JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 6:31 AM |
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We are a small HOA (63 homes), we have forclosers, dues and repairs pending with approximately $8,000 in the budget. We incorporated single-family homes with existing quadruplexes that were already in the subdision for about 8 years. As part of the incorporation new bylaws were issued. As an enducement to sell the homes the bylaw state: replacement of roofs, painting exterior of home and the replacement of gutters. Of course these are captial expenses and the bylaws were from 1998. A new roof costs about $15,000 for the quads and of course the HOA's budget just doesn't have the monies. We need 2/3 votes of all members to amend the articles ref. these capital expenditures. Many of the homeowners are senior, some as mentioned in arears for their dues, some homes already have pending liens on them. A homeowner has decided to sue the association and we can afford legal fees but it isn't cheap and the little monies we have would go for those legal bills. Is there any recourse the association has in this situation.? Just curious if anyone else's hoa is facing the same dilema.
Thank you! |
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SusanW1
(Michigan)
Posts:5202
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| 01/30/2012 6:44 AM |
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Didn't you have a reserve fund for the roof?
Good luck on getting people to relieve the HOA from its responsiblities/obligations.
What is this member suing the HOA for - because the obligations are not being done?
You need to have an emergency meeting of ALL members and explain the issues.
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BruceF1
(Connecticut)
Posts:1510
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| 01/30/2012 6:53 AM |
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Jacqueline,
Don't you have D&O insurance? That's supposed to cover lawsuits arising out of the board's errors and omissions. |
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BradP
(Kansas)
Posts:2491
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| 01/30/2012 6:54 AM |
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| Do you have D & O insurance? If so you should refer this to them and let them handle it, that is why you pay them. |
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FredS7
(Arizona)
Posts:210
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| 01/30/2012 6:59 AM |
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So what exactly is the homeowner suing for?
> As an enducement to sell the homes the bylaw state: replacement of roofs, painting exterior of home and the replacement of gutters.
This is very unclear. Explain. Maybe the explanation helps us understand what the suit is about?
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JoanneD1
(Arizona)
Posts:269
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| 01/30/2012 7:14 AM |
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| Fred is asking the big question.....anyone can sue for silly reasons but this sounds like a real mess and you do need to check on your insurance and that claim can be turned over to them and you should not even have to mess with it. Do you have a good property manager as he should be advising you also! KNOW YOUR GOVERNING DOCUMENTS. Ours state we must have a manager. |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 7:18 AM |
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| We have never been able to save that much for even one roof ($15,000) which is for one quadruplex. When the economy to a hit, it made things evern worse, we were just surviving. Also, what is D& O insurance, I've never heard of it.? |
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BradP
(Kansas)
Posts:2491
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| 01/30/2012 7:19 AM |
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| Director and Officer's Insurance...every HOA should have this in addition to liability insurance. |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 7:21 AM |
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| The only oversite that I had always fought for was that about 6-7 years ago I told the board that we needed to look into "article amendments" well, there was always a reason why we couldn't, I was made to feel rather stupid for even suggesting it. Now they are saying, they should of listened to me. There isn't an error I don't thing by the board, just the lack of judgement I think. |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 7:22 AM |
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| They want a new roof. We have done any leakage repairs they may have had in the past, but now they want a new roof. |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 7:24 AM |
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| If in the bylaws it states "roof replacements" would the D&O cover that? |
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BradP
(Kansas)
Posts:2491
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| 01/30/2012 7:28 AM |
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no, D&O insurance wouldn't cover it...sounds to me like you need to increase your annual assessments to create reserve fund to adequately maintain your neighborhood. It also sounds like you need to have reserve study done so you know exactly what you need. I would also venture to say that a special assessment is in order to pay for this roof.
Does the roof really need replacing, or does someone just want one? Either way the residents in your association will have to pony up some cash. As for the lawsuit, if they are suing to get the roof repaired it sounds like you need to take a preemptive strike and get a special assessment on your docket. |
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SusanW1
(Michigan)
Posts:5202
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| 01/30/2012 7:32 AM |
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(D & O insurance protects your board if it gets sued.)
Your roof problem falls under the fail-to-plan category. I suppose someone could sue your board for failure to take care of the common areas, as identified in your documents. But, so what if someone sues? There's no money!!
Has the board failed to take care of the roof?
Amending your bylaws would go against your CCRs which most likely state that the HOA MUST take care of common areas. The roof is common area.
Is this an emergcncy (leaks, etc) A Special assessment might be the way to go for this repair, if that is the case.
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BruceF1
(Connecticut)
Posts:1510
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| 01/30/2012 7:36 AM |
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Posted By JacquelineB2 on 01/30/2012 7:24 AM
If in the bylaws it states "roof replacements" would the D&O cover that?
D&O insurance pays for the defense and any judgement arising from a lawsuit against the HOA. I would never serve as a board member without D&O insurance because board members can be personally sued for their actions (or inaction). D&O insurance protects them.
