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Subject: HOA Can't pay for retention ponds
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JohnM97
(North Carolina)

Posts:5


12/28/2020 7:30 PM  
Hello Forum, I'm part of an HOA in NC. We have retention ponds that are keeping having big issues. The HOA can't economically keep up with this issues anymore. Our HOA is on the deed for the ponds without any signature or any HOA seal on it. So I don't know how they did that. The permit of the ponds are still under the developer's name that built the subdivision, but is out of business. So, we don't have anymore money to put the ponds in compliance. One of the reasons are the annual fee has been created too low, and we can't legally rise it as we need because the covenant rules. Having the approval of the majority neighbors to put fees up by changing the covenant would be impossible to have. If we would be forced to dissolve the HOA, who would be responsible for the ponds? We are doing our best to keep everything up and respect the State rules about the ponds, but seems we can't ay for it.
Thank you for possible suggestions.
TimB4
(Virginia)

Posts:17180


12/28/2020 7:53 PM  
John,

I doubt you would be forced to dissolve the Association.

More likely, the following might happen:

Special Assessments
Bankruptcy (which might place the Association under receivership allowing the court to raise assessments the amount needed to cover expenses).

My advice - prepare for special assessments by saving now and potentially look to move.


The Association should also look at any bond the builder may have put up in the county/city and lay claim to it.
An attorney can assist you on this (yes, I know, more money)
KellyM3
(North Carolina)

Posts:1599


12/29/2020 11:58 AM  
If the NC Department of Environment and Natural Resources is on your case about the operations of the retention pond, your HOA may be forced to do something about those repairs, including making HOA dues adjustments or special assessments to cover the costs. The challenge is that your HOA budget cannot pay for it under its current revenue structure.

We have some state-controlled aspects of our pond where state officials visually inspect it and can demand changes, but never have...yet. It's a very unpleasant thought for me as an HOA director.

I don't see how the HOA organization gets out of the ongoing maintenance obligation since those retention ponds are clearly there due to the creation of the community years ago. It's a really tough spot.
AugustinD


Posts:4828


12/29/2020 12:28 PM  
-- TimB4 and KellyM3 gave wise advice, in my opinion.

-- I understand the OP's point about the covenants prohibiting an assessment to fix the retention ponds. However, I think this may be a situation of 'damned if you do and damned if you don't.' In which case, the board has to pick the least worst option.

-- One option: If the HOA cannot get the money via a special assessment, the board likely can borrow from a bank and slowly raise the assessment to pay back the loan in the coming years.


-- The OP may want to google in receivership; share this information with the members; have the board be forthright with members about how the only options the board has are bad ones; and then special assess the membership as needed and risk the possibility of some jerk suing when the board is in an difficult situation legally.

-- Not fixing the retention ponds poses significant liability to the HOA, in my opinion. Meaning a failure to fix them may cost the membership a lot more money.

SheliaH
(Indiana)

Posts:3670


12/29/2020 12:37 PM  
It seems odd you can't legally increase the annual assessment - are you sure you're looking in the right place? Covenants usually address how the common areas (like retention ponds) are used, whereas the Bylaws dictate how the association is run. that would include stuff like how many board members, levying assessments, who sets them and how often.

As for the ponds, you may have to consult a private attorney, as Tim noted to see what's really going on as far as who's responsible for them. Unfortunately, when the developer went belly up, it may be some things were missed, so if the HOA is on the deed and it's been caring for them ever since the association was turned over to the homeowners, you may be on the hook for maintenance. Which may also mean a special assessment - sorry.

Maybe there's a way you can spread the cost of the repairs for whatever's causing the issues over several years - what did previous contractors for the repairs tell you? It also sounds like you don't have a recent reserve study that would address the association's saving money in a reserve fund for major repairs/replacement of the common area, like retention ponds? If you did one, and it's more than five years old, it's time for another one and if you've never had one, that should be a priority for 2021 so you'll have some ideas of where you stand. Other common areas like the streets could also be addressed in the study.

Unfortunately, that will also cost money, so any way you slice it, you and your neighbors will end up paying more. Now it's a matter of determining how much. The cost will never decrease, but better planning could help keep them under control. Good luck!
TimB4
(Virginia)

Posts:17180


12/29/2020 3:17 PM  
Posted By SheliaH on 12/29/2020 12:37 PM

It seems odd you can't legally increase the annual assessment - are you sure you're looking in the right place?




