Headlines

Who Pays for Sealed Condo Chimney Inspection?

Offensive HOA President Accused of Abusing Association Funds

Condo Dissolution Sought

Condo Contemplates Adjoining Land Purchase

Who Pays for Sealed Condo Chimney Inspection?

Posted in: Condominium, Financial, Governance, Insurance | Comments (0)

C.N. from New Haven County writes:

Dear Mister Condo,

My fireplace is sealed and insulated. I don’t use it. Now the HOA Board is requiring I pay to have the ‘chimney and outside components’ inspected to be sure no dead animals or debris are in there for insurance purposes. Is this my responsibility?

Mister Condo replies:

C.N., as the weather cools, a nice fireplace sounds good right about now. However, you are not alone in sealing and insulating your fireplace and, I assume, you were well within your rights to do so back when you did. Was the Board notified of that action? Was approval needed to do so back when you had it sealed and insulated? The Board is responsible for the safety and well-being of unit owners within the HOA. That includes purchasing insurance to protect the common elements and outside elements. As a requirement of insuring buildings with chimneys, the insurer can certainly require that chimney inspections take place. The real question is why do they require an inspection of a sealed chimney? You would think proof that the chimney has been sealed would end that request. Regardless of the “why” they need the inspection, the issue of “who” pays for it is likely outlined in your condo documents. My guess is that the chimney is a limited common element (provided solely for your use and enjoyment). As such it is possible that all care and maintenance falls to you as the owner of the unit. The inspection falls under care and maintenance so you may be on the hook. That being said, if you can offer the insurance company proof that the chimney is sealed, that may suffice. If you do need to have the chimney inspected, I would request a copy of the inspection report so that you have it on file for the next time they require an inspection. At that time, you should be able to produce the report that shows the chimney is sealed and needs no inspection for dead animals or debris. However, just because the chimney is sealed now, that doesn’t mean it couldn’t be unsealed in the future. Even though that possibility is remote, I can see a scenario where you are asked for the inspection report time and time again even if all the report does is confirm that the chimney is sealed and not in use. Hopefully, that doesn’t happen. All the best!

Mister Condo @ October 31, 2014

Offensive HOA President Accused of Abusing Association Funds

Posted in: Board, Condominium, Financial, Governance, HOA, Legal, Management, Volunteer | Comments (0)

V.R. from Florida writes:

Dear Mister Condo,

Recently, I received a letter from a concerned neighbor that revealed some serious issues at our condo. The HOA was dropped by both the auditor and Property Management Company due to concerns over internal controls. Included were copies of letters from each company terminating their services and citing concerns: use of debit card for many unexplained transactions ($12K unexplained ATM withdrawals, $6K debit card transactions at casinos in 2013), the board moved Reserve Funds to operating without approval, paying of invoices in cash – questions of related parties, HOA paying $80 a month for a safety deposit box, personal expenses of HOA president charged to operating expense. I went to my first HOA meeting the day after receiving this letter and it was a complete circus. None of the questions of concern were answered. The most persistent questioner was the former HOA president. The current president proceeded to slander him, claiming that he lost his job with the city by saying the “N” word (he actually said the word which causes quite a stir). The meeting broke up and I talked to some of the other residents (it is a big complex of 400+ units). The stories were outrageous: people who have confronted the president have had their tires slashed, the HOA president racked up $250K legal fees (paid for by the HOA) fighting a $5K fine due to late financials (I’m thinking the accountant had a lot of questions), the HOA president rides around his golf cart wearing a bathrobe carrying his gun. We have assigned parking spaces, recently they were repainted with numbers matching the unit numbers (potential security risk: easy to see who is not home). What would Mr. Condo do?

Mister Condo replies:

V.R., what a nightmare! For starters, I’d probably avert my eyes when the gun-toting, bathrobe-wearing, president drove by in his golf cart. Yuck! On a more serious note, you have a series of serious issues to contend with and while the image of the HOA president you have portrayed is humorous to the point of being cartoonish, I can assure you that theft of association funds, impropriety of governance, and the potential loss to your association is no laughing matter.

