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Ask the HOA Expert
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Comparing HOA Dues Answer: Assuming your budget is formulated with factual information, the result is what is required to pay for real operating and reserve costs. However, there are many homeowner associations that do not fund their budgets properly. Many put nothing in reserves and this generally should account for 20-40% of the total homeowner fee. Still others self manage in a foolhardy attempt to save money. It doesn't. It costs plenty in substandard service, inadequate maintenance and falling market values. Besides, who wants a 24/7 job with ongoing criticism and no pay for very long? So a comment like "We charge higher fees/dues than XYZ HOA" is meaningless without knowing the particulars of XYZ's budget, the extent of their amenities and maintenance responsibilities, if they are self managed or professionally managed and a host of other variables that can skew the bottom line dramatically. So, no, I've not done such a dues study because there are simply too many variables for it to be meaningful. But here is a good and honest response to inquiring members: "Our budget is barely adequate to fund a reasonable level of maintenance, services and reserves that the members expect and state statute requires. The Board has considered and explored options to reduce cost without cutting the quality of service and has made some cuts where possible. But quality of service is necessary to sustain the value of our homes and cutting quality will only cut our market values and salability. The proposed budget is the result of careful analysis and we need every penny to get the job done properly." BACKQuestion: Our Board recently announced that it plans to conduct business by email. Can the Board do that? Answer: Unless the governing documents are properly amended by an appropriate vote of the members to allow conducting non-emergency business by email, it is not permitted. Email meetings effectively shut out members from the decision making process. Members are entitled to attend meetings and audit discussions. While it’s okay for your Board to exchange information by email, business decisions should be formalized at a regularly scheduled meeting open to all members. Even if the Board could get support for an email initiative, I don’t recommend it. Email is very useful but face to face meetings allow a better quality of discussion and debate. If the topic is already agreed upon, email is probably fine but if it needs discussion and has great implications, email just won’t do it justice. Any topic decided behind closed doors (or in cyberspace) will invariably be perceived in a negative light by the most disgruntled HOA members. However, there are some cases when transacting business by email is justified. Some HOAs are composed largely of second homeowners for vacation purposes (on the beach, in the mountains, etc.). If a majority of the owners normally live in distant places, getting together for meetings is problematic and expensive. In those cases, a compromise of, say, two site meetings a year supplemented by email is reasonable, particularly if you have a local management company or site manager who is looking after day to day issues. BACK
Enforcing Old Violations Answer: The Board can request that old violators come into compliance but unless they are willing, it will be an uphill battle that the Board should probably compromise on. Five years is a long time and most courts likely would view it as silent consent on the Board’s part or a prescriptive easement (passing of time legitimized the installation). The case is stronger if the installation is unsightly, dilapidated or causing damage to buildings or grounds. The Board should prioritize the violations according to severity and deal aggressively with the most blatant. If there is resistance, the Board will need to decide whether legal action is prudent or cost effective. Less offensive violations can often be dealt with by getting the offender to sign a recordable document that identifies the property, describes the violation and states the offending installation must be removed when the property is sold. Most owners view this as getting their way while the Board can inform other members the installation is temporary. Prospective buyers are notified via their title policy of the violation. BACK
Firing the Board President Answer: There are several issues. Directors of the Board typically only can be removed by a vote of the membership. But officers of the Board are appointed by the directors. So a majority of the directors may remove a President from office. Once divested of his office, he may choose to quit the Board voluntarily. If he does, the remaining directors will have a vacancy on the Board that needs to be filled. That is usually done by appointment by the remaining directors or at the Annual Meeting if it is coming up soon. The management company is not the appropriate party to ask the President to resign. This is like hiring a hit man to do the dirty work. If the directors have a problem with one of their own, they (or one of the directors appointed to do it) should speak to him in person and in private to avoid unnecessary embarrassment. The issues should be discussed frankly, honestly and diplomatically. If he can't make a case why he should be allowed to stay and refuses to step down, the Board can remove him from his office by a majority vote. (All this, of course, unless your governing documents read otherwise.) BACK
