Ask the HOA Expert

Charging Higher Interest
Question: The board has begun to charge 12% interest on past due balances. This is in conflict to the governing documents which state 8% per annum.

Answer: The board cannot institute a collection policy that contradicts the governing documents. Only an appropriate vote of the members (as defined by the governing documents) can change or eliminate the stated percentage. BACK

Using an HOA Contractor
Question: Can a homeowners association force unit owners to use its contractor to repair unit interior damage when the HOA is responsible for repairs? In this case, water seeped in due to failed waterproofing and damaged carpet, drywall, paint, baseboards and insulation. The HOA is paying a contractor to do both exterior and interior repairs but I do not want to use this contractor. I’ll accept the HOA’s cost estimate to do my interior repairs but want to get my own contractor.

Answer: The reason the HOA wants one contractor is it’s easier, faster and cheaper to use one contractor for all repairs. But unless interior repairs involve things like structural repairs (safety issue) or mold remediation (health issue) which can adversely impact neighboring units, individual unit owners have the right to take care of interior repairs using their own contractor. Expect to pay the difference if your contractor is more expensive. BACK

Resale Disclosure Packets
Question: I am a real estate agent specializing in HOA property. In the past, I was used to seeing a charge for resale disclosure packages of around $100. Yet, recently I’ve seen charges up to $250. Isn’t there some sort of regulation that prohibits price gouging?

Answer: HOAs and their management companies are entitled to a reasonable charge for producing information related to HOA home and unit sales. This should not be a profit center for a self managed HOA although it is usually a profit center for an HOA management company. The board needs to make sure that charges are commensurate with the actual work required and not allow the management company to set any price it wants, especially if it could hamper sales.

That said, some states have more complex resale disclosure requirements than others so time requirements to fulfill them varies from state to state. Also, Fannie Mae and Freddie Mac (the two entities that underwrite the majority of condominium mortgage loans) enacted more stringent underwriting requirements in 2007 and 2008 which expand lender verifications of HOA reserve studies, renter occupancy, delinquency rates and insurance. This has placed additional burden and time on boards and managers to comply with resale disclosure so an increase from $100 to $250 may be entirely reasonable. You need to inquire on a case by case basis what the justification for the additional cost is. BACK

Setback Restriction
Question: We bought a lot in an HOA and were given a copy of the recorded governing documents prior to closing. We read them carefully before we closed the sale. Several months later, we submitted house plans to the Architectural Review Committee (ARC) for approval and were informed that we could not build any structure within 30 feet of the back of our property line. This restriction was outlined in the ARC’s "Landscape Guidelines", something we were not provided a copy of before closing. As it turns out, the standard rear setback is 15 feet but a 30 foot restriction applies to a few lots (including ours) to maintain a "view corridor". Can the HOA really enforce this kind of selective setback restriction on us?

Answer: It depends. You apparently were aware that there were HOA architectural restrictions since you knew to submit plans to the ARC for approval. Did you not think to inquire about what those restrictions might be before closing? On the other hand, the seller most certainly knew about the special setback on this lot. If it was not disclosed, you have an issue with the seller. Finally, any setback or other restriction that applies to selected lots should be made part of those lots’ title record so prospective purchases can be made aware of it prior to closing.

You likely have a strong case in your favor to get the restriction overturned. However, you may be fighting your neighbors who will get their view blocked as well as the HOA to get it done. You should retain an attorney that specializes in HOA law to help you sort it out. BACK

Hardship Case Rentals
Question: I purchased my house several years ago. The next year, the members voted to set a limit on rentals. I am serving in the US Air Force and was recently deployed overseas for 1-2 years. Since the real estate market is down and I would take a sizeable loss if I sold now (if I could sell at all), I contacted the HOA board to request permission to rent my house until I return. The rental policy provides for exceptions due to hardship. Yet the board informed me that there were too many rentals already and that my request was denied. What can I do?

Answer: Hardship provisions are meant to be exceptions to the rule so the fact that there are "too many rentals" is immaterial. Your situation seems to be ideally suited for the hardship provision since your deployment is temporary and not of your choosing. You are making a huge personal sacrifice to serve and help maintain world peace. The board should grant your request out of basic respect for your service. Failure to do so might attract negative press for the HOA and the board members personally. (The media loves this kind of story.)

