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Subject: Wrong monthly dues being charged for years
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MikeT18
(Massachusetts)

Posts:8


09/19/2021 6:39 AM  
I live in a 32 unit condo development (townhouse style) in Massachusetts and incorporated as a trust. Also, we are completely self managed with no management company or agent. I moved in two years ago and joined the five member board of trustees earlier this year. This was my first condo so I really didn’t much experience or background. The more I got involved in board activities, the more skeptical I have become on past decisions. Our association President refuses to get quotes from vendors for many projects and instead chooses to use “our mason” or “our carpenter” for all projects. They claim to be using a reserve study form 1995 and refuse to get another one. She and another long time board member also seems clueless about any association rules and claims she has never read the master deed. So basically they have been doing what they wanted for 30 years (the length of her and another board member’s time on the board) while most the of the other residents seemed clueless because many have live there for decades as well.

Here’s where my problem started. Since I have nothing better to do on a Saturday night, I read our entire master deed. Every condo in my complex is slightly different resulting in a different beneficiary interest for each unit. However, they are charging the same flat monthly fee (around $400) for each unit. I did the math on what each person should pay and I overpaid by around $250 total last year. And if you have taken the time to read this long (and I thank you for that!) you might be surprised to learn my association President underpaid the most by $500 compared to what she should have paid under the master deed.

Here’s my problem: what do I do with this information? Do I contact my own lawyer? Do I contact the association lawyer? I’ve only been here for two years but some people have been overcharged for over 30 years.

Remember we are self managed. When we did the board election vote last summer someone asked about counting the votes using the ownership interest and the hoa President ignored them. So she probably understands that not everyone gets an equal stake in the property but chooses to ignore it because as she says for most things that seem wrong “that’s what we have always done”

Also note, I’m desperately trying to get a management company. This is one example why one is needed.

Thank you for any advice! I really really appreciate it!!!
MaxB4


Posts:1339


09/19/2021 6:50 AM  
Does your Master Deed state that a unit may have a different rate, based on say square footage?
MikeT18
(Massachusetts)

Posts:8


09/19/2021 6:59 AM  
Yes, the master deed says general and special assessments for common expenses “shall be allocated proportionately to each unit’s common element interest”.

So yes, the master deed says the dues and any special assessment are based on the Internet which is also outlined in the master deed.
JohnT38
(South Carolina)

Posts:764


09/19/2021 7:06 AM  
While you may be entirely right what would happen if lawyers get involved and all homeowners are due a large refund? Are you prepared as a homeowner to drain the HOA's cash and possibly pay for a special assessment out of your own pocket?

This is a tough situation to be in!
AugustinD


Posts:1672


09/19/2021 7:10 AM  
Posted By MikeT18 on 09/19/2021 6:59 AM
Yes, the master deed says general and special assessments for common expenses “shall be allocated proportionately to each unit’s common element interest”.

So yes, the master deed says the dues and any special assessment are based on the [common element interest?] which is also outlined in the master deed.
I want to make sure I have this right. For each condo unit, does the Master Deed list the percentage interest, out to say four or so decimal places?

When you say you overpaid by about $250 last year, do you mean that $250 is the total amount for the year that you overpaid?
MikeT18
(Massachusetts)

Posts:8


09/19/2021 7:14 AM  
Correct: the master deed spells out the interest for every unit to two decimal places. I was able to then calculate the total dues I should have paid according to the master deed and compared that to the monthly fee that I actually paid.
MikeT18
(Massachusetts)

Posts:8


09/19/2021 7:20 AM  
Posted By JohnT38 on 09/19/2021 7:06 AM
While you may be entirely right what would happen if lawyers get involved and all homeowners are due a large refund? Are you prepared as a homeowner to drain the HOA's cash and possibly pay for a special assessment out of your own pocket?

This is a tough situation to be in!




