Click Here to inquire!Why is There a Negative Amount in the Condo Operating Fund Reserve?
Posted in: Condominium, Financial, Reserve Fund | Comments (0)
B.D. from Middlesex County writes:
Dear Mister Condo,
Under the reserve section of the condo balance sheet there is a Negative amount noted for “Operating Fund Reserve”. What would that negative amount be the result of?
Mister Condo replies:
B.D., I know better than to tackle an accounting question without checking in with one of my expert friends. I reached out to my friend Sam Tomasetti, CPA of Tomasetti, Kulas & Company, P.C. for his advice. Here’s what he had to say:
B.D., with the sparse information provided it is a little tough to give you a definitive answer. However, the most likely reason is that over time your operating fund liabilities have exceeded your operating fund assets and thus have resulted in a negative operating fund reserve. Remember the operating fund on the balance sheet is an accumulation of activity from the inception of the association. On the income statement you may have a year where there is a profit, but when this is added to the activity of prior years, you can still have a negative operating fund on the balance sheet.
You should work to understand this negative as it could be a symptom of financial difficulties such as poor budgeting and borrowing from the replacement reserve to cover negative operating cost variances or poor collection policies regarding account receivable. On the other hand it could be that the your association has a significant loan outstanding that it plans to pay down over time with common charges to be collected in future years thus restoring the fund balance to a positive.
Understanding this negative can be confusing, but please keep trying!
Mister Condo @ June 18, 2013
No Board Members to Serve at this Illinois Condo – What Now?
Posted in: Common Fees, Condominium, Financial, Governance, Legal | Comments (3)
I.K. from Illinois writes:
Dear Mister Condo,
What happens to the management of a condominium when there are not enough board members to serve? Does management of the association get turned over to the State? Does this vary by state? I live in Illinois.
Mister Condo replies:
I.K., rules about condo governance do vary from state to state. You would be well advised to check with your local chapter of CAI (http://www.cai-illinois.org/) or a qualified attorney for a more detailed explanation of what can happen. I can give you a brief overview of what would likely happen if your condo had no governing body.
There are certain matters that are the responsibility of the association; maintenance of the condo and common grounds, insurance, tax reporting, and such. Without a governing body, these things start falling through the cracks and before long a lawsuit would be brought against the association. It could be a vendor looking to get paid for previous work. It could be a homeowner suing over lack of maintenance or insurance. Whatever the cause, lawsuits end up in court. If the association did not defend itself, it would lose. The court could order a receiver (very likely an attorney) to take over and begin dissolving association assets to make good on the debt. This receiver would function as a governing body over the association and unit owners would find themselves responsible for the bill, including the receiver’s cost for service, which would likely be quite significant. The receiver could order special assessments, increased common fees, whatever it took for the association to conduct its business.
In case you couldn’t tell from my description of what would happen if no volunteer leaders came forward, it isn’t a pretty picture. It costs unit owners dearly when there is no volunteer governing body. It is far better for the community to manage itself than to have the court appoint an outsider to do the job. Of course, your local laws may vary but I’ll bet their spirit, intent, and end results are quite similar. Best to rustle up some volunteers. Good luck!
Mister Condo @ June 17, 2013
Handicap Ramp Installed at Condo Impedes Common Entrance
Posted in: Condominium, Governance, Legal, Neighbor Issues | Comments (3)
L.E. from New Haven County writes:
Dear Mister Condo,
My neighbor wants to install a handicap ramp. We share a common doorway stoop, and she would be “taking” my right to walk out my front door directly to the sidewalk, forcing me to walk three times as far down her ramp. And she won’t be able to lift a wheelchair to her car once she gets it down the ramp. What rights do I have to not have my doorway access commandeered? Thanks for any thoughts.
Mister Condo replies:
L.E., I feel your pain but my guess is that the Americans With Disabilities Act (ADA) trumps any rights you or other homeowners sharing this access would have. Your Board is in a “no win” situation. If they side with you, they will almost certainly be sued (and lose) against preventing the ramp from being installed. They can consult with an attorney, as can you, but I am almost certain the advice would be to yield to the rights of the disabled unit owner. Condo associations who haven’t done so in the past have been punished with significant fines.
Of course, you do have the right to sell your unit and move. My advice would be to do just that if you think the inconvenience of dealing with a ramp will inhibit your enjoyment of your condo. On the flip side, a unit that is handicapped enabled may be quite appealing to a potential buyer who needs such a ramp. All the best!
Mister Condo @ June 14, 2013
Should I Buy a Water-Damaged Condo at a Distressed Price?
