Ask the Expert

Marjorie Jean Meyer, CMCA®, PCAM®
Vice President and National Director of Education and Certification
ASSOCIA

I live in a community of nearly 1500 homes. Our current board members are the original board members-over six years and they have amended the bylaws so that they are their own electors. We have a very strong management company that had a hand in this. Our board president is an attorney and he is the attorney on record in many of the cases involving the management company and homeowners. Also, if a homeowner has an easement problem to put in a pool or deck, they are told to pay this attorney (our association president) over $600. Also, one of the board members is an accountant and his firm did an "independent" audit of our funds with this management company which was inconclusive. Can we file a complaint? Where would we do so in Florida?

- Deborah

Professionals such as CPAs and attorneys should not provide paid service to the association while serving on the board of that association. Not only could their license be in jeopardy, but the perception of impropriety is difficult to overcome.

Florida has a Bureau of Condominiums to which complaints may be filed. Use any Internet search engine and enter "Florida Bureau of Condominiums" for contact information.

Sincerely,

Margey

Several years ago, two members of our Association's Board of Directors volunteered to serve as property manager for our condominium at no charge; the offer was happily accepted. Subsequently, they formed a corporation, and two years later, sought and executed a compensated contract for their services with approval by the Association. Since then, one of the two has completed his term on the Board, but the other has just been elected to an additional term. There is a lack of consensus as to whether this situation presents a conflict of interest, but it seems quite clear to me. Can you help me clarify in a way that could be understood by those who think it's a good idea "...they know us!"? This management company is a two-employee operation, one of which is serving as the Board president. I'm confident this won't be of interest to a broad range of readers, but it's such an unusual set of circumstances that evolved unintentionally, we don't know where to turn for help. I think of it as the joke about putting the frog into the cold water and heating it slowly to cook him before he realizes what's happened. Some of the Association members are concerned about the additional fees that are being paid to the "management company" based on a contract signed by the parties who are the current Board president and the past Board president, but that’s only the beginning. Thank you very much for any input you can provide.

- Anne

It is a conflict of interest for board members to provide community association manager services for a fee. There is no system of checks and balances in place in such a situation. While the board members may have the most altruistic motives to offer both roles, thinking they better know what is best for the association and can provide services for less money than a professional management company, there needs to be an arms-length distance between the two functions.

Additionally, it takes years of education and experience to be a professional community association manager. Your board members are shortchanging the homeowners by not providing the most qualified management services to your association.

Sincerely,

Margey

We have a large neighborhood of over 300 homes. Our current president is not following the bylaws. He is making his own rules. He is not having an annual meeting and decided to just appoint people to the board, the few that get along with him of course.

The president is also the treasurer who has $600.00 of non-accounted for petty cash. The president has a very secret life and refuses to tell anyone what he does for a living. Recently, he made the management company so upset that they gave a 60 day notice. He is taking over as management company according to him. He is not maintaining any of the common grounds with the money that is paid for dues, which is over $18,000 a month!!!!!!! We are concerned that he is going to run off with all the money once it is in his hands. The common grounds are full of weeds and the community is covered in trash, its going down hill very fast.

What can we do? Do we have to continue to pay him our dues? Can they be put in an escrow until something is done about the grounds maintenance? How can we protect the community from him running off with the funds? Should we notify the insurance agent to this possibility?

One thing I find is that it seems no state wants to help when it comes to an issue with a HOA. The condo act doesn't seem to protect us at all, the residents who are being treated disrepectfully. Soon this will be a dictatorship. I' m at a loss here.

- Jennifer

In most community associations the owners elect board members and the board members, in turn, elect their own officers. So, if the other board members in your association acquiesce to the president's demands and actions, then you and your neighbors should advise them of your discontent and ask for action to address the situation. If the owners are dissatisfied with the board members' response, then it's time to call for a special meeting at which new directors are elected to represent the best interests of all owners. I urge you to read your association's governing documents, in particular the bylaws, which should contain a provision that describes the specific steps to take to call a special meeting of the homeowners to recall board members.

