Ask the HOA Expert

Performing Unauthorized Maintenance
Question: One of our board member is pursuing a personal agenda. He performs unauthorized maintenance and pesters unit owner about minor rule infractions. What can we do?

Answer: Communicate with him directly, clearly and specifically. Explain that performing unauthorized maintenance undermines the budget and the system for addressing maintenance. Provide him details about specific complaints by owners. Explain that his independent actions undermine board authority. BACK

Unapproved Projects
Question: We have two board members that plan projects outside of the board meetings. When the rest of the board finally finds about them, they are already in process. This is creating unnecessary tension or friction.

Answer: Board members can research anything they want outside a board meeting. But if it is something that requires board approval, that approval needs to happen. If a majority do not approve the proposal, it dies on the vine like any other. However, sometimes a project is in keeping with the budget and can be approved by the Board President. Speak to the individuals in private and insist that all projects need to be at least run by the President. If the President feels the board needs to weigh in, the project will need to wait until the board convenes. BACK

Unauthorized Payment Plans
Question: We have a unit owner who is over a year delinquent. Our property manager took it upon herself to set up a payment plan to include the dues plus $50 extra per month. It will take over three years to pay off the late assessments! Is it typical for managers to make this kind of decision without input from the board?

Answer: No, the manager should not have made any deal unless the board authorized it. If the manager was not authorized, the board can rescind the offer and tender a demand for payment in full.

Has your board adopted a formal Collection Policy? That policy should call for aggressive measures like filing liens against the unit, garnishing wages and foreclosure if allowed in your state. The policy should allow the use of an attorney to collect rather than a collection agency. The attorney will press for full payment of the delinquency, late fees, attorney fees and related costs so that the HOA gets all the money it’s owed. Collection agencies generally take a percentage of the proceeds. Waste no more time of this urgent matter. Collections are of prime importance. BACK

Keeping Pace with Inflation
Question: Our current HOA fees have been the same amount for seven years. The proposed budget is calling for a 30% increase with an additional $500 special assessment. I understand the importance of maintaining the property and providing adequate reserves for future capital projects. However, at what point do high HOA fees have a negative impact on unit market values?

Answer: Your board is finally addressing a long overdue reality: HOA fees that don’t keep pace with increasing costs and inflation will prevent the board from paying for adequate maintenance, repairs and services. Over seven years, inflation alone would cause a 30% increase in prices. Boards that fail to increase HOA fees each year usually pay for cost increases by starving or stealing from reserves. Over time, though, reserve projects like painting and fencing can no longer be avoided and the board is forced to address the deficit by increased fees, special assessments or both.

While the HOA needs to be competitive with similar HOAs, keeping HOA fees low is not how to do it. Too many HOAs keep their fees artificially low by ignoring reserves. Because of this, future owners will be forced to pay for expenses that should have been partially subsidized by current owners. As a general rule, 25-35% of HOA fees should be dedicated to reserves which are only used to pay for major renovation work like painting, roofing and paving. (A professionally done reserve study will produce a funding plan specific to your HOA’s reserve needs. See www.apra-usa.com for a list of qualified reserve study providers.) The balance of the HOA fee should be adequate to pay for operating expenses (management, landscaping, pool, etc.) without stealing from reserves. That means that HOA fees should increase a minimum of the current inflation rate each year, currently around 2½%. BACK

Utility Billing Allocation
Question: Our HOA is billed in bulk for electricity. Each unit has a submeter which is read monthly and billed to each unit owner. Subtracting the total unit usage from the bill leaves the total usage for the common areas. Currently, we are adding 3 cents per kilowatt hour to each owner’s bill to pay for the common area cost. So, owners who use more electricity pay for a larger percentage of the common area electricity. All other HOA costs are shared equally. Are we doing this correctly?

Answer: If HOA costs are shared equally, this applies to common area electricity. The board has no authority to do otherwise. To correct this, an accounting of common area electricity charged to units should be done and credits or charges processed as appropriate. BACK

Redefining Common Area
Question: Recently, our HOA members approved substantial amendments to the governing documents which include:

1. Sidewalks are now deemed common area even though the subdivision plat indicates that the sidewalks are located within a utility-and-sidewalk easement located on private lots.
2. An HOA landscape easement was created over the front yard of the privately owned lots.
3. The HOA claims authority to enter lots to inspect for compliance with architectural design restrictions.