I am not an attorney, so please consider my advice as friendly and not legal. For legal advice you will want to contact a local attorney, which I strongly suggest you do. This Board president needs to go and there are proper procedures for recalling him from the Board and then following up with civil and criminal charges if association funds have been stolen, which it sounds like they have.

Your condo documents outline the procedure for recalling a Board member. Generally speaking, the unit owners are called together for a special meeting to recall the Board member, in this case, the HOA president. Once he is voted off the Board, it is important that all access he has to association funds is immediately revoked. Certainly, if he is the one with the ATM card making withdrawals, you will want to make sure that ATM card is voided. Since the Property Management firm has washed their hands of the association’s business, this will require the remaining Board members to work with the bank(s) directly. Again, a qualified attorney is your best option to run you through these steps to assure as smooth a procedure as possible.

Stealing money from an association is a serious crime and is punishable by fines, repayment of stolen funds, and/or jail time. Once again, a qualified attorney will be the association’s best friend when it comes to handling these charges properly. Once the HOA president is out of office, he won’t have the association’s funds to bolster his defense. Have the attorney draw up proper charges and file with the court and/or local authorities if an arrest is warranted. The courts are designed to get to the bottom of a mess like this and it sounds like there is plenty of forensic evidence to prove the wrongdoings of the Board president.

Finally, it’s time to get your HOA back on track. I find it hard to believe that this president was elected to serve on the Board and then elected to the office of president of the Board by his fellow Board members. This is a wake-up call to association members to nominate and elect better people to serve on the Board and watch over their finances and governance. You’ve outlined $18,000 in possible misappropriated funds. The amount in question is paltry compared to the potential money this person had access to and could have stolen. Volunteers who serve on Boards are elected by their fellow HOA members. Did the power corrupt this person so badly that he behaved this way only after he was in office? Or is the community struggling to find qualified leaders from within its membership? Either way, I would suggest that a Nominating Committee may be in order for your HOA. Applicants for office need to be screened for potential problems before they serve. Also, the rest of the Board members need to be much more selective in deciding who will lead the Board as president. Your state has laws requiring that Board members receive training and certification shortly after being elected. Make sure all of your Board members are certified. This is exactly the type of behavior that training and certification are designed to curtail. All the best!

Mister Condo @ October 30, 2014

Condo Dissolution Sought

Posted in: Board, Buying, Condominium, Financial, Governance, Legal, Mortgage | Comments (2)

S.C. from New Haven County writes:

Dear Mister Condo,

Hello! We are in the process of buying two units that are essentially a multi-family house that was converted to a condo 7 years ago. It is a foreclosure and cash deal because of the condo mess. The owner that let them foreclose has a third house (condo) on the property with a minority interest. Best we can tell, besides the original filing of condo docs, there doesn’t seem to be any financial records, no board, no reserves, nothing. So we were trying to see what our options are because even though the property will be bought with cash, we will have to get a regular mortgage in the next few years. We have a few questions or possibly some suggestions. How hard is it to eliminate an association and what steps would we have to take? If we keep the association, is there a way of eliminating the third unit to prevent confusion? Any thought or ideas would be appreciated. Thank you.

Mister Condo replies:

S.C., smaller condos like the one you are describing can be quite challenging for many of the reasons you have described. I think your term “condo mess” sums up what you have purchased. I am not an attorney and can only offer some friendly advice. As you can imagine, there are lots of legal hurdles in your way and if you have not already done so, you will most likely need to hire a good attorney who can help you navigate the legal obstacles that lie ahead.

The conversion to or from a condominium is done by filing papers with the local municipality. The classification on file is the legal status of the property. A multi-family house is not the same as a condominium in the eyes of the law or the eyes of anyone granting a mortgage so it is important that you pay attention to the details if you plan on mortgaging the property as you say you plan to.