Escrowing or withholding payment of your maintenance fees could result in damage to your credit and, worse, loss of your home to foreclosure. Follow the steps to replace your current leadership with more rational, ethical and compassionate volunteers to protect your property values and restore reasonableness and fairness in your community.

Sincerely,

Margey

After 5 years of living at a condo in ****, Michigan after finding your web site, I am in hopes of some help. When the president of the condo association and his friends want to do some thing that is different than the rules they go and do it, they will just say the President told them it is ok. Nothing is done and when I speak up I am later sent letters about having a dog barking and I will have to pay a fine and I do even have a dog. The last time I wrote to the condo management company all they did was send a copy of the letter to the president and he told me that he was the president and he could do what he wanted and later that day he turned on the lawn water hose at my door and got me and my elderly family all wet.

My question is can one person make up all the rules and when they are broken, nothing can be done. so far after 5 years this is true at the ****** Condo's and no one cares. Looking forward to your answer.

- James

I posed your question to Mr. Craig Koss, President of Kramer-Triad Management Group, an Associa member company with offices in Detroit, Troy and Farmington Hills, Michigan. Here's Mr. Koss' response:

"Every co-owner in a community association has the same rights and should expect application of the community policies to be applied uniformly and with fairness. One of the reasons to hire a professional management company is to advise the Board of Directors in matters of policy that will help create decisions by the Board of Directors that are equitable and just. It may seem that the President of your community receives special treatment. In reality, board members are often held to a higher standard as the leaders of the community. Just because a “friend” of the President says they had permission to break the rules doesn’t necessarily mean that permission was granted.

I would suggest that you continue to report incidents to the manager and allow the appropriate follow up to occur."

Sincerely,

Margey

Problem Board Members - Removal

We have only a President, VP and Secretary at our small Condo complex.

The President is uninformed, irrational and bias. Example: Our water bill is out of control and he is more concerned at how much we are spending on a Gardener than how much the water bill is when he and his children are the only ones that wash their cars onsite.

The VP and I (secretary) would rather replace him but we aren't sure if we can do that until the next election in October. Can we vote him out now with our 2/3 vote and elect another President? Our bylaws state one person can hold two positions.

- Evie

Typically, association bylaws state that an officer can be removed by the board members at any time, with or without cause. Check your association's governing documents for similar or contrary wording.

Sincerely,

Margey

Our Association declarations state that "Any officer may be removed for cause at any time by a vote of two-thirds (2/3) of the total membership of the Board at a special meeting hereof." -- is removing a board member this easy? (I realize that a super-majority of the Association of Owners may also remove a board member) The Illinois Condo Act has basically the same language.

- Ray

Based on the provision you quoted, board members may remove officers by a 2/3 vote at a board meeting. However, removing a board member is much more involved, typically requiring a certain percentage of votes of all the owners.

Sincerely,

Margey

How do you recommend the board handle a homeowner who is so convinced that the board has not hired the proper vendor that she is out seeking vendor proposals on her own? How do you recommend the board handle any single issue homeowner or extremely negative and divisive homeowner cliques in small groups?

- Robert

It is discouraging to experience the disruption created by the efforts of a single person or small group of people on the operations of a community association. Similar issues arise when a gadfly purchases one share of stock of a publicly-traded company just to be able to appear at the annual meeting and attempt to agitate the other stockholders and gain media notoriety.

Suspicion grows as information is withheld. The more you can demonstrate to all owners that the board is managing the association with transparency and integrity, the better chance you have of eliminating -- or at least reducing -- charges of inappropriate actions and behaviors. Be responsive to requests for access to your association's records, keeping in mind that there may be some documents, such as those relating to litigation and attorney communications, that should not be disclosed without approval of legal counsel. Provide information on the financial health of the association at regular intervals, perhaps monthly or quarterly. Describe the process by which specifications are developed and bids requested and evaluated.

If, after all your efforts, a homeowner or homeowners continue to question the board's actions, it may be time to bring in an impartial mediator to listen to all parties and help them reach a mutually-satisfactory solution. Alternatively, perhaps your association's attorney could speak with the homeowner(s) and attempt to resolve their issues or, if all else fails, instruct the owner(s) to refrain from harassing the board members and preventing them from conducting the business of the association in a timely and reasonable manner.

