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Condo Board Liability for Underfunding the Reserve Fund

G.H. from outside of Connecticut writes:

Dear Mister Condo,

What are the recommended best practices for boards to abide by when deciding whether, or not, to adjust annual Reserve Fund contributions to take inflation and interest on reserves into account? Is there any liability assumed by a Board if they do not take these two factors into account when finalizing the annual budget and establishing the HOA’s contribution to its’ reserve fund?

Mister Condo replies:

G.H., there are several states that have enacted legislation to force associations to use Reserve Studies and to adjust their common fee contributions to keep the Reserve Fund at adequate levels. A list of these states can be found at the CAI website at https://www.caionline.org/Advocacy/StateAdvocacy/PriorityIssues/ReserveStudy/Pages/default.aspx. So, if you live in California, Delaware, Hawaii, Nevada, Oregon, Utah, or Virginia, your association is required, by law, to have a Reserve Study in place. The page also lists Washington State as having a statute that “encourages”, not “requires” a Reserve Study to assist the Board in determining the appropriate level of common fees for an association. Even if you don’t live in state where it is mandated, Reserve Studies are vital tools for associations to know that they are following the Best Practices and sound business judgment in running their associations. I am not aware of any liability assumed by the Board for not taking inflation or interest into account when determining Reserve Fund contributions but a well thought out Reserve Study would certainly do so. In other words, if there were $100,000 needed to replace the common elements in 20 years and only $100,000 were budgeted to do so, factors like inflation and interest would likely make that number too low when the time came to actually make the expenditure to replace the common element. On the other hand, a well-funded Reserve Fund can actually offset some of the interest expense by being invested in a reasonably liquid asset, such as a CD. Hope that helps!

Change Needed in Condo Leadership

C.C. from New Jersey writes:

Dear Mister Condo,

Do you know of any condominium law in the state of NJ that would limit a single person holding the same position on the board as president for many, many years? The power is being monopolized and we need a change!!

Mister Condo replies:

C.C., the power to change the Board is in your hands! Board members, including the President, are elected by the unit owners. You simply need to vote new people in to office and the old ones go away. What happens far too many times is that the association is unable to produce new volunteers to serve on the Board. Guess what happens then? The folks who have been serving continue to serve, regardless of whether they do a great job or a terrible job! If you want to see a change in leadership, you need to take action. You may need to volunteer your own time to serve on the Board. You will certainly need to convince your fellow unit owners to also serve and to support new candidates in elections. Otherwise, you will keep getting what you’ve been getting. Good luck!

Who Pays for New HOA Parking Area?

R.W. from outside of Connecticut writes:

Dear Mister Condo,

We have three towers in our development with three separate HOA’s. However, there are some common items shared such as parking and entry gates. Have you ever determined what causes most parking problems? Number of condos/owners? Number of bedrooms? Square footage? Our development does not allow rental for less than a year. Therefore, we have no short-term rental parking issues. However, with 66 total units, we only have 96 parking spaces/garages. The garages are deeded owned units, the other parking has been on a “first come first served” basis. Two of the towers have 25 units and our building only has 16 units. All our units have deeded garages, the other two buildings have unit owners without a garage. We are trying to establish the best manner to distribute the cost of adding additional parking for the three-unit complex. Should we assign cost based on number of units, number of bedrooms, square footage, or is there any reference you can provide for other distributions of cost of similar problems.

Mister Condo replies:

R.W., the only thing consistent about parking woes at condos and HOAs across the country are too many cars per unit. It is not uncommon for there to be only one parking space per unit. Combined with a garage or a reasonable amount of Guest Parking, that usually does the trick. But, wait, Unit 17’s son and his wife have just moved in with the owner of Unit 17 and now there are three cars instead of one assigned to that unit. And then another unit is rented to a family with three cars, and so on it goes until the parking lot is at capacity and residents have nowhere to park. This scenario plays out time and time again at condos and HOAs. The only real solution is to have a strong and enforceable parking program. As for the cost of any additional parking, the formula is typically to follow the percentage of unit ownership formula for all units. If the three-unit complex is its own HOA, then the cost is born by the unit owners according to the formula. However, if the parking lot is owned by the Master Association (you mentioned shared parking), then the cost may be split out using the Master Association formula. It really depends on how your governance documents read. If you haven’t already done so, this is a great time to get the opinion of the association attorney on the matter. All the best!

