Ask the HOA Expert

Lame Duck Board Budget
Question: Our budget process takes place in the fall so we will have an approved budget at least 30 days prior to the start of our fiscal year which begins in January. As it turns out, we hold our annual meeting in January and a new board will be elected then. All of our contracts expire next year. Should the current board review, renew and/or secure new bids for our contracted services as part of the budget process or wait for the new board to build its own budget?

Answer: Since the new budget will likely increase fees to owners, the current board should review and approve the next year’s budget so that the new fee structure will go into effect January 1. If the new board decides to amend the budget in some way, that’s its prerogative. BACK

Average HOA Fees
Question: Our board is negotiating a management agreement with a local property management company. Can you give me a idea of what the average cost per door is for HOA management? We'd also like to review a menu of services so we can customize our agreement to our needs.

Answer: There is no "average" cost per door. Cost of HOA management service is directly related to the scope of work. The board needs to develop a scope of work and request proposals from at least three qualified management companies. Choose only those that specialize in HOA management with references to prove it. If you are in a major metropolitan area, look for a chapter of the Community Associations Institute which often has most HOA management companies as members (see www.caionline.org) For assistance in preparing the scope of work, see the www.Regenesis.net Manager Issues section for Request for Management Proposal. BACK

Director Proxies
Question: Can a director of the board give his proxy to someone else to vote at a board meeting?

Answer: No. Proxies can and should be used for the annual owner meeting for elections and other business brought before the group for a vote but directors of the board cannot proxy their authority to someone else. BACK

New Fannie Mae Rules
Question: Fannie Mae and Freddie Mac recently imposed new requirements for reserve studies and insurance deductible reserves on condominiums. Does that same requirement apply to non-condominium common wall homeowner associations? Our townhouse association is responsible for maintaining our building exteriors (roof, siding, paint, decks etc.) but is not a condominium.

Answer: While the new requirements should apply to all common wall HOAs which operate like condominiums (maintain the exteriors and/or insure the structures), they are currently limited to condominiums only. That said, every HOA should have and follow a properly done reserve study whether there is a requirement to do so or not. No business can be run successfully without proper planning and funding. A reserve study provides the board the mechanism to execute both. For a list of Professional Reserve Analysts, go to the website of the Association of Professional Reserve Analysts www.apra-usa.com. BACK

Developer as Manager
Question: I read your article about the possible conflict of interest that develops with managers who are hired by HOA developers. Our HOA has a more serious problem. The manager IS the developer. We now have a number of construction related problems that the developer refuses to fix. The developer/manager attends all board meetings to audit board discussions of these issues. Isn’t there a conflict of interest going on here?

Answer: This developer has an indisputable conflict of interest in serving as manager. The good news is the board has the authority to hire and fire management. Considering the likelihood of continued conflicts of interest, the sooner management is changed, the better. While it’s fairly common for developers to manage the HOA during the marketing phase of the development, once the authority is turned over to a board of homeowners, it is time to get an independent management company to do the work. Even a developer with the best of intentions cannot fairly serve two masters. BACK

Shifting Maintenance Responsibility
Question: If the governing documents state that maintenance of the common area is the responsibility of the homeowner association, can the board enact a policy that allows homeowners to plant flowers around their unit and mandate that homeowners maintain that area?

Answer: The board has no authority to enact a policy that contradicts the governing documents. Amending the governing documents requires an appropriate vote of the members ("appropriate" means the percentage of members required in the governing documents). BACK

Failure to Enforce Rules
Question: What are my options as an owner if the board and management company refuse to enforce one of the rules. I've filed an official complaint and they refuse to act. It's a board member in violation.

Answer: "One of the rules" is a bit vague. Not all rules are created equal nor carry the same importance of enforcement. But assuming the rule in question is a flagrant violation like parking an illegal vehicle, harboring a killer pitbull or adding an unapproved addition to his house or condo, then you indeed have the right to question what is going on. A board member who thinks that rules only apply to others should not remain on the board for obvious reasons. Foxes guarding the henhouse seldom serve the chickens.

Your next move might include a petition signed by a significant number of owners (5-10) who agree with you. The petition should describe the specific violation and the need to correct or cease and desist. If that does not have the desired effect, a letter from an attorney might do the trick. Board members have personal liability for their HOA actions and some have been subject to sizeable fines for failure to heed that fact. Lastly, you have the right to run for the board to start making a difference. It’s often easier to make changes from within than without. BACK

Damage Repair
Question: A unit owner has requested that the HOA repair damage to his unit deck that was caused by a prior owner. It looks like burn marks from a barbecue. This owner claims the HOA should inspect units for sale so this kind of damage is repaired prior to sale closing.

Answer: This damage is not normal wear and tear and damage caused by a resident, even a previous resident, is not the responsibility of the HOA. And, no, the board or management is not responsible to inspect units that are for sale. Presumably this owner did not buy the unit sight unseen and likely knew of the damage before closing the deal. If it was a deal breaker, he should have made sure the seller fixed it, not the HOA.

While HOAs are often responsible to repair and replace things like decks, it should maintain all units in a consistent and cost effective manner, and not to increase a particular unit’s value or marketability. BACK

Securing Vacant Homes
Question: We have a number of vacant homes in our homeowner association. Does the HOA have a responsibility to secure and protect them?