Sincerely,

Margey

Can a Board member who resigns from his seat as officer of the board become a Committee Chairperson if he is no longer a unit owner in the condo complex? Is now a renter instead? Many residents feel only a unit owner or a voting member of the association has the right to be appointed to any Committee Chair or elected to the board of directors. Does the Association Times have any ruling or other condos who allow renters to be committee chairs or serve as officers on the board of directors???

- M.

Community associations should welcome renters as residents, rather than treating them as second-class citizens. However, your association's governing documents should contain specific requirements with regard to board eligibility; frequently, only owners may serve on the board. Just as frequently, there are no provisions that prohibit interested renters from serving on committees, which support the board's efforts by performing research and furthering the spirit of community through social gatherings and communications.

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

My wife & I purchased our 1st home in a 400+ Single Family Home community in Texas. This Community was originally built in the 1970's as a 55+ community. It was converted 5 years ago to all-ages.

Best I can tell, about 65% of residents are still 55+, and 8 of the 11 board members are 55+.

From attending HOA meetings and dealing with some difficult neighbors in the 6 months I've owned my house, it's clear that they wish it was never converted to all-ages.

My question is, how can the younger home owners suggest changes to the deed of restrictions and by-laws? Specifically in the areas of not being allowed to have swing-sets or gazebos (anything not directly attached to our homes) in our backyards? As the 55+ owners have no need (no kids living with them), they don't understand that these things are important to us.

- Andrew

As more younger owners move into your community, more of that group can run for the board until they are in the majority. At that time, they have control over the rules and regulations that may be modified by board action alone, without a vote of the owners.

I would recommend that the board conduct regular surveys of the members to determine priorities and interests, including with regard to allowing swing sets and gazebos in the back yards.

Sincerely,

Margey

Dear Sir or Madam:

My husband and I own a condominium in Oregon. We have owned it for 3 years & have participated at every Board Meeting as well as the annual homeowner's meetings. My question is simply this, what is the legal right of the owner to be heard at an open forum Board Meeting. Particularly when there are emergencies regarding maintenance issues that need to be addressed, and voted on, by the Board Members. My husband was repeatedly told he was out of order by raising his hand to address the board on particular agenda items. The Board would not allow him, or any other owner, to speak during the meeting. The Board stated that if any Board Member would volunteer to stick around after adjourning the meeting, they would listen to comments, however, with the meeting being adjourned, the Board had no jusidiction, or responsibility, to vote, let alone put same in the minutes! Also, how would the non-attending members be aware of any comments, or concerns, if it is not addressed in a formal meeting.

Thank you in advance for your courtesy and cooperation.

- Sincerely,
"Frustrated Condo Owners"

Annual meetings are not the appropriate forum for individual homeowner complaints or service requests. The purpose of an annual meeting of homeowners is to elect board members and for the officers of the association to report on the status of the association's administrative, fiscal and physical condition.

If you are experiencing a situation that requires attention from the board or management company, immediately contact them and cordially request assistance.

Sincerely,

Margey

Miscommunication

I received another letter from the homeowners stating I have an oil stain in my driveway. I have no oil stain in my driveway and I would like to have someone come out to show where this is. I also think they might have my address messed up with the one across the street. Their driveway has oil all over it. I would correct the problem if there is one. Can you please help me with this problem.

- Terry

I suggest you send a photograph of your driveway to your board of directors proving that there is no oil stain and requesting that they ensure that the copy of the letter they sent you is expunged from your file.

Sincerely,

Margey

Accrual vs. Cash Basis Accounting

I am told "we have always" (20 years) used the Cash Basis method of accounting. We engage an accounting firm to prepare our Annual Report and they use the Cash Basis method. Now, our management company will have us convert to the Accrual Basis when they implement their new system next month. My question is, which is the most recommended method and why?

NOTE: We are a Condominium Association in Minnesota. There are 120 units situated in 19 2-story buildings. Our Operating Budget is $300,000 amd our Cash & Reserve balance is $225,000. I am Treasurer of the Association.