Aggressive Dogs Answer: The issue of pet aggressiveness isn’t necessarily tied to breed. The pet owners know whether theirs is or not but will never admit to it so the Pet Policy should be clear that pets that are aggressive and threatening are not allowed in the common area. That way, if complaints are received about this kind of behavior, there is a clear reference about it in the Pet Policy. Attacking, biting, of course, should be adequate cause for immediate removal from the community. One strike and they're out. BACK Heat Pump Installations Question: Our board is considering a proposal from a homeowner which includes a heat pump in the common area. The specs looked reasonable but will allowing this kind of installation create unintended consequences? Answer: There are several things to consider. If heat pumps are allowed for one, they should be allowed for all. The Board should look at this request as if all owners want one. Should this equipment be the standard for future requests or would another design be more universally acceptable in all locations? Would the curb appeal suffer if there were many such installations? Heat pumps can be noisy and hot, especially for neighbors who have their windows open for fresh air. Heat can also damage the landscaping. If there is a way to allow all members to take advantage of this kind of installation without creating curb appeal, noise or heat problems, it's probably okay. But if only a select few can meet the test, you will be setting up a platform for conflict. You're in a better position to answer the hypothetical questions. Keep the big picture in mind. BACKDirector Residency Requirements Question: Our by-laws state that only residents of our community can be on the Board. Our current president does not live in the community but owns a rental unit. What should we do? Answer: If residency is a requirement of holding office, this person could not be legally elected. How did he get on the Board to begin with? I suspect he was appointed to a vacancy with little thought by the Board about the residency requirement. Now that someone (you) realized the inconsistency, you have the right to demand his removal, that he move in or bylaws be amended to accommodate his situation. I recommend the bylaw amendment option because restricting directors to residents is discriminatory and could easily be challenged in court. All owners should have equal rights. BACK Director Compensation Question: Since volunteers are hard to find, we’ve been considering paying our directors. Is that okay? Answer: Most governing documents prohibit compensating directors. But even if yours are silent about it, it’s best not to walk that road. There is a clear conflict of interest and it could lead to abuse. BACK Manager Using Proxies Question: Our Board allows members to designate the manager as their proxy at Annual Meetings. While he’s a good guy and all, this doesn’t seem right to me. Answer: Having an employee or contractor as proxy would be a huge conflict of interest since he could easily vote in friends who write his checks. This is a bad idea from start to finish. BACK Landscape Renovation Question: Our HOA is 20 years old and our landscaping is looking pretty tired. We have a Grounds Committee but it seems it’s not making much progress in beautifying the grounds. Thoughts? Answer: What you need is a master landscape plan provided by a landscape design professional that will take into account your irrigation system, tree cover, maintenance costs, curb appeal and, of course, cost of installation. This plan can be competitively bid by landscape construction contractors since it will show all the details of plant and bush species and placement. Landscaping is a big part of home value and this issue should not be neglected. Investing in landscape renewal will pay dividends in reduced maintenance costs, water bills, increased curb appeal and member pride. Pay and little and reap big rewards. BACKManager Oversight Fees Question: Our professional manager charges a 5% oversight fee for renovation and insurance repair projects that the association enters into. Is this common? Answer: The manager should not be expected to work for nothing. Extra work like this justifies extra pay. It's common for an HOA manager to charge either a percentage of the project cost or an hourly rate for project oversight. However, it’s important to have someone that is knowledgeable about the particular work being done. Oversight of straight forward projects like painting could be done by the managers but complex structural or roof work, for example, demand a higher degree of expertise. If the project is lengthy and multifaceted, it makes sense to hire a construction manager to schedule the phases, coordinate material delivery, perform progress inspections, process change orders and approve payments. Costs can vary but it’s usually more than worth the expense to ensure competence, good work and timely completion. BACKDirector Vote Abstention Question: At a recent Board Meeting, a director abstained from voting. Is that legal? Is the abstention counted as a No vote? Answer: Yes, a director can abstain but should have a good reason for doing so, like a conflict of interest. The abstention is not counted as a NO vote but may have the same effect if lack of that vote means a majority vote can't be met. The minutes should reflect the director’s abstention and reasons. BACK Developer Fee Payment Question: Our HOA developer still has a number of unsold lots for which he is not paying homeowner fees. The governing documents allow this under the condition that there is no building permit in effect. This doesn’t seem fair when there is ongoing landscaping, insurance, administrative costs. Answer: It is not unusual for developers to reserve special privileges for themselves. These kind are shortsighted and bound to create ill will. But even if the developer isn’t paying fees, he’s still obligated to maintain his unsold lots in reasonable condition. Either he can reimburse the HOA for providing the maintenance service or arrange for it on his own. If he fails to properly maintain his property, the HOA has the right to do it for him and require reimbursement. That's only fair. BACK Elections