Central to the dissolution of a condominium is the governing documents which very likely detail how the association is to be run and how it may be dissolved. If there are no instructions for dissolution, you will need to refer to state and even local law for guidance. Again, an attorney is going to be well worth the investment as doing this incorrectly could prove quite costly and ineffective. Basically, the association needs to be debt-free and have a unanimous vote for dissolution. If there are no mortgages or lien holders on any of the properties involved, a simple vote of the unit owners can accomplish this. If there are lien holders (like mortgagors), they will also have a say in whether or not the association can be dissolved. Getting mortgage holders to sign off on condo dissolution is no easy feat so be prepared for an uphill struggle if mortgages are involved. However, minutes from the meeting need to be taken and kept for proof should the dissolution vote come into question in the future.

Provided there are no other obstacles from unit owners or creditors to the association, the association can be dissolved and the former multi-family home can once again become a multi-family home. There will be recording fees and such due to the municipality. Once the deed is recorded as individual property, the association is dissolved. Hope that helps! Good luck!

Mister Condo @ October 29, 2014

Condo Contemplates Adjoining Land Purchase

Posted in: Assessment, Board, Condominium, Financial, Governance, Reserve Fund | Comments (3)

S.T. from Michigan writes:

Dear Mister Condo,

Our Board wants to purchase adjoining land (12.7 acres) of field/trees which will be a berm/buffer zone for the Association as protection from purchase by another party which might construct an apartment complex, for example. We do not intend to build on it but leave it as it is. There would be somewhat of a tax increase for co-owners with this purchase ($50,000), which is being done primarily through co-owner donations, all except $8,000 which will be in a loan or borrowing from reserves with payback through co-owner additional assessment in the budget until paid back.

The concern is if we need a co-owner vote for this purchase. Our bylaws state that the board has the right to purchase land “on behalf of the Association in furtherance of the purposes of the Association.” The property line is very close to the backyard of one building and we only have a 35 foot buffer zone from there. The SEV on the property is $13,900 as are the taxable and assessed values. The bylaws don’t really list that we need co-owner approval/vote (we have support in donations from 1/3 so far), but we are concerned about the possible ramifications from the tax increase to co-owners, though it shouldn’t be that significant. Would that aspect possibly mean we would need a vote? We would need to have an amendment to the Master Deed here to include this land as part of the common elements. If you have insights on this situation, please give feedback. Thank you.

Mister Condo replies:

S.T., always happy to hear from Michigan folks like yourself.12.7 acres is a lot of land and this sounds like a great opportunity for the association to add a buffer zone to protect and enhance the value of the common grounds. That being said, it would seem to me that some legal advice is in order here. As you know, I am not an attorney nor am I verse in the laws of your state. But I do have friends that are both! I turned to them and posed your question. Here is what they had to say:

The condominium documents really need to be reviewed by an attorney to determine whether the addition of the property is allowed and what the requirements would be to add it.  The other challenge is that reserve funds are being used towards the purchase.  Under MCL 559.205, reserve funds can only be used for repair and replacement purposes.

That’s some great advice. Looks like you should consult an attorney to make sure you are not in violation of your own condominium governing documents or any state laws. Once you have determined that is legally proper to proceed, I think what you are trying to do is a great idea. All the best!

Mister Condo @ October 28, 2014

Mixed Use Condo; Mixed Up Board!

Posted in: Assessment, Board, Common Fees, Condominium, Disaster, Financial, Governance, Insurance, Legal, Neighbor Issues, Reserve Fund, Volunteer | Comments (4)

M.B. from Middlesex County writes:

Dear Mister Condo,

Hello! I live in a 7 unit plus an office condo. We picked 4 people to manage our finances and they stopped paying maintenance for their apartments. Since 4 of them live in 2 apartments, we basically lost about 20% of our maintenance per month. It’s been like this for 4-5 years already. A couple of years ago, they raised maintenance fees. Now, the wall above my window started to leak and they say that there is no money for the repairs since all utilities went up. They want to raise the fees again. My question is this: Is it legal for them not to pay maintenance? (There is nothing said about it in a condo book) and what can I do about it? Also, can I fix it myself and subtract the amount from maintenance?

Mister Condo replies:

M.B., I am sorry for the water intrusion into your building. What you have described is a really bad system of governance and a series of unfortunate events that is now shining a ray of light onto the truth of what is really going on in your condo. I am not an attorney and my advice to you right out of the chute is to contact an attorney so that you can protect your rights and bring about some needed change at your association.