That said, you have the right of appeal and include:

1. A current market valuation of your home from a local real estate agent to prove your point about taking a large loss on sale. You can get a free valuation from www.zillow.com
2. Promise to hire a local property manager who will act on your behalf to handle tenant issues.
3. Promise to provide and make HOA rules and regulations a condition of your Rental Agreement.

With these facts and assurances, the board should be willing to grant your hardship exception. If not, an attorney letter on your behalf might help. BACK

Distributing Minutes
Question: We are a self-managed HOA. Over the years, the board has only distributed minutes of the annual meetings. Should we be sending minutes of board meetings and if so, should we wait until they have been approved?

Answer: Absolutely. Distribute meeting minutes clearly marked DRAFT within one week after each meeting along with the caveat that they are subject to addition and correction at the next meeting. Distributing DRAFT minutes is important since there may be action items that will take place before the next meeting and members need to be informed before the fact, not after. Get email addresses for distribution purposes to eliminate cost and improved efficiency. BACK

Can HOAs Buy Real Estate?
Question: Is it permissible for an HOA to invest in real estate by buying a unit in the complex and renting it out for income? The return would be much higher than any CD or money market account.

Answer: Larger condominiums are often designed with a manager’s unit. But buying a unit for investment purposes would expand the common elements and require a vote of the members (which could be up 100% of them depending how the governing documents read). Also, the typical HOA does not have hundreds of thousands of extra dollars which could be locked up in such a relatively illiquid investment like real estate. Virtually all reserves are earmarked for future repair and replacement projects. To pay for those projects, reserve funds are typically invested in Certificates of Deposit for 3-12 month terms so the money can be readily available when needed. BACK

Charging for Photocopies
Question: We have a member that requested copies of HOA records which, granted, he is entitled to see. He was quoted a reasonable price per page of 10 cents which includes the copies and the property manager’s time to produce the copies. He showed up at the next board meeting claiming he was entitled to the information for no charge.

Answer: It is not reasonable for the HOA to provide unlimited copies to members for free. His grandstanding at a board meeting doesn’t change the fact that this is a special request and not routine HOA business. As such, he should pay a reasonable cost. Of course, he could save the money by simply reviewing the records he’s interested in. Requesting piles of paper is a common intimidation tactic. BACK

Changing the Number of Directors
Question: Our board consists of five directors. In past elections, it has been difficult to get people to run for the board which may not be the case in coming elections. The bylaws state: "The number of directors shall be designated by resolution of the Owners from time to time but shall in no event be less than three nor more than nine directors, and shall always be an odd number". The current board majority stated that it has no desire to increase the number of directors.

1. Can a resolution to increase the number of directors be included in the Notice of Meeting and to be voted at the meeting by the membership?
2. Can a resolution be proposed at the Annual Meeting by any member to increase the number of directors?

Answer: It’s fine for the board majority to express its opinion on this matter but it has no special authority to control the outcome of a vote. In your case, changing the number of directors requires a vote of the members and such a proposal needs to be noticed in advance of the Annual Meeting in the Agenda so all owners are aware of it and have the opportunity to vote. This proposal cannot be first announced at the Annual Meeting itself since owners that are not present will have no knowledge of it nor be able to cast a vote. BACK

Waiving Fees
Question: An owner recently died and several board members believe we should waive the monthly assessment for the widow. Others believe that the board does not have the authority to waive assessments.

Answer: The board has authority to make reasonable compromises on payment of HOA debts. But there is no debt issue here. So, if the board feels strongly about this, it should pass the hat to raise private money for the widow. The money should not come from the HOA pot. BACK

Victory Gardens
Question: Do you have any information about "Victory Gardens"? Our HOA pays over $100K in water bills for our 300+ units, pool and landscaping needs. I would like to turn some of the vast lawn areas we have into gardens.

