Tag Archives: Common Fees

Condo Association Not Paying Bills!

H.F. from Hartford County writes:

Dear Mister Condo,

Help! My condo association is not paying its bills! What can be done?

Mister Condo replies:

H.F., that is shocking! If your condo association is unable to pay its bills, it is likely a sign of a very large problem. The annual budget should take into account all of the likely expenses for the year and offset that expense with common fees and assessments if needed. If many unit owners default on their common fee or assessment payments, the association could find itself out of money when the bills come due. That can lead to many problems for the association, especially if a vendor sues the association. A court of law could order the association into receivership, where a court-appointed receiver (usually an attorney) takes over the finances of the association and will issue assessments and take other actions to get the association back on solid financial footing. Let’s hope it doesn’t come to that. Ask to see the books of the association and see if you can figure out what has gone wrong. Encourage the Board to raise the funds they need to pay their bills. The alternatives are dire. Good luck!

Condo Owner Seeks Association Employee Salary Info

D.U. from outside of Connecticut writes:

Dear Mister Condo,

Can a condo owner demand or file freedom of information form to see how much the maintenance people are paid, that work for the management company? Their salaries are set by the condo association in their budget. I know they are paid well and receiving hefty bonus payments twice a year.

Mister Condo replies:

D.U., This is a question I get quite often. You can see some of my previous replies here: http://askmistercondo.com/?s=salaries I can understand your curiosity about how much employees of the association are making, especially since their salaries are paid by you and your fellow unit owner through your common fee contributions. However, I would liken it to the same way your tax dollars pay for municipal employees. Just as municipal employees are employed by the city, association employees are employed by the association and under the purview of the Board. You do have access to the budget, which details certain expenses of the association, including salaries and benefits. Your democratically elected Board of Directors is keeping an eye on the details for you and they do know what the employees are making, including bonuses. They most likely have their reasons for doing so (competitive pay, rewards for work done, etc). You can ask for these records but unless your documents specifically give you the power to review individual salaries, I doubt you will get it. May I ask what you will do with that information? As a unit owner, you have no power to pay employees less or alter their bonuses. If you have an issue with how the Board is handling the salaries and bonuses, you should take it up with them. Ask them how they decide when to offer bonuses. If you are satisfied with their answers, you’re all set. If you don’t like their answers, you are free to vote for other candidates for the Board or run for the Board yourself. I hope that helps.

HOA Board Ain’t Fixin’ Nuttin!

R.M. from outside of Connecticut writes:

Dear Mister Condo,

4 months ago, I purchased a duplex which has 3 buildings and 6 owners. I had a hard time getting documents during the sale and did not understand the dynamics involved. The first email I got from the treasurer was on the day the fees were due. Our first meeting when I met the other owners was a nightmare. The president has been in position for 20 years and has Alzheimer’s so her daughter had appointed herself to the position. The treasurer was appointed by her, not vote, and the secretary had been behind 6 months in fees which they were trying to cover up. When I brought up concerns about the outside of our building, I was yelled at by the President’s son-in-law and told “we ain’t fixing nuttin, we got no money!” Then my neighbor brought up a repair not done properly and he stood up screaming and swearing at her and everyone started fighting. I asked for the bylaws and I was told by the president to find them myself. She doesn’t have them.

A few weeks ago, the fascia that needed repair was hanging off of my roof. I called the president and son in law started screaming and threatening me and said we have no money to fix it. I mentioned the Reserves that we should have had when I moved in, and both him and the treasurer admitted it was fudged to make the sale happen and accused my realtor of fraud. I had her call them and the next day the son-in-law apologized and paid out of pocket to have the fascia repaired.

They had previously called a special meeting to discuss the budget so I told them I did not want the son-in-law there as he has no business there; they agreed. The meeting started off ok until we brought up questions about missing payments from a couple of owners. We started getting bullied again. When the argument was brought up about the fascia I defended myself telling what the son-in-law said to me. He came running down the stairs screaming and swearing and threatening me again and threw me out of his mother-in-law’s house. I called the police.

I want to have the President, Treasurer, and Secretary removed by law for keeping false books, hostile environment, favoritism, harassment and negligence. If I have solid proof (which I do), will I be able to charge the association for the attorney since it’s in the best interest of the owners? It’s the board who caused all of these problems.