by Mail Question: Are there legal guidelines for elections by mail that must be followed? How are ballots secured prior to being counted? How and where are they counted? Answer: Voting by mail precludes nominating someone at the meeting, getting to know the candidates or the issues. Voting by mail should generally only happen when the majority of owners are non-resident and cannot easily attend a meeting, when issues are clear cut and don't require debate. That said, if an election or vote is done by mail, ballots should only be collected and tallied by a neutral third party. To do otherwise would certainly open the door to fraud. An independent CPA, attorney or escrow agent (Title Company) could facilitate that process. Once the ballots are all received, any member that would like to be present when they are counted should be allowed to be there. The time and place of the tally should be declared in the election notice and ballot material. There is no reason the neutral third party couldn’t conduct the tally onsite at the HOA for easier accessibility to the process. BACKGating an HOA Question: We are contemplating gating our HOA What are the pros and cons of such an arrangement? Answer: Gating an HOA is not allowed in some jurisdictions so checking with the City or County is the first step. From a more practical aspect, there are concerns about emergency vehicle access. Legitimate vendors like pizza delivery, lawn service and the plumber will have to run the gate gauntlet as well as your friends and family. Gates are far from maintenance free and tend to break down after hours when repair rates double. Most gated HOAs end up discontinuing them due to the many glitches of the system or the perception of being elitist. BACK
Directors Serving on Committees Answer: Yes, board members can serve on committees and often do. Committee meetings typically are not open to non-committee members. This committee may be up to something it shouldn’t be. Committees should have clear marching orders. If a committee goes "rogue", the board can terminate it since it exists at the pleasure of the board. BACK
Eligible Board Candidates Answer: Assuming the governing documents define "eligibility" they way you describe it, no one can be a candidate for the board unless they are current with money owed to the HOA. So, you only have one eligible candidate at this point. If the delinquent member who wants to be a candidate makes good on his promise to pay, he can nominate himself at the annual meeting. BACK
Transfer Fees 2 Answer: Transfer fees can be charged if there is actual cost incurred by the HOA in handling paperwork and physical move-in or move-out tasks. For example, when moving in or out of a high rise condominium, special parking might be needed for the moving truck as well as reserving an elevator with special wall padding installed. Special janitorial is often needed to clean up after the movers. The entry access system often needs to be reprogrammed as well as parking garage openers. In this kind of scenario, the HOA is incurring real costs and is entitled to recoup reasonable costs to facilitate the move. However, sometimes the transfer fee have no basis in cost but is used as a way to extort money from new owners who have no choice but pay it, kind of like a hotel tax for tourists. The justification is often that the transfer fee will be added to reserve funds. The problem is, new owners do not owe money to reserves since they have not yet enjoyed the benefit of the common elements. Any deficit in reserves is owed by current and past owners not by new owners. While the board does have the authority to enact reasonable fines for failure to abide by the rules or pay dues as agreed, it does not have authority to impose special fees on new owners over and above what it really takes to execute the task (change the lock, the records, etc.). Anything more is considered a special assessment on a select group of owners. The board has no authority to special assess certain owners merely because they are new (or landlords, another common target for special fees or treatment). That said, if the members vote to approve a fee which all members pay including the owners already in residence, it would probably pass muster. BACK
Rule Violation Procedures Answer: This question raises several important issues relating to rules and their enforcement: 1. What are the ramifications for failing to enforce a rule? Not all rules are created equal. The three major categories of rules involve people, pets and parking. Each one of these categories can address or involve a safety issue. Safety ranks higher in the hierarchy of rule enforcement than, say, curb appeal issues. For example, people that smoke can create a second hand smoke health hazard for their neighbors. Physically aggressive dogs can attack people. Cars parked in the HOA’s fire lane can block emergency response vehicles like fire trucks and ambulances. If the rule issue involves personal safety, it behooves the board to take enforcement more seriously. 2. Why have rules without consequences? Rules without consequences beg violation. If something is worthy of a rule, there must be an effective penalty for violation. Penalties should be reasonable and fit the crime. In the case of second hand smoke, the penalty may be a ban on the smoking in the common area. In the case of the aggressive dog, either the owner keeps it securely under control while in the common area or remove it permanently from the HOA. In the case of a fire lane violation, immediate towing is the best and most expedient enforcement. 3. Should unenforced rules be purged? Rules with no consequences should be un-ruled. Reasonable people need few rules. Unreasonable people will not respect rules that restrict something they want to do. So enact only the few needed rules that aren’t already codified by the local government. And make sure they have effective penalties for the scofflaws. Now, all that said, is the HOA responsible for a child getting hurt while running out between illegally parked cars? The HOA’s liability insurance typically covers injuries that happen in the common area so from that perspective, yes. Is the HOA responsible for a 24/7 parking patrol? No. However, if there is a No Parking Zone, there should be a reasonable procedure for penalizing or removing violators. But since enforcement usually falls on HOA volunteers, it’s a hit and miss proposition. Does that mean the HOA should not have parking regulations? Absolutely not. It just means the enforcement procedures vary according to the budget available to enforce them. In those HOAs with volunteer enforcement, parents should watch their children closely. BACK