Can the HOA legitimately claim these rights?

Answer: The HOA cannot vote itself ownership of property belonging to private owners without their consent. In this case, all lot owners would need to agree to relinquish ownership to the HOA. A majority vote can’t force it. Same answer for the landscape easement. The HOA has no authority to commandeer private property by member vote.

The third item is different. As long as the HOA has the right to dictate architectural design standards, it has the right to inspect for compliance. BACK

Special Assessment Funds
Question: I've heard that special assessments have to be kept in an escrow account and cannot be used until all owners have paid. Is this true?

Answer: It depends. Special assessments should be kept in a designated account if they are to be used for a specific purpose, like repairing roofs. If the special assessment is simply to build reserves, the funds can be put in the general reserve fund. There is no requirement that an entire special assessment has to be collected before it’s spent however, if all the money is needed to pay for a specific project, the board needs to be careful about starting a project without the money to pay for it. BACK

Prepayment Discounts
Question: Can the HOA offer discounts to those who prepay their HOA fees or special assessments?

Answer: The HOA should not offer discounts since the budget requires payment of full fees to fund it and offering discounts would create budget shortfalls. It is appropriate, however, to charge late fees to those that pay late. The budget should not anticipate extra revenue through late fees although there will likely be some. By the same token, there could be a shortfall in revenues if collections are not successful or take a long time to collect. BACK

Individual Roof Replacements
Question: Is it permissible for individual condo unit owners to pay for their own roof replacement?

Answer: Condo owners typically don’t own their roofs unless the condos are stand alone units. Virtually all common wall condo roofs belong to the HOA. As such, roof repairs should only be paid for by the HOA according to a prescribed schedule. While lack of funds may force doing only a portion of the condo roofs, for example two of five buildings, doing the roof over one condo makes little sense since the same unit owner is responsible for a share of the repairs of all unit roofs. BACK

Future Agenda Item
Question: We will have two new board members elected in two months. One of the current directors wants to add an agenda item for the first board meeting after elections. Since there will a new board at that time, is this permitted? Several of the current board members don’t want the proposed item on the agenda.

Answer: All HOA members (not just directors) are entitled to request an agenda item for a board meeting. The fact that some of the directors don’t like the proposed agenda item is immaterial. All members are entitled to be heard and such requests should be honored. The agenda item, once it comes up, should include a motion to do something or other. If there is no motion made or the motion dies for lack of a second nothing more need to be discussed. BACK

Replacing Board Vacancies
Question: One of our directors is stepping off the board and we need a replacement. Is it customary for the runner-up in the most recent election to be appointed?

Answer: It certainly makes sense to consider runner-ups since they obviously have an interest in serving. But the board is under no obligation to do so and there may be better candidate willing to serve. These situations can get political so the board needs to focus on what’s truly best for the HOA. BACK

Tapping a Unit Meter
Question: Recently, our HOA added additional lighting in our parking lot. There is not a common electrical meter so the wiring was connected to the closest unit available. The electrician needed to get inside the unit to hook up the wiring. The board president was supervising the job and did not have a key to the unit, so broke in. The unit owner later discovered the damage and was understandably upset.

Answer: The board president used extremely poor judgment and what he did constitutes breaking and entering. The HOA has no right to enter a unit except for emergencies like fire or flood. All non-emergency circumstances require the owner’s permission in advance. If that owner delays a project for weeks for personal reasons, that’s the way it is. Private property rights must be respected.

This owner has every reason to be upset at what happened. The president should apologize profusely for what he did. In the long term, I question having a person with such poor judgment in a position of HOA authority.

And I also question tapping a unit’s power source for an HOA purpose. Most HOAs have a common meter. If yours lacks one, the HOA should pay to have a common meter installed, especially for the purpose you describe. BACK

Rule Rules
Question: We need some effective rules for architectural, parking and pet violations. Do you have any pointers?

