Ask the Expert

Marjorie Jean Meyer, CMCA®, PCAM®
Vice President and National Director of Education and Certification
ASSOCIA

I enjoy your website and advice, and am hoping you can solve a dilemma for me.

My HOA is a private, non-profit corporation located in Michigan. As is typical of HOA's, our members apathy has led to many open positions on the Board of Directors.  Recently a very mature 16 year old submitted his candidacy for becoming a board member (Director), as our CCR's and bylaws do not prohibit minors or non owners.  The minor's name was on the election ballot and he won the board position.

However, one homeowner strongly objects, stating it is against the law (statute) for the minor to be on the board.  He claims expertise as a past member of the CAI and management of another HOA, and has threatened to invalidate the election ballot (and election) due to the minor's name being on it.

Since the Directors in our HOA can only discuss & vote - no legally binding issues, and our liability insurance will cover him, I see no reason why this go-getter cannot join and elicit some enthusiasm to our aging group.

I've searched online and could find no substantiation to the claim the minor cannot be a director on our board.  Can this young man legally be on our board in the state of Michigan? Thanks much!

- Karen

While I'm not aware of any particular state statute that precludes minors from serving on the board of a homeowners associations, I can tell you that, to my knowledge, the Community Associations Institute does not address this issues. Here's my "however", though -- there may very well be some limitations either in the Michigan Nonprofit Corporation Act (Act 162 of Michigan state statutes, which you can access through Association Times State Resources page) or in your association's Directors' and Officers' Liability insurance policy. I suggest you talk with your insurance agent as well as your association's legal counsel to ensure that the young man may legally serve his community as an elected leader.

If you determine that the either state law or insurance requirements limit board members to those 18 or 21 years of age or older, please encourage your young volunteer to serve on association committees (if permitted by your insurance company) until such time as he may legally serve on the board. You certainly want to encourage his desire to be actively involved in his community's operations -- good volunteers are sometimes hard to find!

Sincerely,

Margey

Our Homeowner's association which I served on in the past, contracts out our Lawn Maintenance and Snow Removal Services annually. Lawn Maintenance runs about $1000 per week (probably 20-25 weeks in a mowing season) and Snow removal in an average winter runs about $5000. One of the board of directors who own's his own business (though not a lawn care business), received the contract for lawn care and snow removal. Several of us are asking whether this represents a conflict of interest since the board member is trying to pad his income b/c his personally-owned business is slow in the summer. He gets two people to help and frankly does a less than professional job in twice the amount of time it has taken other professional lawn care services to complete, but the board doesn't seem to care. We have mentioned the conflict of interest to the president of the board and she almost appears offended that we would consider it as such... Thank you for your professional opinion in advance.

- G.

Please refer to the "Ask the Expert" Archives for detailed discussions regarding boards of directors' conflict of interest situations.

Sincerely,

Margey

We did, and the discussion wasn't clear to this matter... That is why we asked.

- G.

The February, March and May archived issues of Association Times' Ask the Expert" clearly address board member conflict of interest situations similar to yours.

Sincerely,

Margey

There are empty common areas in our building that are unused. The condo board has passed a law into effect that they can be sold and changed into limited common area. This was just recently released to the public (homeowners). A few of the board members have already taken ownership of these spaces, previous to the public announcement. Is this a conflict of interest?

- Ed

"Insider knowledge" as it may be called, can certainly be considered a conflict of interest. However, there are possibly other issues that may have been ignored in the process of passing the rule authorizing the sale/conversion of common areas. Check your Condominium Declaration/Master Deed and Bylaws for provisions that address the conversion or sale of common elements. Does the process require an affirmative vote of the owners? Does is mandate that all or most lenders and mortgage companies approve the sale or conversion before it can be implemented?

In addition, go to Association Times' State Resources page, then click on your state to investigate state statutes to determine if there are any provisions in the Condominium Act delineating a specific process by which to sell or convert common areas or limitations to such an action.

You might consider retaining the services of an attorney knowledgeable in your state's condominium laws and court cases that may impact the legality of your board's actions. A competent lawyer should be able to quickly advise you if the board's actions were appropriate and, if not, what recourse the owners have.

Sincerely,

Margey

Last meeting nominations were taken from the floor. Homeowner asked the board, "Who on the current board was running"? Board replied with "they didn't know". Is there a deadline on getting a name on the ballot?

- Sally Ann

The answers to your questions should be found in the Bylaws for your association. Typically, there are provisions in the Bylaws which detail the annual board election process including the deadline for accepting nominations. It's possible that candidates may be nominated from the floor at the annual meeting and immediately voted on.

Since I don't know if your reference to "last meeting" meant the last board meeting or the last annual meeting, I can't comment specifically on your situation. However, I encourage you to read your association's bylaws, and perhaps the Declaration, for the procedure in which new board members are elected.

Sincerely,

Margey

We are a VA condominium. Currently the board of directors holds an open forum at the beginning and the end of each board meeting. The first open forum is held before the meeting is called to order and is not included in the meeting minutes, the second open forum is held at the end of the meeting and before the meeting is adjourned and is included in the meeting minutes.

What are the rules concerning open forums? How many do we need to have and do they need to be included in the minutes?

- Denise D.

To ensure that I give you answers specific to the state of Virginia, I asked Mr. Scott Meardon, CEO of Community Group in Richmond (www.communitygroup.com) to help me out. According to Mr. Meardon, Section 55-79.75(D) of the Virginia Condominium Act defines "Meetings of unit owners' association and executive organs" and states:

Subject to reasonable rules adopted by the executive organ, the executive organ shall provide a designated period of time during a meeting to allow unit owners an opportunity to comment on any matter relating to the unit owners' association. During a meeting at which the agenda is limited to specific topics or at a special meeting, the executive organ may limit the comments of unit owners to the topics listed on the meeting agenda.

Community associations are a form of representative government, where the citizens (unit owners) elect representatives (board members) to represent their best interests in governing the affairs of the community. The purpose of the meetings of the board is to provide a working session for the elected board members to discuss issues and make decisions. Although unit owners may observe meetings of the board (except for executive sessions), they are not permitted to participate or otherwise interfere with the proceedings of the elected representatives. Open forums are provided by the board of directors as an opportunity for unit owners to address their community leaders and bring items to the attention of the board.

Common protocol for open forums include a requirement to sign a register requesting to address the board (and only allowing those who registered to speak) and limiting the amount of time the individual may address the board (usually three minutes, or a maximum of five minutes). Prior to responding to questions or issues raised by a unit owner during an open forum, the board may want to wait and discuss the issue during its subsequent meeting, place it on the agenda for the following meeting, or investigate the issue further.

Should open forums discussions be included in the Minutes? Not necessarily. The minutes are only required to reflect the actions and decisions of the board, not general discussions. An exception to this rule would be an issue that the board wanted to specifically be noted in the minutes or an item that was then addressed by the board during its meeting.

Sincerely,

Margey

I'm very delighted to find this website! I live in Maine. Better grab a snack & drink, here's a mouthful and then some:

We have a HOA (RA) with 28 households.  The Road Association is geographically and politically divided in half.  The board members enjoy approximately 51% of the membership's support - they are all friends.  The board's president wants to use his friend, the contractor, for roadwork. The friend quoted approximately $1K over what other contractors would charge.  The president all-out refused to obtain other bids.  The entire board supported this and tried to push a vote on us members to pay the assessments - and they won't tell us the details of what work needs to be done, so we can't do our own comparision bidding to present to them.  Unfortunately the assessments passed by their majority vote.

We members managed to force a vote for the board to obtain bids, but they remain entirely in control as to who to request bids from and the final decision.  (The "impartial" moderator at the meeting convinced the amender to change the wording from "receive bids" to "request bids".)  I fear that they may consult with the contractor friend on who else to request bids from (i.e., a contractor who he knows is too busy, or a contractor on vacation) so the contractor would still win the bid within the time alloted.