Small Condo Board Can’t Get Along!

R.G. from Litchfield County writes:

Dear Mister Condo,

The President of our 3-unit condo would like to go virtual! He no longer wants to have regular meetings and would like to do everything completely by email, with a 24-hour period for responses. Although he claims it is because of lack of civility on everyone else’s part, besides his own, this man is even ruder in emails! My question, however, is on the legality of voting and holding meeting by email. Our by-laws do not mention this as they were first enacted in 1986. What other ways would you suggest our board holds meeting so that there is accountability and respect for all. We have come up with having a mediator and meeting in a more public place. Both were rejected by this man; the first was too expensive, the second, not private enough. We are at our wits end!

Mister Condo replies:

R.G., it is hard to imagine that such a small community would have this type of trouble. 3 units requires that three unit owners sit down monthly or less frequently if the by-laws allow, and take care of association business. There may be no provision for using email or any other form of communication that didn’t exist back in 1986 but that doesn’t mean that the association can’t adopt it, provided no state laws are being violated. The larger issue is that all parties need to agree to this “virtual” meeting and records must be kept as these meetings are official business of the association. Additionally, there will need to be Minutes from these meetings that serve as permanent record of the items discussed and voted upon. In a small association like yours, that sounds like a lot of work. The mediator idea is valid and may make sense to get the association out of its dysfunctional phase and back on track. Ultimately, the three unit owners should find a way to work together to handle the business of the association. You can disagree but not be disagreeable. I am guessing the mediator will help with that process. Good luck!

Condo Bylaws Call for All Cars to be in “Good Working Order” but According to Who?

J.Z. from outside of Connecticut writes:

Dear Mister Condo,

I own a condo and two deeded outdoor parking spots. My car was in an accident and the condo board is telling me I’m not allowed parking my car in my own spot because it is not in good working condition. Apparently, this is in the building’s bylaws. The car is not severely damaged and is not leaking fluids. It does not pose a security risk to other owners. They gave me 48 hours to comply or they have threatened to tow it. Can they do that? What are my rights?

Mister Condo replies:

J.Z., I am sorry your car was in an accident. Unless your documents spell out what “good working order” is, you have plenty of wiggle room here. That being said, you do need to be mindful of the condo documents and ask yourself if you would want to see other damaged cars allowed on the property. It is a sticky wicket for the Board, at best. If you are going to have the car repaired, why not take it to the shop sooner rather than later? That way you’ll get your car back and the Board will have nothing to complain about. Even though it is your parking space, the lot is owned by the association and under the authority of the Board. It is up to them to enforce the rules. If they do tow your car and you end up taking them to court, you are going to get into an argument over what “good working order” means. Your definition of “not leaking fluids” or “posing a security risk” may not be enough. If the car is visible damaged, that may be all that is needed for the Board to prevail. Best to get the car off of association-owned grounds as soon as you can. Good luck!

Condo Maintenance Standards vs. By-Laws

J.J. from New Haven County writes:

Dear Mister Condo,

I have heard that maintenance standards overrides the bylaws. If so, what is stopping associations from just putting in what they want rather than changing the bylaws, which is very costly?

