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Subject: Hypothetical Question About Money
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Author Messages
PeteH
(New Jersey)

Posts:6


02/05/2006 2:12 PM  
Our CE&Rs say that all special assessments must be approved by a 2/3 vote of the members. What options does a board have if the members defeat a proposed special amendment and the assessment is not for something that woul dbe covered by the reserve?

This is (hypothetically) in NJ.

Thanks.
EdR
(Texas)

Posts:170


02/05/2006 2:23 PM  
PeteH:
Our board appear to have the authority to spend the reserves without membership approval. They are now dipped into 2/3 of them, and although it hasn't happened yet, but will have to, we believe they will have to have a special assessment for necessities because they've spent the reserves on cosmetic repairs that could have waited or could have been spread out over a few years. You would have to read the specifics about your association, but ours doesn't specify what reserves can or cannot be used for. It was the decision of the board several years ago to keep one year's worth of membership dues in reserves at all times (these are in CDs, etc.), so I guess since that was their vote, they can undo it and spend all of the members' monies (here in Texas). We have a unique situation in our assn.--the current directors are not using good judgement or fiduciary responsibility right now; we are hoping this comes to a head soon before our property values take a dive.
EdR
BeckyV
(Michigan)

Posts:43


02/05/2006 4:01 PM  
It depends on what the special assessment was to be used for. If it was a capital improvement, you just go without it until there are monies to support the improvement. If it was general maintenance, the board has a fiduciary duty to raise assessments to meet the need. If it was for capital maintenance then the reserves have to be subsidized to meet the need. I have been in an association where the association obtained a loan to cover the need and raised regular assessments temporarily to cover the loan. An increase in regular assessments is within the scope of the board and does not need a vote unless your documents put a limit of the amount of the increase.
Becky
MarnaR
(California)

Posts:27


02/05/2006 4:21 PM  
Becky,

Thank you very much for this information. I'm a new board member and we're faced with having to raise rates to return our reserves to full funding, as well as to meet the day to day expenses of our community. It is helpful to have the input from people who've been there, done that.
PeteH
(New Jersey)

Posts:6


02/05/2006 5:17 PM  
Posted By BeckyV on 02/05/2006 4:01 PM

It depends on what the special assessment was to be used for. If it was a capital improvement, you just go without it until there are monies to support the improvement. If it was general maintenance, the board has a fiduciary duty to raise assessments to meet the need. If it was for capital maintenance then the reserves have to be subsidized to meet the need. I have been in an association where the association obtained a loan to cover the need and raised regular assessments temporarily to cover the loan. An increase in regular assessments is within the scope of the board and does not need a vote unless your documents put a limit of the amount of the increase.
Becky

I think I said that the expense was not one covered by the reserve. But you're saying that the board could get a loan from some kending authority and then increase the regular assessment as per the CE&Rs. Useful. Thanks.
JohnM3
(Florida)

Posts:288


02/06/2006 8:11 AM  
edr: My suggestion is go serve on a board then you will know what goes on then you can act in what you think is the best interests of your community.
We stopped this reserve nonsense about 6 years ago and went to a straight checking and savings system. What ever we dont use on specific budgeted items automatically goes into savings at the end of the year in addition we fund our savings to the tune of 3000 per month plus all monies captured by our member collection company goes into reserves( savings) I live in a hurricane zone yes wilma did her urban renewal act but thats okay yes the insurance was a joke but thats okay too. Cause baby we learned a lot example, trees are not covered, fences are not covered, basketball courts, are not covered want to go into more detal? So whats the answer, simple hire a independent assesor every year that you change boards to check the policies for loop holes the insurance company is not in business for your protection but for theirs understand that. Do not plant non native trees they blow down like match sticks besides the cities will not let you cut them down when they are on the verge of becoming a nusance.On common grounf be very carefull what you allow to be planted!! no ficus what so ever they are a nightmare.
By going to savings - checking with a 1000 emergency slush fund you leave yourself wide open to fix any eminent dangerious situation or if a fire guts a house out you have the finances to board up the unit with plywood till the insurance folks wander out to give there 2 cents worth.
BeckyV
(Michigan)