This board has also lied to the membership about how much money they have set aside - pleading poverty.  They asked each of us for $300 to pay for the repairs, but later I discovered that at last year's annual meeting it was voted to hold $3,500 aside for these repairs - hence less than $200 per household truly needs to be collected to pay the contractor. One member is a professional contractor and has offered free gravel and labor to the president, only to be turned down because the president dislikes the member.

There are no annual financial reports sent out to us.  Meetings are announced with a date, time, place but rarely with an agenda.  Sometimes the agenda written doesn't match the agenda of the meeting once we get there. Notices/minutes etc. are only sent out to select members, not all of them. "Must of got lost in the mail" is their excuse.

They tape record meetings but fudge the minutes to read what they want them to.  (Example:  we voted for the Road Committee to oversee bids, they documented it as the Board to oversee bids) and they refuse to let us hear the tapes. We've tried to negotiate and meet them in the middle, but they know they have the  majority so they refuse to acknowledge us.  They are great at stonewalling us.

Otherwise it is a wonderful neighborhood, and many of the 51% are wonderful people - but some are corrupt and others are simply misguided by years of close friendship with the corrupt ones.  Any attempts at campaigning their friends gets reported to the board.

Phew! So, how can we as the "vast minority" stop this corruption? Thank you so much for your time and effort.

- A.

For such a small community, you certainly are experiencing some big-time challenges!

With regard to questionable bidding practices, boards of directors are typically empowered to negotiate and execute contracts for the community.  Most boards, in order to show a sound decision-making foundation, would obtain several bids by sending out a well-detailed Request for Proposal requiring sealed bids.  In addition, to avoid a conflict of interest, board members who may be acquainted with or related to a bidder should fully disclose the relationship, obtain written acknowledgement of the potential conflict from his or her colleagues on the board, and then either recuse himself or herself (physically leaving the room whenever discussion or voting on the contract is imminent) or, in the least, abstain from the voting.  It is unfortunate, that this may not be the case in your association.

As for information that is available to the members, your association's governing documents and/or the state law will specify what a member can review and obtain.  Most  of the items your listed in your email normally should be available to the members during regular business hours.  Meeting requirements including notice period, agenda, location, time and conduct may be outlined in the Bylaws and state statutes. Tape recordings are used to as a tool for the Secretary or minute taker when creating the minutes.  Once the written minutes are reviewed and approved by the Board, the tape recordings should be destroyed or the next meeting taped over them.

As for majority rule, consider running for a seat on the Board of Directors at the next election.  Other homeowners in your community may be willing to vote secretly at an annual meeting to change Board members, but may not be willing to openly voice their opinion at Board meetings in front of their  board/neighbors. You might also consider presenting your board members with publications available through the Community Associations Institute (www.caionline.org), a national educational and research organization which focuses on helping homeowner association board members foster successful, productive communities, as well as downloading articles from our own website, www.associationtimes.com.

Finally, check out our archived "Ask the Expert" answers for more information on the appropriate conduct of community association board members.  

Sincerely,

Patti

Patti Jo Lewis - AMS®, CMCA®, PCAM®

We had a meeting and the old board won by proxy - a group of co-owners believe they have mishandled our funds, one reason is they have changed the financial report from last year, no one but the old board had last years financial report, a resigned member gave us a copy, we are not allowed to come to meetings unless we make an appointment to come and tell them what we want. We want an audit done, but from a company we choose, not any of their friends. What can we do??

- Kathryn

The best way to ensure that your community association is run the way you want it to be is to galvanize your neighbors to either attend the annual meeting or assign their proxy to you. Since your annual meeting was held recently and the current board re-elected, you still have options but they are not as easily implemented:

1. Review your Bylaws to determine the requirements for calling a special meeting for the purpose of removing the current board and electing new directors. If you believe you have enough support from your neighbors, follow the procedure detailed in the Bylaws that require the Secretary to call a special meeting for that purpose.
   
   
2. Determine if your state statutes require that all community association board meetings be open to the members, and that the books and records be available to the members during regular business hours with any reasonable request. If you are unsure how to access your state statutes, go to the Association Times State Resources page and click on your state.
   
3. Determine if your association's governing documents, in particular the Declaration and Bylaws, contain provisions similar to those described in #2 above.
   
   
4. If your investigation of #2 and #3 above reveals that members of your community association have the right to access the books and records, make copies of those particular provisions and send a cordial, brief letter to the board detailing your findings and again asking for access. If the board still refuses, report the problem either to your state's ombudsman, if one exists, or to your association's liability insurance agent.

Sincerely,

Margey

I serve on a board for one association in a large Condominium Association in Illinois.  We are trying to deal with an extremely obnoxious resident about whom our board and previous boards have received neighbor complaints over the past 9 years.  The complaints include her spreading extremely toxic insecticides over the outside walls of her building which houses 3 other units besides hers; threatening and bizarre behavior; extreme noise being created in the early hours and on a regular basis, and so on.  We actually have a spreadsheet citing the complaints and any action that was taken about them.  It appears that previous boards tried to stay out of the disputes, but about 3 years ago when this person had a young couple move into the unit above her, the bad behavior   escalated to vandalism at which point the board at the time fined the  woman.  While this stopped some of her behavior for a short time, she was soon at it again, pounding on the young couple's floors at all hours of the day and night, and frightening both of them with confronting and irrational behavior.  We actually had one of our board members stay at the couple's premises to verify what they were saying.  As a result, we held a hearing on the matter and fined her once again (we increased the fine based on legal advice so that it would be considered reasonable but would hopefully make this woman take notice that we were serious). 

The young couple, having suffered through 3 years of this harrassment, finally decided to put their unit up for sale.  We just heard yesterday that they had almost closed a deal on their house when the obnoxious neighbor had a "chat" with the potential buyer and suddenly he backed out of the deal.  We are trying to confirm what the potential buyer was told.

I see that you recommend mediation in disputes, but this woman never admits to doing anything wrong.  According to her, she is perfect and everyone else is nuts.  I am personally concerned that this is going to escalate into something dangerous - certainly, the neighbors have called both our security and local police on numerous occasions which we prefer particularly if there is such outrageous behavior.

My question is, is there some way that a resident can be asked to leave an association?  We consider her dangerous, and obnoxious to the point that a number of her neighbors have moved or are now planning on moving just because of her.  She is single handedly making it impossible for anyone to live in the same building she is in.  

- Janet

If your resident is as unbalanced and dangerous as you described, there are several options I can suggest:

• Contact a family member or friend  who may not be aware of the person's possible illness and erratic  behavior;
  
  
• Contact the police, fire  department or other appropriate municipal enforcement department if the  resident threatens another person, demonstrates inappropriate and illegal  behavior or makes loud noises during times in which a noise abatement program  is in effect;
  
  
• Contact the Environment  Protection Agency if the resident pours "extremely toxic insecticides" on the  common walls.

Most important, however, is my recommendation that you contact an attorney knowledgeable in Illinois community association law who can guide you through this sensitive issue. I do think the board has an obligation to act in order to protect the other association members and the assets in your community, and I'm sure you want to handle this matter in the most professional and compassionate manner possible.

Sincerely,

Margey

We have a resident (ex-HOA president) in out small townhouse community in NC that has posted an anti-HOA website. The attacks are usually against the new HOA Board, but his last post was attacking his next door neighbors, and included some personal information about the couple's relationship. Does the Board have any authority to try and stop this behavior, or is he protected under freedom of speech? 

- Holly

When issues in a community association become so emotional that libel and slander ensue, it's time to bring in a dispassionate third party to help the parties reach a mutually satisfying resolution. It sounds like the former president has a lot of axes to grind, whether real or perceived, so giving him a controlled forum in which to articulate his issues might well resolve the current antagonistic situation.

There are several mediation services available to the public, ranging from your association's legal counsel to members of the American Arbitration Association, the Better Business Bureau, and perhaps a free dispute resolution center.

The longer you wait to confront this issue and attempt to resolve it, the more heated both sides will become. Take the first step by making the offer to meet to discuss all issues bothering the former president. If he refuses to meet, consult with your association's attorney to determine your next course of action. Filing for slander and libel may be options the board will want to consider, as may the intended target of the president's venom.

