Category Archives: Financial

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 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!

Fairness of Condo Common Fees Questioned

A.L. from Hartford County writes:

Dear Mister Condo,

Mr. Condo, how should HOA fees be calculated in a condo association in the State of Connecticut? Is it fair that everyone pay the same fee every month even if all the units are not the same size?

Mister Condo replies:

A.L., common fees are typically defined in the condo governing documents and usually are derived using the percentage of unit ownership formula which does take square footage into consideration. However, neither the state nor the governing documents require the use of this formula and there are many other perfectly legitimate methods of determining common fees. The only universal rule is that the governing documents dictate the formula and that formula can only be changed by very strict rules for doing so. It is extremely uncommon for the formula to be changed and typically requires a full consent vote of the unit owners and, many times, even the mortgage holders of the units. Some of the other factors that I have seen that determine common fee allotment include: water-view versus non-water-view, top floors versus middle and bottom floor units in a high-rise, and end units versus middle units. Some associations like yours use a simple “everyone pays the same” common fee, which may not be fair, but is certainly not illegal and is well known before anyone purchases into the association. There isn’t too much you can do about it, A.L., as changing the common fee schedule is a major legislative ordeal. You can talk to your Board but I doubt you will see things change. Good luck!

Rules for Condo Special Assessment

R.F. from Connecticut writes:

Dear Mister Condo,

In Connecticut, can a special assessment be levied, with a vote by homeowners to paint buildings, repair buildings, labor and material? Can the Board of directors create a special assessment, by vote from homeowners for capital improvements which is patently a capital expense?

Mister Condo replies:

R.F., the rules for levying special assessments are determined by a few things, including the association’s own rules and state law. If the homeowners were allowed to vote, then, typically, the assessment would be deemed valid. Of course, all of the rules for giving proper notice of the vote would have to have been followed and all of the rules for conducting the vote would have to have also been followed. It sounds to me like that is what happened. The underlying issue is why was there a need for a special assessment for a capital expense that has likely been known about for years. You might want to suggest the Board conduct a Reserve Study and then present a plan for funding the Reserve fund so future capital expenses can be paid for out of Reserves and not via special assessment. All the best!

Previous Condo Trustee Allowed Unit Owner Delinquency to Go Unchecked!

M.C. from Middlesex County writes:

Dear Mister Condo,

Our trustee just sold her unit making me the new trustee. After she left, I found out one of the Unit owners wasn’t paying their HOA fees and that the former trustee had used funds I put in the Reserve Fund for my share of assessments to front for them. We were about to hold off on a planned assessment because of this when the city slapped us with a fine so now we have to move forward or rack up more fines! I asked a lawyer for a consultation hoping he could give us some advice on how to proceed and he practically laughed me off the phone saying the situation wasn’t worth a lawyer. But the unit owners still aren’t paying and the city is expecting us to move forward with the assessment! What do we do?

Mister Condo replies:

M.C., for starters, you get a new lawyer! I don’t know of any lawyer committed to community association law that would “laugh you off the phone” for such a potentially serious and clearly legal matter. You have three very separate matters to attend to here. The city slapping you with a fine is likely your biggest fish to fry. Get your association in compliance with the city so no further fines result. The city likely has powers to make your life quite uncomfortable depending on the nature of the offense. If they find your buildings are uninhabitable due to a safety issue, they could actually forbid people from living in your units. You certainly don’t want that and I am hoping that the fine is for something easily remedied. If a Special Assessment is needed to bring the association into compliance with the city’s requirements, it may be time to levy that assessment. Be sure you do so in accordance with your association’s governance documents and state law. Second, you need to take legal action against the unit owner in arrears as allowed by your governing documents. Typically, this is the work of an attorney or collection agency. Do not take matters into your own hands. Collections is a delicate and legal process best handled by professionals. Collection efforts may even lead to a foreclosure action by the association against the unit owner in arrears. This is not a matter to be taken lightly. Finally, the previous Trustee has acted inappropriately and, perhaps, even illegally. The decision to let another unit owner to forego paying assessments was very likely outside the scope of their authority. At the very least, it was a dereliction of duty. An attorney can best advise you if it is worth seeking criminal or civil charges against the previous trustee in an attempt to collect the delinquent common fees. Once you get all of these problems behind you, M.C., you can focus on running the association like a business, as it was intended to be. Good luck!

Condo Grease Trap Back-up Leaves Unit Owner Footing Amelioration Costs

K.K. from Illinois writes:

Dear Mister Condo,

My condo sustained water damage from a backup in the sink drain line shared by three units, in a three-story building. My unit is on the first floor, and when the exterior grease trap backed up, water was forced up through my kitchen sink and into the unit. I was out of town at the time, and by my return there was a significant amount of water, slime and mold in the unit. The amelioration bill was $2,300. My insurer covers everything except this, and the condo board refuses to file a claim with the association’s insurer. Also, this happened before to the previous owner of my unit, and to other first floor units. Doesn’t the association have the responsibility to file a claim rather than deny responsibility? The condo is in Illinois.

Mister Condo replies:

K.K., they don’t necessarily have to file a claim but they are likely still responsible for the damage seeing as it was caused by a common element. Your homeowner’s insurance is always your first line of defense and it looks like they paid for the worst of the damage. If your association is refusing to file a claim or pay for the amelioration, it may be time to seek the advice of an attorney. Personally, I would file a suit (most likely Small Claims although I don’t know what your local laws dictate for a $2300 claim). If the association doesn’t want to file a claim, they don’t have to. However, if they are liable, they still have to make you whole. I am sure finding your condo water damaged was stressful enough. Getting the association to pay for the amelioration shouldn’t be. Good luck!