Mixed use condos like yours are not uncommon. In theory, they can be quite successful because in addition to the traditional condo unit owners like you, the association benefits from having a commercial owner or tenant who shares in the costs of the upkeep of the common grounds. It can be a “win/win” situation when done right. However, what you have described here is not being done right.

Begin with a review of your condo documents. Inside you will find all sorts of important information about governance and the percentage of unit ownership formula that determines what percentage each unit owner pays toward the common fees or maintenance fees as you have called them. My guess is that the governance is provided by a volunteer Board comprised of unit owner volunteers. “Volunteer” is the key word here and unless it is stipulated as such, these folks are not excused from paying their monthly common fees. Those 4 folks who are not paying common fees are very likely going to have to pay their missed common fees for as long as they haven’t been paying. As you can imagine, that can add up to quite a lot of money.

I am not surprised that they are raising the common fees on a regular basis. They would need to if none of them are paying their fair share. Also, I am equally concerned but not surprised that there is “no money” available to address your problem. You should have homeowners insurance. The association should have insurance. There should be money being saved in a Reserve Fund to pay for upcoming maintenance expenses. Technically, you cannot fix it yourself and subtract the amount from your common fees. I am not even sure what you would fix. The wall that has failed and allowed the water intrusion is likely association owned property and, therefore, their responsibility.

It would appear to me that some type of sit down meeting needs to happen and needs to happen fast. The governance documents need to be reviewed and adhered to. That may lead to collection efforts against the folks who have not been paying their common fees as prescribed in the condo docs. This will be costly and time consuming but it needs to be done. An attorney can best guide you as to what your next steps should be. It would not surprise me to see a lawsuit in the association’s future.

As I mentioned at the beginning of my reply, M.B., there are many successful mixed use condominiums in our state. From your description, the one you are in is not one of them. My personal advice is to put your unit up for sale and get out before this gets any worse than it already is. Best of luck!

Mister Condo @ October 27, 2014

Where to Live While Condo Repairs Are Made

Posted in: Board, Condominium, Disaster, Financial, Insurance, Legal, Management, Neighbor Issues | Comments (4)

M.D. from New Haven County writes:

Dear Mister Condo,

Water is leaking into my unit from the condo upstairs. The plumber is fixing that unit’s bathroom. How can I stay downstairs with a hole in the bathroom ceiling? The hole is large enough that bad fumes come from upstairs into my unit. Help!

Mister Condo replies:

M.D., I am sorry for your problems. Water intrusion events like yours are not all that uncommon in multi-level buildings where an upstairs water problem creates an issue for downstairs residents. I assume you have alerted all of the people who need to know about this issue. Your property manager, your Board, your insurance company, and perhaps even an attorney may be needed to rectify this situation for you. The plumber needs to stop the leak from upstairs and make the repair to prevent further water damage. Sounds like that work is being done.

Your unit obviously needs to be repaired. Depending on what insurance is held by your association, your upstairs neighbor, and you, one or more of the policies should come into play. The insurance I am interested in for you is your homeowner’s policy, also known as HO-6 here in Connecticut. You may have a clause that will pay for your accommodation outside of your home in the event that the unit is uninhabitable. You should contact your agent and see if your insurance will pay to house you temporarily in a hotel while these repairs are made. Also, you may need to speak with an attorney to see what recourse you have to get your repairs taken care of as soon as possible so as to minimize your loss of your unit.

The bottom line is that this is an unfortunate situation that will require you to take action to remedy. Squeaky wheel will get the grease so make sure you have involved all of the key players to get your problem resolved. Good luck!

Mister Condo @ October 24, 2014

Condo Unit Guest Intimidated Condo Employee

Posted in: Board, Condominium, Governance, Management, Neighbor Issues | Comments (3)

R.S. from New Haven County writes:

Dear Mister Condo,

I live in a high rise condo and in 32 years we have never had problems with residents being rude to our employees. But a live-in guest of one resident intimidated and was extremely rude to a 19 year-old employee who was only trying to enforce the house rules. What is the board to do? We do not have a “fine system” in existence.