Posted in: Buying, Condominium, Disaster, Financial, Insurance | Comments (7)
C.H. from New Haven County writes:
Dear Mister Condo,
My wife and I are looking into purchasing a condo. We toured a unit earlier today that is significantly less expensive than any other unit in the complex because it needs quite a bit of TLC. There is a great deal of water damage through three of the floors and there is visible damage in the attic which appears to be from the roof. We are going to have it inspected to get further details on the extent of the damage. If the damage throughout the unit is due to neglect from the exterior would it fall under the responsibility of the condo association to fix the damage throughout the unit? And if so what advice would you give regarding to make sure there is no mold damage after it is fixed? Thank you for your time.
Mister Condo replies:
C.H., be weary and beware, my friend. The sweetness of a low price can go away quickly and be replaced by the bitterness of an expensive repair. TLC to me is new paint, wallpaper, carpets, and other cosmetics. A unit that needs water damage repair and mold remediation sounds like a potential cash cow to me. The fact that the association allows this unit to remain in such disrepair is another red flag. But let’s talk about the potential upside and why you might still consider purchasing this unit.
Association insurance covers the building exteriors and common elements of the condo unit. Common elements vary by association but, generally speaking, any damage done to a unit interior is repaired at the unit owner’s expense. That is why most condos require unit owners to carry HO-6 (homeowner’s insurance). The current or previous owner may or may not have had this insurance in place but that will be of no use to you once you purchase the unit. The new policy that you will purchase cannot be used to repair existing damage. Unless the damage can be directly linked to the failed roof and the association’s insurer agrees to pay for the damage, you will likely find yourself on the hook for the repairs. Ouch!
Mold remediation is another story. If the condo association has insurance in place for mold remediation, you may be able to have the mold remediated at the expense of the association or their insurance. Of course, mold doesn’t always appear right away and it may be years before it becomes a problem. Who pays for the remediation isn’t my only concern. I know many people who have become quite ill as a result of mold growing in their homes. You might want to think twice about the potential for long-term health problems before purchasing this unit. At the very least, you might want to spend some money on mold prevention before you rebuild this damaged unit. Again, this would likely be at your own expense.
So if the math works and this sounds like a good deal to you, C.H., then jump on it. If it were me, I would likely look elsewhere. There are many wonderful condos available to choose from. Most of them are in great shape. They may cost a little bit more but, in the long run, I think you’ll be happier. Best wishes!
Mister Condo @ June 13, 2013
Too Much Noise From Neighbor’s TV at This Illinois Condo
Posted in: Condominium, Governance, Neighbor Issues, Noise, Rules Enforcement | Comments (3)
C.S. from Illinois writes:
Dear Mister Condo,
My husband and I are an elderly couple who are not in the best of health. My husband is quite ill and requires a great deal of attention as well as peace and quiet so he may get some much needed rest. The problem is our condo neighbor who is quite hard of hearing plays a television set at a very loud volume at all hours of the day and night. The sound comes right through our walls and keeps us both awake. We have complained to the condo manager and the Board but no one seems to be able to help us. Do you have any ideas on how we can get this neighbor to turn down the TV volume so we can get some rest? Thank you for your help.
Mister Condo replies:
C.S., I am sorry for your troubles and your husband’s illness. Even in the best of health loud neighbors are a problem at condos all across the country. There is very little you can do to prevent the noise on your own. I might suggest earplugs to help muffle the sound but the real problem here is getting the Board to take action against your neighbor. If your neighbor is approachable, I would suggest a conversation explaining the problem and ask if there is any way you can help to provide a better listening experience for your neighbor. There are TV listening devices such as TV Ears (http://www.tvears.com/) which would work perfectly for your neighbor if your neighbor is willing to wear them. Perhaps you could offer to buy a pair for your neighbor to use. If that doesn’t work you need to pursue your Board to have them enforce your condo bylaws. In particular, I am talking about the right to peaceable enjoyment of the property, which is your right as well as your neighbor’s. If your condo docs aren’t clear about what level of noise is acceptable and at what hours, the Board may not be able to do too much. You should also check your local laws and sound ordinances. Many communities have required periods of time where only limited noises is tolerated. You can contact the local authorities and ask if you have the right to report a loud neighbor. Perhaps a visit from the police in the middle of the night will be the gentle nudge your neighbor needs to turn down the volume or start using those TV Ears you suggested. Good luck!