- George

The American Institute of Certified Public Accountants (AICPA) recommends that community associations' books be kept on the accrual basis of accounting. If board members are confused about the additional information provided by the accrual basis, the management company or CPA should conduct a training session educating them about the benefits of accrual accounting and understanding the data that's provided.

Accrual accounting offers a much more comprehensive picture of the financial condition of the association than does cash basis accounting.

Sincerely,

Margey

Budgets

Who approves the budget for Homeowners Association, the owners or the board. What about if the owners are not agreed with the board, the board wants to approved the budget but the owners no, what can be done?
Thank you in advance!

- Dafne

Typically, the board of directors has the authority to approve the association's budget unless otherwise stipulated in the governing documents. If the owners disagree with the board's decision, they should follow the steps listed in the governing documents to call a special meeting to recall the board, or wait until the next annual meeting to present a slate of candidates who support the homeowners' position.

Understand, however, that the board must also pay those increased assessments. Before denouncing them for asking for more money, find out what's happening in your community that necessitated the additional funds. Your board members should be glad to answer your questions.

Sincerely,

Margey

Delinquencies

I have a financial and ethical concern upon my (MD) HOA.

I mistakenly missed three months of dues to the HOA. Usually I make these payments on time and missed them around the holidays. I was contacted by the HOA concerning the payment and informed that the payment will be mailed out by a certain date, they accepted that date for the payment.

The process goes as: the expected date of payment was the 5th, however on the 6th the HOA forwarded my file to their attorney, on the 7th the payment to the HOA was posted. The payment was mailed on the 30th and takes 1-day for mail delivery.

One concern the holding of HOA due payment forcing into collections.
Second concern is that it appears that the days - 5th, 6th, 7th - as too much systematic as just holding out on the posting or depositing of payments to force into collection by 1-day or less. Third and the most serious concern is that the HOA deposited the payment and we are getting a lawyer demanding collection payment - for what?????

I have a serious concern of ethics about the lawyer and HOA relationship. In mine and other business & homeowners I inquired with, come up with the same concept - if you hire a lawyer for collections any/and all payments, inquiries, payment arrangements, and posting of payments needs to be handled by the lawyer who then forwards the stated amount to the client - here the HOA.

Is this an ethical concern? A conflict-of-interest? Should the lawyer be paid for zero-services rendered? How should homeowners paying an HOA dues prevent this from happening as a proactive resolution for the two-payment as describer above?

Please advise.

- M.

When your payment was not received by the 5th of the month as you promised it would, the diligent accounting person initiated collection proceedings on the 6th. I advise homeowners not to wait until the last minute to submit payment; one never knows when the mail service will be delayed. I would hope that your association is not delaying posting payments in order to collect additional late fees. If that is indeed happening with the board's knowledge, and you have proof of that practice, then I believe you should request reimbursement or credit of all late fees.

It is not untypical for an attorney to proceed with collections in the manner you described. After all, the association needs every penny in income that it budgeted in order to meet its financial obligations. As long as the attorney sent a demand letter, the association has incurred the expense of that letter. It's possible that his letter crossed your deposit in the mail, but you should have made sure that the payment was received before the 5th of the agreed-upon month.

Sincerely,

Margey

We are assessed on percentage of ownership. The original CC&R's had a certain percentage assigned. The revised CC&R's we were given are missing the attachment with the percentage. For the first time in 8 years we received a breakdown of assessment percentages and an additional .40 % was added to 18 units to reduce the remaining 2 units percentages.

Can these units be forced to pay the recorded percentage even if their assessment was wrong when purchased and would be higher now? Which stands, the original or revised CC&R'S. How far back can we collect over-payment?

- Ruth

If the percentage interest of the units was changed by legal amendment to the CC&Rs, which may have required permission of all mortgage holders or at least those mortgage holders having an interest in the units for which the percentage interest changed, then the new percentages should be used. If the new percentages corrected miscalculations or misprints in the original CC&Rs, only your association's attorney can advise you as to whether the association should attempt to correct previous improper billings. Typically, attorneys recommend that the association not try to bill or credit owners or previous owners with the difference between what was billed and what should have been billed.