Sincerely,

Margey

A group of homeowners held a meeting and determined they were able to send out a special proxy to all homeowners that allows a homeowner who is not able to attend the annual meeting to assign their voting privileges to certain members in attendance at this special meeting. As secretary of the Homeowners' association, I have reviewed the bylaws, which appear vague and cannot determine if this proxy is valid. I have sent out an annual meeting notice, an agenda, and a proxy form regarding an election of officers. Do you know if the proxy that was issued would allow the group to put additional items on the agenda and then allow a vote by their proxy? Sorry to be so obtuse. Any information would be appreciated.

- C. T.

Unless your association's Bylaws or state statutes mandate that only one form of proxy may be used by members of a nonprofit corporation or, even more specifically, of a homeowners association, then different proxy forms must be accepted so long as the required information is presented.

The issue of adding agenda items to the official annual meeting agenda is an interesting concept. If your Bylaws or state statutes provide a formal mechanism by which homeowner association members may insert items on the agenda for an annual meeting, then it's possible that your members' actions are appropriate and, as Secretary, you must add those issues for discussion. However, if there is no such provision, then only the board may set the agenda for the annual meeting.

To determine your state's laws regarding homeowner associations, go to our State Resources page . To find out more about parliamentary procedure, including the use of proxies, go to "Robert's Rules of Order" under "Parliamentary Procedure" on our Links & Resources page.

Sincerely,

Margey

Under King County and the State of Washington, which has the governing authority of cc&r's and homeowners associations. Also, under such authority what is the vote that is needed to ratify an association? I have a neighborhood that has voted in members three years ago, but has never had any more open meetings and set no fees or costs. The president sold there home over a year ago. Since then there has been no closed meetings or notice of meetings at all. Now as of last week they say that they want to vote on a new board without as far as I can tell ratifying whether the homeowners want the association. What are your thoughts? Also what are the regulations that cover this?

- Bruce W.

Here's the hierarchy of authority with regard to community associations, from highest to lowest:

• Federal government
• State government
• Local municipality (City or County government)
• Declaration/Covenants/CC&Rs
• Articles of Incorporation
• Bylaws
• Rules and Regulations not included in the governing documents (Declaration, Articles, Bylaws)

While I'm not quite clear on the status of your association, it appears that it was legally created three years ago, but not much has been done with regard to addressing the operations of either the community or the association. However, I understand that there is currently a group of homeowners willing to volunteer their time to serve on the board and administer the association for the benefit of your community.

If I understand the situation correctly, there is no need to again vote on whether or not to continue with the association. The association remains in existence until the appropriate number or percentage of homeowners, as detailed either in state statute or the governing documents, vote to dissolve the association.

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

I am trying to get a meeting agenda form, that I can have ready for the homeowners at the next meeting. They have been notified by newsletter what is being discussed and if they have any other items that they want to get into the meeting, they need to call or email them in. But does someone have a good form letter to put all the items on the sheet, with Q&A, space to make remarks, and parking lot items for next meeting?? I would appreciate it.

- Lily

Association Times has several excellent resources that address your question. In fact, the November 2004, February 2005 and March 2005 archives of Ask the Experts, in addition to most other months' issues, have specific information regarding meeting agendas and conduct. You'll also find a link to a parliamentary procedure site at Association Times.

Sincerely,

Margey

Our condo agenda has a sentence at the end: A copy of the Board Meeting Materials package is available for review in the condo management office.  I went to the office to read the upcoming monthly board meeting package and only found in the book a copy of April's Monthly Minutes of that meeting and the property managers financial reports.  So, why isn't the whole package of materials available to unit owners that the board will be discussing at the May Board Meeting? Also, how does an attorney develop a policy regarding treatment of condo staff? I understand from the board meetings that a person has challenged our board and the board president doesn't like it, so now we will have somekind of policy to restrict unit owners on what they say to the staff.  Can you shed some light on both these issues.  I did check out the VA Condo Act of '04 Sec. 55-79-75. I feel this board is in violation in that it is not providing the unit owners the total package that will be discussed at the May Board Meeting.

- M. R.

If you have not done so already, speak with the management company about the board meeting materials package. Perhaps the agenda went out early; however, the package may not have been ready for copies at the same time.  Also, attend the Board meeting to ask the Board members about the package.  It might just be an oversight or a timing delay.

As for the policy about treatment of staff members, there are numerous publications addressing code of conduct at Board meetings and at association offices.  Association Times is one excellent resource for information regarding board meeting conduct; the Community Associations Institute's Bookstore at http://www.caisecure.net/ is another. Some states have regulations about member conduct, length of speeches, content, and other board member and homeowner behavior to keep the meetings civil and professional for all parties.

Sincerely,

Patti

Patti Jo Lewis - AMS®, CMCA®, PCAM®

Our board believes they have the right not to have open board of director meetings. There is no communication between the board and the homeowners except for annual meetings. Our HOA is in Texas.

- Cathy

In Texas, the Uniform Condominium Act (Chapter 82 of the Property Code requires condominium associations to allow members to attend all meetings. These requirements are not the same as the Texas Open Meetings Act, but they apply specifically to community associations. While there is no specific statute mandating that homeowner (not condominium) associations except The Woodlands conduct meetings that are open to the members, I strongly urge every Texas board of directors to allow members from attending, but not necessarily to speak at, all board meetings. The board should meet in private only to discuss specific situations that involve litigation, personnel issues, contract negotiations and issues of a sensitive nature. Otherwise, homeowners have the right to know what decisions are being made that affect their quality of life or financial requirements.

Please review the "Ask the Expert" Archives for discussions about the importance of frequent, consistent and informative communications from the board to the homeowners.

Sincerely,

Margey

The board of directors of my HOA (California) has instructed the managing agent of our community not to reply to my e-mail messages or answer any question that I ask. The board president will not reply to my messages or return phone calls. (My questions are very simple, such as standards for plant materials along the side of my home.)

I have not been advised by the board of directors or the management company why this action has been put in place, in spite of repeated (courteous) requests. I am not and never have been the subject of discipline by my association; I am not and never have been delinquent with my dues.

Likely, the action against me is retaliatory because I have been repeatedly asking the board and the managing agent to explain why they refuse to consistently and uniformly enforce the CC&Rs in our community, or even to enforce them at all. My guess is that I have angered the board because I have questioned their decisions or judgment. I cannot accept the board's "there is nothing we can do" stance regarding CC&R violations when the CC&Rs and rules and regulations documents are very clear about what is and is not permissible in our community and how violations are to be handled. I believe that the board has a duty to its membership to govern the community according to established rules. Is this an incorrect belief?

Any thoughts on what I could or should do, short of contacting an attorney to help me uphold and protect my rights as an owner in a CID? I feel this action is unwarranted and unexplained discipline, that information is willfully being withheld from me, and that it essentially amounts to homeowner discrimination. I have spoken with six other residents, none of whom are subject to this same treatment.

- Jerry

It sounds to me like you and the board have gotten crosswise with each other and are now having a difficult time re-establishing channels of communication.

Instead of sending emails and phone calls, why not send the board a cordial, nonaccusatory, succinct mailed letter less than one page in length, using 12-point font and bullets to highlight your concerns? Snail mail provides more psychological time to respond with thoughtful, comprehensive answers to your questions without feeling that one's integrity and honesty are under attack.

Once you have established an acceptable form of communication, both you and the board should be able to treat each other with respect, which is the basis for a workable professional relationship.

If your efforts at communicating with the board with respect and courtesy still result in no response, you might consider running for the board yourself so that you can be a part of the community leadership process.

Sincerely,

Margey

What is the Georgia Law regarding an Audit for a Home Owners Association?

- Iona B.

Please see our Association Times' link to state legislatures on our State Resources page. Then, click on "Georgia", then scroll down to "Chapter 44: Property", then to 44-3-221 which is entitled the "Georgia Property Owners' Association Act".

