Category Archives: Common Fees

Condo Money Dries Up, Irrigation Sprinklers Turned Off!

G.O. from outside of Connecticut writes:

Dear Mister Condo,

My condo association decided to turn off the sprinklers because they went over budget with other maintenance. Now I am losing valuable plants that I’ve put in over the years. Can they do this?

Mister Condo replies:

G.O., I am sorry that you are losing your plants and I am sorry that your condo association has decided to save money be turning off the sprinkler irrigation system. As the democratically elected leaders of the association, the Board often finds itself in a difficult position when it comes to managing the association’s finances, especially when those finances are tight. I am guessing that the underlying problem here is common fees that are too low. There really isn’t any other reason that a maintenance project should cause a deficit to something as basic as operating a sprinkler system. The short answer is that, yes, they can make the decision. As a unit owner, you can petition the Board to rescind that decision but there may simply be no money to operate the sprinkler. Ideally, you will encourage them to raise the common fees so there is enough money in the budget for the Board to fulfill all of its duties and provide all of the services unit owners expect. Good luck!

Condo Board Depletes Reserves Without Plan for Replacement

K.C. from Long Island, NY writes:

Dear Mister Condo,

I live in a 40-unit condo community in Suffolk County, Long Island that was built 8 years ago. The sponsor upon his departure left $25,000.00 in Reserves with the recommendation that we continue to increase our Reserves to $35,000. Our present Board recently depleted all Reserves for the rehabbing of the wood on 2 buildings. According to our By Laws, the Reserves are to be used for roofs, roads, curbs, bulkhead. Living in an area susceptible to storms, floods and hurricanes – this makes me extremely nervous. Is there a source I can go to for laws & information on HOA Reserves for NY condos?

Mister Condo replies:

K.C., you are right to be concerned about how the Board is using the Reserve Fund and any of the association’s resources. A substantial Reserve Fund, or lack thereof, is often the difference between success and failure in condominium communities like yours. Unfortunately, the state of New York has been largely silent on the issue, leaving unit owners such as you, to review the association’s governance documents to make a determination as to what, if any, provisions exist that require the association to conduct and maintain a proper Reserve Study and to then properly fund the Reserve Fund so that the unit owners are protected against future maintenance costs which will surely arrive. When the community is not prepared for those expenses, unit owners get his with Special Assessments and/or increased common fees to carry the debt created by an HOA loan used to fund the repairs. It is truly a “pay me now or pay me later” scenario for unit owners. My best advice is for you to review your governance documents and see what they say. Most allude to having a Reserve Fund but few have a required contribution. You may suggest the association adopt a Reserve Fund annual contribution either based on a Reserve Study or even 10% of revenues collected. This will require an increase to common fees but it will help the association survive in the years ahead. You might also suggest the association hire a Reserve Study specialist who can best advise the association of how to plan ahead and save now for tomorrow’s known expenses. It might be an additional expense to the association today but it will provide great peace of mind and fiscal stability to the association in the future. All the best!

Neglected Condo Roof is Only the Tip of This Problem

M.L. from Massachusetts writes:

Dear Mister Condo,

I’m in a condo association of two just outside Boston. We split common expenses 60(upstairs)/40(me). We need a new roof and upstairs neighbors are stalling and finally admitted they don’t have the money. This repair is long overdue and I am concerned that deferring could lead to damage. What are my options?

Mister Condo replies:

M.L., I am sorry for your problem. 2-unit condos like yours can be the perfect arrangement for some and a horror show for others. Your situation, I am afraid, is a bit of a horror show. I am not a lawyer and offer no legal advice here. However, I suggest you speak with an attorney from your area to see what other legal remedies you might have available to you. Your only real option, in my opinion, is to sue the other owner. But that won’t necessarily solve your problem seeing as you already know they don’t have the money. The truth is they can’t afford to live in this condo since they can’t shoulder the financial burden of doing so. In my opinion, your best bet is to sell and leave this problem to someone else. If you wish to fight the good fight and stay, you can either live with the problem roof or you can begin a lawsuit that will likely end in them losing their home through foreclosure and might still not get you the new roof you need. That is a very ugly, complicated, and nightmarish way to live for the next year or two that this would take to unfold. If it were me, I’d put my unit up for sale and spend my time and energy elsewhere. Good luck!