Sincerely,

Margey

Personnel

I am so happy to find this site. I am a fairly new owner to a long established condominium in Colorado.

Last September 2006, the board held an executive session and gave substantial raises to our staff. We found out about it after the fact.

The decision will impact our budget by $12,000.00. I believe the current board viewed the raises as a "personnel issue" and that is why is was kept from the owners. The owners would not have voted for such high raises. And to top it off, the mother of the person who received the highest raise is a board member. Somehow I do not think this is right. Will you be so kind as to get us a definitive answer? Thank you so much.

- Suzie

In most states, personnel matters are not subject to scrutiny by members of a homeowners association (check Colorado statutes for the definitive word regarding records access).

Homeowners delegate to their elected board members the obligation to operate the community association and to make financial decisions affecting the budget. However, to avoid any perception of a conflict of interest, I would hope that the board member whose child is an association employee recused herself from any discussion and the actual vote regarding her child's salary increase. If she did participate in the discussion and the vote, then her actions could be considered a conflict of interest and the remaining board members should consider revisiting the issue.

Sincerely,

Margey

Reimbursement -
Out-of-Pocket Expenses

I've searched and searched through your archives, and haven't found and asnwer to this one, so here I go.

About a month ago, the developer turned the HOA (175 single-family houses) over to the owners, and I was elected president. As president, can I expect the association to reimburse me for out-of-pocket costs for HOA business, i.e., cell phone, mileage, computer paper & ink cartridges, etc? Because the developer didn't see fit to turn over the records in good order, I have had to re-copy & print them, to make them understandable. Also, my cell phone is the one I use as the HOA president, and is on all of my correspondence as the primary contact number, although a small portion is for personal use.

Am I out of line in thinking this? The by-laws make no mention of this, and some of the members are questioning me on this. If I am wrong, then I'll reimburse the association. If I'm not, then what? I have also looked through Title 18 of the Oklahoma code, and so far, can't find anything about this. I want to be a good president, and I sure don't want to be accused of any wrong-doing. Can you please help me?

- Robert

Typically, board members and officers of a community association may be reimbursed for reasonable, direct out-of-pocket expenses related to the operations of the association. However, since the officers and directors must uphold the fiduciary trust imposed on them by the governing documents, I strongly suggest that every single reimbursement to them be approved by the entire board to ensure that there is no question as to the appropriateness of the payment. As you seem to indicate, there is already some suspicion and mistrust regarding your reimbursements; to avoid any perception of impropriety, ensure that every payment request is substantiated with hard-copy documentation and that you would not have incurred the expense had you not been serving as president of the association.

Remember the word "reasonable" when expending association funds; don't incur the expense if it is not absolutely necessary. Consider providing your owners with your land-line phone number instead of your cell phone number to demonstrate that you are conserving common funds as much as possible.

Sincerely,

Margey

Our community has just been turned over from the Declarant. One of our residents insists that all of the funds in our Working Capital Account must be transferred to the reserve fund at year end, or returned to the unit owners. This would leave us with no money for current bill paying and we would have to rely on January dues to pay any bills which come due the first of the year.

Further it does not take into consideration any outstanding checks which could come in against the account. Isn't a condominium Association allowed to have an account for paying bills and any emergency expenses. It seems to me that a $20,000.00 balance at year end in an account that services 71 Units is not an exhorbitant amount. We are governed by the O.C.G.A. of the state of Georgia.

During the period of time when the community was still under the Declarant's control, that was the amount left in the account at the end of the year.

Thank you for your time and trouble. We need to resolve this matter as it is causing an extreme rift among two factions of the community.

- Ruby

Unless your association's governing documents specifically require that the reserves or operating funds be returned to the owners upon turnover to homeowner control, the funds should stay in the association's account and increase annually through payment of maintenance fees in anticipation of the eventual replacement of the major physical common area components of the community.

Sincerely,

Margey

PLEASE!
We have an existing situation where we have a new treasurer (no formal accounting background) she is writing checks making all deposits and doing the bank reconciliation. Is it appropriate for our President to prepare the profit or loss statement (she has accounting background) and possibly the budget as well. Some owners are claiming no separation of duties. Both the treasurer and the president are signing the checks.

