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Subject: Sudden Assessment
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LS5
(New Mexico)

Posts:5


07/05/2019 7:24 PM  
Last Monday (July 1st), our HOA Board told us there would be a $500 assessment that we needed to pay by this Monday (July 8th). I expected them to raise the monthly dues because at our yearly meeting in May they said the HOA was going to be in the red before the end of the year, but this seems excessive. They are claiming it is because of an emergency leak repair, but the work isn't even scheduled until the end of the month, no one can see any signs of the leak (it is under the grass area). Plus they are asking for twice as much as they need to fix the supposed leak.

I know several people have tried to talk to the board, but they keep saying, "But it's an emergency!" over and over again. How much time does a HOA need to give us to pay special assessments?
MelissaP1
(Alabama)

Posts:8415


07/05/2019 7:34 PM  
As much time as it takes for the contractor to get paid to do the job. Remember the OTHER end of where this money is going. The contractor is most likely asking to have the money upfront or in hand by time that work is scheduled.

Former HOA President
LS5
(New Mexico)

Posts:5


07/05/2019 7:56 PM  
Is there anything the residents can do? I've talked to several other residents, and we don't think there is a leak. The plumber told the board that the leak could cause the fire hydrant to explode, and that doesn't make any sense!

My neighbor asked them to get a second quote, and they refused because "it is an emergency!" and there isn't time. The work isn't being done for several weeks, I'm sure they could get someone out before then.
LS5
(New Mexico)

Posts:5


07/05/2019 8:56 PM  
The Declaration says that owners agree to pay to the Association: (1) annual assessments or charges, and (2) special assessments for capital improvements, such assessments to be fixed, established and collected from time to time as hereinafter provided.

Does this mean that special assessments can only be used for capital improvements? Does fixing a leak (with no sign of damage) count as a capital improvement?
AugustinD


Posts:1886


07/05/2019 9:34 PM  
Yes, per your HOA's Declaration, special assessments must only be used for capital improvements. But I think fixing a pipe could be said to be either a capital improvement or maintenance.

I think if I were in your shoes, to get my concerns resolved quickly, I would call the water company (the city?) and ask if they see signs of excessive water usage for your HOA.

The law allows you to see financial records of your HOA. Make a records request for the past year's monthly balance sheet and profit-and-loss statement. Ask to see any bid made to make the repair on the pipe.

How many members does your HOA have? Is it a condominium or stand-alone houses? How much is in the Reserve fund?
LS5
(New Mexico)

Posts:5


07/06/2019 12:00 AM  
39 people in the HOA. It is townhouses.

What is a reserve fund?

Our water usage went up in June, but that is when the pool was opened. They say it went up last September (and even showed us a graph that shows it increasing) but I'm not seeing that on the reconciliation detail sheets they make available. I did see several checks to board members and residents without any further explanation.

I don't understand their reconciliation sheets. January is missing from both 2018 and 2019. Feb 2018 the ending balance is 9762.64. May is 4787.33. December is 4708.56. How could they lose 5000 from Feb to May and not from May to December, when May, June, July, and August all have pool costs. Feb 2019 is 8651.32, and May 2019 is 7276.3.

The last president (who was only there like two months) held a community meeting where she told everyone that she wasn't sure they could open the pool the next year. A couple living here had been taking care of the pool for us, but was quitting. Some board members wanted to hire an outside company but the president said that there was no money, we were like seriously broke. Dues were going to go up, but they would need to go up more if someone from the community didn't take care of the pool. She was asking for ideas, or volunteers, so we could keep the pool open. That was November 2017, I think, and I think she quit like right after that meeting. Current president then paid the couple last year, and then hired a pool company this year. Dues didn't go up until January of this year, so I thought the previous president was exaggerating.
MelissaP1
(Alabama)

Posts:8415


07/06/2019 12:20 AM  
We went through something similar... Our HOA we originally had 1 water meter. If you did not pay your dues, we could shut your water off. It also had the issue that if your water line broke, we'd have to repair it. Which you can imagine could be quite expensive. It actually made our dues $75 a month just to cover the water repairs. We later switched over to individual water meters. It lowered or dues to $50 a month. We had to turn our streets over to the city and make them public. You were now responsible for repairs from the meter to the house. Anything from the meter to the street was on the city. That saved us ALOT of money. However, we also had to update our CC&R's to reflect that change. Which was another added expense and time...