Condo Antenna Lease Renewal Quandary

E.M. from outside of Connecticut writes:

Dear Mister Condo,

We are looking for an advisor to help us understand the market value of an antenna lease we have with a major carrier. Sadly, the lease revenue is being used to offset operating expenses and not just going to build reserves. Therefore, the homeowners have become used to this “operating subsidy”. The long-term contract with the carrier will soon expire and we need guidance. Any ideas for resources?

Mister Condo replies:

E.M., utilities such as renewing or changing carriers for services like an antenna lease are the purview of the Board. The use of the lease revenue to help fund the Reserve Fund is noble but not likely required. If a previous Board diverted the lease revenue from the Reserve Fund in to the Operating Fund the current Board can take steps to remedy that. However, if there is a desire to keep common fees lower by using the revenue for the Operating Fund, there may be little motivation for the Board to make the switch back. Concerned Unit Owners like you can ask the Board to make the switch. As for renewing the antenna lease itself, the Board does have a few options depending on the competition for services in your market. Their best bet would be to see what their options are and solicit bids, just like they do for any other service they buy on behalf of the association. Good luck!

Common Fees Continue After Condo Unit Fire Damage

E.J. from outside of Connecticut writes:

Dear Mister Condo,

We recently purchased a foreclosed unit. Just prior to the foreclosure being finalized the unit was badly damaged in a fire, originating from the unit below. There is damage to our unit which is being repaired. Am I correct in assuming that the condo fees will abate until the unit is habitable?

Mister Condo replies:

E.J., I am sorry to say that you are not correct. I am sorry that you have suffered a loss in the form of fire damage but that is what insurance is for. Common fees continue unless the Board has decided it will not rebuild the unit (unusual). Your common fees pay for far more than just your unit. All of the common grounds are maintained, reserve funds are built, and all of the day-to-day expenses of property management and maintenance continue. Your common fees are part of the pooled common fees that pay for all of these expenses. Should you elect not to pay them, the association is then forced to pursue you for collection, up to and including, foreclosure on your property. You certainly don’t want that to happen. You should continue to pay your common fees and encourage the association to get your unit in good working order as quickly as possible. Good luck!

Outside Condo Stairway Being Treated as Unit Owner Responsibility

J.L. from outside of Connecticut writes:

Dear Mister Condo,

I just received a letter stating that I have to replace the rug on the outside stairway of a four-unit condo. The building has a first-floor landing and stairs that go to the two second floor units that are in open air under the building roof. Isn’t the stairway considered a common area?

Mister Condo replies:

J.L., generally speaking, any shared portion of a condominium such as an externa staircase as you have described would be considered a common element, owned by the association. But, just because you and I think it should be a common element, small condos like yours often come with unusual wording in the condo documents which might cast some doubt as to who owns what. You need to look at the condo documents and see if the staircase is described as part of your unit or a common element. If the documents are unclear as to the ownership of the stairs, you would do well to question the cost of the carpet replacement. You might wish to hire an attorney to review your documents and give you a proper legal opinion. I would certainly push back before simply paying for the carpet. Good luck!

Small Condo; Big Governance Problem!

J.P. from Florida writes:

Dear Mister Condo,

I live in a small condo association in Florida. While being a new owner, I have noticed that the whole board and the running of the property is out of control. The President has been in place for several years as I can tell since no one else wanted to be on the board. It is a 55+ community. He also put himself as the property manager. The budget is less than $100K, so no property management company is required. He does not pay any HOA fees as he says that is in lieu of his property manager position. The association never voted for this, he just took this over on his own. He bullies the owners who are old and some do not speak good English. When he gets mad at you, he is very vindictive and knocks on people’s doors late at night. This guy is in his 70’s and a heavy drinker. I voted myself onto the board recently as Treasurer to have a voice and he has yet to hand over the books, check writing, etc. Many people believe he is hiding stuff and he now refuses to answer his door or calls from me. He feels threatened and believes I will expose what he has been doing the past 5 years or so. What do you recommend the best course of action to get control of the situation? I have spoken to the association’s lawyer who says to file a complaint with the state (Florida), I plan to do so in hopes of getting the ball rolling to have him removed. We also have cameras throughout the property which he installed but he is the only one who has control of them as it is set up in his unit. Many people feel uncomfortable as he watches all day and approaches people when they get home. I have to assume that is not legal as when we ask to see a clip he does not allow it. As you can see this place is a mess and would be happy to hear any suggestions you may have before I contact the state. Thank you for your advice.

Mister Condo replies:

J.P., there is very little that I can add before you contact the state, which I hope you have already done. The association attorney can only do as much as the association (the Board) instructs him or her to do. You do need to review your governance documents (or have the attorney review them for you) to see what steps will be necessary to remove the President from office and from the Board. If funds are missing or misappropriated, there may very well be criminal charges as well. Right off the bat, I can tell you that the association should go after the unpaid common fees. Board members are not exempt from common fees and unless there is some kind of formal agreement between the President and the Association for him to serve as a paid Property Manager, he will have to make good on those unpaid fees as well as any late fees. Shame on your fellow unit owners who took no action until now. From what you have said, this behavior has been going on for years. Who knows what financial perils this person has brought upon the association. What about other Board members? Are there none? This situation stinks to high heaven and you are correct to pursue a remedy for you and all of the other unit owners are at serious financial risk as long as this individual has the association checkbook. The time for action is now. Good luck!