I agree. I honestly don’t know what to do. It’s a loose loose situation. And I’m trying to get a management company to come and take over operations. This will get brought up by them if we even get a company in here. Residents tried a few years ago to get a management company but the over-controlling board members scared many of the long-time residents into thinking it would increased monthly dues by a couple hundred dollars.
AugustinD


Posts:1672


09/19/2021 7:33 AM  
Posted By MikeT18 on 09/19/2021 7:14 AM
Correct: the master deed spells out the interest for every unit to two decimal places. I was able to then calculate the total dues I should have paid according to the master deed and compared that to the monthly fee that I actually paid.
Thank you.

I presume the Master Deed states something like: The assessment each unit pays for the coming year will be the total expenses anticipated for the coming year in the annual budget multiplied by the unit's percent interest. Said percent interest is given on page ___ in the Master Deed.

First, there is case law on the subject of a corporation doing business pursuant to ___, which happens to be in violation of the corporation's governing documents. When this course of conduct goes on for years, and not one owner/member/shareholder says nothing, then an attorney for the corporation might very well successfully argue that the owners/members/shareholders consented to this violation by, say, acquiescence. The attorney would go on to argue that the corporation therefore has no obligation going forward to remedy what happened in the past.

Second, let me emphasize: All owners have a copy of the Master Deed. This is legal notice of what their obligations are. Owners, as much as the board, were at fault here.

Third, going forward and to minimize the risk of litigation, I believe your Board should do this the way the Master Deed states, starting immediately.

Fourth, I think you (MikeT18) have a fiduciary duty to inform the Board of this error. Then I suggest you motion for the board to seek a meeting, with all directors present, with the COA's attorney. You can mention that you have heard what I wrote above, and that you think it's possible the corporation will not have to remedy its past mistakes on this issue.

Lastly, that a reserve study has not been done since 1995 is not acceptable. It's time to think Surfside, Fl. I would bet money that past Boards have not adequately funded the reserves. In the coming months I believe the Board's focus probably should be on getting a new reserve study done; getting your condo association's reserve funds to where they should be; and going forward, assessing properly, pursuant to what the reserve study says and what the Master Deed says about percent interests et cetera.
JohnC46
(South Carolina)

Posts:11507


09/19/2021 7:39 AM  
Mike

Depending on the duties of an MC, you can ball park one at about $10 per month per door so in your case $120 per year, per unit. At $120 per unit, per year, the services would be basic bookkeeping and little more. With some additional services one could easily run $20 to $30 per month or $240 to $360 per year, per unit.

Can you see people agreeing to pay $20 to $30 per month more for an MC? I doubt the average owner will see the advantage. Not that the advantages are not there, but being seeing the advantages is a different issue.

Now as far as them not applying the proper dues formula per unit based on unit size you could raise this to the BOD and see their reaction. One thing I would do is work up what each unit would pay under the revised formula and present that also. Do not present a problem without a solution. Typically in townhouse and private home associations, equal yearly dues is the standard.
AugustinD


Posts:1672


09/19/2021 7:54 AM  
Posted By JohnC46 on 09/19/2021 7:39 AM
Typically in townhouse and private home associations, equal yearly dues is the standard.
In condos with a fair amount of variation in the size of the units, I think having a different dues, based on unit size, is typical. At least, at the two condos where I owned, unit size coupled with the annual budget determined the unit's assessment (all per the governing documents).
JohnT38
(South Carolina)

Posts:764


09/19/2021 8:01 AM  
Posted By AugustinD on 09/19/2021 7:54 AM
Posted By JohnC46 on 09/19/2021 7:39 AM
Typically in townhouse and private home associations, equal yearly dues is the standard.
In condos with a fair amount of variation in the size of the units, I think having a different dues, based on unit size, is typical. At least, at the two condos where I owned, unit size coupled with the annual budget determined the unit's assessment (all per the governing documents).




