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Subject: Limited Common Elements
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KatharinaW
(Pennsylvania)

Posts:50


10/29/2019 6:59 PM  
Hi all,

We have approx. 200 Units in our community. 8 of them are sharing 4 grinder pumps, which were put in without letting the homebuyers know about this. The prior board “graciously” agreed to pay the $20 electricity bill for the grinder pumps, but those 8 homes pay a bit more in dues, to cover a reserve for the replacement of the grinder pumps.

The new board was halfway trying to get the grinder pumps off of the back of the HOA, but our PM advices, given the electricity bills are in the HOA name, and given the history, that the HOA will need to keep the grinder pumps as part of the responsibility to replace.

Neither of our documents talks bout limited common elements, but I am wondering if we can designate the grinder pumps to be limited common elements assigned to only these 8 units, to also legally make sure in case of a replacement, the overall reserve won’t be touched, but rather only the grinder pump reserve and worst case a special assessment only against those 8 units made. I feel like the way it is now, someone could say EVERYONE has to cover the grinder pumps...

But of course I could be over complicating things...

Does any of you have any input on this?

Thank you so much
TimB4
(Virginia)

Posts:16542


10/29/2019 8:17 PM  
It may require a change to the covenants vs. changing any other document.

AugustinD


Posts:1991


10/29/2019 8:20 PM  
I have seen covenants that declare that replacement of any common element, that serves only a specific building or buildings, may be assessed against the owners in that specific building or buildings. You should scan your covenants for wording like this. It may or may not be there.

Else in my experience, this is a complicated legal situation. Here's a few reasons why:
-- The grinder pumps are an added reserve component. Is their addition an amendment to the covenants that was not voted on, and so is not lawful?

-- The grinder pumps were not disclosed to the buyers as being their responsibility.


I think your HOA's board is stuck with paying for an attorney's opinion.
NpS
(Pennsylvania)

Posts:3865


10/29/2019 9:18 PM  
You say that these 8 units pay more in monthly fees than the other units.

To get a better understanding of your situation, could you provide the following info:

1. How much more do they pay?

2. What would it cost to replace the grinder pumps?

3. What's the expected life of a grinder pump?

4. Are the funds allocated for grinder pump replacement in a separate bank account? In a separate line on your balance sheet?

Thx.

Sikubali jukumu. Read all posts at your own risk.
SamE2
(New Jersey)

Posts:181


10/30/2019 5:23 AM  
It sounds like you already did what you want. Only 8 units are paying the extra for the reserve for grinder pumps. If the reserve does not cover the replacement you would do a special assessment against the 8. The only question I can see if you have detail accounting of the reserve account for the grinder pumps so you can explain the special assessment if it is needed.
KatharinaW
(Pennsylvania)

Posts:50


10/30/2019 6:26 PM  
Thanks everyone for the input so far.

Wording from Declaration I could find:

“Controlled Facilities means all real estate and improvements within the planned community which is part of, or benefits solely, a Unit, which is not a common facility, but which is maintained, improved, repaired, replaced, regulated, managed, insured and/ or controlled but he association. Controlled facilities for the units include, but are not limited to: all lawns, on the Unit, the roofs, gutters, downspouts, soffit, fascia, siding and masonry.

Controlled Facility Expenses means the expenses of the controlled facilities, which are to be assessed against the Owners if incurred by the association as the result of its responsibility for maintaining, improving, repairing, replacing, regulating, managing, insuring and controlling the controlled facilities which are part of, or benefit solely, the Units. “

To me the second paragraph says, even though the common facilities are items only benefiting one owner, all owners are responsible for the expenses associated. Otherwise if an HOA were to replace three roof for example and wouldn’t have enough money in the reserves (for whatever reason) only these three owners would be charged a special assessment. I am not aware that this is how it would be done.

NpS:
They pay $20 more each month. Based on a 2016 reserve study, the first $10k repair event would be in 2020. The expected life based on the reserve study is 10+ years. The funds are a separate line item on our balance sheet but not in an actual different bank account at the bank.

Sam:
The problem is, that prior boards often times did things without any standing, but because no one ever questioned anything, they got away with it for sooo long. I on the other hand am on Th board since this year and like having everything in order and legally stable.

Thanks everyone
NpS
(Pennsylvania)

Posts:3865


10/30/2019 7:08 PM  
You quoted "Controlled Facilities" and "Controlled Facility Expense" from the definitions section. But, per 5205, you need to also identify somewhere in the Declaration what those controlled facilities are and whether the HOA will cover the cost or the cost is on the owners.

"A declaration must contain ... a description of controlled facilities and the obligations of the association for their maintenance or regulation ..." (The actual statutory list concerning
what must be included in a declaration is rather long. It is recommended that an individual
review the applicable sections of the Act for more detailed information.) 68 Pa.C.S.A. § 5205.

Sikubali jukumu. Read all posts at your own risk.
NpS
(Pennsylvania)

Posts:3865


10/30/2019 7:28 PM  
Posted By KatharinaW on 10/30/2019 6:26 PM
They pay $20 more each month. Based on a 2016 reserve study, the first $10k repair event would be in 2020. The expected life based on the reserve study is 10+ years. The funds are a separate line item on our balance sheet but not in an actual different bank account at the bank.


