R.F. from New Haven County writes:
Dear Mister Condo,
I am a member of the Board of Directors for my association for 6 years. There are 135 homeowners in 32 buildings plus a clubhouse. The buildings’ ages are from 30-36 years built with exterior wood clapboard. The repair, prep, material and painting are on a 12-year cycle. This is the 3rd year for a “special assessment”. There is a conflict as to the definition of a “special assessment” which is targeted for only “capital expenditures” which include building prep labor, material, and painting. There are BOD members that are not supporting the assessment with painting included. Additionally, the “special assessment” also includes a new roadway and new street lighting fixtures and installation.
Additionally, can emergency new roofing or repairs can be added along with emergency plumbing issues, walkway and sidewalk replacements, street signs, drainage gutter replacement, chimney caps installations and tree maintenance which is a huge $20,000 expenditure line item? Also, the association is spread over 15 acres and landscaping and snow plowing is a combined $85-90K annual budget. Can this be also placed in “capital improvements”? Finally, can clubhouse improvements and expansion along with swimming pool maintenance be included as a capital expenditure and added to “special assessments”?
Mister Condo replies:
R.F., thank you for your 6 years of Board service. It would appear that your association is facing the same kinds of challenges that many older condo associations are facing, namely that not nearly enough money was raised and set aside over the years to cover the maintenance and improvements that are now surfacing. Capital Improvements and Special Assessments are not the same thing and you would do well to make sure that these various projects are labeled correctly so that the Board doesn’t find itself having to walk back either because they called it the wrong thing. Your documents likely detail the maintenance items the association is responsible for, typically the common elements (such as paved roads, parking lot, clubhouse, pool, trees, landscape, building exteriors). Ideally, these items are budgeted for in advance and common fees are large enough to include an adequate contribution to the Reserve Fund so that the money is available to maintain these known upcoming expenses.
Special Assessments can occur for a variety of reasons. Basically, they occur when the Board determines that there just isn’t enough money in a particular budget to perform work or improvements that are either needed or wanted. Many older associations have a bad habit of “deferring maintenance” when there isn’t enough money to perform the work required. This is a short-term fix but a long-term nightmare. When current unit owners get hit with a Special Assessment, they are largely unhappy. This is because they are paying their common fees and don’t understand why there isn’t enough money to pay for items that they thought were budgeted for. When you hit unit owners with Special Assessments year after year, they get downright ornery. I am guessing the Board isn’t too happy about it either and you are already seeing some Board members reject the idea of spending money based on the requirement that the money be raised by Special Assessment.The lack of available funds needs to be addressed. It is very likely that the common fees are far too low for your association and that they will need to be raised significantly this year and subsequent years if the association is to get back on solid financial footing. This isn’t popular with unit owners but it is what is likely required to right a sinking ship. The reward for the increased common fees will be a stop to the Special Assessments, which may also need to continue until enough money is raised. A Reserve Study would be an excellent investment for the community as well. It clearly identifies the common elements and acts as a guide for the Board to determining how to properly fund the Reserves. It is a long road ahead, but it should have a happy ending. All the best!