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Ask the HOA Expert
Q&A |
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Restricting Occupancy Question: Our governing documents restrict unit occupancy to three people. There is a unit that has four. What should we do? Answer: If you have a limit of three, I assume your units are quite small. If you have two bedroom units, four would be reasonable but, honestly, this kind of regulation is overly intrusive. It's not the number of people that dictate problems, but the lifestyle. One obnoxious resident can create more problems than dozens of considerate ones. Rules should focus on behavior, not numbers (weight or size, in the case of dogs). Occupancy rules are very difficult to enforce unless the owners willingly comply. It is a constant game of cat and mouse with the violator claiming extra occupants are just temporary guests. And to really enforce it, the HOA must be willing to go to court where the judge would likely view the rule as too onerous (read "you lose"). Unless there is a clear problem being caused by the extra occupants, this is a rule that is for all intents and purposes unenforceable or effectively so. Either amend the bylaws to remove it or send periodic reminders in the newsletter asking for voluntary compliance. Don’t make this a high priority enforcement issue. You can’t win. BACK Resolution Guidelines Question: When is a resolution required and should they be included in the homeowner's handbook? Answer: Resolutions are never required but are a desirable policy format for defining complicated issues like collections, architectural control, parking and others. (See Resolution Process section for details and samples.) Handbooks should always contain the full text of all rules and resolutions. These should also be posted on an HOA website for the benefit of prospective purchasers, real estate agents and others that have an interest. BACK
Manager Won't Return
Calls Answer: Let's assume that the property manager is otherwise doing her job correctly. Homeowner inquiries can take an enormous amount of time to respond to, especially if they take research. If the question relates to maintenance that is the HOA's responsibility, the manager should respond. But certain owners can engage the property manager in fishing expeditions related to board actions or projects. They badger the manager for details of contracts and meetings and demand copies of records. While it's an owner's right to review certain information, demanding the manager's time to compile the information is not. The property manager's basic scope of work is typically limited to "ordinary and routine" HOA business. When a member, whether board or general, makes repeated and special requests, it exceeds the intended scope of work that the manager is being paid for. The manager can respond to this several ways: 1. Start charging for the extra work, or 2. Stop responding to requests that are excessive or non-routine business. The board should either defend the manager against owners that believe the manager is being paid to do anything and everything or be prepared for extra charges. To do otherwise is unrealistic and ultimately will fracture the board/manager relationship. To control costs, there must be reasonable limits to homeowner requests. The manager usually knows when an owner has reached that point and should expect the board to intervene or support the manager's judgment. BACK Pet Vaccinations Question: We have number and weight limits for pets at our HOA. Can we also require that pets be spayed, neutered, have ID and required shots? Answer: These requirements would be going too far. Even a weight limit is too far. The issue should be based on demeanor, not size or reproductive capability. BACK
Requiring Resident Directors Answer: Restricting candidacy based on occupancy is inappropriate because it assumes that resident directors make better directors than non-resident. This, of course, ain’t necessarily so. I have dealt with many non-resident directors who were thoughtful, talented and valuable additions to the Board. Candidates should be evaluated based on their talents not location. BACK
Hostile Neighbors Answer: Difficult people rarely change their ways. But if there is someone in your group that has the ability to communicate to them what you have just described, it might make a difference. Maybe they don't realize how abusive they are. Also, the Board is not required to respond to every opinion and complaint. If it's pointed out to these folks that their demands are likely to fall on deaf ears if they are aren't more restrained, that too may help them change. But if they refuse to mend their evil ways, simply refusing to respond to them may be the best alternative. BACK
Surcharging Landlords Answer: This kind of surcharge is illegal since it changes the homeowner fee allocation. Changing that allocation takes a 100% approval vote of the membership and, possibly, their mortgagees. However, if any resident causes extraordinary costs to the HOA like damage to common elements, those costs can be passed on for reimbursement. It is fairly common to charge Move In/Move Out fees when there is documentable costs incurred by the HOA but those fees should apply to all residents, not just renters. BACK Denying Permitted Additions Question: Our HOA has provisions in the governing documents requiring Board approval for certain additions like awnings. The Board recently received several requests for awnings and the Board has decided not to allow awnings of any kind. Is this a correct interpretation of the Board authority? Answer: It's reasonable for members to assume that since the awning option is mentioned in the governing documents, the intention was to allow them. The Board cannot enact a policy that contradicts the governing documents. If the Board feels that awnings aren’t desirable in any form, the governing documents should be amended by an appropriate vote of the membership. Otherwise, the Board should honor the provision as it is written, arrive at a awning standard and approve requests under those conditions. Adopting a standard is important because of