Ask the Expert

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

Problem Board Members

Does a Board President have the authority to demand that the property manager send all communication/information to him before sharing with the entire Board?

- Curious

While a board president does act as the CEO of the association, the other board members have even more power since they typically can remove any officer at any time with no stated cause. If the rest of the board disagrees with the president's actions, they should first cordially discuss the matter in an attempt to amicably resolve the dispute. If that effort is unsuccessful, the board could follow the steps detailed in the bylaws to remove the president.

Sincerely

Margey

Last month all board members resigned simultaneously. We have no current board. Can our management company take over board responsibilities for three months or so to provide a breathing space for all members to settle, reflect, and decide on the next step? If a new board is elected, must they simply fill the appointments of those who resigned?

- MaryAnn

A community association management company does not have the authority to assume the responsibilities of the board of directors. Your neighbors elected the board to represent their best interests in the operations of their community. The board, in turn, delegated to the management company some authority for the day-to-day management of your association, but it's the board that is ultimately responsible for everything that occurs regarding the community association. According to most associations' governing documents and state statutes, only the board can make policy decisions which a management company is obligated to implement.

If a homeowner no longer is willing to serve on the board, it is imperative that the remaining board members adhere to the resignation and appointment process detailed in the governing documents. As board members, they have a fiduciary duty to act in the best interests of the association; resigning en masse is detrimental to the association's viability. Before relinquishing his or seat on the board, the board member has an obligation to ensure that there remains adequate volunteer leadership.

Sincerely,

Margey

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We are an 86 unit condo developemnt in ******, Tennessee. We are set up as a non-profit corporation and operate under a Master Deed and By-Laws and governed by an elected Board.

Our clubhouse committee is recommending to the Board that we begin charging a $50 use fee for the clubhouse for residents who want to have birthday parties, anniversaries, showers etc. in the clubhouse. This fee would be to clean, replace carpet, furniture and other smenties as needed where the budget would be stretched to cover them.

Please let us know what the ramifications are of charging such a fee? Would money received from charging a fee require reporting to the IRS? Would it jepordise our non-profit status? Can the Board approve this or is it an item that would have to be put before the whole community? Please provide any other information you feel might be helpful to us.

I have searched the Expert answers but could not find anything to help. Thank you for your help.

- Don

If your association's governing documents and state statutes do not prohibit imposing user fees and do authorize the board to set fees and rules for use of certain common areas, then establishing a reasonable amount to use those facilities is a good way to offset the cost of eventual replacement. Non-profit corporations can maintain their status even with a certain percentage of non-exempt income; check with your CPA for specific recommendations.

Sincerely,

Margey

We are stuggling financially as an association. Reading through my covenants I can across this paragraph:

Section 7. Capitalization of Association. Upon subjection of a Unit to the Declaration, a contribution shall be made to the working capital of the Association in an amount equal to three (3) months of the Base Assessment for that year, plus $125.00. Such contribution shall not be considered advance payment of assessments and shall be in addition to, not in lieu of, assessments then or thereafter coming due.

To me this means we can charge new home owners an initial assessment. Is this how you would read it? Our management company disagrees. Before we get an official legal opinion, I was wondering what you think? Thanks.

- Maria, Indiana

By all means obtain an attorney's opinion regarding the provision in question. In my lay analysis, it looks like the capital contribution is collected only once, when the unit is transferred from the developer to the first owner.

Sincerely,

Margey

Should signature authority be handled by the management agent, and not the board? And if so, what controls (two signatures) can be put in place to oversee the proper execution of association funds?

- James

The board of directors should retain signatory authority over reserve funds, requiring dual signatures for withdrawal. Additionally, the board should approve a resolution regarding management's authority to sign operating account checks. However, it's even more important that the resolution specify under what circumstances and limits management may authorize expenditures, since the association will have already incurred the expense by the time the invoice for payment is received.

Sincerely,

Margey

My husband and I have been members of an HOA for 12 years now, owning a condominium in a building w/ 48 units. We own our own business and are at times late paying the HOA dues, since we often have to juggle income. My husband has served as Board President in recent years, tirelessly serving homeowners here. Since that time, the board added a By-Law stating that anyone who was late would be fined $250 for use of the common areas, including the elevator. We were fined several times but after complaining to the management company about the unlawful nature of this tactic the charges were removed (except for one). Now, after being 39 days late, we received a certified letter from the attorney representing the board and management company accelerating our debt, including legal fees and excessive charges for storage.