Mister Condo replies:

J.J., maintenance standards are generally enacted to ensure the community association insurance policies will protect the unit owners. Maintenance standards, or rather lack of, makes the association particularly vulnerable to damage caused by items that commonly wear quickly. Water supply hoses and water heaters come to mind. When either fail, tremendous damage can ensue. Without maintenance standards in place, the association could find itself uninsured for the liability. That being said these standards are still introduced and voted upon by either the Board or the full membership of the association before they are put in place. By-laws cover so many other areas of association governance that it is hardly fair to put them in the same category as maintenance standards. You couldn’t simply make a rule about something like “use of the clubhouse” and call it a maintenance standard. That would be a by-law change. Other associations feel that maintenance standards are important enough to actually create a by-law change. Either way, unit owners are bound to these standards once they are properly adopted. It is in the best interest of all association members that these standards are in place and enforced. All the best!

Do All Buildings in a Condo Have to Match?

M.K. from outside of Connecticut writes:

Dear Mister Condo,

We are replacing siding, roofs and doing repairs to buildings with structural problems in our condo. In our association, we have condos that face a busy street and others that face a forested area. We all have walls on our deck that will be removed. We were originally told that we would have frosted glass used to replace the walls. We have now been told we will have only metal railing. Those of facing the street are going to lose most of their privacy.

It was suggested we install the metal railings on the units facing the forested area and frosted glass on the units facing the busy street. All the buildings facing the street would be uniform in appearance and all the units facing the forested area would be uniform in appearance. We are now told that cannot be done because all buildings in the association have to match each other.

We have the funds to use the frosted glass but the board thinks we should install a security gate instead. There has never been a security gate here. I’m all for a security gate, but do not want to lose my privacy.

Do all buildings in a condo association have to match exactly?

Mister Condo replies:

M.K., the term architectural compliance is the standard that most associations use to determine what is and isn’t acceptable when it comes to any modifications within the association. Most association simply rebuild whatever they had when the time comes for replacement. Your association is contemplating a change and with that change comes more questions than answers as you are seeing first-hand. I doubt that there is anything in your condo governing documents that states “all buildings have to match each other”. However, that doesn’t mean that they should be altered too much from how they were originally built either. In fact, making some changes will require a consenting vote from wither a majority or supermajority of unit owners depending on how your governing documents allow. There is also the question of common, limited common, or unit owner responsibility for the new railings and frosted glass. My guess is that all will be common elements owned and maintained by the association. When the Board struggles with issues like this, it is my experience that a legal opinion can be quite invaluable so no costly mistakes are made. The community association attorney can advise you of the right way to go about making these changes so that no single unit owner can come back and challenge the decisions made. This is going to be an expensive project so why not dot your I’s and cross you T’s? My guess is you will get the finished product the association members are expecting and desiring. Good luck!

Condo Cleaning Contractor Petitions Unit Owners

B.B. from outside of Connecticut writes:

Dear Mister Condo,

Hello Mister Condo! Our Condo Board has a service contract with a cleaning contractor to provide cleaning services for our condo properties. The service contract has been uncontested for 15 years. One full-time on-site contract employee has been the same person for 15 years, the other part-time employee has not served as long. There has been an increase in complaints about the cleanliness of the properties, and after requesting a copy of the service agreement from the Property Manager, the Board realized the staff is not addressing all the tasks included on their contracted weekly schedule. The lead staff person is a nice person, and the President of the Board makes excuses for his not addressing his weekly schedule, by using snow, heavy rains, equipment breakdowns, unit owner issues, etc. as the reason. Complaints about housekeeping started to be mentioned at the monthly Board Meetings, and letters were written to the Property Management Office, which prompted a Housekeeping Committee to be created and a walk-through to be conducted of the properties. A revised cleaning schedule was recommended.

The President of the Board and Property Manager do not wish to change vendors as it would disrupt their schedules, and the Property Manager would be required to be on-site more often. The cleaning staff have become an extension of property management, and share responsibilities with the sole part-time maintenance employee, with maintenance tasks, plumbing, heating, issuance of parking passes, passing out flyers, etc. All the while, the properties are not being cleaned. Somehow, after much debate, we are now at a point where we are now entertaining new proposals from competitive cleaning contractors, of which the President of the Board is trying to diminish or do away with. The existing contractor has also been given the opportunity to revise their contract to put together a more realistic job description for their staff.