Thanks so much!

- Sally

It is inappropriate for the person writing checks or making deposits to also reconcile bank statements. There must be a system in which no one person has control over the association's money. Requiring two signatures on checks is a good start in preventing accidental loss or deliberate embezzlement of common funds.

It sounds like your association could use more volunteers to serve either as the Treasurer or on an oversight committee to monitor the financial transactions in your community.

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

I purchased a new home in a community two years ago, the HOA has not done squat and I have brought this to question several times to the management company with no answer. As I read more into the bylaws, etc. I began to ask more questions, again I was blown off. Finally out of the blue there was this "board" ruling the HOA, etc. I began to ask questions about finances, election process, minutes etc, all the while being shoved aside with no answer.

Just recently, I VOLUNTEERED to be on a committee for the HOA. At the meeting the president was asking for volunteers and stated how desperately the help was needed! I signed up and was sent a letter stating that my services were not needed! I was volunteering my time to my community and my services were not needed? WOW! I feel this is direct link to me asking questions, ie snooping around in business they do not want me in.

What can I do? Can they deny me volunteering my time to the committee or the HOA Board? They don't even have a quorum??

Thanks 4 your help.

- Jim

The board has the authority to appoint whomever they want to committees, and to turn down offers by volunteers who they think may act in a radical, uncooperative, or uncollaborative manner. While your offer was appreciated, the board may have felt that your feelings were too antagonistic or negative to support the challenges facing the committee members.

Perhaps if you approached the board in a more cordial, conciliatory, supportive manner, they would welcome your offer of help.

Sincerely,

Margey

Consequences -
No Association

What are the major consequences of owners not forming an association? My friend has tried to get other owners together to start one but no one is interested. It is only a 13 unit facility but it's already 4 years old and some units have been resold! They all just send their assessment payments to the builder. But the builder doesn't seem to send financial statements to the residents. I've been searching for articles on the topic but have found one that will get them off the butts and act responsibly.

- Tom

The governing documents, in particular the Condominium Declaration or Declaration of Covenants, Conditions and Restrictions/CC&Rs/Deed Restrictions (the name varies in different regions of the country) for your association should have been recorded in the courthouse of the county in which your community is located. The Declaration should contain wording that specifically details how and when the developer is required to turn over control of the association to the homeowners. You should have received a copy of all legal documents relating to ownership in your association when you closed on your home; if you did not, contact your real estate agent or title company/escrow officer for copies.

If the developer did indeed create a condominium/homeowners/community association, then it is essential that owners of all thirteen units understand their obligation to participate in the governance of the association. There are serious legal ramifications, including potential IRS penalties, for failing to file required reports and obtain the necessary property and liability insurance to protect the common areas. You may need the services of competent legal counsel to help figure out what needs to be done to ensure the appropriate management of the operations of your community.

Sincerely,

Margey

My H.O.A. board is dissolving the association due to lack of homeowner interest in being members of the board. My mortgage company says they can foreclose on me if this happens. What can I do I live in Colorado?

- Tony

To prevent dissolution of the association and foreclosure of your mortgage, why not volunteer yourself, and rally some of your neighbors to do the same, to serve on the board and administer the business of your association?

Sincerely,

Margey

My HOA periodically sponsors social events for the neighborhood children, which are held at the home of my neighbor (a board member). The events involve rented carnival-style equipment, farm animals, and other activities. It's great for the kids, but unfortunately the party tends to be loud and to spread into my yard. I'm wary about children running through my landscaping and playing in my driveway, and farm animals in the street. We've also run into problems when the HOA closed our street for the event without letting us know we would not have access to our garage. My spouse needed to leave for work but was unable to get the car out of the garage. The HOA has a playground area and also common grounds, and I don't know why the events cannot be held there.

Is this normal for an HOA? Do I have the right to object to the event spreading to my property? If the association sponsors an event and a child is injured while on my property, am I liable as homeowner? Do I have the right to insist upon access to my driveway/subdivision streeet if I must leave during the event?

Thanks in advance.