Answer: Victory Gardens were also called "war gardens" or "food gardens for defense". They were vegetable, fruit and herb gardens planted at private residences in the United States, Canada, United Kingdom and Australia during World War I and II to reduce the pressure on the public food supply brought on by the war effort. In addition to aiding the war effort, these gardens were also considered a civil "morale booster" in that gardeners could feel empowered by their contribution of labor and rewarded by the produce grown.

Victory Gardens are a historical fact but what you are suggesting is a mechanism for converting unproductive and costly to maintain common area into productive crop gardens. This concept is particularly relevant in older HOAs that have vast lawn areas that require mowing, maintenance and irrigating. Due to ever increasing costs for large landscapes, most new HOAs have much less common area and what they do have has less lawn (if any) and more planting beds.

"Xeriscaping" (xeros is Greek for dry) is a word coined to describe a form of landscaping featuring drought tolerant native species that require little water, pest control or maintenance. With proper plant selection, an HOA can convert a resource hogging black hole to a resource miserly oasis.

The downside of your garden proposal is curb appeal. HOA landscaping is typically maintained by professional landscape contractors. Your proposal to turn maintained common area over to individual owners assumes that each owner will adequately and consistently maintain their garden plot. Such experiments are usually hit and miss at best with many plots turning into unsightly weed patches.

However, if the garden plots are properly screened or in areas that would not detract from curb appeal, it could work. And if it doesn’t, the area could be converted to a xeriscape design which the landscape contractor could reasonably maintain. The idea has merit in the right setting and could provide a "victory' by reduced costs. BACK

Controlling Solicitors
Question: The topic of solicitation is often raised at our board meetings. Our entrance is posted with signs that prohibit both solicitation and trespassing. However, we frequently have people wandering through the community leaving coupons and flyers on the doors. This prompts owner complaints why this is "allowed". The greatest concern is security because many units are second homes and vacant much of the year.

Answer: Solicitation is usually construed to be door to door person to person selling, not leaving advertising material on the door. The advertising is hand delivered, of course, because it’s much cheaper than mailing it. Usually a phone call to frequent offenders stops it. But it is an ongoing process since anyone that wants to sell something can use this technique. This is just another form of junk mail and one of life’s little irritations. It sounds like the HOA has done what is reasonable to stop it by posting signs. Periodic calls to the worst offenders may lessen the frequency but until the HOA has controlled access to the grounds, stopping it altogether will be next to impossible. BACK

Getting a Director Resignation
Question: We have a board member who is now living at a rehab facility. Eventually, he hopes to return to his home in the HOA but that is uncertain due to his physical condition. We’re debating whether to ask him to resign from the board. What would you suggest?

Answer: Directors need to be able to attend meetings, make inspections and take care of routine board business. Unless the prognosis is short term, he should resign his board position and allow another to be appointed. While the reason here is somewhat unusual, the result is the same as a director whose job takes him out of town for extended periods. When circumstances change or prevent continued board service, it’s time to bring others in who are able to serve. The board president should ask for his resignation with tact and compassion. BACK

Flooring Creates Noise
Question: I just spent $7000 to install hardwood flooring in my unit and my downstairs neighbor is complaining about noise. Can’t I decorate my unit that way I like?

Answer: In common wall communities, noise transmission is a huge issue. Most new construction provides for sound proofing in its design and material by installing double separation walls and concrete floors. Older buildings with single wall construction and wood frame flooring have substantial noise challenges. If these conditions exist, it’s best for the HOA to restrict the installation of hard surface flooring which will only exacerbate the problem.

There are number of soundproofing products produced by www.QuietSolution.com which claim to dramatically reduce noise transmission. The products can be installed over existing surfaces.

Your neighbor probably has a legitimate complaint which won’t go away. You might offer to install soundproofing material on his ceiling at your cost. And walk lightly. BACK

Uninsured Contractors
Question: If a contractor has been hired by the HOA but will not provide proof of insurance, can the members of the HOA be sued if a worker gets hurt?

