E.K. from outside of Connecticut writes:
Dear Mister Condo,
Our small 4-family has some residents who do most of the chores voluntarily. Snow removal, cleaning of stairwells, taking in and out trash, book keeping, and bidding and supervising special projects have all long been done by volunteers. Unfortunately, only 2 households are ever willing to take on any of this work and it is requiring between four and six hours per month to handle these tasks.
All households unanimously voted to approve a system where we could deduct an agreed upon hourly rate for time spent on behalf of the condo. I am now meant to take over the books (which will require some more hours!)… Is there a legal way to manage this, if good records are kept and all parties agree? Can we treat this like a credit or a deduction or are we basically turning this into a job that requires IRS forms and such.
If this wouldn’t work, can you suggest other ways we could build a system that fairly allows some folks to not pitch in and others to save the building a lot of money by doing it themselves without the current imbalances that tend to cause tension among neighbors?
Mister Condo replies:
E.K., you have stumbled upon a very grey area of small condo ownership and management. Paying residents in any way, shape, or form opens the door to a great many potential problems, the least of which is your compliance with tax laws and the IRS. Let’s start at the beginning and talk it through.
Your condominium is a non-profit corporation. As such, you are required to file forms every year with the IRS, even if no income is produced (which is typical for a smaller condo like yours). Once the non-profit corporation gets into the business of hiring workers (even unit owners who are hired to perform the work on the property or keeping the books) the corporation now becomes an employer and needs to comply with state and federal employment laws. If these workers are treated as contractors and perform services that exceed $1200 per year, which means issuing tax statements so they can claim that taxable income on their own tax return. Since the association is employing people, it is also taking on additional risk and should consult with the association’s insurance provider to make sure the association is covered. For instance, if a unit owner’s “job” is to remove snow and they lose a hand in the snow blower, the association has liability. Yikes!
A more reasonable approach might be to look at your governing documents and see what they say about handling the day-to-day business of the association. For the most part, associations are run by volunteer leaders from within the association for those tasks they can easily handle and outside vendors are hired to perform the “work” of the association. Of course, these vendors need to be insured and licensed to keep association risk minimized. The typical challenge in a small association like yours is cost. No one wants to see their common fees raised to handle “jobs” they can do themselves. While this works for many associations, this is not correct and it creates potential liabilities and, as was your case, disquiet amongst residents who can tire of always cutting the grass, or always picking up after their neighbors who litter in the hall or having to give up four or more hours per month to pay the bills and keep the books.
My best recommendation for you is to speak to a local community association lawyer about what other communities in your situation are doing to deal with these issues. My guess is that they are either on an “all volunteer” method or they have elected to hire professionals to do the work and raised their common fees accordingly. Once you start paying yourselves for the work, you have violated the spirit of the governing documents and set the stage for true legal problems down the road. All the best!