Mister Condo replies:

R.S., I wish civility could be legislated but, in reality, there are just lots of extremely rude people in the world. It sounds like one resides in your high-rise condo. Ideally, the employee will report the incident to the employer who will take the appropriate action. If the employer is a property management firm, they will likely train the employee in how to interact with unit owners and speak with the unit owner. If the employee was truly threatened, the employee can seek action against the unit owner. The police can even be involved if the activity was criminal.

Of course, there are always two sides to every story. Do the live-in guest and this employee have a relationship outside of work? Did they both puff up their chests and go at it? There are just too many variables that are not being reported here and it is very likely going to come down to “he said/he said”. How can you add rules to address that kind of situation?

For the most part, residents and their guests do not need to interact with association employees other than security or concierge personnel. Even maintenance folks should be contacted through property management and not directly unless that is the policy. If the Board wanted to implement a policy for how and when to interact with association employees, it could certainly do so. If it wanted to back up that policy with a fine system for violating the policy it could do that also. It seems a little extreme over one incident but it is within its right to implement both. I wish you a speedy and peaceful resolve.

Mister Condo @ October 23, 2014

Condo Parking Lot Turned into Obstacle Course

Posted in: Beautification, Board, Condominium, Governance, Neighbor Issues, Parking | Comments (3)

J.K. from Fairfield County writes:

Dear Mister Condo,

Parking in my assigned spot became difficult when a unit owner placed very large planters on the blacktop in an area where I make a turn to get into my space, especially in the winter. Is placing these planters on the blacktop legal?

Mister Condo replies:

J.K., unless they are looking to add an element of danger and driving challenge to your condo experience, I can think of no reason an association would allow obstacles to their parking lot. There may very well be rules in your bylaws that prohibit anything but automobiles being allowed on the common area parking lot but this is an area that is under the Board’s full control. Depending on your relationship with your neighbor who has created this issue for you, you could approach them and ask them to remove the planters. If that doesn’t work or if you don’t want to confront your neighbor, simply contact your Board or Property Manager and alert them to the situation. They will likely inform your neighbor to remove the planters. Best wishes!

Mister Condo @ October 22, 2014

Condo Walkways and Parking Lot Failing

Posted in: Assessment, Beautification, Board, Common Fees, Condominium, Financial, Governance, Reserve Fund | Comments (0)

L.F. from Hartford County writes:

Dear Mister Condo,

My condo association has neglected repairs to the walkways and alcove between the 2 buildings. Rain water enters the alcove and puddles restrict you from getting your mail. The walkways are cracked with large crevices. The parking lot has huge pot holes and the front steps are sinking into the ground. I had to call for an ambulance and the EMTs complained and nearly tipped over the neighbor. I have sent a letter and discussed this at the Association meeting 2 weeks ago. No response.

Mister Condo replies:

L.F., that is a really troubling problem that your condo is experiencing. I am sure you and your neighbors would like to see these issues corrected as soon as possible. I am certain that these conditions did not occur overnight. In fact, it likely took many years for the situation to get as bad as it has. 2 weeks isn’t enough time to gauge your Board’s response to the problems but let’s explore the forces that are likely at play here and how your vigilance can help correct the situation.

Neglected repairs are a very visible sign of financial problems at condo associations; not just here in Connecticut but across the country. When condominiums are shiny and new, the grounds are usually immaculate with lush greenery and beautifully paved roads and freshly poured cement walkways. They are picture-perfect ideals of a community that anyone would want to live in. Then comes the reality of aging common elements and the underlying beast begins to show its head. A pothole in the parking lot, a crack in the sidewalks, a few shingles blown from a roof, or small sinkholes that collect rainwater as you have described. What then? Who is responsible for the repairs? More importantly, where is the money going to come from? And that is where the real problem usually lies.