consistency, quality and curb appeal considerations. It also saves both Board and petitioner a lot of time and guesswork. BACK Manager at Meetings Question: Our regularly scheduled Board Meeting fell on a holiday. At the last minute, our management company informed us that they could not make the meeting and failed to provide reports or materials for us to review. I cancelled the meeting and reschedule it for another date. Some directors disagreed with my decision stating I was letting the management company run the HOA instead of the board. Was I wrong? Answer: A board meeting scheduled on a holiday is never a good idea and the management company should have advised you well in advance about not being available to attend. Presumably, there was just a miscommunication. But you made the right decision to reschedule. One of the most important benefits of professional management is the counsel the manager provides. Having the manager attend Board meetings is critical to get objective feedback and adequate information for the Board to make informed decisions. It sounds like some directors are maneuvering to self manage. In most cases, this is a very bad decision. There is a lot more to it than they imagine, not the least of which is having to collect money and enforce rules on neighbors. It rarely works and all members suffer the consequences. The management company is hired to manage and distance the directors from these sources of conflict. BACK
Amending Documents
Minimum Answer: There is usually no minimum number required to propose an amendment although there may be specific requirements in your governing documents. Otherwise, any member can propose an amendment. That said, the Board is not required to ensure a proposed amendment is in proper form, legal, etc. The member proposing an amendment should provide to the Board in writing: 1. The specific amendment language These requirements are reasonable and will limit the number of amendment proposals to those that are seriously supported. BACK
Collection Enforcement
Penalties Answer: Besides amending the bylaws to increase the late fee (which takes an appropriate vote of the members), the Board should adopt a comprehensive Collection Policy which includes a provision for turning over all accounts delinquent for more than 60 days to an attorney for collection, filing of lien, etc. These additional collection costs can be added to the outstanding balance and are usually an incentive for most folks to pay their bills. The Board could also enact an "administrative fee" of, say, $15-25 to cover the cost of time and supplies it takes to get a late notice out. Another collection tactic is an Acceleration Clause which is triggered if payments are late for, say, 60 days. After sixty days, the Board can accelerate (call due) the remaining fees for the entire budget year. This tactic is, of course, more effective when invoked early in the year. So there are a number of alternatives the Board can use to enforce timely payments. Of course, any additional collection penalties and procedures proposed by the Board should be reviewed by a knowledgeable HOA attorney in your state prior to enactment. BACK
Total Window Replacement Answer: If window replacement is an owner's responsibility, the HOA cannot force an owner to participate in a window replacement project. However, it is very likely that getting all the windows replaced at the same time will reduce the cost by up to 50% over the cost an owner would normally pay due to bulk buying discounts and having the siding removed for the installation. Buying this many windows at once qualifies the HOA for factory direct pricing and with the HOA contracting the installation, the cost will drop dramatically over the best price any owner could ever hope to get. Installing new windows now also ensures that the new siding is not altered or damaged by future window replacements. Noise reduction and utility savings of thermapane windows always justifies spending the money. Your local utility company will provide you with savings calculations. Dividing the installation cost by the annual utility savings produces the payback period in years. Windows is often one of the best investments you can make. Energy efficient windows will also increase the unit market values due to enhanced curb appeal and livability. Between reduced energy costs and increased market value, this one is a no brainer. The Board simply should make its case and assume all owners will fall in line. If you only get a majority, it is still possible to amend your governing documents to make window replacement an HOA responsibility. Then, the HOA could move forward with the project even over the protests a minority. Or move ahead for those that agree and require future installations by owners to comply with the same standard. Finally, siding replacement time is also a good time to consider exterior lights and door replacement. BACK
Hiring Unlicensed Contractors Answer: The HOA should only hire contractors that are licensed, bonded and insured. It is usually a bad idea to hire homeowners even when they are properly licensed. If it doesn't work out, you not only would have to fire a contractor, you will alienate a neighbor. Plus, there is an unavoidable conflict of interest in this kind of arrangement. BACK
Scanty Swimwear Answer: "Proper swimming attire" means appropriate to the majority of people that use the pool. In this case, it sounds like the majority are families and/or seniors. What is normal in Brazil is not normal in the United States. You should conform to the request. Find something more modest or find a place where what you wear is the norm. BACK
FHA Condo Loans Answer: Following the real estate crash of 2008, the Federal Housing Administration (FHA) emerged as a key player in the residential mortgage industry. FHA currently insures over 50% of new residential mortgages nationwide. FHA loans are of particular interest to homeowner associations where it can be very difficult to find conventional lenders willing to write mortgage loans. FHA has established limits on the maximum loan value for single family dwellings according to county. These loan limits can vary significantly from county to county and are subject to change. Current FHA limits can be found at https://entp.hud.gov/idapp/html/hicostlook.cfm (Information provided by Chris Scott of Landye Bennett Blumstein LLP) BACK