Mister Condo replies:

R.M., your tale of woe reads like a comedy of errors. I am glad you got your fascia replaced but the rest of this tale is a nightmare! This is a small homeowner’s association (6 units if I understood your opening statement). Small associations face the same challenges as larger associations but have far fewer resources to handle the issues. A functioning Board is a good start but there are legal remedies available to you. I want to ask you about your own purchase into this association. Did you use an attorney? Did the attorney review the governance documents? They can’t go missing as they are part of the closing process. Of course, if you somehow waived your right to these critical documents in an eagerness to make the purchase, you are experiencing a major case of “Buyer Beware!” It sounds to me like there is awful lot of impropriety going on here. You need to speak with an attorney, which I am not. I offer friendly advice; an attorney will offer you legal advice. You may end up suing the association, individual officers, anyone else associated with these misdeeds in an attempt to get the association back on sound footing. By the way, 6 owners don’t guarantee deep enough pockets to do that. In fact, you may be throwing good money after bad in an attempt to correct this problem. Your attorney can better advise you if you can include your own legal fees in any litigation but winning the litigation is just the beginning. You need to collect from these folks, who clearly don’t have the money from what you have told me. If it were me, I think I would try to sell and cut my losses. Otherwise, be ready to deal with an ongoing problem for months and even years to come. Keep the police on speed dial because these folks clearly have no idea what they are supposed to be doing and will likely continue doing what they have always done. Good luck!

Condo Developer Transition Litigation Nightmare

N.P. from outside of Connecticut writes:

Dear Mister Condo,

I am in a large condo association that was in litigation with the developer when I purchased many years ago. We were never told of the litigation, and strangely enough had no problem getting our mortgage, which was not the case with many potential buyers from what I have been told. Over the years, the board, which is a veiled one, never fully disclosed the extent of the deficiencies until 6 years after the litigation ended. Now every member has been told we will be assessed potentially over $60,000! (They have not done bids yet for the work.) The board will not allow us to see a cost breakdown as to how the engineering company got to this amount. The property manager has also said that in times of litigation open meetings are not required even to ratify any binding action. The minutes of open meetings cannot be accessed because this management company has said anything before their time (3 management companies in 7 years) is missing. To top it off, there was a recent election in which the property manager was bad mouthing certain people running as write-ins to people just turning in their proxies. Faced with this huge looming bill, I am feel like this community is in huge trouble. I fear numerous foreclosures and the association going belly up! What can we do?!

Mister Condo replies:

N.P., I am truly sorry for your situation. The developer transition period is a unique time in an association’s history and it is a time that requires all unit owners to be wide-eyed, leery, and as well-represented as possible. I have written numerous columns on the subject which you can read by following this link: http://askmistercondo.com/?s=developer+transition

I would love to say that your situation is unique but that is hardly the case. The dollar amount in question is unusually high but I have heard of worse, especially when the transparency is lacking between the developer and unit owners. It is not too late to take corrective actions but the underlying financial damage is likely to remain and perhaps intensify if the association needs to take legal action against the developer. Here is what I would recommend you and your fellow unit owners do to protect yourselves.

First and foremost, speak with a qualified community association attorney (NOT the Developer’s Attorney!). You need legal guidance here and each state has its own version of condominium and incorporation acts that will likely come into play. Construction defect lawsuits are not uncommon, can be very expensive, and tricky to pursue. However, money invested in a construction defect lawsuit that may yield millions for the association is money well spent, in my opinion.

You need to understand which phase of developer transition your community is in. Has the developer relinquished governance of the association to the Board or is the Board only functioning as outlined in the development stage, meaning the developer still has large control of the Board? If the developer is no longer in control, different rules apply. This is another discussion to have with your community association attorney. If the Board is in full charge of governing the community, it is also likely time for a new management company as the one originally in place had the best interests of the developer in mind and not necessarily the unit owners. From what you have described, this management company is working for the developer, not the association. 3 management companies in 7 years is not a good thing. Be sure to thoroughly interview thoroughly to make sure the next management company is a better fit for the association.

Finally, consider selling before it gets any worse. This is going to be an expensive and drawn out process. If you don’t have the constitution for it, get out while you can and consider moving into another condo without these problems. Even if you talk a loss to sell your unit, you may be coming out ahead of a $60K special assessment and who knows what else if a legal battle ensues. When money is needed from a community association there is only one source: the unit owners. You might just do better to cut your losses and move on. Good luck!

When Do Monthly Condo Common Fees Begin?