Answer: This is more of an issue in HOAs that have attached or common wall housing like condominiums and townhomes. Most of the damage to vacant units is caused by rodents, freezing pipes that cause flooding, and vandalism. An unheated unit could have pipes freeze which causes flooding to it and neighboring units. This could be disastrous in a high rise condominium.

Controlling the freezing issue is extremely important in units vacant for long periods of time. While most HOAs have the legal right to have access to vacant units for emergencies, the HOA needs to pre-plan by being aware of specific units which are vacant and know whether they are abandoned or merely temporarily vacant.

If a unit has been abandoned due to foreclosure, the HOA should take proactive measures to ensure that the unit is winterized (pipes, toilets and hot water heater drained). Beyond that, the HOA is not responsible to damage the unit interior may suffer due to extended vacancy. Abandoned units are usually in some stage of foreclosure, so at some point a lender will take measures to secure and protect their collateral. Until then, the HOA needs to do what is necessary to protect neighboring units. BACK

Updating Old Governing Docs
Question: Our governing documents are over 20 years old and outdated. What process should we use to bring them up to date?

Answer: You should always use a knowledgeable HOA attorney when amending documents to ensure they comply with proper form, current statutes and get properly recorded. Amendments to the governing documents require an appropriate vote (as defined by the governing documents) of the members which varies sometimes depending on the type of amendment. In other words, some amendments may require a larger or smaller number of "yes" votes. If you plan many or some sweeping changes, break out the individual amendments and vote on them individually. BACK

Conforming to ADA
Question: Do you have information regarding the Americans with Disability Act and its affect on HOAs?

Answer: In general, HOAs are required to provide "reasonable accommodations" to persons with verified (like a doctor's letter) disabilities. That means the board needs to allow necessary installations like ramps to a unit or reassign HOA controlled parking spaces to disabled residents for easier access to their unit. The HOA is not required to pay for these installations and can require reasonable quality standards.

That said, if a majority or sizeable number of members have disabilities (like many senior residents who can’t climb stairs), it is certainly permissible to have the HOA pay for and maintain commonly used ramps, handrails and other installations which many would use. BACK

Foreclosure Special Assessment
Question: We recently received notice of a $300 special assessment which is due in 30 days. This special assessment was necessary due to a number of foreclosures that made some past due accounts uncollectible. Why should the other members have to pay for this?

Answer: You are describing a fundamental reality of HOA living: If all members don’t pay their fair share, the rest have to fill the gap. That is why it is so critically important to have an aggressive collection policy that includes filing liens to protect the HOA’s interests. "Aggressive" means that any amount that is at least 10 days past due should receive a late notice and late fee. Any 30 days past due, should receive a 10 day notice to pay or the matter will be turned over to an attorney for collection. All legal and collection costs should be charged to the delinquent owner. There are other important collection considerations. For a sample collection policy, see www.Regenesis.net Policy Samples section. BACK

Committee Selections
Question: Volunteers are an important part HOA living. But how does a board deal with owners who are totally negative, derail attempts to reach a consensus, disrupt meetings and yet want to serve on committees?

Answer: Consensus is not required in an HOA. HOAs are designed to work like a representative democracy. That means that the board is elected and given authority to make decisions. The fact that some members don’t like how the board runs things is no surprise. Welcome to America. The board should respond to their challenges within reason but not waste time trying to placate them. That can be a full time job and waste of time considering they are rarely, if ever, satisfied.

The board is under no obligation to appoint anyone that wants to serve to a committee. Committee appointments should make sense and the board typically wants members that will help, not hinder, the board’s work. For more on this topic, see the Committees section.

The board does not need to tolerate disruptions at meetings. Meetings should be structured so that members have a right to speak during a member forum but not otherwise unless the board president asks for their opinion. If they disrupt a board meeting, they should be asked to leave. If they refuse, the president should adjourn the meeting and refuse to admit them at future board meetings until they promise to behave.

If these folks are going door to door trying to stir discontent, the board should do periodic informational newsletters and flyers to set the record straight. There are some irritating aspects about free speech but truth is truth and lies are lies and fortunately most people can tell the difference. Take heart. BACK

Reserve Fund Interest
Question: Our HOA recently established a reserve account which is earning interest income. The board doesn't want the HOA to pay tax on the interest income, so each owner was issued a Form 1099 for a portion of the interest income with instructions to report the interest on their individual returns. The actual interest remains in the reserve account in the HOA's name. Is this proper?

Answer: If the reserve funds belong to the HOA (usually the case), taxes on interest income cannot be passed through to individual members. The HOA is responsible for recognizing and paying the resulting tax. BACK

Burned Deck Repair
Question: A unit owner requested deck repairs based on burn damage caused by a barbecue. He claims he didn’t do it which may be true. He purchased the unit several years ago. Is the HOA responsible? He claims the HOA should have inspected the deck before he bought it.

Answer: The damage was not caused by normal wear and tear. Damage caused by a resident, even a previous resident, is not the responsibility of the HOA. And the HOA is not responsible to inspect units that are for sale. It should maintain all units in a consistent and cost effective manner, not to increase a particular unit’s marketability. The current owner is the one responsible to inspect the property he is purchasing. If he had an issue with the deck, he should have dealt with the prior owner on it. BACK