Answer: All rules should be truly necessary. Making a rule to control a scofflaw is a waste of time. All rules should have enforceable and reasonable penalties and a right of appeal. There are a number of sample rules in the Policy Samples section. BACK

Meeting Terrorist
Question: Our board, is dealing with a difficult situation. A former board member (Tom) has expressed an interest in being on the board again. During his former tenure, the board was totally dysfunctional. No small wonder. He is very aggressive, confrontational and difficult to deal with.

The current board communicate wells, works effectively together and uses these "Guiding Principles":

1. Place the interest of the community above that of individual owners
2. Enforce the rules, change or eliminate them
3. Try to achieve consensus with the general members on important issues
4. Openness and communication with other owners

Tom attends every board meeting and makes a point of challenging the board on a range of issues, many which are petty. He makes a point of critiquing the minutes and demanding they be changed. He has taken an inordinate amount of our time and energy. We are concerned about the prospect of him getting reelected and further upsetting the apple cart.

How have other boards dealt with people like this? What do you believe is the best response? How detailed do the minutes need to be? Do you know of a good "shrink" for beleaguered board members? Any other insight?

Answer: Your board is not alone in being harassed by a former board member. People that crave power feel frustrated when they don’t have it. While members in general should be allowed at meetings, they are there to listen, not participate. So if Tom is interrupting, you can insist that he not or leave the meeting. Providing a Member Forum at the start of the meeting can allow him to vent but not interfere with the business meeting. Limit him and others to no more than five minutes each. Do not allow him to commandeer the preset agenda by demanding the board deal with something. A response like "The board will consider what you have to say and whether it should be discussed at a future meeting" works.

Minutes are minutes not seconds or hours. They should memorialize actions taken, not discussions. If someone wants to discuss something, the chair should ask for a motion and second to see if two directors are interested in discussing it. If not, move on. Most meetings can be summarized in a page or two.

The board is not responsible for getting member consensus and trying to do so makes getting business done much more difficult. The board is elected to get HOA business done. It’s fine to ask for feedback on an important piece of business but delaying action until everyone agrees bogs down the whole process and invites a malcontent to slow it down even more. Consensus sounds very noble, but unless you have an extremely harmonious group that all attends the meetings, it won’t work and simply makes a volunteer board’s job much harder. Do board business efficiently and openly but use the representative democratic approach. The board was elected to make decisions. Do it.

Responding to Tom’s ongoing series of demands is not necessary when there is a pattern of harassment. The board could and should choose which items to respond to and when. The fact that he wants something NOW! doesn’t mean the board has to give it to him now or provide it for free. Slowing down response time or selectively responding may help educate Tom (or not).

If you fear Tom’s prospects of getting re-elected, you should promote the candidacy of someone you feel will be a better team player. If you do nothing, you may get your worst nightmare. BACK

Adding a New Amenity
Question: Our HOA needs to dredge a common area lake and build a new dock. The board has decided to do both projects using a special assessment since there isn’t adequate reserve money set aside. Some of the non-lakeside owners don’t feel that they should bear as much of the cost because they won’t benefit as much. Thoughts?

Answer: First, let’s separate the lake dredging issue from the new dock issue. HOAs should plan for predictable repairs and replacements. Since lakes silt up over time, dredging is something that should be included in a reserve plan just like painting, roofing, fences, etc. Money should be side aside over time to deal with it in the future and not by special assessment which is unfair to those that have to pay it.

Building a new dock is something which should be voted on by the members. The issue here isn’t whether lakefront owners should pay more but whether the dock is supported by a legal majority (as defined by your governing documents) of the members. If it is, it should be paid for according to the same formula other HOA expenses are paid for. Since it is not part of the reserve plan, a special assessment is appropriate to pay for it.

Neither the board or a group of members has the legal right to change the HOA fee allocation formula. If the fee allocation formula is to be changed, it may require 100% approval of all members and possibly their mortgagees since this issue impacts their collateral.

If the HOA members vote to approve installation of the dock, don’t forget to add the cost of future replacement to the reserve plan. If your HOA does not have a reserve plan, it should contract to have one done as soon as possible by a qualified reserve plan provider. For a list, go to www.apra-usa.com For more, see the Reserve Planning section. BACK