This is the case where I live. We have different size condo's ranging from 1200-2000 square feet. It makes sense when you consider the cost of upkeep for each condo will vary based on how much siding there is, the size of the roof, etc.
JohnT38
(South Carolina)

Posts:764


09/19/2021 8:01 AM  
Posted By AugustinD on 09/19/2021 7:54 AM
Posted By JohnC46 on 09/19/2021 7:39 AM
Typically in townhouse and private home associations, equal yearly dues is the standard.
In condos with a fair amount of variation in the size of the units, I think having a different dues, based on unit size, is typical. At least, at the two condos where I owned, unit size coupled with the annual budget determined the unit's assessment (all per the governing documents).




This is the case where I live. We have different size condo's ranging from 1200-2000 square feet. It makes sense when you consider the cost of upkeep for each condo will vary based on how much siding there is, the size of the roof, etc.
JohnC46
(South Carolina)

Posts:11507


09/19/2021 8:18 AM  
I am familiar with different dues for high rise condos, some based on view alone but again my experience says single story and townhouse association generally have the same dues per home.
SheliaH
(Indiana)

Posts:4220


09/19/2021 8:24 AM  
I've never figured out why assessments in high rise condos are based on the size of the unit. The building's roof covers all owners, so you don't more of the roof than another just because your unit has more square feet.

However since your documents are written like this, I think step one is to get an updated reserve study - it's been over 20 years since the last one, and there have been A LOT of changes regarding inflation, building codes and what not, not to mention changes in the amount you pay for routine expenses. Before you address the assessment rate, do this first, because it will play a role in figuring out who pays what.

Forget about giving people refunds or credits based on "overcharges". That will take too long to figure out and all help will break loose among the homeowners, especially the ones who wouldn't be eligible. It would also wreck havoc with your budgets (operations and reserves) and as Augustin noted, Surfside should make it crystal clear to everyone why you cannot take reserves lightly.

Once you have updated numbers, you can set assessments based on the formula in the documents. I would set one percentage rate for everyone for next year (because I'm sure everyone is or has started work on the 2022 budget). Between now and the end of 2022, you can get the reserve study, educate everyone on what it means and how the recommendations will affect the budget, and then you can bash out the date for 2023 and move forward from there.

If people squawk and want to change the documents so everyone pays the same rate, you can still have that conversation and you might get enough interest to get homeowners to approve such a change, but you need to start working with more realistic numbers first. A final tip - when you get the study, ask the specialist if he or she would speak at a special homeowners meeting where the study findings would be presented and homeowners can ask questions. This way if they have to vote on anything they'll make an informed decision.
MaxB4


Posts:1339


09/19/2021 8:35 AM  
Actually, the reason behind dues based on square footage or number of bedrooms, is the utilities that are included. In many condos, gas and water may be included in the assessments. In addition, insurance to rebuild from a fire would be cost per square foot, so it would cost more to rebuild a 2000 sq ft unit, than a 1000 sq ft unit. Roofs are a less exactly science.
JohnC46
(South Carolina)

Posts:11507


09/19/2021 8:58 AM  
I have seen dues based on the floor one lived on as the upper floors used "more elevator" then the lower floors. I have seen first floor people scream about elevator charges as they do use the elevator. Figure those out.
PatJ1
(North Carolina)

Posts:246


09/19/2021 9:10 AM  
OP posted:

"Also note, I’m desperately trying to get a management company. This is one example why one is needed."

MC's are NOT the one's to interpret your governing docs and make any adjustments. They are there to collect the monthly assessments as stated due.

There may be miscalculations that date back many years. These calculations can be complicated.

Consult an attorney to review your documents and provide an opinion on how much the dues should be for each townhouse.

Unless your Reserve account is fully funded, ask the attorney if you are required to refund any over collected dues or if they can be retained by the HOA and new dues amounts calculated going forward.

Unless your HOA is in a surplus situation, do not offer to give any money back to the owner's legally required.



Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
MaxB4


Posts:1339


09/19/2021 9:23 AM  
Posted By PatJ1 on 09/19/2021 9:10 AM
OP posted:

"Also note, I’m desperately trying to get a management company. This is one example why one is needed."