- Quiet Neighbor

It is not typical for an association to prevent access to a home for a social event without giving adequate notice or even asking permission of the affected owners. I suggest that the events be held on common property without impairing access to any home.

Sincerely,

Margey

Top | Board of Directors | Communications | Finances | General
Insurance | Legal | Maintenance | Management | Rules

I am on the Board of Directors of an HOA for a small neighborhood in central Texas (single family homes). One of our homeowners is an agent for an insurance company. He recently submitted a proposal to our Manager for insurance coverage for the HOA. Even though this person doesn't own the insurance company, he would certainly benefit from this sale as one of its agents. If we bought his insurance policy, do you believe there would at least be the appearance of a conflict of interest? Would you recommend us doing it? Thanks in advance for the advice.

- Paul

If the homeowner's insurance proposal is the most beneficial for your association when considering service, premium and coverage, then it is appropriate for the board to select his bid. When conducting the vote, the board should be sure to insert in the minutes an acknowledgement that the insurance agent is a homeowner and detailing why it is in the best interests of the association to select his bid.

Sincerely,

Margey

If a homeowner association has a managing company with a community ass manager on site, does the community need a fidelity bond for its directors. Not D&O or E&O but a fidelity bond. Thank you.

- Tom

All associations in which members or a manager have access to the association's funds should have a fidelity bond to cover potential theft, loss or embezzlement.

Sincerely,

Margey

Hello. Our 18 unit association (townhomes) in Minnesota is in the process of rewriting by-laws. There are differing opinions on whether the association should be responsible for maintaining/replacing unit owner's homes, in part because we have only a small reserve fund at this time. The homes are not alike in plans or square footage, and members have added decks and remodeled so the values are not alike. Also, members are questioning the wisdom of having a large reserve fund, partially because our association is involved with a lawsuit with the developers and partially because future development plans (with a different developer) are unknown. (Our association now has 18 units, but there could be at least double that amount if a new developer builds more units.)

Personally, I would like to see the association responsible only for common elements and unit owners responsible for all other areas, in terms of replacement and maintainance. (The declaration states that the association is responsible for replacement and maintainace of outdoor walls, etc., but the dues were not set to allow for much of a reserve fund. I personally see many problems when roofs/windows/decks/siding will need to be replaced if our association pays for this, because the reserve fund will have to be very large and because the units are so different and will not cost the same in terms of replacement. Any advice would be appreciated. Do you know of situations where the association has been responsible for maintenance but not replacement for individual units, or do most associations maintain responsibility for maintaining and replacing common elements only (my suggestion). Thanks.

- Martha

My advice regarding making any changes to the association's governing documents is simple: use a competent attorney who can ensure that any proposed amendments are valid and enforceable.

Sincerely,

Margey

I live in Washington State in a community bound by covenants.We are called morningside HOA. A small group of homeowners have decided we need to change the by-laws and CCCR's which will take an 80% vote. They insist the declarant must be removed. I have lived in communities in other states and this was not done. They want the document reviewed prior to the vote and this will cost quite a bit. We are in a situation that our budget is tight and unable to maintain some issues in the common areas and gate maintenance. Is it really necessary to remove the declarant for our covenants to be enforceable? Thank you.

- Kathleen

As long as the declarant/developer is no longer involved in the operations or management of your association, it is not necessary to remove references to him in your association's governing documents. There should be some provisions in your documents that specify when the Declarant must turn over control of the association to the owners, after which the homeowners are responsible for the operations of the community.

Any changes to the governing documents or consideration of controversial rules should first be referred to a competent attorney for evaluation.

Sincerely,

Margey

The By-Laws of our Condominium does not clearly state which officers signs contracts. Is it the President or another board member?

- Gary

Typically, the president of a corporation or a designated officer signs contracts on behalf of the organization.

Sincerely,

Margey

When a homeowners association in Maryland receives notice of a pending lawsuit against the association do they have an obligation to notify all the members of the pending lawsuit? The lawsuit is from a homeowner in the association and the owner is suing for 1,500,000. Is it a requirement to disclose this lawsuit in a resale package?