Does your association have a Reserve Fund? Is it adequately funded? Does the Board have the ability to write a check and make these problems go away? Unfortunately, the answer is usually that there is not enough money in the budget to pay for the necessary repairs because adequate amounts have not been charged to unit owners over the years. The only way to raise the needed capital is to levy a special assessment or take out a community association loan, neither of which is very popular with unit owners (including Board Members) as, either way, unit owners will have to foot the bill. This leads Boards to postpone or, in your case, not address major failures of the infrastructure.

The association needs to have a few things happen to correct the immediate problem and the long-term problem. Immediately, repairs need to be made to uneven and dangerous surfaces. That may require an engineering opinion and milling and repaving, neither of which is inexpensive. If there is no money in the Reserve Fund for the project, unit owners should be told to expect a special assessment in the very near future.

To get back on track for the long term, it sounds like your association would benefit from a Reserve Study and implementation of regular contributions to the Reserve Fund in the form of increased common fees. If your Reserve Study were to show that your smaller Association needed to budget $10,000 per year in Reserves so there will be money available for future maintenance projects, your monthly common fees might increase by $40 – $50. That money is earmarked for the Reserve Fund and it assures unit owners that there will be money in the Reserve Fund so that these repairs don’t mount up again and again. I wish you speedy repairs and the best of luck!

Mister Condo @ October 21, 2014

Unlicensed Contractor Hired by Condo President

Posted in: Board, Condominium, Financial, Governance, Volunteer | Comments (7)

K.B. from California writes:

Dear Mister Condo,

What if the President of our association knew all along that he hired an unlicensed contractor? I just found out that this guy was paid close to $11,000 in 4 months and I have yet to figure out what he actually did. The person heading the yearly audit requested from our Association President requested the detailed account of the work performed and was denied. The reason? The president called the request a distraction.  What should we do?

Mister Condo replies:

K.B., greetings from across the continent! Charges of fraud or embezzlement are words you never want to hear from within your own condominium or homeowners association. If there is any good news here it is that, so far, you have only mentioned $11,000. I have seen some associations get taken for hundreds of thousands of dollars. The reality is that unless certain safety steps are in place before the fraud or embezzlement occurs, the community is usually left picking up the pieces and trying to restore an air of fiscal responsibility. Most associations subscribe to some very basic safeguarding principals that make fraud or embezzlement very difficult. However, that requires an active Board and good accounting practices to be in place. If your association is lacking either of those, you may have just scratched at the underlying problem.

Who signs the checks at your association? Most associations have a Treasurer and a second Board member sign larger checks. It is not uncommon to have a property manager with the ability to issue checks under a set amount ($5,000, for instance) so the day to day business of the association can be conducted. If your association doesn’t have simple anti-fraud measures in place it is time to do so. CAI has published a great (and FREE!) guide for you to download at http://www.caionline.org/info/help/Documents/Preventing%20Fraud%20and%20Embezzlement.pdf. I highly recommend your community use it.

Hiring unlicensed and/or uninsured contractors is a bad business practice. It opens the association up to all sorts of potential problems and lawsuits. If this was an oversight in the hiring process, it should be corrected at once. If the President is acting independently and without the support or oversight of the Board, the President may be part of the problem. The usual method of hiring a contractor involves the Board preparing a Request for Purchase (RFP) for the work that needs to be done. It is usually sent to three or more contractors for bid submission which should include a requirement for their license and insurance information. Finally, the bids are reviewed and a contractor is selected. There are exceptions to this standard but this method should be used whenever practical and possible as this is a best business practice which the Board is bound to follow as part of their duties.

The final issue here is the president denying the auditor a detailed description of the work that was done. This is a tremendous red flag and one that merits further investigation. If the president is unwilling to give this information, I would suggest that it is time to vote him out of office. Fellow Board members can remove the president or this person can simply be voted out of office at the next election. Since there have been no formal allegations of wrongdoing, and you have not detailed any money missing, I would advise that this is likely a case of someone doing the job the way they see fit versus the way it should be done. Simply vote this person off the Board and let the Board return to doing their job of governing the community. Hopefully, they will select a more fitting choice for the president and implement anti-fraud and best practices in their next session of community governance. Good luck!

Mister Condo @ October 20, 2014