You might also consider reviewing your association's governing documents (both the Declaration and the Bylaws) to determine if audit requirements have been imposed on your specific association. The American Institute of Certified Public Accountants recommends that homeowners associations contract annually for an audit, not a review or compilation.

Sincerely,

Margey

I am looking for a format to set up a home owner association budget for a large new Condominium Project in ******, Washington. I need to get something to start with electronically. Respectfully.

- Jill T.

While there are no standard formats for preparing a homeowners association budget, most communities prepare their budgets in Excel. I encourage you to check out the many useful budget preparation and developer-related resources at the Community Associations Institute, or attend a local CAI chapter function to meet with member management companies and CPAs who may be able to offer you more specific information. You can reach the Washington chapter at:

Community Associations Institute
Chapter Executive Director
Michelle Medlock
PO Box 4111
Bellevue, Washington 98009
Phone: 425-778-6378
Fax: 206-770-6123
E-mail: mmedlock@wscai.org
Web URL: http://www.wscai.org

Sincerely,

Margey

The developer spent almost 2 times the amount collected for HOA dues in 2004. The HOA dues are primarily for lawn care. The developer paid his own company and one of his employees husband's companies for lawn maintenance. The homeowners have contacted landscape contractors for bids. The bids have come in at about 85% of the monthly dues which would leave a small surplus. Unfortunately, we are in a serious deficit situation. The cash collected in 2005 has been used by the developer to pay for the excessively high maintenance charges of 2004. Do the homeowners have recourse?

- Rita G.

So long as the developer retains control of the homeowners association by virtue of the number of unsold lots as proscribed in the Declaration/Covenants/CC&Rs, there is little the owners can do to gain control over the association's funds. However, there certainly are some options you might consider with regard to ensuring that your maintenance fees are appropriately expended:

1. Ask the developer for a meeting with his board and a small group of owners (no more than five so as not to overwhelm him). Present to him a summary of your bids -- perhaps a chart or graph comparing the different prices -- making sure that the specifications are comparable. Give the developer the benefit of the doubt -- perhaps he was unaware of the fees charged by other landscape companies. The proof will be in his response to your presentation. If he agrees to switch to a more competitively-priced company or reduce the current company's fees to the level of a competitor's, he's acting in the best interests of the association. If he insists on keeping the current contractors, consider options #2 and #3 below.
   
   In your meeting, you might suggest to the developer that he appoint one of the members of your group to the board as the homeowner representative. An alternative might be to create an Advisory Committee comprised of owners who are interested in the operations of their community and willing to volunteer their time to help the developer monitor contractors, expenditures and other operational issues.
   
   
2. If the developer is not willing to change to another company, remind him that, as a board member, he is a fiduciary agent for the association, legally entrusted to act in the best interests of the community and its members. If he fails to act appropriately as a board member, he is breaching the trust of the owners and may be found personally liable for his actions. Further, it's possible that his Errors and Omissions policy, or Directors and Officers liability policy, will not pay for his defense or any judgments or settlements in the event the owners sue him because he is willfully breaching his fiduciary duties. For other possible repercussions, see #3 below.
   
   
3. Usually, a developer's primary focus is on selling his lots/units as quickly as possible. If your neighbors are also upset about the alleged mismanagement of association funds, as a last resort you could galvanize them to picket the sales office, or you could contact the local media with your story and ask their consumer advocates to help you -- which could mean a front page photograph or a television news segment (both of which could hurt the developer's marketing efforts).

I would hope that option #3 does not become necessary, because it can also hurt both your and your neighbors' property values in the short term. However, you are not without recourse. Start first with cordial discussions; it's always better to try to resolve disputes amicably than to immediately start attacking a person's integrity. Look for common ground and mutually satisfying solutions.

Sincerely,

Margey

Our association was established a little over a year ago in Minnesota. There are still 7 units unsold and the builders pay a nominal fee (per some state statute that I cannot find) and do not seem to be actively trying to sell the units. This is resulting in a $500+ deficit every month in our operating budget and we had to raise our dues to make up for this. My question is, is there any recourse we have to make them find different real estate agents who are actually going to try to sell the units? Also some of these are rented out by the builders; if they are receiving income from the units, should they still be exempt from paying the full association dues? Thank you.

- Theresa

To determine what your state statute really says about a developer/Declarant's responsibility for payment of maintenance fees, go to our State Resources page for the links to state legislatures. Then, click on "Minnesota" and scroll down to "515A Uniform Condominium Act" or the bottom link, "515B", for the "Minnesota Common Interest Ownership Act", whichever one is applicable to your community.

In addition to state statute, however, read your association's governing documents, in particular the Declaration and Bylaws. There are usually provisions in these documents, more particularly the Declaration, that specify when the Declarant must begin remitting partial or full payment of maintenance fees for all unsold units. If the developer has leased the units and is receiving a monthly rental fee, then it makes sense to me that he should be paying full maintenance fees because he has, in essence, assumed ownership of the units. However, you may want to consult with a competent Minnesota attorney knowledgeable in community association law to provide you with insight into state statute and your governing documents as well as possible recourse the homeowners may have in collecting maintenance fees from the developer.

Sincerely,

Margey

We live in a new townhouse development in Georgia. We are incorporated as a condomium.  Control of the Association has just been turned over to the residents and a new board has been elected. In reviewing our financials, we noticed that the developer has not been paying dues on the unsold units. It's our understanding that Georgia Law requires builders to pay dues on unsold units, although we are uncertain exactly which provision of the Georgia code requires builders to pay dues on unsold units (the GA Condo Act??). If our understanding is true, the builder owes our association many thousands in unpaid dues.

Could you please confirm that GA law does require builders to pay dues on unsold units. Also, can you recommend the best approach for collecting this money from the builder? Is there any way the builder can avoid paying these dues? Thanks!!!

- Jeff

The Georgia Condominium Act (Articles 44-3-71 through 44-3-116 of the Georgia Code does not appear to contain provisions addressing the issue of Declarant's (Developer's) responsibility for payment of assessments. That means that the answer to your question should be found in your association's governing documents, probably the Condominium Declaration but perhaps the Bylaws if the developer's attorney wasn't quite sure where to include the provision.  In your Declaration, can you find a paragraph or two pertaining to Declarant's responsibilities relating to supporting the operating expenses of the association before it is transitioned to homeowner control? There may be one of several alternatives presented with regard to the Declarant's obligations:

• fund any shortfalls in the operating account;
• fund any shortfalls in both the operating and the reserve accounts;
• pay a discounted maintenance fee on all unsold units;
• pay full maintenance fees on all unsold units;
• pay discounted or full maintenance fees only on completed but unsold units;
• pay full maintenance fees only after control of the association has transferred to the homeowners;
• some other permutation or combination of the above

If you determine that the Declarant has not complied with the provisions of the association's governing documents addressing this issue, I suggest that you first approach him with your findings, giving him the benefit of the doubt. Perhaps he was unaware of the requirements detailed in the governing documents and will quickly rectify his oversight. On the other hand, if the governing documents clearly state the Declarant's financial obligations to the association and the Declarant is recalcitrant in his refusal to pay what is legally due, your board will probably require the services of a competent attorney knowledgeable in community association law (there are several such lawyers in the Atlanta area!) to help seek compensation through the legal system.

Sincerely,

Margey

Our Association is currently updating its bylaws. I have recently heard of the idea of a Homeowner's Association receiving .03% of the sale of a home, as a closing cost. This money is then used for Management Company costs and common areas, etc. Can you tell me more about the concept, or a site that might explain it better? I would like to present the idea at our next Association meeting. We are a very small community, and it seems that money is always short, especially now that we are paying a management company. We do pay a Homeowners Association fee, annually... This "home sale asset/profit" seems like a great way to help stablize the Association, ...but not sure how one could enforce it, even if in the bylaws.  Thank you for your help.

- D.T.