- Brenda

I posed your question to Kevin B. McParland, an attorney with the law firm of Bregman, Berbert, Schwartz & Gilday, LLC in Bethesda, Maryland. Here's Mr. McParland's response:

"Yes, the Board of Directors has an obligation to notify all members of the homeowners association of a pending lawsuit and the existence of a pending lawsuit must be disclosed in the resale package. The duties of the Board of Directors of an association are comparable to those of directors of a corporation. Just as a corporate director occupies a position of trust and confidence in relation to the shareholders, the directors of a homeowners’ association owe a fiduciary duty to act in good faith and with due regard to the interests of its members.

Generally speaking, the Board has a duty to keep its members apprised of the association’s business affairs. More specifically, Section 11B-106(b) of the Maryland Homeowners Association Act requires the owner of a lot, upon resale, to provide the purchaser with a statement in writing as to whether the owner has actual knowledge of the existence of any pending lawsuits against the homeowners association. Given that in most instances the resale package is prepared by or under the direction of the Board, the existence of a pending lawsuit would have to be disclosed therein.

Although the writer does not specify the grounds for the lawsuit or the limits of the association’s insurance coverage, hopefully the association’s insurer will defend the case and, if necessary, pay any judgment rendered."

Sincerely,

Margey

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Our association (160 condo's) management company included as part of its contract renewal in Decemer of 2006, a clause that stipulates they are to receive 10% of any insurance claim above $2500.00 for "administrative purposes." In that same month, a claim was in fact made and accepted by the insurance company relative to hail damage to 11 buildings which would require each to have a complete replacement of shingles on each in the amount of about $180,000.00. We have received the check from the insurance company (minus about $18,000.00 to be paid to the management company). My question: Should we be concerned about a management company that would benefit from such "questionable" requirement for "services rendered"?

- David

Many professional community association management companies have a clause in their management contract that stipulates payment of a certain percentage of the proceeds of an insurance claim for which the company oversees the restoration. Management fees typically cover the normal, day-to-day operations of a community association; administering an insurance loss demands more time not just of the manager but of many of the support staff in the management office as well.

Margey

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I am President of a 500 member association in NC. Our guidelines prohibit the use of signs directing potential buyers to homes that are having an open house. We do permit signage at the open house but just for the day. Some residents and real estate agents find this very unfriendly. Others find the use of these signs to be an annoyance especially if the agent does not pick them up after the open house. Any suggestions?

- L.

If the prohibition against open houses is a "house rule" and not a deed restriction, then the board could consider surveying the owners to learn their opinion regarding changing the rules to allow directional signs for open houses. If the majority of the owners agree that the signs should be permitted, the board could pass a rule specifying the length of time the signs could be installed and penalties for noncompliance (which typically would be a sign committee removing the sign and storing it at a location where the sales agent could retrieve it for a certain fee).

Sincerely,

Margey

I live in AZ and am having issues with a neighbor who runs their hot tub all night long. The noise level isn't above normal but there is a vibration in my bedroom that keeps me up all night. The HOA said there is nothing I can do. Is it true that these inconsiderate people have the right to keep me up and I just have to take it? We tried to resolve the issue by asking them to turn it off at night and they said they would insulate it if we paid for it. Now it runs more than ever. Do I have any options?

- Jeanne

Ask your municipality's zoning department and police department if there are ordinances against certain noise or other nuisances that aggravate other residents. Additionally, if your association's governing documents contain a provision that requires the board to intercede when a resident's right to peaceful enjoyment of his or her home is interrupted, then the board must intervene on your behalf and instruct the neighbor to run the hot tub only when it's in use.

Sincerely,

Margey

When we closed on our house the contract included the stipulation that no home may be used as rental property for a period of one year. Several homes on our street are now rentals even though it has been less than a year. What steps must I take to rectify this and save my property value from going down? Doesn't the HOA have authority over this?

I live in Texas.

- James

If your association's governing documents, in particular the Declaration/CC&Rs/Restrictions (the name varies in different regions of the country) specifically prohibit renting homes within one year of purchase, then the board of directors of your association are obligated to enforce that provision. The directors may be unaware of the violations, so perhaps you could send them a cordial letter advising them of your observation and knowledge.

Sincerely,

Margey

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