It's odd but not unheard of.

In my retirement home Association, the covenants specify $50 per year.
Here is some of the language:

The fee shall be $50 per lot per year. Delinquent fees are subject to reasonable collection costs, attorney fees, 12% interest and 10% late charge. Any increase in Association fees will have to be approved by a 2/3 majority of the members of the Association.


GenoS
(Florida)

Posts:4242


12/29/2020 3:47 PM  
Posted By JohnM97 on 12/28/2020 7:30 PM
The permit of the ponds are still under the developer's name that built the subdivision, but is out of business. So, we don't have anymore money to put the ponds in compliance.

Hang in there. You will.
MichaelS56
(Minnesota)

Posts:61


12/29/2020 4:15 PM  
Is the water that is in the retention pond only coming from the Association or is some of the water coming from nearby not HOA property?
GeorgeS21
(Florida)

Posts:3602


12/29/2020 4:48 PM  
Hmmm ... these are likely “detention” ponds. Storm water management mechanisms.

Who owns the property the ponds are located on?

You are certain the county does not maintain them?
SheliaH
(Indiana)

Posts:3670


12/30/2020 9:14 AM  
Posted By TimB4 on 12/29/2020 3:17 PM
Posted By SheliaH on 12/29/2020 12:37 PM

It seems odd you can't legally increase the annual assessment - are you sure you're looking in the right place?




It's odd but not unheard of.

In my retirement home Association, the covenants specify $50 per year.
Here is some of the language:

The fee shall be $50 per lot per year. Delinquent fees are subject to reasonable collection costs, attorney fees, 12% interest and 10% late charge. Any increase in Association fees will have to be approved by a 2/3 majority of the members of the Association.






You don't say how old your community is, but if they've stuck to $50 a year for five years or more, I hope the board is managing the hell out of the money - otherwise, you and your neighbors may be for a nasty surprise down the road. They may want to go to US inflation rate calculator - https://www.usinflationcalculator.com/ - put in $50 from the year the community was turned over to the homeowners, and see how much it's risen since then. I put in $50 and 2015 (5 years ago) and it noted the same item would cost $54.90 today, $59.67 if you use 2010 and $75.56 if you use 2000.
JohnM97
(North Carolina)

Posts:5


12/30/2020 11:18 AM  
Thank you all for the suggestions. For who asked me. The ponds are on the HOA deed. One pond is split in 3 different properties. 1 HOA. 2 Private homeowner. 2 Private homeowner.
On the Covenant we can't raise the annual fee for more than a small percentage.
JohnM97
(North Carolina)

Posts:5


12/30/2020 11:20 AM  
Posted By MichaelS56 on 12/29/2020 4:15 PM
Is the water that is in the retention pond only coming from the Association or is some of the water coming from nearby not HOA property?




The water is coming from the HOA property but we are having a new subdivision built close by that would impact our ponds also. We talked with the Environmental Service and seems there's nothing we can do about it.
JohnC46
(South Carolina)

Posts:10366


12/30/2020 12:03 PM  
John

If two years ago, you asked our owners about raising Dues (Annual Assessment) you would have gotten all kinds of answers with many saying not without owner approval. Well no one had the right answer until the BOD looked hard at the numbers and determined a dues increase was needed. We had an attorney review that section of our Covenants and his answer was the BOD can raise the Dues as much as they want to and how to do it. We did.

I would suggest it might be time to get an attorney's advice on what you can do to increase Dues or even an Emergency Assessment for pond costs.
SheliaH
(Indiana)

Posts:3670


12/30/2020 1:10 PM  
And once you've done as JohnC46 suggested, get an estimate for repairs and a professional opinion as to what happens if the association does absolutely nothing about this - and how much THAT may cost. Share all this with the homeowners and hold a vote on what to do. If they choose to do nothing, they also choose to accept the consequences (meanwhile sell your house as soon as you can before the bough breaks!)
GeorgeS21
(Florida)

Posts:3602


12/30/2020 3:45 PM  
If it gets really ugly, you might also determine if the county can take over the ponds.