Borrowing
Money for Painting Answer: Loans to HOAs are very expensive in terms of fees and interest rate since they are considered commercial loans which typically have shorter terms, like 5-10 years, and often carry annually adjustable interest rates. On top of this, it’s up to the HOA to collect numerous loan payments from each member. As a general practice, HOAs should stay away from borrowing money and let each member provide their own source of funding. For most, home equity loans are easily obtained and have low or no fees and the lowest interest rates available. Others may have savings. Let each decide how to provide the funds and steer the HOA clear of the banking business. Finally, it sounds like you don’t have a reserve plan or, if you do, it isn’t being adequately funded. A properly executed and funded reserve plan is designed to provide funds for things like painting and roofing. If you don’t have a reserve study, order one as soon as possible. If you have one, update it and begin a funding plan that will sock enough money away to avoid the scenario you describe in the future. BACK
Distributing
Minutes by Email Answer: Distributing HOA information by email makes perfect sense labor and budget-wise. But since HOA websites are very cheap, it would be even better to post HOA information on your very own HOA website and merely put a link in the email to the website when new information is available. Those that are email challenged will still need to be provided the information by mail. At least you’ve saved 3/4ths of the cost. BACK
Paying the Treasurer Four months went by and the treasurer proposed the board reinstate the compensation based on the job duties and time required to get it done. Can the board reinstate this payment and overturn a decision made by the homeowners at an annual meeting? Answer: Generally speaking, the governing documents prohibit board members from taking compensation for their board duties. If this is true for your HOA, no, the treasurer should not be paid nor should the board disregard a matter the members have clearly expressed their wishes on. There are professional bookkeepers that can provide this service although it may cost more money. BACK
Selective Rule
Enforcement Answer: It's in the best interest of the HOA for the board to enforce all rules consistently. But not enforcing one rule does not negate all rules. But if the board fails to enforce a particular rule for an extended period of time, the board may compromise its authority to enforce it all. Another common HOA issue is that different boards enforce rules more or less consistently. If a particular board feels strongly that renewing enforcement of a particular rule that has long gone unenforced is a good thing, the matter should be discussed in the annual homeowner meeting or, at minimum, in a newsletter that clearly informs all members of the issue and the board's intention to enforce it. Catching members by surprise is bad policy. On the other hand, maybe a particular rule isn't needed at all. It's okay to take a rule formally off the books by an appropriate vote of the members. Don't just have rules for rules sake. There are plenty to follow already. BACK
Signs of Embezzlement Answer: The management company is there to carry out the board’s reasonable requests. Doubling the return on reserve funds is certainly a worthy endeavor and, yes, the manager should make it so as soon as possible. If there is more resistance, you should investigate the current status of the reserve account to make sure all is as it should be. However, normally, the manager does not have check writing authority over the reserve funds since there can be significant sums there and it might be an enticement to embezzle. If your management company has authority over this account, I would recommend changing that to, say, the board President and Treasurer. Board officers can also embezzle so the HOA should have Fidelity Insurance to protect against this and insist that all checks written have two signatures. BACK
Open Committee Meetings Answer: Board meetings are held to approve HOA business. Those meetings should definitely be open to the general members. Task Force meetings are essentially committee meetings. Changing the title to Task Force doesn’t change its purpose. As the saying goes, if it walks and quacks like a duck, it’s a duck. Committee Meetings do not need to be open to the members unless the board authorized the committee to make decisions on behalf of the board. But Committees are generally advisory only. That means they make recommendations to the board and it’s up to the board to make decisions based on those recommendations.So if the Task Force is truly only there to gather information and make recommendations, the Task Force meetings can be closed. However there is a caveat: If the Task Force is largely made up of board members, it essentially is a board meeting or certainly would be perceived to be one. To avoid that perception, populate the Task Force with non-board members. BACK Shortening Board Meetings Question: Recently, a less than enthusiastic board member sent an email suggesting that we place a limit of 1.5 hours on the board meetings. I have a strong belief that no time limits should be set for a meeting since the board has a fiduciary duty to all our members. If this particular director can't see fit to hang in there for a 2-3 hour meeting once a month then that individual should not be on the board! Answer: 1.5 hours is probably a bit too short but, generally, board meetings should not go longerthan 2 hours which seems to be the limit of concentration for most. Meetings are more effective when there is an "action" agenda and related information which is circulated in advance to the directors for review. If this is not done, rambling discussions usually ensue as directors try to get up to speed on the issues. The board is there to make informed decisions, not BS the night away. A lot can get accomplished in 11/2 hours if the board is prepared in advance and focused on goals. BACK