Condo’s Underfunded Reserve Creates Many Problems

C.R. from outside of Connecticut writes:

Dear Mister Condo,

I live in a condo building with 58 units. There are zero adornments except for a very nice meeting room. We have two elevators which travel eleven floors up and down. I am currently serving on the board. Our Reserve fund is at 18K which in my eyes is very low. We will need a major elevator repair in a few years and increasing insurance as well as a rooftop service plan. We have decided to increase HOA dues 15% = $3000. more each month or 20% increase equaling an extra $4000. per month. We want to propose this to our residents and are working on a plan. Currently, there are a few things that need addressing (i.e. a new awning, a better gardener and washing the windows). We do not feel we can do these things with such a low Reserve. We have had many leak and flooding issues some handled by insurance some not. Can you offer any advice?

Mister Condo replies:

C.R., I feel your pain. When it comes to long-range planning and proper funding a Reserve Plan and a commitment to fund the suggested amounts of Reserves is a commitment taken on by the community (through the Board) are always the best solution to problems like yours. However, as many as 7 out of 10 associations decided to underfund or completely fail to fund their Reserve Fund, leaving them in the same precarious situation you now find yourself in. You have answered your question by suggesting that it is time to increase common fees and fund the Reserve. It may also be time to consider a community association loan to make the more urgent repairs. Neither of these options are going to be popular with the unit owners as both will cost them an increase to their monthly fees. Many Board members who wish to continue serving on the Board will be afraid of upsetting their constituents by suggesting an increase to the common fees but that is what needs to be done. How you handle it will determine your success. I suggest an open dialogue with all unit owners. Explain the problem and the proposed solution. It may be a bitter pill for them to swallow but it is the only way to keep their investment properly protected and financially secure. Good luck!

Condo Owner Suffers 9 Years Without Kitchen Hot Water!

K.D. from outside of Connecticut writes:

Dear Mister Condo,

I have no hot water pressure in my kitchen. It is a building problem for several units and is on the “to do” list. I have asked about getting a reduced HOA fee as I am not receiving the same amenities as other condo owners. This has gone on for 9 years!!! Whenever I bring it up they assure me it is the next priority. Can I put my HOA payments in an escrow account until the problem is fixed?

Mister Condo replies:

K.D., I am sorry for your problems and your Board’s ineffective management of the repair. No, you cannot withhold your common fees or the Board can foreclose on your unit for unpaid fees over time. What you can do is sue the association for not providing the hot water. Ultimately, that will get you the hot water, which is what you really want here. Saving money on the common fees doesn’t help. Hot water will fulfill your expectation of what the association is supposed to provide. 9 years is far too long to wait. Speak to an attorney and see what you can do to get a lawsuit against the Board in place. They will likely find it less expensive to get your hot water running than to defend against a suit. Good luck!

How Does the Condo Know How Much to Keep in Reserves?

B.B. from outside of Connecticut writes:

Dear Mister Condo,

What is a good process to determine the amount to be kept in reserves and set assessments?

Mister Condo replies:

B.B., there is only one tried and tested process to determine the amount to be kept in Reserves and set assessments and that is the implementation and adherence to a Reserve Study. There are many companies that specialize in this service but associations that wish to save money and have the confidence they can do it right can even do it themselves. The concept is simple. The minute the first common element is added to the association, it begins to age and decay. Some go quickly, some take decades, they will all need to be replaced and have a known useful life. The Reserve Study looks at the cost of the common elements and uses a formula to determine the likely cost at the age of replacement. Obviously, it cannot be an exact number but I think you will find these studies, when performed properly, are surprisingly accurate. Once the study is performed, a funding plan is put in place. As long as the funding plan is adhered to, there should always be enough money in the Reserve fund to handle these known upcoming expenses as they come do. Additionally, the association benefits from accruing interest on these funds which tend to help offset inflation. I wish you and your association the wisdom of Solomon in determining and adhering to your Reserve Study findings. Good luck!

No Formal Condo Association Leads to Informal Roof Problem

M.L. from outside of Connecticut writes:

Dear Mister Condo,

I own a condo in a converted 1860-era house. I have the first floor and upstairs neighbor has 2nd and 3rd. We don’t have a formal association. We just split shared expenses 60/40 (I’m 40). It has worked fine but now there is an issue. We desperately need a new roof. But they keep stalling and finally have come clean that they don’t have the money. What recourse do I have?