Is there a law in Texas that prohibits this type of treatment? I am specifically concerned with the fact that 30 days late seems a little early to begin
collection and the fact that we feel singled out for unusual treatment. Is there any protection available to us? Thanks very much for your reply.

- Kelly

Board members must demonstrate absolute adherence to all provisions of their community association's governing documents, including timely payment of maintenance fees. They are legally held to a higher level of responsibility and should be model homeowners to their neighbors.

Many association documents provide for acceleration of assessments after a 30-day grace period. Referring delinquent owners to an attorney for collection is certainly a typical collection action. However, as you pointed out, the board must uniformly enforce their collection efforts and not single out certain individuals for more stringent compliance criteria. Please use the Search function and enter "collection" in the key word field for more information regarding pursuing community association delinquencies.

Sincerely,

Margey

Maintenance Fees

I am on a committee to gather information on pro rating our dues. One homeowner has suggested that the owners pay a pro rated share according to their condo size and the vote for each condo also be pro rated according to the same formula. Have you any information on pro rating votes? To me it doesn't make sense to give someone more authority because they have more expense. Thanks...

- Janet

Before exploring the best way to assess and vote, check your association's governing documents. Any changes to the recorded method of assessing maintenance fees and voting typically entails amending the Declaration which could also require approval of all mortgage lenders.

Most condominium association documents and state statutes mandate that unit assessments and voting rights be calculated based on a percentage interest formula. The theory behind such requirements is that fact that in a condominium, each owner owns his unit (usually, the airspace) and a percentage of the common elements based on dividing the unit's square footage by the total square footage of all the units.

Sincerely,

Margey

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What is the Homeowner Associations duties/responsibilities when they refuse to sign a 60 day letter or subordinate for a homeowner that would like to use their equity? I don't understand how a homeower can be blocked or denied access to their home equity if we have paid all of our yearly HOA dues.

- T.

Most home equity lenders require the homeowners association to subordinate their maintenance assessment lien to the lender. That means that not only is the community association's lien second to the primary lender, but the equity lender would also take precedence in the event of bankruptcy or foreclosure. Most community associations will not willingly take an inferior position because it would have a more difficult if not impossible chance of collecting potentially delinquent assessments and other late charges.

Sincerely,

Margey

We just had our annual meeting and part of the agenda was to vote on a position on the board. One the members is seeking re-election and I decided to run against him. Now we are about a 100 unit Condo development in Massachusetts and we have a 5-member board.

My question is this... we did not have quorum (even with the proxies) so the management company informed everyone that there can not be a vote tonight and it will be brought up again at the next meeting (not yet scheduled). I thought to elect a board member technically you do not need a quorum. Is that true? Any information is appreciated

- Steve

In order to legally conduct any business at a formal meeting of an organization, a quorum must be present in person or by proxy, if proxies are permitted by the governing documents or state statutes.

Sincerely,

Margey

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We live in a condo in *****, FL. Our mortgage company is requiring that our second floor unit have $250,000 in flood insurance. The HOA master policy covers this building (6 units) for $690,000 or $115,000 per unit. Are we required to purchase the excess coverage ourselves or does the HOA have to pay for this?

- Mary

If your association is complying with the association's governing documents and state statutes with regard to providing flood insurance coverage, then you would be responsible for acquiring and paying for higher limits.

Sincerely,

Margey

I live in a 55+ community. In our Declaration of Covenants there is a subsection entitled Delegation of Right of Use under the Article on Common Area. The subsection states: " Any Owner may delegate its rights to the use an enjoyment of the common area to family members who reside permanently with such owner and to its tenants, contract- purchases, invitees and guests."

What does this mean? Does the owner who delegates rights no longer have any?

- James

Most community association governing documents and state statutes require that either the renter or the owner retain the right to use the common elements, in particular the recreational facilities. It's one or the other, either the renter or the owner, but both may not use the pool, clubhouse or other amenities unless specifically detailed otherwise in the documents or statutes.

Sincerely,

Margey

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Hello, don't know if this would concern you - but we need help. Our neighbor has the worst run-down property I have ever seen. Junk every where, weeds everywhere and a definite fire hazard and a very unhealthy environment, possible all kinds of creatures within that junk.

Our property value is not good with this condition next door to us. We have been in our home 4 years over here in ****, Texas and keep it neat and clean. Who do we report them to? And what needs to be done in order for them to clean it up?
Thank you for reading this.

- Roberta

Your municipality may be able to cite your neighbor for not adequately maintaining his property. Contact your city councilmember, Zoning Department or Planning and Development Department for assistance.

Sincerely,

Margey

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