The idea of allocating a percentage of a home's sale price to the community association's operating fund is a fairly new concept.  In certain states, it is referred to as a Community Enhancement Fee and is calculated as a percentage of the selling price of the home.  Other communities have a flat fee that is paid to the Community Enhancement Fund. In both scenarios, either the buyer or the seller is responsible for payment of the fee, depending on the regulation that was passed. However, ultimately the cost of the fee is negotiated during the sale, so the critical issue is that the appropriate amount is collected at closing for forwarding to the community association.

Since it appears that your association currently is not authorized to impose a Community Enhancement Fee on new owners, your board would need to propose to the membership an amendment to the Bylaws/Declaration/Master Deed/CC&Rs/Covenants. Amending any of your governing documents requires that the association follow a  very specific procedure detailed in that particular document, including issues such as  notice, quorom, agenda, and voting percentage.

Remember, too, the hierarchy of community association governing documents to ensure that you do not draft an amendment to a document that conflicts with another document farther up the hierarchy. Here's the pecking order, from most important to least; amendments or rules may not conflict with any document farther up the ladder:

1. (most important) plat, map or plan of the community
2. Declaration/Master Deed/CC&Rs/Covenants
3. Articles of Incorporation
4. Bylaws
5. (least important) Resolutions

If you are seriously considering implementing a Community Enhancement Fee, I urge you to consult with your association attorney  to ensure that your association is in compliance with state statute and your association's governing documents every step of the way.

One final note. Community associations are supposed to be not-for-profit, and collect only what they need to operate.  Each member should pay their fair, proportionate share, and no member or group of members (i.e., purchasers/new members) should subsidize the routine operating costs of the association.  If there is a measurable amount of additional work and costs specifically related to the purchaser/new member entering the community association, then it would be fair to charge them that specific amount; but a percentage of the purchase price has nothing to do with the amount of additional work/cost the Association may incur.  For the existing members to approve an unfounded and disproportionate charge only against future purchasers/new members is a "cheap shot."

Sincerely,

Margey

I am an inexperience president of a newly formed condo association board and we are in the process of discussing what amount we should charge for those who are 30 days delinquent in paying their assessments. In the bylaws booklet that came with each unit, it says we should charge 4%. I am proposing we amend this bylaw and change it to a flat $50 late fee. Are we within our rights as a board to do this and how do we make the change legally? Is it as simple as writing a letter to all of the owners? Also, the building I live in is a new rehab... I don't know if that makes a dfifference or not? Thank you.

- Victor E.

Congratulations on your election as president and your recognition that there is much to learn to adequately fulfill your responsibilities! Association Times is here to help you, so check out both our articles and our archived Ask the Expert answers to provide insight and encouragement to you as the leader of your community.

With regard to the late charge amount, you would indeed have to amend the document (Condominium Declaration or Bylaws) that contains the 4% late penalty provision. Look toward the end of the document for a provision that specifically details the process by which the document may be revised. One would hope that since your condominium community is newly constructed, the developer's legal counsel created governing documents that reflect the most current law regarding community associations, including how those documents may be revised. However, just to be sure, check your state statutes for any references addressing amendments to nonprofit corporations' or condominium associations' governing documents. There may even be a provision limiting the amount a condominium association may impose as a late fee or penalty. You can access your state statutes by going to the Association Times' State Resources page and clicking on your state.

It's possible that your documents authorize the board to make certain revisions without homeowner approval. If that permission is clearly stated, then the board should follow the resolution process detailed in the September archives of Ask the Expert under "Communications". If changing the 4% late penalty to a $50 late charge requires an amendment, then it's critical that the amendment process is followed explicitly in order to ensure that the result is valid and legal.

Whether by board resolution or membership vote, the amendment process can be confusing and overwhelming. I encourage you to seek competent legal counsel knowledgeable in community association law to guide you through either process.

Sincerely,

Margey

What are my rights? The condo was suppose to replace gas meters with readable gas meters. Last time I called was Monday May 16th and I did not get a returned call. I was inquiring about if they had any information from the meeting they had that week concerning the Meters. I did not receive the notice of the date I should be in the house for this process to be completed. They access my property with a locksmith key to gain entry today May 18th. When I came home the meter was replaced and they left me a notice. I called one of the unit neighbors to see if they got the notice and she did and she said that it also states that there would be a $60 charge for the locksmith. I had paid the money for the Gas meter change in November 2004 and I had called and written letters requesting when. Please help.

- Sonia M.

It seems to me that there may be a breakdown in communications between you and your association's board or management company. I suggest that you send a certified letter to your manager, with a copy to your board, with your correct mailing address and contact telephone numbers to ensure that they have the most current information. You could include in your letter a request for an explanation regarding the process by which the gas meter installation and fee were approved and a reminder that you had sent other letters (enclosing copies) asking when you needed to be home in order to accommodate the installer, but never received a response.

I would hope that when your board members are presented with irrefutable proof that you had clearly indicated your desire to be in attendance when the meter was installed, they will agree to waive the $60 locksmith fee. If they don't, you might consider going to small claims court or whatever the local court jurisdiction is called in Philadelphia, to have the opportunity to ask a judge to order the association to reimburse your $60. However, be aware that the filing fee for your claim may be more than the $60 you are seeking, and there is no guarantee that you may prevail in court.

Sincerely,

Margey

The ******** (a subdivision in Harris County, Texas) deed restrictions limits the amount of maintenance assessment the ******** Home Association can collect.  The Association sets up a name called Service Fee to collect additional maintenance fees from the residents and claim the Association is authorized to charge pursuant to Texas Property Code 204.010.a(9) and made the Service Fee mandatory.  The problem is, that is not what the code says.  In the title of code 204.010 (a)states:  Unless otherwise provided by the restrictions or the association's articles of incorporation or bylaws, the property owners' association...may: (9) impose...fees...

In other words, the deed restriction overrides.  I've asked different attorneys, they all affirm my understanding of the law.  I've been trying to reason with the ******** Home Association since 2003. We've paid the Maintenance fee but not the voluntary Service Fee.  We are not allowed to use any of the facilities.  Now they are holding this against us and wouldn't let my 12 years old boy join the swim team!

I've e-mailed them the attorneys opinions, the case of the famous old lady Blevins v. Champions East Subdivision in Houston, and a case the Texas Supreme Court ruled on June 25, 2004 that the Northglen Association of Harris County lacked the authority to increase assessments beyond limits imposed in deed restrictions even the attorney for Northglen argued "the increases were authorized by a section of the state property code passed after the deed restrictions were adopted".  The Texas Supreme Court, in its unanimous opinion, said the increase were improper because the subdivision's deed restrictions did not permit them.

They refuse to give any written response and the person in charge of the swim team called me and told me that if my son goes to swim practice today he would be asked to leave.  She refuses to put this in writing.  What can I do? Please help!!!!!!!!!!!!!!

- A Worried Mom

I suggest that you send one final certified letter to your board, quoting the attorneys you've consulted as well as the case law you researched and advising them that if they do not respond to you within fourteen days you will report their mismanagement to the association's Directors and Officers' Liability Insurance agent and initiate a claim against the board. The purpose of the letter is to open a dialogue between you and your board so that each of you has the opportunity to present your position.

If the board does not respond to you within the fourteen days, follow through with your promise to file a claim against them. If the association's insurance agent is wise, he or she will intervene and attempt to resolve the dispute before a formal claim is filed with the underwriter. If the agent responds that the claims process can be initiated only upon receipt of a letter from an attorney, you may need to retain legal counsel to send a demand letter to the board.

Sincerely,

Margey

Are Homeowners Associations permitted to retroactively increase annual assessments?  Are there federal law implications to their doing so?

- Ken A.

Depending on your state statutes (which you can access through our State Resources page) and each homeowners association's governing documents (primarily the Declaration and Bylaws), board members may or may not retroactively increase maintenance fees. There are no federal laws regarding this issue.

Sincerely,

Margey

We have a homeowner association member that owns 3 lots. He does not have a residence on any of the 3 lots, however, he has put personal property on the lots, i.e. boat, a shed with things in it, etc. He claims he doesn't have to pay home owner road or snow removal maintenance fees because he has no home. Our covenants state that a homeowner with a vacant lot does not have to pay fees, however, he has personal property on the lots. What is the legal term for real estate purposes of the word "vacant"?