Answer: It sounds like one of the board’s requirements of being hired was providing evidence of insurance. If the contractor can’t produce it, the board can and should terminate the contract. And yes, the HOA indeed could get sued if an uninsured worker was injured on the job. That’s why it’s so important not to hire anyone that doesn’t have the proper licensing, bonding and insurance. The board that ignores this basic puts itself and the other members at risk. BACK

Dangers of Radon
Question: One of our unit owners discovered his unit tested positive for radon during a sale related inspection. The results came back at three times above the EPA's recommended level. In order to sell his unit, the buyer required him to install a radon abatement system. The unit owner felt that the HOA should pay the cost since the radon originated from outside of his unit. Is he right?

Answer: Radon is a toxic and radioactive gas which causes cancer and death. See http://www.epa.gov/radon/pubs/citguide.html The unit owner is correct that this is an issue that the HOA should remediate just as it should with water intrusion, rats, termites and other issues that originate from the common area. All ground floor units should be tested and the HOA should install whatever abatement solution is indicated. Radon is deadly and the sooner evaluated the better. When it comes to health issues, the board should aggressively respond. See www.epa.gov/radon/nram/public.html BACK

Unused Special Assessment
Question: Our board billed us for a special assessment to construct a guardhouse and gate. The money was paid but the gate and guardhouse project was cancelled. We have asked for a refund many times. The board responded that the funds will be applied to our HOA fees.

Answer: The purpose of this special assessment was specific. If the project did not take place, the money should be refunded to those that paid it. Applying it to HOA fees is fine as long as each owner approves doing that. The board has no authority to change the use of the funds on its own. And the more time that passes, the higher the likelihood that some that paid the special assessment might no longer be owners. This board needs to refund or credit back the money immediately. BACK

Contract Signing Authority
Question: Who on the board has the authority to sign contracts? Our Secretary recently executed a large renovation project agreement in the president’s absence.

Answer: Typically, the president signs contracts. If the President is not available and there is an urgency to get the contract signed, the Vice President can act on behalf of the President. The Treasurer and Secretary are not generally authorized to sign contracts unless the governing documents indicate otherwise. BACK

Seizing Meeting Control
Question: Our HOA’s attorney attended our Annual Meeting. We were discussing a matter to be voted upon which had been noticed to all members along the Notice of Annual Meeting. At the meeting, out of the blue, a member said, "I make a motion to table this issue" which was seconded by another member. At this point, the attorney spoke up and said, "a motion has been made and seconded and we'll take a hand vote." My questions:

1. Should the attorney have acted as he did?

2. If members can make motions from the floor and get a vote, how does a board actually govern? It would appear that the masses are in charge and the board simply executes the process.

Answer: Annual Meetings are different than board meetings. Owners are entitled to make motions to be voted on at Annual Meetings as long as the matter is noticed in advance of the meeting to all members so they have an opportunity to attend and vote or give their proxy instructions on how to vote. However, once the issue reaches the Annual Meeting, a motion, second and vote to table it is legitimate. If the required majority votes to table it, so it goes.

No, the attorney has no right to steer or control the meeting. If he is there to represent the interests of the HOA, he should keep quiet until asked to speak. If, however, he is carrying proxies from one or more members, he is entitled to participate in the discussion and vote on behalf of those he represents. BACK

Newsletter Editorials
Question: Our HOA newsletter editor has taken to attacking the board by way of editorials. What should we do?

Answer: An HOA newsletter is much different from a public newspaper where the editor can write anything he wants (as long as he doesn’t offend the advertisers that pay his salary). An HOA’s newsletter should be factual and not opinions. Expressing opinions in the official HOA publication confuses the members as to what the policies are and undermines the board’s authority and credibility. The board should establish a policy for what is and what isn’t acceptable content in the newsletter. There is plenty of factual information that the members need to know such as architectural design policy, common rules to heed, pool hours, proper use of clubhouse, etc.

And it is highly recommended that the newsletter be published on an HOA website. The website allows members to self help 24/7 by accessing an archive of newsletters, meeting minutes and other important HOA information. Having this kind of information accessible cuts costs and improves credibility.

It sounds like your editor thinks he owns a bully pulpit for his private use. While free speech is a wonderful thing, it is not appropriate for an HOA’s official publication. The board needs to find someone that can stick to the facts and keep his personal opinion out of it. BACK