R.H. from Cook County, Illinois writes:
Dear Mister Condo,
I moved into a condo complex two years ago. At that time, the reserves were around $180K. I became the president of the board in January, 2019. I am now looking over financial records from 2015-2018. Our reserves went from $379,104 to 214,345 during that time. In 2015 there is only a record of 2 board meetings (One of them lasted 33 minutes). The reserves lost $110k that one year and the board opted to not increase HOA fees. The treasurer during that entire time was 1 person. He has clearly stated in board meetings he does not understand accounting. Lastly, XX Organization is a permanent member of the board because they own 33 units. Do I have any action I can take against the previous board for their clear failure to manage the building finances properly?
Mister Condo replies:
R.H., yes and no. Congrats on becoming Board President. That is an unusually fast ascent from new owner to Board President in one year’s time so I am guessing there weren’t a lot of folks eager in serving. You may have uncovered why. The good news is that there is always an audit trail from the financial institutions where the funds were kept. A withdrawal from a Reserve Fund is not uncommon, especially if a Reserve Fund item was recently maintained. Reserve Funds typically include roofs, pavement, siding, and many other common elements that wear down over time and will require replacement. Where did the money go? You’re claiming that roughly $165K is gone. Work with the bank to see what was paid. If the money went to a roofing contractor and there is a new roof to show for it, likely no harm, no foul. If the money went to XX Organization with no explanation why, it is likely time to get an attorney for the association and start a lawsuit to get the money back. The Community Association Institute has published a particularly good guide to prevent HOA fraud and embezzlement – https://www.caionline.org/HomeownerLeaders/ResourcesforResidents/Pages/Preventing-Fraud-and-Embezzlement.aspx I sincerely hope you will read it and take steps to prevent any further possible fraud or embezzlement at your association. That’s what a good Board President does! All the best!
Do an investigation and follow the money. Very easy to do. If the money was not used for capital improvement projects and was not transferred to the association’s bank account (which it should not have been) then you have a case.
Gather up your paper work and file a police report (get a report number) then contact your insurance company to make a claim (I hope you have a fidelity bond and theft insurance).
It happens.
Condominium story above is similar to ours. Except, director treasure highered a new property management company. During transition, she transferred the money into her own personal account. Now it was time to replace roofs all though it could have waited. well the money was Missing. since then hoa was raised 3 times & a special assessment was to be paid as well. I refuse to pay ASSESSMENT, NOW THEY WANT TO PUT A LIEN ON MY UNIT. MAYBE FORCLOSE. it’s my home it’s my investment. What do you suggest.
M., this is a tragic situation. The association should be pursuing the director for the stolen money. However, as you have seen, the Board can and has issued a special assessment which you must pay. Talk to the Board and work out a payment plan. They will place the lien and even have the ability to foreclose so, please, take this matter seriously. Good luck!
EVEN IF I PAID THE HOA MONTHLY WITH ALL THE Hoa hikes.
Yes, even if you are current on your HOA fees. The Special Assessment is a tool the Board uses to raise money when needed. All owners are liable for timely payment of the assessment.