MC's are NOT the one's to interpret your governing docs and make any adjustments. They are there to collect the monthly assessments as stated due.

There may be miscalculations that date back many years. These calculations can be complicated.

Consult an attorney to review your documents and provide an opinion on how much the dues should be for each townhouse.

Unless your Reserve account is fully funded, ask the attorney if you are required to refund any over collected dues or if they can be retained by the HOA and new dues amounts calculated going forward.

Unless your HOA is in a surplus situation, do not offer to give any money back to the owner's legally required.





SERIOUSLY, the attorneys I have worked couldn't find their butts with two hands and a flashlight. But, they have the formula down pat for billable hours!
BenA2
(Texas)

Posts:1026


09/19/2021 11:24 AM  
I suggest making a motion to have the HOA attorney review the situation. If the board does not agree then I would contact an attorney on you own. Yes, it may ruffle feathers and cause problems but you have a legal obligation to do what is right.
JohnC46
(South Carolina)

Posts:11507


09/19/2021 11:38 AM  
I see no need to get an attorney involved this early in the game. In fact it could hurt if the BOD becomes defensive. The OP should professionally and calmly present his findings to the BOD and see what action they take. If the OP does not like their course of action then he can hire an attorney and dispute it.
DouglasK1
(Florida)

Posts:1680


09/19/2021 2:14 PM  
My expectation is that if some people have overpaid, others have underpaid. I wouldn't want to be the one conveying that info to those owners.

Escaped former treasurer and director of a self managed association.
MaxB4


Posts:1339


09/19/2021 3:03 PM  
Posted By MikeT18 on 09/19/2021 7:14 AM
Correct: the master deed spells out the interest for every unit to two decimal places. I was able to then calculate the total dues I should have paid according to the master deed and compared that to the monthly fee that I actually paid.



Actually, what does your deed say is the way assessments should be charged. I've worked with a number of association that have uneven assessments, but the decimals have always been either 5 or 6 places.
BobD4
(up north)

Posts:944


09/19/2021 4:12 PM  
Posted By MikeT18 : "I live in a 32 unit condo development (townhouse style) in Massachusetts and incorporated as a trust. Also, we are completely self managed with no management company or agent. I moved in two years ago and joined the five member board of trustees earlier this year... . she says for most things that seem wrong “that’s what we have always done” Thank you for any advice !"

Douglas K1 (Florida) “ . . . I wouldn't want to be the one conveying that info to those owners”.




Respectfully, it is worth checking for at least a corporate resolution by your Trust's Board purporting to equalize the contributions, legal or not. And - whatever - getting the support of at least another Director to work discreetly with minimal direct challenge visible to the President.

As a newbie on your own Board you might be surprised how easy it is for the wagons to be circled. Long established volunteer governance groups can be extremely sensitive & intransigent, no matter what they profess.

MichaelS56
(Minnesota)

Posts:275


09/20/2021 4:20 PM  
When was the last time the Association was audited?
MikeT18
(Massachusetts)

Posts:8


09/21/2021 7:03 AM  
Posted By MichaelS56 on 09/20/2021 4:20 PM
When was the last time the Association was audited?



I don’t think we have ever been audited. Is an audit normal or required by law?
CathyA3
(Ohio)

Posts:2464


09/21/2021 9:09 AM  
Posted By SheliaH on 09/19/2021 8:24 AM
I've never figured out why assessments in high rise condos are based on the size of the unit. The building's roof covers all owners, so you don't more of the roof than another just because your unit has more square feet.

... snip .. .



I think they take into account other common areas such as framing, insulation, firewalls, utility lines, and maybe even utility use if it's included in assessments - so the larger homes "use" a greater percentage of the common area. I agree it's not perfect.

In my community (not a high rise), par value only loosely coincides with square footage. It's more of an evaluation of how "nice" the home is, and also takes into account things like garage size, number of units it shares walls with, etc. Again not perfect. I've noticed that townhome style homes, even if they're considered condos, are more likely to be assessed the same flat rate - but this can vary by community.

