Reserves Contribution - Condo Sale

MaryP - why haven't you been collecting reserve funds all along to cover these repairs? Why weren't these repairs made when they occured instead of waiting for a sale inspection? Why should a specific owner pay for repairs that are the responsibility of the association? Harold

Great idea and thank you. We do have a reserve fund but you are correct we are holding it for major projects including those anticipated by our reserves analysis. I may not have been asking the question correctly but you picked up the point. The challenge is a limited maintenance budget and yes - perhaps not the best proactive maintenace program the past couple of years. It is always a balance act isn't it?

You'll probably have some problem with this. The intitial capitalization fee you paid when the moving into a new condo was to get the association its initial funding. Now you're attempting to make up a shortfall by assessing new owners an extra amount. Your bylaws probably say that all assessments must be paid according to the percentage of value or the method used to determine the eindividual unit assessment. There is probably no language that would allow you to assess a new owner a different amount, especially when they had no part in creating the shortfall. I think an new owner could probably successfully challenge it.

I know that some associations are trying to do this in New Jersey, and I'll try and find out the how they're structuring it. I also say at least one case recently where the association lost when they attempted to do this.

At a minimum I would think it would take changing the bylaws to allow for uneven assessments and a logical reason for doing it, (I don't think "we screwed up so we're going to penalize the new guys" will fly). If I was a board member I wouldn't do this unless I had an opinion letter on file, from the association's attorney, stating it was entirely legal (and even then I have a problem with the ethics of letting the owners sho created the shortfall leave, while new owners who had nothing to do with it get the bill.

Your documents should give the board the power to adopt an additional assessment (levied on everyone as the documents call for) for the purposes of maintaining the common areas, without an owner vote. Most documents only require owner votes for capital improvements, not maintenance.

Joe

I'm interested in learning more about a "buy in" or initiation fee, whichever it would be called.

Our MC charges new owners about $300 for the paper work of changing ownership. We're in Arizona. The Association does not get any of that money.

Now if we were to try and charge a buy-in fee on top of that, I'm thinking that may create some hard feelings with new owners.

I believe the fee would need to be built into our Bylaws, but I don't know.

A new owner may argue that the previous owner(s) of the home has contributed to the reserves up to this point, and all the new owner should be required to do is continue contributing through the monthly dues.

Viewed that way it would seem to be an unfair/unequal assessment on a new home owner.

Are there other ways the buy-in fee could be justified?

I think it is an excellent way to help increase reserves but have some reservations about the equality of the method.

Bill

Gerald,
The Courts in NJ see it differently than you do, especially when the capital contribution is only authorized by Resolution, and is not in the Master Deed or By-Laws. See link below...

http://www.njlawblog.com/community-associations-court-invalidates-condos-nonrefundable-working-capital-contribution.html

There is some pending legislation in NJ to change this, but such a working capital fee would still be required to be set forth in your Master Deed or By-Laws.

Jon
NJ

Here's the NJ case:

NJ: Capital Contribution on unit sales violates NJ Condo Act
MICHEVE, L.L.C. v. WYNDHAM PLACE AT FREEHOLD CONDOMINIUM ASSOCIATION a1014-04

The question presented by this appeal is whether a condominium association may impose a non-refundable capital contribution fee whenever there is a transfer of title to a condominium unit. We conclude that such an imposition violates the provisions of the Condominium Act, N.J.S.A. 46:8B-1 to -38, which require the common expenses for maintenance of a condominium's common elements to be charged to all unit owners.

Defendant is a condominium association subject to the provisions of the Condominium Act. Those provisions include N.J.S.A. 46:8B-17, which requires a condominium association's "common expenses" to be "charged to unit owners according to the percentage of their respective undivided interests in the common elements."

In April 2002, defendant's Board of Directors adopted a resolution which provides that "pon acquisition of title to a unit, the unit owner shall pay to the Association a one time non-refundable working capital contribution of $750." The same resolution also requires payment of "a one time processing fee of $125.00" upon acquisition of title to any condominium unit.

In March 2003, plaintiff acquired title to one of the units within defendant's condominium complex by a sheriff's deed. In June 2003, plaintiff resold the unit to a third party. At closing, defendant required plaintiff to pay various charges, including both the $750 non-refundable working capital contribution and the $125 processing fee established by the April 2002 resolution.

Plaintiff subsequently brought this action seeking recovery of the $750 capital contribution. Plaintiff brought the case before the trial court by motion for summary judgment. The court concluded that the $750 capital contribution, assessed only on new purchasers of condominium units, violated the Condominium Act and defendant's master deed and by-laws. Accordingly, the court entered judgment requiring defendant to refund this assessment to plaintiff.

And here's an article by Rich Thompson about it:

http://realtytimes.com/rtcpages/20040728_feefairness.htm

Joe