Now do I believe the $500 requested is a bit high? Yes. It is being split up only 39 ways. NOT paying it subjects you to a possible lien for it. So not paying it may not be an option. The extra money for filing liens for non-payers may also be built into the amount owed. However, what shouldn't be built in is anything that is outside the scope of the repair costs.

Even though your HOA will need to increase it's dues and/or savings, it shouldn't include that in a specified dedicated amount earmarked for water pipe repair. If it is, then it should be announced they added money to be padding for the existing budget. My HOA did something similar when they did a special assessment once. They didn't reveal they were adding on extra money for padding for other issues. Kind of thought it was sneaky too. So I would ask them if this is their intentions as well.

Former HOA President
CathyA3
(Ohio)

Posts:339


07/06/2019 7:23 AM  
Posted By LS5 on 07/06/2019 12:00 AM
39 people in the HOA. It is townhouses.

What is a reserve fund?

Our water usage went up in June, but that is when the pool was opened. They say it went up last September (and even showed us a graph that shows it increasing) but I'm not seeing that on the reconciliation detail sheets they make available. I did see several checks to board members and residents without any further explanation.

I don't understand their reconciliation sheets. January is missing from both 2018 and 2019. Feb 2018 the ending balance is 9762.64. May is 4787.33. December is 4708.56. How could they lose 5000 from Feb to May and not from May to December, when May, June, July, and August all have pool costs. Feb 2019 is 8651.32, and May 2019 is 7276.3.

The last president (who was only there like two months) held a community meeting where she told everyone that she wasn't sure they could open the pool the next year. A couple living here had been taking care of the pool for us, but was quitting. Some board members wanted to hire an outside company but the president said that there was no money, we were like seriously broke. Dues were going to go up, but they would need to go up more if someone from the community didn't take care of the pool. She was asking for ideas, or volunteers, so we could keep the pool open. That was November 2017, I think, and I think she quit like right after that meeting. Current president then paid the couple last year, and then hired a pool company this year. Dues didn't go up until January of this year, so I thought the previous president was exaggerating.




Reserve Fund: https://www.investopedia.com/terms/r/reservefund.asp

A reserve fund's purpose is to pay for replacement of big ticket items without having to resort to special assessments. Predicting such future spending is at best an educated guess made with reasonable assumptions at the time. It's not perfect, and because conditions that affect the predictions change with time, associations need to have periodic reserve studies done by professionals. Many states' condo laws address these requirements in more detail, meaning it's not up to condo boards to SWAG it.

Condo Finances:

Condo spending is not evenly spread out during the year, and it's not unusual to see fairly big swings from month to month. In fact, if you didn't see swings, you should get suspicious.

Water is a major expense, especially if a small community has a pool (my community is 74 units with no pool, and water is still a significant part of our budget).

Just because owners aren't seeing signs of a leak doesn't mean there isn't one. Often the only sign is an unexplained uptick in water usage, which the association must investigate and address. Depending on the size and location of the leak, repairs could run into many dollars. It may be appropriate to use a special assessment depending on where the leak is located. The water system is part of the community's infrastructure and must be maintained and upgraded as needed.

General Comments:

Many condo associations are "broke", and this is a good sign that either monthly assessments are too low (very common) or the board is overspending or both. Many boards are reluctant to set assessments high enough to cover all items in the budget as well as set aside a portion for the reserves because they fear blow back from owners. However, it's their job because the bills will always come due, and then there will be wailing and gnashing of teeth because unexpected special assessments are necessary. Minor pain now, or major pain later. I don't think $500 is necessarily out of line - special assessments can run into many thousands of dollars, depending on what needs to be paid for.

I recommend that the OP learn more about condo financing in general and his/her community's finances specifically. It's a reality that condo owners are financial partners with all other owners. It's also a reality that "low maintenance" does not equal "no responsibilities". Apathy is a very common failing among condo owners. Many believe "out of sight, out of mind" and that it's the board's problem to deal with everything. Newp.