G. from outside of Connecticut writes:

Dear Mister Condo,

Good Day, Mister Condo! Do I need to pay monthly dues even if I sign the certificate of acceptance but have complained (fixture of toilet bowl is not working)? I don’t have a key yet but I have signed an agreement. What will I do?

Mister Condo replies:

G., I am sorry for your situation. Quite honestly, your best bet would have been to not sign any contract until the unit was in good working order and to your liking. Once you have signed the agreement to purchase the unit, you are on the hook for the common fees that accrue from that day forward. So, even if the toilet bowl isn’t working properly, you still have to pay your common fees. If you don’t, the association will be forced to take collection actions against you which can be quite costly. You don’t want that to happen. Pay your fees and work with the association to get your toilet fixed. Hopefully, you’ll be able to enjoy your new unit once that repair is made. All the best!

Condo Audit Requirement Law

A.B. from New Haven County writes:

Dear Mister Condo,

Are there any CT states law that require audits be performed on Condominiums?

Mister Condo replies:

A.B., in Connecticut, I am aware of no such law. Some states, like New Jersey, do require audits at certain intervals as a matter of law. It should be noted that all audits are not created equal so even if there were an audit requirement, it would have to be detailed as to what was being audited and how often. Depending on the amount of money in play, an audit is a prudent decision as it provides relative confidence that no association funds are being pilfered. However, since Connecticut is home to so many smaller associations, an audit might be an unnecessary expense and truly unnecessary. If the Board is doing a good job of keeping an eye on the money as to income and expense, an audit might be one more useful tool. If the Board suspects there is money that has gone missing, an audit would be a great way to get some clues as to where the money has gone. I hope that helps.

Delinquency Usually Leads to Collection Action by the Condo Association

R.A. from Fairfield County writes:

Dear Mister Condo,

I was previously 3 months delinquent on my common charges with no assessments and the condo association attorneys told me that I had to pay a total of $2000 dollars in order not to go into foreclosure. It seems to me that I am being extorted for money and I am on disability. The reason the attorney said I had to pay the $2000 dollars was for title search, legal letters and other fees that I do not understand. My delinquent fees are only $690 and they are trying to tact $2000 on top of that fee. My HOA dues are $230 a month. I was also told by the management Company that I could not talk to the Board because the matter was out of their hands and I had to deal with them or their attorneys. Being an owner in a condo I know I have rights other than to do nothing. I have been paying my common charges with an extra $100 dollars to put toward the delinquent balance. I know I’m being taken advantage of, can you please help me? Thank you.

Mister Condo replies:

R.A., you most certainly do have rights as a condo owner but not paying your common fees is not one of them. I am sorry you find yourself in this position but what choice does the association have? For the three months that you were delinquent, all of the bills of the association were still paid. Your insurance, your grounds keeping, your maintenance, your unit management, all of this and more were still paid. By not paying your fees on time, you triggered a legal action against yourself. The association turned the matter over to the collections folks (the attorney) and they did what they do which is take steps to insure the association gets paid. In this case, that meant lots of legal fees. While I appreciate that you may face special challenges as a disabled person, I am sure you know there are certain expenses of owning a condo that are recurring monthly – mortgage, common fees, utilities. If you don’t pay your mortgage or utilities, what happens? The bank can take your home or the utilities will turn off your supply. It is the same with common fees. I am sure you will always pay them on time in the future so this may just be an expensive lesson in why. You should speak with the collection folks about your $100 per month repayment schedule to make sure it is acceptable. Ideally, you would just pay off what you owe and be done with it. If you feel your rights as a homeowner were violated, you should most definitely speak with an attorney. I am not a lawyer so I cannot offer you any legal advice on the matter. From what you have told me, you were treated the same as any other delinquent homeowner would be treated. Good luck!

Condo Executive Board Deferring Common Fees as Payment for Service!

B.D. from outside of Connecticut writes:

Dear Mister Condo,

 

Our Executive Board of 5 members has about 80% of their monthly HOA fees deferred as compensation for their time spent working on Association issues. Their contention is that 1099’s need not be issued because the Association is a nonprofit entity as defined by IRS regulations. I believe that is incorrect and that they each should have received a 1099, declared the income, and paid whatever taxes were due to the State and Federal Government. I researched the question and found some information from the National Council of Nonprofits that suggests 1099s should have been issued, but the particular circumstance they cite has to do with charitable nonprofits. I don’t think that makes a difference, but would like clarification before I approach them with the information. Thank you for your time and expertise.