- Alicia J.

While common sense might indicate that once a lot has a use, such as for storage, the owner should be responsible for paying maintenance fees, the issue is not quite so clear. Both your documents and state statutes might address this issue with more clarity. I encourage you to consult with a competent attorney knowledgeable in community association law in your state for help in determining if storage material may in certain circumstances be considered an occupying a lot.

Sincerely,

Margey

What is the best way, or most commonly used to finance the front end legal and auditing expense of the Transition committee prior to turnover?

- Gerald B.

The most appropriate method of funding the Transition Committee is through the association's annual budget. By including the expense in the budget, all homeowners pay their prorated portion of the expense in every maintenance assessment payment.

Alternatively, if the Transition Committee expense was not included in the budget, it may be politically correct for the developer to foot the bill. It's better to transition the association to homeowner control on a positive note than with owners grumbling about an unanticipated expense. On the other hand, if there are excess unallocated operating funds in the association's account, it is not uncommon to use those funds to pay for the transition audit, engineering study and necessary legal expenditures.

Sincerely,

Margey

Here is a part of our Declaraton of Covenants:

Section 2. Purpose of Assessments.
The assessments levied by the Association shall be used exclusively for the purpose of preserving and enhancing the values, amenities, opportunities, environment, desirability, and attractiveness of the Property, and for carrying out the powers and duties listed or referred to in Article V hereof, and for any other purpose that is necessary or desirable for the maintenance and improvement of the Property or that is of general benefit to the Owners and other occupants of the Property.

Section 3. Assessments.
a. Annual assessments shall be One Hundred Twenty Dollars ($120.00) per Lot, which annual assessments shall be subject to increase as hereinbelow provided.

b. The Board of Directors of the Association may, by resolution on or before April 1 of a calendar year, increase annual assessments, effective January 1 of such calendar year, without a vote of the Members, by a percentage not to exceed seven percent (7%). Any increase in annual assessments pursuant to this Section 3(b) shall, subject to additional increases pursuant to this Section 3(b) and other Provisions of this Declaration, continue in effect in subsequent calendar years.

c. Annual assessments may be increased, above that established in subparagraph (b) by a vote of two-thirds (2/3) of Members entitled to vote who are voting in person or by proxy at a meeting duly called by the Board of Directors of the Association for this purpose.

d. The Board of Directors may fix the annual assessment at an amount not in excess of the levels provided hereinabove, and may collect such annual assessments in advance of, or at any time during or following, the period of assessment. Any increased in annual assessments as provided in this Declaration shall be cumulative.

Section 4. Special Assessments for Capital Improvements.
In addition to the annual assessments authorized above, the Association may levy upon al Lots uniformly, except Developer's Lots, in any calendar year, a special assessment applicable to that year only, for he purpose of defraying, in whole or part, the cost of any construction, reconstruction, repair, or replacement of a capital improvement upon the Property, including fixtures and personal property related thereto, provided that any such assessment shall have he assent of two-thirds (2/3) of Members entitled to vote who are voting in person or by proxy at a meeting duly called for this purpose.

Question 1 is: Would a board have the right to approve the building of a new Pool that would attach to our existing one without a vote of the home owners?

Question 2 is: Back in December we passed a increase in dues and as part of the Vote was a list of example projects that the increase would be used for (ie., a new baby pool). Can they take that Yes vote for increase in dues and also say that was also a Yes vote of the Baby Pool? Thanks for your time and consideration.

- Steve

Based on the provisions you quoted, it appears to me that the board must obtain approval of the members for capital improvement expenditures. A special assessment is required for a capital improvement, which may not be paid with maintenance fees.

That said, I urge you to talk with a competent attorney knowledgeable in your state's community association laws to provide you with a legal opinion regarding your questions.

Sincerely,

Margey

How does one compute / justify a specific amount for threshold funding?

- Bob B.

Threshold reserve funding is a relatively new term when discussing community association reserves. I asked Mr. David Gauvin, a Reserve Specialist who works for Lewis Management Resources, an Associa member company located in Tucson, Arizona (www.lmri.org), to discuss this new concept.

According to Mr. Gauvin, it's still necessary to identify all the capital components for which the community association is responsible, determining each component's expected lifespan, remaining life and replacement cost. Once this information is obtained, one of four types of funding methods may be selected:

• Baseline Funding -- Maintaining a reserve balance above zero, considering when a component will be replaced and how much money will be needed at that point in time.
  
  
• Full Funding -- Maintaining a reserve balance at or near 100% of total replacement cost of all the components
  
  
• Statutory Funding -- Maintaining a specified minimum reserve balance and/or minimum percent funded as required by state statutes
  
  
• Threshold Funding -- Establishing and maintaining a minimum reserve balance and/or minimum percent funded as determined necessary by the board of directors or by a homeowner-approved resolution.

For more information on community association reserve funding, consider reviewing the publications available at the Community Associations Institute's bookstore, in particular "Reserve Funding and Reserve Investment Strategies".

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

I heard about garage sales in our community (******). What do we have to do to be involved in this in June?

- N. N.

I suggest you contact either a member of your board of directors or your managing agent for more information regarding the garage sales in your community.

Sincerely,

Margey

Help. Starting an association from the bottom up. Our community is about 15 years old. It has approximately 40 homes. We have CCRs on county file. Our CCRs show an Architectural Control Committee that not only has been inactive, but unfortunately never officially passed control over to the homeowners. Now, we have community entrance deterioration issues, unkept houses, rental problems, all bringing down our property values.

I personally sent all the neighbors a letter to spark interest to "better our community". The majority want some sort of "organization", some did not want to hear HOA, others did not even know that they were part of CCRs.

It is clear that our community does not want a dictatorship. How formal does an association have to be to be effective? I need advice as to moving on from here. I plan on having a community meeting to introduce the CCRs, talk about road issues,etc... What are your thoughts on voluntary vs. mandatory associations? How do you enforce a newly formed association with no money and timid owners?

Also, should I contact the 3 officers of our ACC and what type of formalities are legally needed for them to resign their positions and select representation? Please, help with all this confusion.

- Carl

I put off responding to your question for a few days because I didn't know where to start to tell you all the information you need to know about community associations. I finally decided that the Ask the Expert forum is not the venue for your questions. Instead, I urge you to consult with an attorney knowledgeable in your state's community association statutes and case law as well as being a person who encourages his board members to be reasonable, fair and compassionate in their roles as community leaders.

I also recommend that you visit the Community Associations Institute's website for a wealth of information about successfully operating community associations and fostering a sense of "community" in homeowner associations.

I commend your interest and dedication in revitalizing your community, and hope that the two resources I mentioned will be able to help guide you through the maze of homeowner association obligations and responsibilities so that your community is one in which all residents are proud to call "home".

Sincerely,

Margey

Do you have any kind of a matrix that would help us plan a disaster recovery plan for the condo?

Most things appear to be obvious and common sense, but any kind of a guide as to what to put in place would be appreciated.

- Mary B.

The Community Associations Institute (CAI) has three very useful publications addressing disaster planning and emergency management:

• Before Disaster Strikes
  
  
• Disaster Management for Community Associations
  
  
• Community Association Risk Management

You can access these publications by going to the Disaster Management section of the Community Associations Institute Bookstore.

Sincerely,

Margey

I am on the Board of a Home Owner's Association that has 96 units. The community is going on 30 years old and our clubhouse is not handicapped accessible. Many of our residents are older and do not manage stairs well and we have one resident who is wheel chair bound. These people cannot come to monthly Board Meetings nor utilize the association clubhouse. We would like to make the clubhouse accessible to all of our residents, but the cost is overwhelming. Do you know of any resources (grants, etc.) that are availible for communities to renovate for accessibility?

- Patricia

I applaud your concern for the welfare of your older residents. Most community associations are not obligated to retrofit common area to comply with the Fair Housing Act. However, it's nice to read about board members who are sensitive to their members' limitations and want to help.