Director Serving as
Property Manager Answer: Most HOA governing documents prohibit board members from receiving compensation. While reimbursements are appropriate, waiving her fee is not. It is just another way of receiving compensation and a clear conflict of interest. If she wants to be paid for her work, she should resign from the board. BACK
Raising Chickens Answer: Most HOA governing documents restrict raising poultry and other farm animals or local laws may do so. If this is something like a short term 4-H project, it’s probably no big deal. If it is an ongoing production facility for eggs and meat, not a good idea. The main issues are sanitation and noise (particularly from roosters). BACK
Who Fixes Leak Damage? Answer: This is a classic example of why all HOAs (particularly the common wall kind) should have a clear Areas of Maintenance and Insurance Policy that defines who (owner or HOA) is responsible. This policy should identify all building and grounds components and where the dividing line is between common and non-common. Most governing documents are not precise in defining this so the board needs to adopt a policy that gets more specific. This policy not only helps avoid disputes but directs the various insurance companies concerning their responsibility to cover certain damage claims. The importance of this policy cannot be understated. Typically, the HOA is responsible for repairing common plumbing lines. Since the plumbing line in question serves multiple units, it is considered common. Damage repair to units caused by the leaking pipe, however, is usually the unit owners’ responsibility unless the HOA neglects to perform plumbing repairs in a timely manner when informed by a unit owner. For a sample Areas of Responsibility Policy, see www.Regenesis.net BACK
Sharing Violation Letters Answer: Unless state law requires sharing this kind of information, a violation issue is a private matter between the board, management and offender. Such information should not be shared with other owners. BACK
Special Assessment Protocol Answer: If the board has decided to move forward with a special assessment, it should definitely hold an informational meeting to discuss the reasons and to answer questions. It is possible that there will be people that take exception to the special assessment and want to express that opinion. They have a right to do that as long as they are civil. The board should attempt to respond to all questions and concerns if possible. Trying to respond to "I don’t have the money" is a waste of time even if true. Special assessments are never pleasant and there will always be some that have a problem paying them due to disability, unemployment, divorce, too cheap, etc. Going forward, the board should have a long range plan to avoid them in the future by setting aside adequate reserve funds to avoid special assessments. It would a good thing to point this out to the members now. BACK
Sharing Lawsuit Information Answer: How much you divulge about litigation depends on the subject matter. Your attorney should be helpful in giving you direction. Some highly sensitive issues should be kept confidential. But generally, the owners should be made aware of any litigation that is headed to court and when substantial legal costs are possible. The general nature of the litigation, the board’s position on the issue(s) and current status (without naming names) is a reasonable approach. BACK
Developer Design Exceptions Answer: The developer has no special right to violate architectural restrictions established in the governing documents. However, it is commonly done because the developer wants to sell homes. If the developer has allowed certain exceptions, the board needs to decide if this is something which should be allowed by other owners. To avoid a double standard, the answer is usually "yes" and the board should develop and approve the standard so all are done the same way with quality design and materials. BACK
Housekeeping Fire Hazard Answer: There are several issues here. As a general rule, the board or management should not hold keys to units unless there is an emergency or a rental management contract in place. Otherwise, either the unit owner or their representative should be present to allow access. However, assuming that the unit owner gave permission to enter, if there is a real fire hazard or sanitation problem, the manager should inform that unit owner in writing with specifics. That said, it is up to the unit owner to respond. In other words, the board and HOA do not have the authority to dictate resident lifestyles unless they clearly are affecting the common area or neighbors. For example, if the sanitation issue creates a rodent problem, the HOA has the right and duty to control it. In every HOA, there are certain individuals that are pack rats or live like slobs. That is their right as long as their lifestyle does not bleed into the common area or adversely affect the neighbors. BACK