1. In your earlier post, you said that the HOA was covering $20 for electricity. Is this $20 reimbursement for the $20 the HOA is paying or is it intended for long term maintenance?

2. $10k over 10 years is $1k per year needed for reserves (before considering inflation factors). You're collecting $20 x 12 x 8 = $1,920 per year from those units. Certainly enough to cover the reserves needed for the pump repairs. But I'm wondering if that's enough to cover pump replacement. I don't know much about reserves for pumps, so I'm only guessing that there will be sufficient funds from those individual contributions.

3. If the HOA is willing to keep covering the electric costs, my best guess is that you're getting enough funds from the 8 owners. This was my biggest concern since it's always hardest to justify collecting more money.

4. Per prior post, I would suggest making sure that controlled facilities properly documented. I would also suggest having a separate bank account for those reserves - Not absolutely necessary, but details like that tend to get lost in the shuffle when old Directors move on and new ones come on board.

Sikubali jukumu. Read all posts at your own risk.
KatharinaW
(Pennsylvania)

Posts:50


10/30/2019 8:11 PM  
The paragraph does state what is all considered a controlled facility (lawns, roofs,siding, etc..) Do we need more specific definitions? It was filed with the authorities so I’d hope the declaration is up to standard for the time it was filed (14 or so years ago).

But it also has the typical “including, but not limited to” speech in there, which I am not a fan of to be honest....

The $20 for the electricity was a decision by a former board president, since the homeowners supposedly were surprised by the added expense, since the builder supposedly did not inform them. This was all before my time even living here, so this is all hearsay I have.

The costs for a replacement and 10 years lifetime would be covered. They had done the math back then and therefore came up with the $20. I do think it needs to be revisited though due to inflation and increased labor costs soon, but those are smaller details at this point.

I suggested having a total separate bank account and was shot down. But thank you for giving me new hope. I will bring this up again.

I am just worried, since they are not mentioned anywhere, and it is all kept a quiet secret, and the rest of the board trying to get rid of it, that we do not classify it in the documents properly and are not taking the steps needed, to protect the other homeowners to not having to pay for this. Granted, for 200 units a cost of $10k is not the end of the world, but as I said earlier, I like to keep things as clean and organized as possible and fair and transparent and just want to do the right thing.
NpS
(Pennsylvania)

Posts:3865


10/30/2019 10:10 PM  
Posted By KatharinaW on 10/30/2019 8:11 PM
The paragraph does state what is all considered a controlled facility (lawns, roofs,siding, etc..) Do we need more specific definitions? It was filed with the authorities so I’d hope the declaration is up to standard for the time it was filed (14 or so years ago).

But it also has the typical “including, but not limited to” speech in there, which I am not a fan of to be honest....

The $20 for the electricity was a decision by a former board president, since the homeowners supposedly were surprised by the added expense, since the builder supposedly did not inform them. This was all before my time even living here, so this is all hearsay I have.

The costs for a replacement and 10 years lifetime would be covered. They had done the math back then and therefore came up with the $20. I do think it needs to be revisited though due to inflation and increased labor costs soon, but those are smaller details at this point.

I suggested having a total separate bank account and was shot down. But thank you for giving me new hope. I will bring this up again.

I am just worried, since they are not mentioned anywhere, and it is all kept a quiet secret, and the rest of the board trying to get rid of it, that we do not classify it in the documents properly and are not taking the steps needed, to protect the other homeowners to not having to pay for this. Granted, for 200 units a cost of $10k is not the end of the world, but as I said earlier, I like to keep things as clean and organized as possible and fair and transparent and just want to do the right thing.


My first question is always - Who's responsible for paying what?
My second is - How significant would an error be?
My third - Pick your battles carefully?

If all you are talking about is $10-20K over a period of 10 years, that would come to less than $1 per month apiece for the 200 houses. The money is small. Anyone who's going to complain about $1 per month needs to get a life. You're currently collecting a premium for the long term maintenance but not the cost of electricity. BOD members have resisted a separate bank account. Under the circumstances - Not worth changing the status quo. Let sleeping dogs lie.

I'm even not sure if it's worth the effort to make changes to your declaration. I've got a list of stuff I've wanted to change in mine for 5 years. You really need to be able to allocate time and money to such a change - From start to finish, it can easily take as much as a couple of years. Is this the time? Is this the most pressing issue you need to resolve? If things aren't in tip top shape everywhere else, I wouldn't deal with this at the present time.

Something that we have found very helpful is a Responsibility Chart - item by item - which shows who is responsible for what. Ours is only 2 pages long, and it is the true reference point whenever there is a discussion. (No one around here looks to the formal documentation - the chart covers a broader set of issues based on what's been asked in the past. We update it as needed - Much easier than changing the Declaration.) You might consider developing one for your community if you don't have one. I've attached a copy of ours. A lot of time was spent haggling over the wording, but it was worth it and we didn't have any outside costs.

Attachment: 11030101640571.pdf


Sikubali jukumu. Read all posts at your own risk.
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