That said, I'm not aware of organizations that offer grants to convert buildings to make them wheelchair accessible. Perhaps you could contact AARP, media consumer advocates or a local volunteer group for seniors for guidance on possible resources to help you defray the cost of your efforts.

Sincerely,

Margey

My wife and I have condos in New Hampshire and Florida. This is about a note in our recent condo newsletter in Florida -- NOT a request for a definitive legal interpretation, by the way.

The newsletter states: "...The Manager will notify owners who have placed chairs, tables and other objects along the front walkways that they are in violation of MFPA, Life Safety Code Chapter 7.3.4. Inspections will be made and all residents in violation will receive notifications."

I think MFPA is really NFPA, the National Fire Protection Association, a private enterprise that I believe furnishes fire safety and life safety information to public bodies (governments). However, I cannot find a FREE copy of the Life Safety Code in order to find the what the cited reference pertains to. Nor, in a fast search of the Florida Statutes, can I find more than references to fire or life safety codes without quoted documentation of what sections have been adopted by the state fire marshal.The NFPA web site includes references to PURCHASE the codes at some high amount of money! Which of course I'm personally unwilling to pay.

Do you have a copy of the code and the above reference and if so may I impose upon you for a copy of the citation? Thanks.

- Glen H.

I sure don't have a copy of the referenced material. Here are some possible resources for NFPA's code book:

1. Your association's board of directors
   
   
2. Your local fire department
   
   
3. Your local library
   
   
4. You local municipality

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

Our property is new and our board is new -- just formed in January of 2005. We are located in Michigan, in February we had a co-owner slip and fall on ice. Her husband gave the board two bills for two office visits. She is an older person with a bad hip. Their Medical insurance covered most of it but they want the Association to pay their co-pay. We asked our insurance carrier this question and they told us since he and his wife are co-owners that they can not make a claim, it would be like falling in your own driveway if you owned a single family home and placing a claim with your insurance. The amount is not very much but we are torn as to who really is at fault. The vendor we use for plowing was out salting and plowing whenever it snowed but this winter was one of the worst on record. So to have a win win should we pay it or deny it?

- Bridget

Many communities have conflicting emotions concerning the responsibility for "slip and fall" injuries. On the one hand, you would think people should take extra precautions and be more careful when snow and ice are present (perhaps not even traverse the ice unless absolutely necessary), that accidents are a common occurrence when such situations are present, and that, unless the association was negligent, the consequences and medical costs should be the expense of the person that fell (and not the prorata cost of all the association members). On the other hand, when a person is injured on our property, as good stewards we should want to help alleviate their suffering, avoid potentially more expensive litigation and assist them by offering to pay their medical expenses.

To make sure I provide you with a Michigan-specific response, I asked Mr. Craig Koss, Vice President of Kramer-Triad Management Group, L.L.C. (www.kramertriad.com), an Associa member company with offices in Farmingham, Troy and Ann Arbor, to help me answer your question. According to Mr. Koss, there are several issues that are perhaps competing with each other in this situation. Your alternatives are:

1. File a claim with the association's insurance company;
2. Reimburse the owner for out-of-pocket expenses;
3. Do nothing.

Let's first discuss option #1. According to Mr. Koss, "Filing a claim would be the choice only if the amount is substantial or if the homeowners refuse to file a full release for reimbursement directly offered by the board. The association may have a deductible on the liability policy, so make sure the claim amount exceeds the deductible in order to receive any benefit. There's no point alerting the insurance company to a claim if the amount the homeowner is asking for is less than the deductible. Of course, filing a claim may cause their insurance rates to increase and will stay on their loss history for 3-5 years."

With regard to option #2, this may be the solution if the homeowners are truly asking only for reimbursement of expenses and not for the ubiquitous "pain and suffering". If they are willing to execute a release (which should be prepared by the association's legal counsel to ensure that it adequately protects the association from future litigation), then the most expedient and, yes, the nicest response would be to pay the small amount the homeowners are requesting and apologize for the inconvenience and pain they may have experienced.

The third option really shouldn't be a consideration. According to Mr. Koss, "Paying nothing to the homeowner exposes the association to a potential lawsuit. If a lawsuit is subsequently filed against the association, it is likely that the board would end up filing an insurance claim and it could cost them more in the long run."

I concur with Mr. Koss' final piece of advice: "If the amount that the owner is asking to be paid is small (from a business judgment standpoint), the board should pay it."

Sincerely,

Margey

I live in a condominium complex in Houston, Texas. My hot water heater recently leaked into the unit below. There was minimal damage to the paint on the wall of the unit below. I immediately went down and looked at the damage and have offered to pay to have the area damaged re-painted. The owner is now saying that there may be water damage in the walls and mold will grow because of the leak. Please give me some advise on how to deal with a situation like this. I feel this owner is just making a big deal out of a very little amount of damage. Thank you.

- Lisa

If you have not already contacted the management company or the board of directors regarding the leak in your water heater, it would be a good idea to do so.

The association’s master insurance policy may provide coverage for the damage if it exceeds the deductible. In addition, contact your own insurance agent for your property insurance and let them know what has happened.

Rather than be involved in a potentially emotionally-charged dispute with your neighbor, involve outside parties who are well versed in these proceedings.

Sincerely,

Patti

Patti Jo Lewis - AMS®, CMCA®, PCAM®

I live in a new complex and we have questions about whether an association should have been formed already.  We currently have 12 or 13 co-owners. Page 1 of the Master Deed says a total of 36 units will be constructed, with the right to EXPAND to 92 units.  Page 1 of the Condominium Bylaws says the condos are being constructed in phases to comprise a total of 96.  The Bylaws were recorded at the same time as the Master Deed. Page 2 of the Condominium Bylaws says an initial meeting of the members of the association shall be convened within 120 days after the conveyance of legal or equitable title to nondeveloper co-owners of 25% of the units that may be created.  Which number do we use?  The 36 units described as the initial phase in the Master Deed, because it is possible not to build beyond this number?  The 92 it might be expanded to in the Master Deed?  Or the 96 referred to in the Condominium Bylaws? Thanks for your help.

- Maggie

What a quandary! I can only respond in generalities, not knowing in which state you reside or all the provisions of your governing documents, so I hope this helps.

With regard to the variance in the total number of units, your Declaration is higher up the hierarchy of important documents than the Bylaws, so I would hope that your developer really is planning to build 96 units. Did you receive a Condominium Information Statement from the developer and, if so, what's the total number listed in that document?

You might consider advising your developer of the discrepancy in the count of total units. He or she might want to amend the erroneous document to prevent potential future problems regarding this matter.

Most documents consider the total number of units that MAY BE constructed in determining when to hold the initial meeting of members. Again, though, your governing documents or state statutes might provide alternate language.

If my responses seem a bit indecisive, it's because there are too many unknowns for me to be more specific. You might want to consult with a competent attorney knowledgeable in your state's community association law for a more precise response to your questions.

Sincerely,

Margey

I serve on a HOA board and recently several items have surfaced that point to the possible need of making changes in the Association's By-Laws. What is the correct procedure to follow to make these changes? And, must the document be filed with the court? Thank you for your response.

- Jo T.

Your association's Bylaws should themselves contain the procedure by which they may be amended. Absent any language in your Bylaws, check your state's nonprofit corporation act and parliamentary procedure for guidance.

Most states require amendments to a community association's governing documents to be recorded in order to be effective. I encourage you to consult with a competent attorney knowledgeable in community association law to ensure that the amendment(s) you wish to pass, and the process by which the amendment is approved, are both appropriate and legal.

Sincerely,

Margey

I am a new board member in a condo association in Los Angeles. We are in need of updating our 40 yr old CC&R's to cover modern issues. The quoted legal cost is $4,000. Where can I go for resources that I can study that will help us make sure we cover any issues that might be missed and maybe do some of the research ourselves. Who knows all the points that needs to be covered besides the $4,000 lawyers.

- David L.