Mister Condo @ June 12, 2013
Concerned Over Lack of Condo Reserve Fund
Posted in: Assessment, Common Fees, Condominium, Financial, Governance, Reserve Fund | Comments (1)
D.J. from Fairfield County writes:
Dear Mister Condo,
I am a new owner in a 6-unit condo association. I am concerned about the lack of Reserve Fund here. I’ve been told that, when asked, the Board has not been able to agree upon setting up any kind of reserve fund for ongoing maintenance and capital repairs. We had a new roof put on this spring which seemed to go off without any major issues. But, it really opened my eyes into the potential predicaments we could find ourselves in if an expense were unexpected and/or if somebody was unable to pay.
Reasons I’ve heard for not doing so up to this point: we’ll have to pay taxes on it on any balances at the end of the year…what happens when somebody sells? I need to learn the in/outs of reserve funds so I can begin to debunk the myths and present the case for taking the time now to set up a reserve fund while we have no major planned expenses on the horizon. Can you point me in the right direction? Thanks.
Mister Condo replies:
D.J., you are wise to be concerned over your condo’s lack of an adequate reserve fund or plan for long-term expenses that are known. However, in such a small condo as yours, the residents either agree that there will be large out-of-pocket expenses or they begin setting up a proper Reserve Fund. Condo by-laws don’t always speak to the specifics of the Reserve Fund although they do dictate the percentage of unit ownership formula that determines who will pay what percentage for common fees and expenses. If it is a simple division of 100% divided by 6, each unit owner is on the hook for 1/6 of these future expenses. As long as you know there is no active contribution s being made to the Reserve Fund, I would strongly suggest you start saving your own money in an interest-bearing savings account for the sole purpose of paying for these future expenses. If the association decided to pursue a Reserve Fund, you’ll be ahead of the game and ready to start making your contributions out of this savings account.
As you know, major expenses are always getting closer. As soon as the first board is nailed in place, building maturation begins and the clock is running on replacement. Forward thinking condominium associations address this issue by creating and managing a Reserve Fund that can help pay for these expenses and build a solid financial institution for current and future owners. Associations without Reserve Funds could easily find themselves facing financial failure, especially if one or more unit owners can’t make the payments for the assessments as they come due. Smaller associations may also face an additional problem due to their size. Lenders are generally unable to loan money to associations under 25 units as the risk is not spread out enough. That leaves special assessments as the only method of raising capital when the monies are needed. Best wishes!
Mister Condo @ June 11, 2013
Chicago Condo Parking Debacle
Posted in: Buying, Condominium, Governance, Legal, Management, Parking, Rules Enforcement | Comments (3)
A.L. from Illinois writes:
Dear Mister Condo,
I bought a premium, first floor parking space in downtown Chicago. It is a limited common element, and is assigned to my unit exclusively. I had it rented until recently. Now that it is not rented, I or my daughter would want to use it when we are in the area. The new manager told me that we cannot park there because we do not reside in the building. Being that it is just inside the door, and there are 4 floors of parking, whenever I drive by there is a car in the spot. When we used the unit before renting, this was always a problem also, and we had to have the garage attendant get in touch with the car owner and have it moved. Do you know if the manager’s decision to not allow us to use our parking space can be challenged? We would not even enter the building, as the overhead door is across from the spot.
Mister Condo replies:
A.L., not being from your neck of the woods, I am not certain of the laws for common interest communities in Chicago. That being said, you own the unit, which includes the parking space, so I can’t see where this manager has a leg to stand on should you decide to bring suit which is exactly what I would do. Perhaps the threat of the lawsuit will help this manager see the light and realize that you are entitled to what you have paid for. Please review your deed to make sure you understand what is included in your rights as a condo owner within this association. If you do need to hire an attorney, you may be able to include those costs in your suit against the association. Good luck!
Mister Condo @ June 10, 2013
Town Ordinance Allows for Dog Walking on Condo Property
Posted in: Condominium, Neighbor Issues, Pets, Rules Enforcement | Comments (3)
J.N. from Middlesex County writes:
Dear Mister Condo,
Many residents of my condo association believe that the rules ban owners from walking their dogs on common property (the rules are ambiguous about this – they state owners must clean up any droppings left on common property, but they also designate a specific area for dog walking).
Our town ordinances state specifically that dogs can be relieved on condo association common property, as long as the owner immediately picks up after the dog.
So my question is, can condo rules ban unit owners from doing something that the general public is allowed to do? If I lived outside of the association, I could relieve my dog on the condo common property as long as I cleaned it up, but my neighbors believe I’m not allowed to do so as a resident of the community.