Condos really are their own universe...


CathyA3
(Ohio)

Posts:2464


09/21/2021 9:19 AM  
Posted By MikeT18 on 09/21/2021 7:03 AM
Posted By MichaelS56 on 09/20/2021 4:20 PM
When was the last time the Association was audited?



I don’t think we have ever been audited. Is an audit normal or required by law?



Look in your bylaw or in your state's laws. My bylaws require an annual audit, and my sense is that this is pretty common. It's definitely good business practice and can help prevent shenanigans.
MichaelS56
(Minnesota)

Posts:275


09/21/2021 10:47 AM  
We do an audit each year.
JohnC46
(South Carolina)

Posts:11507


09/21/2021 12:24 PM  
Posted By MichaelS56 on 09/20/2021 4:20 PM
When was the last time the Association was audited?



Keep in mind there are various levels of audits and in the OP's case I doubt any audit short of a Forensic Audit, the most costly level, would catch the error.
MaxB4


Posts:1339


09/21/2021 12:41 PM  
Curious, how would a CPA or accountant know if the assessments were calculated correctly or incorrectly?
SusanW15
(Texas)

Posts:6


09/26/2021 12:09 PM  
I'd show the board the master deed and tell them your understanding is that the dues should not be computed as equal fees from each member. Show them your computations. They should be especially disconcerting to the board since the president has been underpaying all these years. Find a management company! In my experience, they are worth their weight in gold. They're the bad guys when enforcement actions need to occur and they have connections to vendors, maintenance companies, companies who preform reserve studies etc. Your fees will be based on the level of service they provide. You have to live near your members so you likely don't want to be the one telling them they're in violation of anything. Good luck to you!
JohnC46
(South Carolina)

Posts:11507


09/26/2021 12:13 PM  
Posted By SusanW15 on 09/26/2021 12:09 PM
I'd show the board the master deed and tell them your understanding is that the dues should not be computed as equal fees from each member. Show them your computations. They should be especially disconcerting to the board since the president has been underpaying all these years. Find a management company! In my experience, they are worth their weight in gold. They're the bad guys when enforcement actions need to occur and they have connections to vendors, maintenance companies, companies who preform reserve studies etc. Your fees will be based on the level of service they provide. You have to live near your members so you likely don't want to be the one telling them they're in violation of anything. Good luck to you!



Susan raised a good point. One thing we pay our MC for is to play the heavy for violations, fines, unpaid dues, etc. so when an owner complains, we say talk to the MC. Notifying them dues have not been computed properly and here is the new dues structure is a good example. That said, my advice is do not go after anyone based on the old dues structure. Just move forward from now.
MichaelS56
(Minnesota)

Posts:275


09/27/2021 5:18 AM  
Why do the other Board members allow the President to have so much power when he has the same voting power as everyone else? The Board should be deciding on the number of bids not just the Pres.
MaxB4


Posts:1339


09/27/2021 10:36 AM  
Posted By JohnC46 on 09/26/2021 12:13 PM
Posted By SusanW15 on 09/26/2021 12:09 PM
I'd show the board the master deed and tell them your understanding is that the dues should not be computed as equal fees from each member. Show them your computations. They should be especially disconcerting to the board since the president has been underpaying all these years. Find a management company! In my experience, they are worth their weight in gold. They're the bad guys when enforcement actions need to occur and they have connections to vendors, maintenance companies, companies who preform reserve studies etc. Your fees will be based on the level of service they provide. You have to live near your members so you likely don't want to be the one telling them they're in violation of anything. Good luck to you!



Susan raised a good point. One thing we pay our MC for is to play the heavy for violations, fines, unpaid dues, etc. so when an owner complains, we say talk to the MC. Notifying them dues have not been computed properly and here is the new dues structure is a good example. That said, my advice is do not go after anyone based on the old dues structure. Just move forward from now.



I've had a couple of association approach me just for that, be the bad guy. I said, thanks, but no thanks.
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