 

Mister Condo replies:

B.D., since I am neither an attorney nor an expert on IRS regulations regarding non-profit organizations, I cannot offer you a legal opinion on this issue. However, I will say it is tremendously unusual for any individual to receive tax-free income from any source and would not likely stand up to the scrutiny of an audit by the IRS. Further, do your governing documents allow for compensation to Board Members? Most condominium association by-laws forbid compensation of any kind to Board Members as it is a voluntary service, meaning the volunteers seek election and then volunteer their time on the Board. If your Board has taken it upon itself to claim compensation for their volunteer efforts, the association may have a legal case to take action against them and have all monies paid to the Board Members returned to the association. Taking funds improperly from the association is theft and punishable with fines and/or jail. It is most definitely time to speak to a qualified attorney from your state to discuss how your Board has decided to conduct business. If laws have been broken, they need to be thrown off the Board and charged accordingly. At the very least, they should return any money they have received in compensation for their voluntary service. Good luck!

Condo Owner Seeks Access to Reserve Study

G.H. from Fairfield County writes:

Dear Mister Condo,

Is the most recent Reserve Study that the BOD uses to determine owner’s monthly contribution to the HOA reserve fund one of the business documents that any owner has the right to review and/or have a copy of?

Mister Condo replies:

G.H., as a shareholder in the corporation, you have the right to review any and all official records of the association. The Reserve Study is prepared for the association at the Board’s request. Unlike Minutes of a meeting, it is not created by the association but, rather, for the Board to be used as a guide to make sure the proper level of Reserves is being collected to keep the association fiscally sound as the years go by and the common elements deteriorate. It can be argued that since it is a tool for the Board and not an actual record of the Board, it may not be freely available to association members. However, if you request a copy (at your expense), I would think most Boards would allow it. There may be a record inspection fee and there might also be a “per page” copy fee. Reserve studies can be lengthy so it could get a little pricy. Do you know what firm performed the study? You might be able to request an electronic copy of the document which would save you both time and money. If you are fully denied access to the document, you might want to speak with an attorney and see if there is any other way to compel the document from the association. I might also ask you why you need it. If you trust the sitting Board members to properly care for the association’s fiscal needs, the Reserve study is simply a tool to help them do so. Your annual budget, which you most certainly have a right to inspect, will show you what they are doing with that information. I would guess a healthy Reserve Fund contribution would be somewhere around 30% of common fees. If the Board is simply using a 10% number, then it is likely they are following FHA guidelines and not the Reserve Study. Kudos to you for paying attention. Most condo owners simply submit their common fees and hope for the best. Good luck!

Condo Developer Transition Turmoil

S.C. from Litchfield County writes:

Dear Mister Condo,

Our Board does nothing. No communication, they don’t respond to our questions very well, they are not transparent when they communicate among each other (which is not too often) and my biggest beef, they refuse to fix our crumbling infrastructure (roads, outside siding, fascia boards, etc.). It’s one delay, one excuse after another and this has been going on for almost 3 years. Money is tight, they do not properly fund our community yet they are raising the dues and still operating with a negative balance. No one on the board lives here full-time and the president and one other member work for the developer. Clearly, their priorities are not in sync with the homeowners. Most residents will not say a word for fear of being the bad one or simply a case of extreme apathy. I want to round up the troops and have all the board members (well, 3 out of 4) removed. Having been the president of the association and property manager, I have plenty of experience.  I do not know what kind of reaction I will get but I do know there will be some support. Any response from you would be great and I look forward to it. Thank you.

Mister Condo replies:

S.C., I am sorry that your condo Board is not performing to your expectations. However, from what you have told me, the association is still under developer control so the Board truly has limited power during this time period. Once control is handed over to the association, things will change because no one will be beholden to the developer. The association governs itself and many of the items you discuss can be addressed through democratic elections of interested and able volunteers. Now, if the developer has broken covenants with the owners and you think a lawsuit is in order, you might want to discuss your situation with an attorney. However, new owners like you describe may not go along with spending money to sue the developer so you may just need to wait until the developer transition period is complete. If I have misread your letter and the developer transition is already complete, you simply need to elect new leaders for your community. You will need volunteers ready, able, and willing to serve. They will need training and support. You should also consider hiring a community association attorney verse in developer transition, and accountant, and a property manager if needed. The developer’s team was there to support the developer, not the community association. Getting the right folks in place is vitally important to your association’s success. Your local CAI Chapter can help you find the resources you need. Visit http://caict.org to learn more. Good luck!