Not Responding to Repairs Answer: You have the right to prompt repairs, especially when there is potential damage to your property. Write a detailed letter to the board with a copy to the management company making a demand for repairs and citing the previous requests (what, when, etc.). Put a deadline of 10 days to get it done. If they are not done by that time (or in progress), have the work done and submit the paid receipt for reimbursement. Hopefully, the demand letter will prompt action. There seems to be an unprofessional attitude at work on your board and management company. I suggest you run for election the next round, get elected and start making a change. BACK
Special Fees for Landlords Answer: Yes, it is discriminatory. The board has no authority to assess a special fee based on class of owner. The board could enact reasonable charges like a Move In-Move Out fee where the HOA actually incurs costs. Or, if renters damage the common area, the board certainly can require the landlord owner to pay for repairs. BACK
Replacing Cedar Siding with
Vinyl Answer: Unless there is a widespread installation or material defect, I highly recommend against replacing it. Properly installed and maintained cedar siding has a 50-75 year life. The cedar siding you have should last at least 25 more years. Vinyl siding is often not what it is represented to be (lifetime, no maintenance). While vinyl can carry warranties (usually prorated) up to 50 years, experience shows significant failure within 15-25 years. It fades, cracks and warps and you’re stuck with the color for a very long time. Because of fading, replacing vinyl pieces inevitably creates a color mismatch. Vinyl siding is considered by many buyers to be a low-end product while cedar is considered high end. This means that buyers are willing to pay more for wood sided housing. Stick with cedar. BACK
Manipulating a Reserve Study Answer: Manipulating the reserve study numbers to reduce contributions for current members is a violation of the fiduciary duty the board has to all members, current and future. When it comes to paying for major repairs and replacements (the main purpose of a reserve study), there is no free lunch. Shorting reserves today will require making up the shortfall later, usually by special assessment. Special assessments are always unfair to some because they are being required to pay for something that should have been paid for by owners that sold and are long gone. The other mistake frequently made with reserves is failing to fund each component fully. An example of full funding is a $10,000 component with a 10 year useful life should have $1000 per year reserved to be fully funded. Reserving less than $1000 a year will create a shortfall which must be made up later. But since reserves often include money for long life components like roofing, there is an illusion that there is more money than needed to pay for things in the short term. Boards that fall into the trap convince themselves that reducing reserves by a third, or a half, or two thirds is just as good as full funding. Huh? New math? In fairness to all members, current and future, and to eliminate special assessments which are unfair to those that have to pay them, full funding of reserves is the only reasonable approach. Annual updates are critical to keeping a reserve study accurate. The cost of an annual no site inspection update is usually nominal. A site inspection update is highly recommended at least every three years to verify the condition and useful lives of the components. You should stay out of manipulating the reserve study yourselves. It has obviously been a self-serving exercise so far that is bound to result in a significant short fall. You paid for an objective and professional reserve study and you should follow the recommendations. BACK
Involving Owners at Board
Meetings Answer: Your interpretation is correct. Board meetings are designed for the directors to discuss and make decisions about HOA business. There are occasions when co-owner input is appropriate but not as a general rule. A member forum should be held prior to the start of the board meeting to allow input and questions. But once the board meeting is called to order, guests are there to listen, not participate. BACK
Fining Procedures Answer: Generally, the board has the authority to enact reasonable rules and enforcement procedures. They should include: 1. Clearly definition of the
issue (parking, pets, failure to pay HOA fees) Fines need to be reasonable. Any rule or resolution that is contemplated by the board should be reviewed by an attorney that specializes in HOA law in your state for compliance with your governing documents, state and federal law. There a number of sample rules in the Policies section. BACK
Rewriting the Minutes Answer: Minutes should be revised only at a board meeting, not by way of an email circuit. Of course, as secretary, you need to make sure you are taking complete and accurate minutes. There are some things that belong and others that don't. Minutes should record board actions, not discussions. There are many meeting minutes articles in the Article Archive in the Meeting and Ask the HOA Expert sections. BACK
Collection Stock & Pillary Answer: There are many reasons why members don’t pay their fees and the solution varies: Millie is on disability, Joe’s Social Security is inadequate, Mary just lost her job, Bill declared bankruptcy, Gertrude has been trying to sell her condo for two years and Arnold is withholding payment until repairs get done on his unit. What happens if the collection information the board posts is not correct? This kind of misinformation libels someone who may sue for defamation of character. Your board is ill advised to
pursue this collection tactic. It's totally unnecessary and mean spirited.
With a properly designed and enforced Collection Policy, there are effective
ways for the HOA to get the job done without humiliation. There is a sample
Collection Policy in the Policy Samples section. BACK |
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