Setting Fence Height Answer: Architectural and design policies like fences are often enacted by the board. If the board has a reasonable basis for setting the five foot limit (like that has been the standard for years), it has every right to do so. The fact that some may not agree is no surprise. Welcome to America. But the board has the authority to set such policies and amend them later if there is a compelling reason to do so. BACK
Tree Cutting Policy 3 We now have a resident who is requesting to cut two tall pine trees that are close to his house due to the potential of the trees falling. He is stating that the HOA will be liable if the tree falls. Is the HOA exempt from such liability if the governing documents state that significant trees cannot be cut? Answer: Besides the falling tree issue is the potential fire hazard. Trees should be located at least 30 feet from the structure, especially if they are highly flammable like pine trees. There is also the issue of tree limbs damaging the roof and the trees causing foundation damage when they sway in the wind. But to address a specific request, it would be prudent to get a licensed arborist to review the trees in question. If the arborist believes they are a danger, they should be removed. Otherwise, they should not. The board is not responsible for acts of God, only for handling business in a prudent manner. Use experts to your advantage. BACK
Time Limited Board Meetings Answer: Generally, board meetings should not go longer than two hours. This seems to be the average time limit for sustained human concentration. Board meetings should always have a set agenda together with proposals, information and recommendations circulated in advance to the directors for review. In other words, the directors should not arrive at the meeting cold and clueless. They should have a good idea about the topics of discussion and be prepared only to clarify the issues before an up or down vote. Board meetings should never involve rambling discussion. Board meetings are intended to transact business. Stick to the agenda, get business done and adjoin the meeting in two hours or less. Having short board meetings is an effective recruiting tool for good board members. Successful business people value their own personal time and will be more inclined to volunteer if the meetings are run in a businesslike way. BACK
Expanding Common Amenities Answer: The board has no authority to expand the common area amenities. Its authority is to maintain existing amenities in good condition. However, if an appropriate majority of the members are in favor of raising and spending this money for this purpose, that is acceptable. However, the "appropriate" majority may be a super majority of two thirds or more depending on how your governing documents read. This requirement could effectively kill the proposal. BACK
Assigning Proxies to the Board Answer: Proxies should have been distributed and collected in advance of the original annual meeting to ensure there was a quorum. It’s up to the board and manager to make sure those proxies are collected before the meeting to make sure a quorum is secured, not simply hope enough people show up. Getting members to return proxies in advance takes persistence but is extremely important. As far as the proxy process itself is concerned, a member has the right to designate a representative to act on their behalf at an annual or special member meeting. If that member either does not select a representative or the chosen representative fails to attend the meeting, the proxy could include an alternative to allow "one of the directors of the board" to vote on their behalf. If a member isn’t comfortable with a board member voting, the proxy should include another alternative which states "If my designated representative fails to attend the meeting, this proxy is to be used for quorum purposes only." This way, the show can still go on. For a sample proxy, see Forms sections. BACK
Annual Meeting Speakers Answer: Every meeting should have an agenda that is noticed in advance to all attendees. The typical annual meeting agenda template looks something like this: I. Call to Order Since this is a business meeting, the typical agenda does not provide for speakers. However, if there is a proposal under New Business to, say, Improve Security Using Neighborhood Watch, it is entirely appropriate to include a short presentation to reinforce that proposal. In other words, if the speaker is relevant to the business meeting, it should be allowed. That said, you do have the right to request time for a speaker. Your manager failed to address the request. "Not getting a response from the board" is a lame excuse. The board president is the one that approves the agenda. You could have called that person directly to discuss it and should do so in the future to avoid the bureaucratic bottleneck. BACK
Assignment of Rents Answer: Yes, there is a lot the board can do and the sooner the better. The board needs to enact a comprehensive Collection Policy which allows "assignment of rents" from delinquent landlord owners. The Collection Policy could also include interruption of HOA provided utilities in the event of delinquency. The HOA would have to have individual utility unit shut off capability but this is an extremely effective way to get the attention of the unit owner. If the board is going to enact a new or amended Collection Policy, it should be circulated to all members in advance with a notice that it is going into effect on such and such date. This may encourage delinquent members to pay up before it does. And the board should identify and work with an attorney that is knowledgeable in HOA collections to deal with delinquencies in the early stages. If this member has truly filed bankruptcy, the bill may be difficult or impossible to collect. A basic of all HOA collection policies is to act early and aggressively to secure the HOA’s debt. For a sample Collection Policy, see the Policy section. BACK |
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