To quote one of our regular posters, there is no Magic HOA Money Printing Machine. The finances fall equally on all owners, and irresponsible management can reduce the value of everyone's home. If many owners have trouble coming up with %500 at short notice - and according to some recent articles I've read, that's a sizeable percentage of people in this country - then responsible, realistic setting of the monthly assessment is essential. Kicking the can down the road just gives you a dented can that no longer does its job.
MarkM19
(Texas)

Posts:371


07/06/2019 8:02 AM  
Unless I missed it I do not recall any mention from the OP about Reserve Funds. It sounds like with or without this being an actual emergency repairs need to be made asap. This type of repairs should be handled by reserve funds. It sounds like the cost of repairs is under 20K. No reason why not to get 2 other bids for these repairs.

We had a sink in our Lady's restroom in our Pool a few years ago. We called a Plumber that we have used on occasions and he told our PM that it was going to be $600.00 to replace it with new. I quickly Googled how to repair a automatic sink and found out that if the water runs slowly constantly the batteries need to be replaced. It took 4 D batteries for me to fix and about 10 minutes time. Contractors will screw you if you let them. DON'T let them. Multiple bids are a must.

Sounds like your board needs to raise the dues and get sound reserve accounts in place. Nobody wants to hear about $500.00 surprises out of the blue. I would suggest that they start with the maximum amount they can raise dues without going out for a vote. I think it is usually under 10% a year. This may not be popular but it is better than the surprise SA when things break.
LetA
(Nevada)

Posts:741


07/06/2019 8:33 AM  
Your community, I'm assuming not having a reserve fund puts all the owners in a pickle. In a perfect HOA, An special assessment at a minimum would take 90 days to collect. That goes from the time the BOD approves the SA, the mailings go out and accounting collects the payment; and that's not counting the people that call and make payment arrangements because they're on fixed incomes. Typically these payments for emergency and capital expenditures come of of the community reserve fund. since you have none, that places an unfair burden on you the owner. All I can suggest is call the Property Manager and work out a payment arrangement.
AugustinD


Posts:1886


07/06/2019 9:37 AM  
Posted By LS5 on 07/06/2019 12:00 AM
39 people in the HOA. It is townhouses.


Either your HOA's Declaration or its Articles of Incorporation or both should explicitly state whether the HOA is subject to the state Condominium Act or the state HOA Act. Can you check and report back?

If your 39 townhouses yada are subject to the HOA Act, then in a HOA your size (39 members), if a majority of members vote for an audit, the HOA Act requires that the HOA have an annual audit.

I did see several checks to board members and residents without any further explanation.


Ask to see the General Ledger. You are entitled to a brief explanation. You are entitled by law to inspect financial records, as it sounds like you know.

I think CathyA3, MarkM19 and LetA responded to your other concerns. For what it is worth: My former condo had a water leak starting over a year ago. So far t has paid over $20,000 to identify where it is and fix it, often shutting off the water to about 30+ residents. Based on water usage reports for the applicable water meter, the leak still is not fixed. Based on other work the plumber did, I think the plumber may be gouging. I do not think the Board put it out to bid. The manager and the board are pretty infrastructure clueless. One can tell by the incorrect vocabulary they use to describe the condo's plumbing. LS5, I hear you, but some $20,000 of plumbing expenses is not necessarily inappropriate.


TimB4
(Virginia)

Posts:16417


07/08/2019 3:32 AM  
Posted By LS5 on 07/06/2019 12:00 AM
39 people in the HOA. It is townhouses.

What is a reserve fund?




See the following thread on this forum:

Subject: Reserve Studies/Funds 101


If your Association doesn't have a reserve fund the should start one now.
First step is a reserve study.

When we did our first reserve study, we discovered a need to raise assessments by 20% to properly fund the reserves (put enough money into savings to cover the expenses identified in the study).


LS5
(New Mexico)

Posts:5


07/13/2019 6:46 PM  
Today the board cancelled the repairs with no further explanation (I guess it wasn't a emergency! like they said). They haven't cancelled the special assessment that was to pay for the repairs. If the money isn't used to fix a plumbing leak, do they have to refund the people who have paid? Can they still charge those of us who haven't paid late fees?
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