Another option for your roof is for the HOA to take out a loan, but you will have to raise your regular assessments to pay the loan back. However, this may not be viable for you if you are having trouble collecting assessments. You could find yourself in the position of not being able to collect enough assessments to pay the loan back.
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JoanneD1
(Arizona)
Posts:269
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| 01/30/2012 7:43 AM |
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| I cannot imagine ANYONE serving on a board WITHOUT protection of insurance. All it takes is one claim to wipe you out. How can you consider a special assessment if you know that there are owners in financial distress already? I am not even sure that a roof is COMMON AREA other than one that covers a clubhouse or the like. But besides that, you need some professional advice from either a PM or your attorney as the lawsuit is more pressing than anything I would think. |
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SteveM9
(Massachusetts)
Posts:1529
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| 01/30/2012 8:02 AM |
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But, so what if someone sues? There's no money!!
Well, thats not true. The association is made up of everyone who is in the association. So if a court orders your association to pay a court ordered judgement for $10,000 and there is no money in the bank account, the association would have to do a special assessment for $158 for every unit.
You can do a couple of things....
1. Issue a special assessment for $15,000 for the new roof, divided by 63 is $238 per house. Wait for everoyne to pay.
2. Get a bank loan for $15,000, where you will have a monthly payment to the bank with interest and be able to get a new roof right away. If its a $15,000 loan for 5 years at 7% the monthly payment would be $297 which would be an extra $5 per month in dues for each homeowner. You might want to make it $10 month increase to make up for people who dont pay, and other financial issues your having, etc.
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JohnC46
(South Carolina)
Posts:621
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| 01/30/2012 8:06 AM |
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JACQ
I am deducing your HOA is about 24 years old. This is typically the time frame that roofs might need replacing. Seems one member expects their roof needs replacing and has asked the HOA to do so (rightly so it seems but another issue) under the CC&R's but the HOA does not have the money.
Well if your HOA does not have the money, you are in deep trouble.
It appears the issue is your Capital Reserve Fund has little to no money in it. Typically a Reserve Fund is built over the years by setting aside a specific amount of dues (as an example, the FHA says a minimum of 10%) knowing that repairs/replacements will needed to be made sometime in the future. As an example let us say typically a roof replacement will be $20,000.00 and will probably need replacing in 25 years. This means we should set aside $800.00 per year so that in 25 years we have the $20,000.00. Now we have 10 roofs to replace so set aside $8,000.00 per year so in 20 years we have the $200,000.00.
Now if it is time to replace those roofs and we do not have the $200,000.00 we must raise it. There are two choices:
1. Access the HOA Members. So let us say 4 units per building so 40 units so you access each unit $5,000.00, payable now.
2. The HOA borrows the money (say from a bank) and then raises the dues to cover the loan repay.
Based on what you have said, I am sorry to say but I think push has come to shove there and the budget shortcomings need to be addressed. It will not be pleasant, especially if done with a heavy hand.
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 8:30 AM |
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Because we are fairly small any monies that were set aside have been used for emergency, such as Hurrican Charlie that just about crippled out subdivision. We have many homeowners that are really behind in their monthly dues so even if we sent out an assessment we wouldn't be able to collet the monies in a timely manner. And of course, that would mean more people behind. We are a lower middle-class subdivision so many people are just hanging-on. We have a PM but he doesn't seem to have a solution with the exception of the special-assessment. We have been proactive on repairs to the homeowner's roofs when they are needed. I am going to ask our PM is we do have the D&O insurance, I do know we have the "liability" insurance. My thought was, do the "special assessment" for $300 and do the pending roof (just the shingles thank goodness) and then every year have two more and keep those monies specifically for the "capital expenditures".
I do really appreciate all of your input, great response, just love the website because you are giving me some great advise. |
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JoanneD1
(Arizona)
Posts:269
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| 01/30/2012 8:56 AM |
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| Jacqueline......Do your governing documents require the HOA to have a BLANKET insurance policy?? This would include the "common areas" as well as claims on the exterior structures. CHECK YOU DOCUMENTS OR HAVE THE PM DO IT! You may have a deductible so get ALL the data. Any deductible that is less than the cost of the roof replacement is better than paying the whole cost. |
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GlenL
(Ohio)
Posts:3621
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| 01/30/2012 9:52 AM |
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| Jacqueline, the Board needs to discus this with the HOA's attorney ASAP. |
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Your board meeting is not held in the Situation Room of the White House. It's not life or death. Let people in, keep it positive, then go home and get a good night's sleep. If you hold off drinking until after the meeting, instead of before or during, you're probably doing OK. JosephW |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 10:44 AM |
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| I wasn't aware that the "roofs" were common areas. We did contact our attorney who advised that if the subdivision got 2/3 votes we could write an "article amendement" but as you say getting 2/3 of anyone to agree is the challenge. We have always repaired any roof leaks that homeowners have had in the past. Our attorney, when we asked for an "opinion letter" to include information on "dissolving" the association they said that, that is the only part of HOA's they DON"T do. I guess they don't want to bite-the-hand-that-feeds-them. |
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JacquelineB2
(Florida)
Posts:46
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| 01/30/2012 10:45 AM |
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| I am going to check on the information you gave me. I don't know so it would be interesting to find out. |
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MartinH2
(Florida)
Posts:24
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| 01/30/2012 11:16 AM |
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JacquelineB2,
Please examine your Doc's. Under Florida 720 law your Board may have the ability to vote for an assessment to cover all of the costs involved.