The Community Association Institute (www.caionline.org) is an excellent resource for information on the most current and enlightened language for condominium association governing documents. However, having legal counsel involved in the process is very important, particularly in California where there are specific state statutes regarding condominium association operations. More critically, having an attorney guide you through the steps adds credibility to your endeavor as you ask the membership to vote to amend their CC&R's. There is an inherent danger in lay people drafting complex legal documents; the consequences can far exceed the proposed $4,000 legal fee you are currently fretting over.

Sincerely,

Patti

Patti Jo Lewis - AMS®, CMCA®, PCAM®

Can a past president of our HOA sign a contract for our exterior balcony fabric and installation without the present president and excutive board ever seeing a copy of the orignal contract. The past president was president over 6 months ago. He is being sued in small claims court personally. He claims he signed the contract as "the president on behalf our HOA".

- Dori

If the former president signed the contract after his term had expired, then he was no longer a legal agent of the association and had no authority to commit the expenditure of association funds. Even if the board had approved the contract prior to the expiration of the president's term but did not sign the contract immediately, the former president legally relinquished all authority to execute the document as soon as his term of office expired.

Sincerely,

Margey

We live in a subdivision in Missouri that is full and would like to dissolve it. And just keep a street committee. Thank you.

- Jerry

Dissolving an association is a major undertaking fraught with potential legal consequences that can detrimentally impact every homeowner in your community. I strongly urge you to consult with a competent attorney knowledgeable in Missouri community association law to help guide you through the process.

Sincerely,

Margey

I live in a 4 unit building in Florida. We are the only 4 unit building. We all own and the only association here. Can we dissolve our association seeing as we all have our own homeowners insurance and take care of our own yards?

- Matt

While Florida law prohibits me from offering legal advice to its residents, I can tell you that, in general, community associations may be dissolved in accordance with the specific dissolution provisions in the governing documents, which may include approval by all the affected mortgage companies.

An alternative you may want to consider is amending the governing documents to reflect maintenance responsibility preferences of the four owners, rather than dissolving the association. There may be municipal reasons that require the existence of the homeowners association, such as to maintain private roads, common mailboxes and street lights.

Sincerely,

Margey

Our HOA recently foreclosed on a property for assessment default. The president of the board purchased the property for $9800 ("Public" auction which no one seemed to have heard about.) The property is worth approximately $170,000. Was this legal or a conflict of interest for the President - as he profited from knowledge no one else had (not even other board members) - but claims it was published as public information.

- Toni

Several state legislators have passed laws prohibiting standing officers and board members of community associations from bidding on homes in their community that are posted for foreclosure. While the posting is public record, the perception of "insider trading" did not sit well with the legislators.

My concern is that the other board members say they were not aware of the foreclosure. Every board member is a fiduciary agent of the association, entrusted by the members to act in the best interests of the association as a whole. Consequently, each board member is responsible for the actions of the group and even for the acts of just one member of the board unless he or she ensures that his or her objection is recorded in the minutes. Therefore, I would urge your board to understand the precariousness of their position by allowing the president to act without their knowledge.

While the president, as the CEO of the association/corporation, may make minor decisions without consulting with the board member so long as he or she is acting within the parameters of responsibility established by the governing documents, board resolutions and state statutes, there are issues that the board members must address together. I suggest that your board allocate an evening to its own edification, reading each page of your governing documents and reviewing all applicable state and federal statutes and case law that affect community associations. Perhaps having your association's legal counsel lead the study group and the discussion will ensure that by the end of the evening, your board and officers are more fully aware of the extent of their responsibilities and obligations as well as the appropriate chain of command.

With specific regard to the foreclosure issue, your association's attorney may suggest that the board approve a resolution detailing the collection procedure, including the point in the process in which the board must vote to actually foreclose. Foreclosure should be an action of last resort, when all efforts to collect the delinquent amount have failed. It is an action that may result in media attention and additional litigation, not to mention that it is taking away a person's home. The entire board should be involved in those decisions, not just one individual.

Sincerely,

Margey

Our former HOA president was paid for labor costs on repairs in our community, as well as reimbursements for materials purchased for which he did not provide receipts to our Management Company. Most payments were in the form of "installments" for large projects in our community, some of which were never completed. We even have proof that he paid someone for painting out of his own pocket, and then sent a bill for double the amount he paid to the Management Company. We took all of our information to an investigator in the Fraud Unit of our local police Dept. The evidence was passed on to the District Attorney, but he felt it should be handled as a civil case. Our Association is now operating on very limited funds, and cannot afford to hire an attorney. Are the any other avenues that we should consider? Our evidence is strong and greatly detailed. Also, the former president has not turned over any Association material to the new HOA Board, who have made repeated requests since November. Any information you could provide would be greatly appreciated. I live in NC.

- H.

It's certainly unfortunate that some community association officers, albeit a relatively very miniscule number, take advantage of their members' trust by using the association's assets to their own benefit. If you cannot find an attorney to represent the owners on a contingency basis, try submitting a claim to the association's Directors and Officers (D & O) liability insurance policy, which provides coverage for community association board members and officers for their errors and omissions while acting on behalf of the association. However, if the president deliberately misappropriated association funds, the D & O policy may not cover such actions and the president would have to refer the claim to his personal insurance agent.

If you believe the total amount in question is less than the limit allowed in your court of local jurisdiction, such as a small claims court or justice court, you might try filing a claim there on behalf of the owners. Another option might be to contact your local Bar Association to determine if it offers free or low-cost advice or referrals.

If the above self-help methods are unsuccessful, you might consider asking your neighbors to contribute to a legal fund so you can retain competent legal counsel who is expert in community association matters and familiar with other options that might be available to your association that may enable you to retrieve the alleged misspent funds.

Sincerely,

Margey

I am on the BOD for my HOA. We recently instituted new Architectural Guidelines, which included a provision to grandfather existing fences that come up beyond the rear corner of the house. The new rules calls for them not to extend forward at all. Our development has been through more than one builder and some of the homes (having the fences that do not comply) were not always in the HOA. Now all homes are. Meanwhile, at a seminar for HOAs here in Virginia, one board member was told by three separate attorneys that we would have problems enforcing any requirements that grandfather others who are not in compliance. We have put in grandfather clauses for things besides the fences, so I'm wondering if you have an opinion on whether using grandfathering in architectural guidelines is a bad idea? These lawyers said the HOA would not win any court challenge by a homeowner, but we understood grandfathering to be a pretty standard solution to problems like this. What is your experience with this? How does one go about drafting amended rules that improve the appearance of a neighborhood?

- Christina R.

Since three Virginia attorneys have already informally advised your board member of the difficulty in enforcing grandfather clauses, I hesitate to add my two cents. I asked Mr. Scott Meardon, CEO of Community Group, an Associa Member Company based in Richmond, Virginia for his recommendation; Mr. Meardon suggested that you contact Mr. Robert Diamond of the law firm Reed Smith in Falls Church for a formal written opinion as well as good common sense regarding this issue.

Sincerely,

Margey

We are a VA condominium in the County of ****. What are the laws governing the number of occupants per unit? How can we go about enforcing these laws? - if any. Can we have our own occupancy regulation? Would this require a resolution?

The board of directors is proposing passing a resolution concerning lease registration - this resolution requires owners of units that are not occupied by the owners to pay a fee to cover the cost the Association incurs because the unit is not owner occupied. This resolution has been reviewed by the Association attorney and is an appropriate action and in concert with our by-laws and the VA condo Act. My question is: can we include in the fee the costs of legal fees incurred by the Association due to tenants actions? I.e. covenants violations and the cost of legal fees to send out letters from the Association attorney and time the attorney has spent in dealing with the owners advising them and the Association due to tenants actions?

- Denise D.

I asked Mr. Scott Meardon, CEO of Community Group, and Associa member company headquartered in Richmond, Virginia (www.communitygroup.com) for help with your state-specific questions. According to Mr. Meardon, there are no Virginia laws limiting occupancy in condominium associations. However, the county in which the condominium community is located may have ordinances affecting the number of persons permitted per bedroom. In