One week before the Board is to review the competitive bids for a revised or new cleaning service, the contract cleaning staff took it upon themselves to go door to door and camp out in the building lobbies, requesting signatures from unit owners to retain their services! What Unit Owner would feel comfortable not signing this petition? In the meantime, they are still not fulfilling their cleaning contract work schedule and their effort is minimal at best. Five Board Members have signed their petition, which means they are settling for mediocre services because they don’t want these employees to lose their jobs. In the meantime, the employees are stubbornly refusing to fulfill their work contract because they feel they have the support of the President of the Board and the Property Manager.

What does one do in this situation? What do you recommend? Some Board Members will not challenge the existing President, who is a bully. The cleaning staff are taking their lead from the President of the Board. They feel they have his support. This is more than frustrating. All we want is a clean building with staff that respect their positions and do their work. Property Management work is much more appealing than the actual cleaning that is required. Thank you for your time.

Mister Condo replies:

B.B., this is an unfortunate situation but not uncommon. Ultimately, the Property Manager and the cleaning service report to the Board. If the Board is unwilling to correct their behavior then nothing is going to change. Unit owners control who serves on the Board, including the President. If the Board is underperforming, it is time to vote in some fresh blood who will act in the best interest of the unit owners, and the unit owners only. A new Board may also wish to select a new Property Manager when the contract comes up for renewal, especially if the current Property Manager is underperforming as you have suggested. Of course, all this takes a willingness to serve from folks like yourself who are fed up with how thing s are being handled. If no new volunteers come forward, things are unlikely to change. Good luck!

No Common Fees Collected on Condo Unit for Six Years!

J.D. from New York writes:

Dear Mister Condo,

In New York, is there a statute of limitations applicable to a condominium where the entity claiming to be the holdover of the mortgage note has three times, without success, sought to hold a public sale? Now, more than six years have passed since the last payment was made (to a bank no longer in existence, having been absorbed into another bank, which – in turn – was merged by the federal government into the entity which has unsuccessfully thrice attempted a public sale). If such statute of limitations exists – would it be found in the CPLR, GOL, or some other statute, rule or regulation?

Mister Condo replies:

J.D., I can only hope this association has had some legal guidance from a qualified attorney during this lengthy period. I am not an attorney so I cannot offer any legal advice in this column. I am not sure how an entity can claim to be a mortgage note holder without providing some type of documentation. The Civil Practice Laws and Rules (CPLR) and General Obligation Law (GOL) may be a great place to start but I would also suggest that the association has a lien on the property enforced by the New York Condominium Act and that whoever owns the unit is liable for the back common fees as provided in the law. An attorney may have also advised that the association foreclose on the unit for unpaid fees due to the association. Clearly, this unit needs to be liquidated one way or another and the association needs to have a dues-paying unit owner using the unit as soon as possible. That may mean taking a write-off but it should get things back on track. Consult with a locally qualified attorney to see what your options are. All the best!

Delinquent in Assessments But Still on the Condo Board

M.K. from Fairfield County writes:

Dear Mister Condo,

Can members be on the Board who are delinquent in common charges or are in foreclosure?

Mister Condo replies:

M.K., unless the community association governance documents state otherwise, the answer is “yes”. However, unless there are no other candidates for their Board position, there is no reason the association members shouldn’t seek a member in good standing with the association to serve when the next election cycle comes up. Unit owners would be foolish to continue to elect any unit owner delinquent to the association for any reason. How can they expect that this individual will uphold the rules and regulations of the association when some of those rules are aimed at collection activity against the sitting Board member? There are some governing documents that preclude members not in good standing to serve on the Board but that is the exception and not the rule in my experience. Check your documents and see what yours say. And get ready with a replacement candidate for the next election. All the best!