We have 17 ... and spend $30-50K EACH to refurbish them ... figure another $2K per year for maintenance.

Better get a better understanding ... quickly.
MichaelS56
(Minnesota)

Posts:61


12/30/2020 4:16 PM  
Our pond is owned by the city, because nearby properties plus ours flow into the pond. Yu need an attorney to sort this out so that your association is not held responsible for paying for the maintenance of the ponds that are also used by other properties beside your association. It will be a lot more costly in the future if this is not resolved in protecting your HOA.
AugustinD


Posts:4828


12/30/2020 4:33 PM  
Posted By MichaelS56 on 12/30/2020 4:16 PM
Yu need an attorney to sort this out so that your association is not held responsible for paying for the maintenance of the ponds that are also used by other properties beside your association.
Just saying: Municipal Land Use Departments review applications for development intensely for drainage concerns, expressly stating who is responsible for what. Not that this stops litigation. More that, in my experience, JohnM97's HOA is not going to get out of a responsibility that the plats expressly assign to the HOA, regarding drainage.

Nationwide my understanding is that it's common for a lot of tweaking to occur post-development, after all that impermeable concrete and asphalt is laid, on account of the drainage calculations inevitably having a lot of calculation/estimation error associated with them.

I wish JohnM97 would get the hint that he ought to post what his HOA's governing documents say about special assessments.

I figure the only way the City would take over maintenance responsibility of the ponds is to establish something like a PID, where the City could impose a special tax on the HOA owners for maintaining the ponds.

None of the options are cheap.

That's life sometimes.
JohnM97
(North Carolina)

Posts:5


01/01/2021 4:49 PM  
Posted By AugustinD on 12/30/2020 4:33 PM
Posted By MichaelS56 on 12/30/2020 4:16 PM
Yu need an attorney to sort this out so that your association is not held responsible for paying for the maintenance of the ponds that are also used by other properties beside your association.
Just saying: Municipal Land Use Departments review applications for development intensely for drainage concerns, expressly stating who is responsible for what. Not that this stops litigation. More that, in my experience, JohnM97's HOA is not going to get out of a responsibility that the plats expressly assign to the HOA, regarding drainage.

Nationwide my understanding is that it's common for a lot of tweaking to occur post-development, after all that impermeable concrete and asphalt is laid, on account of the drainage calculations inevitably having a lot of calculation/estimation error associated with them.

I wish JohnM97 would get the hint that he ought to post what his HOA's governing documents say about special assessments.

I figure the only way the City would take over maintenance responsibility of the ponds is to establish something like a PID, where the City could impose a special tax on the HOA owners for maintaining the ponds.

None of the options are cheap.

That's life sometimes.




Thank you! What is a PID tax?
AugustinD


Posts:4828


01/01/2021 5:04 PM  
Posted By JohnM97 on 01/01/2021 4:49 PM
What is a PID tax?
Many states use the acronym PID to stand for "public improvement district." In North Carolina, the equivalent acronym is "MSD," which stands for "Municipal Service District." The applicable statute is https://www.ncleg.net/EnactedLegislation/Statutes/HTML/ByArticle/Chapter_160A/Article_23.html
Excerpts:
===
"The city council of any city may define any number of service districts in order to finance, provide, or maintain for the districts one or more of the following services, facilities, or functions in addition to or to a greater extent than those financed, provided or maintained for the entire city:

(1) [flood protection]
.
.
.

(3) Drainage projects.
.
.
.

A city may levy property taxes within defined service districts in addition to those levied throughout the city, in order to finance, provide or maintain for the district services provided therein in addition to or to a greater extent than those financed, provided or maintained for the entire city. In addition, a city may allocate to a service district any other revenues whose use is not otherwise restricted by law."
===

I think you'd have to have your HOA contact its City Councilor and see if he or she can give you more direction.

See also
https://en.wikipedia.org/wiki/Business_improvement_districts_in_the_United_States#North_Carolina
and
https://canons.sog.unc.edu/a-guide-to-business-improvement-districts-in-north-carolina/
JohnM97
(North Carolina)

Posts:5


01/01/2021 5:25 PM  
Thank you very much! I will contact who you suggested!
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Forums > Homeowner Association > HOA Discussions > HOA Can't pay for retention ponds



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