Typically, your Board can engage with a bank for a five year loan.
Then you offer each owner a choice of a lump sum assessment payment or they can spread the assessment costs for each unit owner over 20 quarters which would include the interest.
When in doubt, contact your HOA attorney.
Good luck
Marty |
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SteveM9
(Massachusetts)
Posts:1529
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| 01/30/2012 3:03 PM |
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information on "dissolving" the association
If one of your common areas are the roofs, how are your going to dissolve your HOA? Think people will just put money into a community pot to fix the roof? Aint going to happen. This is why HOA's exist. They are the legal side of community living. |
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JohnC46
(South Carolina)
Posts:621
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| 01/30/2012 4:55 PM |
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JACQ
Tough love here but you seem to be looking for ways to get out from under mismanagement (insurance, dissolve, etc.) rather then face the issue head on.
Kind of like a marriage annulment after 30 years of marriage and several children. Are the children then "bastards".....?????
Am I wrong?
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JoanneD1
(Arizona)
Posts:269
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| 01/30/2012 5:16 PM |
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| Jacqueline....I am glad that you are concerned enough about your HOA to be asking these questions and no question is too dumb. We were not all born with HOA protocol rolling out of our mouths. Most of us learned the same way that you are learning...start with the basics:1. the Governing Documents, the state statutes, your property manager and your HOA attorney. At specific times, one of those components will be more important than the other and then there will be times when they will all come into play but that is why you have a manager. If the manager is NG (and many are no good) then you are disadvantaged. Talk to other owners too. |
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JacquelineB2
(Florida)
Posts:46
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| 01/31/2012 4:16 AM |
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| .....I wish they were illigimate it would be easier to disown them.......oh well a little humour! |
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JacquelineB2
(Florida)
Posts:46
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| 01/31/2012 4:16 AM |
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| .....I wish they were illigimate it would be easier to disown them.......oh well a little humour! |
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JacquelineB2
(Florida)
Posts:46
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| 01/31/2012 4:27 AM |
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Ladies and Gentleman, I have to take this opportunity to sincerely thank you all for the most informative replys to my sometimes confusing situation. I have been on many websites but this by far has proven to be the most worthwhile, such quick responses, so many sincerely suggestions which come across as people who care, i know that's an old fashioned word, but I do mean it.
Okay, I have my board meeting coming up this Thursday. One of the board members is the actual person sueing us and I guess herself. Tell me if I am correct in my thinking. If she has already made it a "legal" issue between her attorney and the association's attorney; should we be disgussing it in the meeting; seems like she would have the upper-hand to go back and tell her attorney whats going on before out attorney is told what the board's dicisions are.
My suggestion is going to be this based upon all of the input I have been given:
In order to do this roof and build-up the coiffers we are going to have two assessments annualy for approx. $300.00 ($600 yearly) for each member. After this is voted on, get with the bank to secure the loan for the pending re-roofing and hopefully stop any further legal action that would depleat any monies we currently have in our operating budget.
Any late dues or back arrears that have already been given to our attorney, have them speed them up to receive payment; if they cannot be satisfied sooner then have liens placed or whatever the next step is. I really do have a concience but I am struggling to pay my dues each month ($105) and I'm a single so there's only one paycheck, the kicker is, I like where I live. I created the "Garbage Committe" (I go around every Saturday morning at 6am and put notices on garbage cans and recycling bins to be retieved by the homeowners; I take a picture of the infraction and the house number just in case there is a problem.) I have received so many compliments it's amazing.....so I believe I am proactive.
I will defintely let you all know what the outcome is of the upcoming meeting....thank you all again so much, i am indebted..... |
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JoanneD1
(Arizona)
Posts:269
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| 01/31/2012 4:45 AM |
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| CONFLICT OF INTEREST!!!!! My own opinion of course. This is as crazy as what I have in my own HOA. TALK TO YOU ATTORNEY IMMEDIATELY and ask if the person who is suing you should be recused from the meeting or even removed from your board! What is the condition of your relationship with the member and the other board members? Why did the member feel compelled to sue to get the board to take action on this issue? Will the remedy that you are taking make the suit go away? What happens if you can't raise enough money to pay the debt? Sorry to raise these questions but you need to be thinking about the future debt since you have said that there are some serious financial issues in your HOA. |
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