Mister Condo replies:

M.L., if you have a condo agreement as part of your purchase agreement, you have a formal association. You and your fellow owner just haven’t been following it, which is fairly common in your two-unit condo. You are about to learn first-hand what happens when one of the unit owners doesn’t have the money for the needed repair and it isn’t pretty. The short-term answer is that unless these folks agree to pony up the money for the new roof, you’re not going to get a new roof. The long-term solution is that you will likely need to sue in order to get them to pay. Since they aren’t likely to do that, they may need to look into other options like mortgaging (unlikely) or selling (ideal). This could take years and you still won’t have a new roof until a new buyer is found who is willing to not only buy their portion of the condo but also pony up 60% of the expense of a new roof. One other option you may have is for you to pay for the new roof and hit them up with a lien for their portion of the roof. You will need an attorney to draw up the papers, which will have to be in compliance with your condo’s governing documents as well. As you can see, this is a most unfortunate event for all involved. There is one other option I didn’t mention and that is for you to sell and make this someone else’s problem. I don’t know if that is an option for you but I wouldn’t hesitate for a minute to get out of this potential money pit if given the opportunity. All the best!

Condo Board Seeks Solution to No Money for the New Roof

P.B. from Hartford County writes:

Dear Mister Condo,

My Board wants to get a new roof. They set up a meeting for owners to vote on whether to take a 250K loan or not. At the meeting an attorney hired by the board to do the closing showed up and was practically running the meeting and trying to convince owners to give approval for the loan. I objected on the grounds that it was a conflict of interest to have the attorney there running the meeting since no vote was taken and not enough owners showed up for the meeting. Now the attorney instructed the board to go door to door to get proxies filled out. Is that ok?

Mister Condo replies:

P.B., not only is that OK, it may be the only way to get the necessary votes for the loan so the new roof can be purchased. HOA loans or Special Assessments are rarely needed by community associations that plan for the future and build a proper level of Reserves to handle something as common as a roof replacement. But, as is too often the case, the desire to keep common fees low wins the battle for fiscal responsibility. The end result is no money in the Reserves when needed. In this case, the Board has decided to seek out an HOA loan. The reason the attorney is needed is that it is very common that the association’s governing documents do not allow for the Board to take out a loan on behalf of the association. The proxy votes are the Board’s attempt to get the authority to negotiate the loan and obligate the association to the repayment of the loan, which is required from the bank before the loan is granted. As you can see, it often plays out as a comedy of errors before the final vote is taken and the money is loaned. The real question is how will you support the association moving forward? Will you be the one to suggest that common fees are raised 15%, 20%, 25% higher than they are right now? Will you be the one to insist that the association build a proper Reserve Fund and that Reserve Study be conducted so that a proper level of funding can be achieved? Without support for the unit owners, the Board’s hands are tied. If you need a new roof, the money will need to come from somewhere and that somewhere is the unit owners. Whether it comes in the form of a loan, a Special Assessment, an increase in common fees or a combination of any of the three, the unit owners will pay. Good luck!

Condo Management Company Charging Statement fee to Unit Owners

M.N. from New Haven County writes:

Dear Mister Condo,

My condo association recently hired a new management company. For the first time in history I was late on a monthly HOA fee and was charged a late fee of $15 and a statement fee of $5. The management company nicely waived the late fee since my check crossed in the mail but refused to waive the statement fee. I told them I want to opt-out of paper statements and they told me they only mail statements. Is it lawful to charge me $5.00 per statement?

Mister Condo replies:

M.N, yes, it is lawful for them to charge you a statement fee. The Board hired the new management company and should have been made aware of the fees and practices of the firm. The late fee was waived but that would have gone to the association’s coiffeurs. The statement fee goes directly to the management company and is a cost of doing business with them that your Board agreed to. If you are unhappy, you need to complain to the Board and ask them to either renegotiate with the management company to have the statement fee removed (unlikely) or find a management company that doesn’t charge a statement fee when their contract comes up for renewal. Or you could just pay the $5.00 statement fee and realize that it is part of how this management company collects its revenues from your association. All the best!

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!