Posts:43


02/06/2006 8:41 AM  
Don't know where you all live, but check your state atatutes. In Michgan there is a mandated amount for the reserve fund and what they can be used for.
Becky
EdR
(Texas)

Posts:170


02/06/2006 9:02 AM  
JohnM3:
I did serve on the board (for 5 years) and the reason I'm not still there is because I'm frugile, careful, legal, honest, etc. (not bragging--just am), but I was forced off because the directors and homeowners who wanted to spend the other homeowners monies without member's knowledge or budget, staged a coup and I was hurt very badly, professionally and otherwise (and my whole family was) by it. Without going into detail, it was a defamation campaign and they kept kicking it up a notch each time they were asked to stop by law enforcement and lawyers. The board directors did nothing to stop it and betrayed me because of directors who were involved in the coup and defamation and I was outnumbered--the majority of the subdivision believed their awful lies and stories (including misappropriation of funds--the rest was moral accusations)--no one checks that out to determine it didn't happen and were all lies, and by the time you prove it in court, the damage is done, believe me. And, I hate to tell you this, but the management company participated with this project because I was one of the four directors (there were nine) who wanted to interview other management companies and make a change, but the person who "accidentally" became president and had all the power, was in bed with the MC and fought it and just helped create and spread more defamation, plus unfortunately she wanted to spend members' monies on select interest groups--like swim teams, ladies clubs, tennis clubs (mostly people from outside) in order to impress friends and business acquaintances for her and her spouse. Don't think for one minute that this ___ doesn't happen--it did and does.

Right now, a group of watchdogs who saw this outrageous thing playing out, are working up lists of wrongdoings by the board and the management company and one of the most eggregious wrongs of the board is not having EVEN allowed the members to be noticed about the budget and discussions--no one even saw it and it was approved by the board. It is not just a vendetta--you would have to hear the whole awful story--it is unbelieveable that humans could do such things--and to children too. We've had depositions so this is not speculations. When we have the ammunition, a group of the community are planning a class action suit. A number of very good directors have quit because they know what is about to happen and they do not want to be on board when it does--although hopefully we will be able to go after individual directors regarding the budget situation, but that remains to be seen.

So, Jim, I did have the best interest of the assn. (total) in mind. I just didn't agree with giving members' monies to special interest groups that included mostly outside (non-payers)--so it doesn't always pay to do a good job at a volunteer job. You can't fire a volunteer, but if you defame them, losing face over something not true, to our family, has been worse than losing a salary over a paying job. So, been there, done that--will never ben on a board again, ever--it's nothing but political, conflicts of interest, kick-backs, you name it, in most HOAs.

Most posts on this site are from people who are on boards presently; I got into this site to find out what else is going on in the U.S. and to get real information about laws and to determine what all we can sue about (mostly fiduciary), but it's appearing that there are no rules governing these HOAs, and they can just about get by with the big "M".
EdR
EdR
(Texas)

Posts:170


02/06/2006 9:49 AM  
Jim: I should also mention that the good guys on the board are still outnumbered--it's going to be tough turning the ship around!
EdR
EdR
(Texas)

Posts:170


02/06/2006 9:50 AM  
Sorry, I meant "John".
EdR
LisaS
(Illinois)

Posts:341


02/07/2006 8:08 AM  
Depends on your state, and your type of association. We are single family community HOA in Illinois. We are not even required to have a reserve (we do though!)

Somewhere in your budget I would have expected the 'unexpected expense' contigency fund. Regardless, if the Association didn't get their 2/3 vote, the expenditure can't be made. It is very hard for most associations who are in your position to get any sort of loan from any lending institution. I would assume that if it gets voted down, it is not an 'emergency' type expense that needs attention immediately.

In our HOA, the Board must vote 2/3 for a special assessment. It makes it easier when there is a need. There is also the portection that if the assessment is contested by petition we have a special hearing and a public vote.


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