Owner Refuses to Pay Because Repairs Not Made
QUESTION: I serve on the board of directors of a new condominium development that has just recently been turned over to the homeowners by the developer. One of our owners is seriously delinquent in paying his monthly assessments.
The delinquent owner refuses to pay because the developer has not completed some repair work inside his condominium unit.
What can we do?
ANSWER: First, your board must enforce the established delinquency procedures that should have been adopted as soon as the association was formed. Always enforce these procedures fairly and consistently with all owners who are delinquent.
Perhaps a friendly visit between the delinquent owner and the board president or treasurer will clear up the problem.
It should by easy to reason with the owner, especially now that the association is no longer under the developer’s control. You can explain to him that the assessment fee pays for common area expenses or common utilities.
For example, the domestic water is probably a common exposure. Ask him if he thinks that his neighbors should have to continue to pay his share of the water bill. Another example would by the lighting in the common corridors. These are services that he is using every day and not paying for it.
The owner has an obligation to pay the assessment regardless of the condition of his own unit. His “beef” is with the developer, and the association has no control over when the developer will complete the repair work. In my opinion, the board should not assume any responsibility to assist the owner in getting the work done.
Former Board Didn’t Stop Noisy Owner
Q: One of the owners in our condominium has been harassing the downstairs owner by stomping, slamming doors and creating other nuisances. The harassed owner notified the previous board of directors, and the only action taken by the board was verbal warning to the noisy owner.
Even though the legal documents prohibit “offensive activity that may be an annoyance or nuisance,” the board felt that the problem should be solved neighbor to neighbor.
Now the complaining owner is serving as president of the board and has directed the management company to send the noisy owner a letter reminding him of the nightly “quiet hours” in our rules. The noisy neighbor now quiets down at 10 p.m. but still is creating disturbances at other times.
The new board president is threatening to sue the prior board members for not taking action on this matter.
Do you think the prior board members were negligent in not resolving this problem? What can this board do to resolve it now?
A: This is the kind of problem that no board member wants to have to solve. The board members may not have been negligent but, in my opinion, they should have tried harder to settle this issue. They could have sent a written violation notice to the noisy owner. Then they could have scheduled a hearing if the noise continued.
If the association’s legal documents permit a fine for this kind of infraction, then they could have levied a fine.
If the current board tries all these methods and fails to get a positive response, then perhaps only a court order will get the offending owner’s attention.
The complaining owner could file a legal action against the noisy owner. If the board does not enforce the association’s legal documents, any individual owner has the right to enforce them.
The association board should consult an attorney who specializes in condominium law.
How to Protect the Board From Lawsuits
Q: Our homeowner association has had numerous conflicts and lawsuits in the past. Now it is almost impossible to get anyone to serve on the board because they are afraid of being sued.
I was recently appointed to the board, but I really don’t know what my responsibilities are. What can board members do to limit our liability? What resources can you recommend?
A: First, you should make sure that the association has directors’ and officers’ liability insurance, adequate property insurance, fidelity bond coverage and worker’s compensation coverage.
Make sure that you comply with all the insurance requirements in your declaration of covenants, conditions and restrictions (CC&Rs;). The directors’ and officers’ liability insurance will not protect you if you fail to adequately insure the association.
Second, read all the legal documents of the association and board meeting minutes, contracts, financial statements and management reports for the past year.
Third, educate yourself by attending seminars given by Community Associations Institute. Check your local phone directory or call directory assistance for the chapter near you.
CAI has many publications that would be helpful. A basic resource is a booklet titled “Community Association Leadership: A Guide For Volunteers.” Topics covered include the role of officers, effective meetings, committee operations and fiduciary responsibility.
The booklet is available from the Greater Los Angeles chapter for $3.50 for each booklet ordered. Send your check to: CAI, P.O. Box 84303, Los Angeles, Calif. 90073. Allow six weeks for delivery.
Board Uses Reserve Fund for Operations
QUESTION: The previous board of directors in my homeowner association was frugal and maintained a reserve fund for future repair of streets, tennis courts and gates.
Our present board has apparently spent all of our operating funds for the year and now must dip into the reserves. Our assessment fees for the next year will probably be increased.
I thought the purpose of the reserve study was to determine the amount of money needed for the future and that none of the money should be used until the full amount has been accumulated. What does state law say about spending reserve funds?
ANSWER: California law does not dictate how the funds are to be spent. The law states that a reserve study must be done to determine the amount of funds that will be needed for future repair and replacement of association property.
The association does not have to wait until the tennis court reserve is fully funded before using the money to resurface the court, for instance. Each year, as money from the reserves is used, the reserve budget for the following year must be revised to allocate more money as needed.
If the board is using reserve funds to make up the shortfall in the operating funds for this year, the budget for next fiscal year should be revised to cover the replacement of any reserve funds that are used to this year.
In other words, if the association is now using reserve funds to pay the gardener for landscape maintenance, the operating budgets for next year will have to be increased to reflect the true cost of the landscape maintenance.
Then the reserve budget will have to be increased to replace the funds that were used for the operating expenses this year.
Reserve funds can be used for emergencies at the discretion of the board, but in this case, it might have been more prudent to have a special assessment rather than use the reserve funds. Using the reserve fund for ongoing operating expenses is a poor way of managing the association’s money.
Hickenbottom is past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually. Readers with questions or comments can write to her in care of “Condo Q&A;,” Box 5068, Thousand Oaks, Calif. 91360.
