If I had not been home and noticed the leaking in my garage (the tenants were away for the week), the damage may have been disastrous.

Do you have any ideas on how to get this unit owner to pay the rest of the bill? I am considering Small Claims Court if he doesn’t pay within the next few weeks.

Mister Condo replies:

L.W., I am sorry for your problems. Typically, when a unit owner damages another owner’s unit, their insurance or even the association’s insurance is used to handle the repair of the damaged area. Since you took it upon yourself to handle the damage repair, you may be on the hook to collect from the other unit owner (or their insurance). Personally, I like your “take charge” common sense approach to getting the repair handled in timely fashion. However, now you may need to take your neighbor to Small Claims court to get your money back. Honestly, it sounds to me like you got an exceptional price for the work but your “shoot first, ask questions later” approach is receiving pushback from your neighbor. You might want to run the information past an attorney to see if you have a legal leg to stand on. Also, since the neighbor has already drawn a line in the sand at $375, you may need to ask yourself how much aggravation you are willing to suffer to recover the extra $375. You might just want to write this one off and pay attention to what happens the next time and hope that there isn’t a next time. All the best!

Condo Board Allows Unit Owner to Custom Landscape

J.B. from outside of Connecticut writes:

Dear Mister Condo,

One of our residents asked for permission to build a berm of trees and shrubs behind his home to help block noise. I say that is a common area and that the entire community should vote on this. The board granted permission. Are they correct in so doing?

Mister Condo replies:

J.B., unless your documents specifically limit the Board’s authority on its management of the common grounds, the Board was likely within its right to grant the permission. If your documents do not allow for the Board to do what they did, then you are right. However, in my experience, the Board is very likely empowered to make this type of decision. Without seeing your condo documents, I’m afraid I can’t offer more of an opinion than that. Take a look at the documents. If you think the Board has overstepped their authority, call them on it. Other than that, the Board was elected by the owners to handle the business of the association. Sounds to me like they did just that. All the best!

Can the HOA File for Bankruptcy?

X.Y. from New Jersey writes:

Dear Mister Condo,

Can an HOA file for bankruptcy in NJ? If the HOA has debts that the HOA cannot pay and keep the property properly maintained and operating? Because of a loophole in the law, a homeowner sued the HOA and lost, but the expenses were sufficient to defend.

Mister Condo replies:

X.Y., it is very unusual for an established HOA to file for bankruptcy, especially without first having the courts appoint a receiver for the association. The receiver would likely levy special assessments against the unit owners to make good on the debts of the association. Since I am neither an attorney nor an expert in New Jersey law regarding common interest communities, I can’t offer an opinion as to the legality of the bankruptcy filing. My guess is that there is no difference between an HOA or any other business filing bankruptcy. However, as I stated at my opening, it would be truly unusual. If the HOA fails to maintain the property it could be sued by a disgruntled unit owner or owners or, in some truly decrepit state of repair, could face condemnation from local authorities. Even that wouldn’t cause a bankruptcy but could force owners out of their units, which might lead to eventual bankruptcy. I am sure there are underlying issues that have set the association on this path. I highly recommend you seek legal advice from qualified local legal counsel before thinking of such a drastic measure. My guess is you will be advised against it and seek another method of satisfying the debts of the association. Good luck!

Plumbing Contractor Soaks Condo Unit Owner with Surprise Bill

J.C. from outside of Connecticut writes:

Dear Mister Condo,

I recently had a slow leak from a pipe in my ceiling. I own a lower unit and asked the condo association to send someone out to determine the source of the leak. It was determined that the leak came from the pipe coming off my hot water heater. I opted to have the repairs done by a private contractor. I later received an invoice from the contractor who investigated the leak for $1700 listing mold remediation as the cause for up charge. I am currently disputing the charges as I did not request remediation and I was not notified of the increased charge prior to the work being completed. I received a letter from the condo association demanding that I pay within 10 days as the master policy says that I am responsible for repairs of non-common areas up to $5k. My state’s home improvement commission suggested I file civil suit. Am I wrong in disputing the charge? Should I just pay the $1700?

Mister Condo replies:

J.C., I am sorry for your situation. I am not an attorney so I cannot offer legal advice here but I will offer you some friendly advice. If my state’s home improvement commission suggested that I file a civil suit, I would seek out the advice of a locally qualified attorney to investigate the practicality of such a suit. $1700 is a significant chuck of change and a lawsuit might make sense. On the flipside, if the money isn’t so precious to you, simply paying the balance due will make this problem go away. My other advice is that should you find yourself in a situation where you need to hire a contractor for any other work, get a full estimate in advance. You should never get a $1700 surprise at the end of the job. You hired this contractor (which assumes a contract was in place). If unauthorized work was performed, a lawsuit might just get you out of the extra money. However, protecting your home against mold is a great idea and proper procedure. You may have agreed to have the work done without explicitly getting a price. As they say, burn me once, shame on you. Burn me twice, shame on me. Enjoy your mold-free dry home!

Neighbor’s Children Ruining Condo Living Experience

S.F. from Florida writes:

Dear Mister Condo,

I live in a condo in Florida. We have 1 assigned parking space. However, the neighbors from hell have moved in with unruly children and company taking up the visitor spot in front of our building. They have visitor spots closer to their building but prefer ours because of the shade. Also, I have sent pics of their kids jumping from one a/c unit to the next and, again, these are in front of our building not their and right in front of my bedroom window which for some reason they like to play. I have a 6-year-old but I don’t allow her to go past our patio. I don’t understand. It’s like they play in front of other people’s window/building except their own. I only rent and wish I could up and move. But what are my options as far as them hogging the one visitor space in front of our building instead of the visitors in front of theirs and these unruly children. Help! I am a migraine sufferer.

Mister Condo replies:

S.F., I am sorry for your troubles. Unruly and poorly behaved children would be a difficult problem in any condo. Many associations are challenged by rules enforcement issues when it comes to children but your only recourse is to report the rule-breaking activity to the management company and Board so they can take corrective action. Parking is a separate issue but with a similar solution. If anyone is parking in a space assigned to another unit owner, they can be reported to the Board and dealt with by fines and/or towing as allowed by your by-laws. However, simply parking in a visitor space is not a violation. If the visitor space is up for grabs or “first come, first served”, there is nothing you can do to stop your neighbor from parking there, any more than they could prevent you from parking in a visitor space other than the one closest to your unit. As for the migraines caused or exacerbated by living with these in considerate neighbors, I would honestly consider renting somewhere else. Why stay in a unit where the neighbors are such a problem? I wish you all the best!

Music at the Condo Pool – Yes or No?

S.H. from Florida writes:

Dear Mister Condo,

Some people want music at pool others don’t. How do I settle this problem?

Mister Condo replies:

S.H., in these days of personal music as close as your cell phone and a pair of earphones, I would think that keeping the association out of the music business would be the wisest choice. That being said, if the association doesn’t take a stand on music being played at the association pool, the association runs the risk of individuals deciding to play their own choice of music on their own speakers poolside, possibly disturbing the unit owners who would prefer not to have music blaring at the pool. My personal recommendation would be to disallow any music played aloud at the pool but encourage folks to use personal music devices with headphones so they can enjoy whatever music they would like privately. Additionally, if the association approves such a rule, I would post signage poolside to help enforce the rule. All the best!