Mister Condo replies:
J.N., my favorite questions about condo living usually involve dog poop… Nobody likes it and everyone is against it. But as a matter of law, it is no laughing matter and dog owners vehemently fight for the rights of their dogs to do their business wherever they see fit. I have never heard of a municipality having an ordinance that allows for dogs to be relieved on private property. Unless your common grounds are actually town-owned, I don’t see how they could legislate such a rule. However, laws trump condo rules so if you are certain that this is the case, you may be able to let Rover do his business wherever you see fit.
Instead of looking at this issue from a legal standpoint, let’s look at it from a neighborly standpoint. I assume that the folks that are upset with seeing dogs defecate on the property are either not dog owners or they are dog owners who are following the rules of the association by taking their dogs to the assigned dog walking area. That does not sound so bad to me and it is a good way to demonstrate that you are, in fact, a good neighbor. If you do not care to be a good neighbor then, by all means, walk your dog wherever you see fit. If you wish to give yourself piece of mind, contact an attorney and ask for a legal opinion on your rights. Either way, I wish you and your dog a happy condo living experience.
Mister Condo @ June 7, 2013
Hoarding Leads to Mouse Infestation at Condo
Posted in: Condominium, Governance, Neighbor Issues, Rules Enforcement | Comments (3)
M.L. from Hartford County writes:
Dear Mister Condo,
What recourse do I have if my association and Management Company are not addressing the problem of mice in a particular row of units? One unit owner is a hoarder and does not respond to inquiries from the management company.
Mister Condo replies:
M.L., this is a case of unit owner’s rights versus association rights. Your best course of action is to continue to pressure your Board and Property Manager to take action. If they refuse, you might want to check your by-laws or consult with an attorney to see if you can bring suit against the Board for not taking action to protect the association’s common property, in this case, your building. While it can be disgusting and unsettling, hoarding is not a crime. However, blocking access to doors may be a fire code violation. Storing potentially dangerous or flammable items is likely against your bylaws as is allowing the unit to fall into disrepair. These are all grounds by which your association could demand access to the unit for an inspection and take appropriate action once inside. Your Board may also need some legal advice here as well so please recommend that they speak with their association attorney before busting down your neighbor’s doors. Good luck!
Mister Condo @ June 6, 2013
80% of Units in Disrepair; Impropriety Charged!
Posted in: Communications, Governance, Legal, Management | Comments (3)
D.C. from New Haven County writes:
Dear Mister Condo,
Our property is in the process of being sided. One of the members of the Board of Directors lives with her boyfriend who is not on the deed. For the last 4 years, 80% of the units sided are still unfinished (rotted decks, fencing, no gutters, etc.). Last year, this board member’s building was sided. She had all of the work done. Her unit is pristine. They also gave her a second deck to replace the one installed by the previous owner. The property manager is at or in her home on a daily basis. He is always hanging out with the boyfriend. The boyfriend is at meetings and allowed to speak. At the recent election she was re-elected by a point. The condo manager was at the meeting handling proxies. There seems to be impropriety here. What can we do?
Mister Condo replies:
D.C., stories like yours are all too common in many condominium and community associations. Impropriety cannot usually be proved so it is assumed. Maybe there is some monkey business going on and maybe there isn’t. The bottom line is that the work that was supposed to be done for the entire association isn’t getting done in timely fashion. The fact that a Board member’s unit was taken care of before others is unfortunate but not criminal. If you feel the property manager threw the vote but you have no proof, you have no case.
So let’s talk about what you can do. Elections are at the heart of any condo association so take a look at your by-laws and determine if the proxies were issued properly and handled correctly. Does it state who counts the votes? If not, demand that an impartial counter be hired to count future ballots. That way the property manager cannot be accused of throwing the vote. Also, be sure to nominate candidates that will beat this Board member who you have brought under question. If you cannot defeat this person in an open election then you will have to accept the wisdom of the electorate.
As for the work that has not been completed it may be time to take action. Has the work already been paid for? Has an explanation been offered for why the work has stopped or been delayed? You have the right to these answers from your property manager and/or your Board. If you can’t get the answers you seek and you have 80% of residents effected, I’d say it’s time to vote out the whole Board and put some people in charge who care about the rest of the community and will communicate better with all unit owners. Good governance does not allow for 80% of the units to lie in disrepair for 4 years unless there are underlying factors (lawsuits, no money, etc.). Whatever the reason you and your fellow unit owners deserve an explanation. Best wishes!
Mister Condo @ June 5, 2013
