Owners Split Over Who Pays for Repairs

QUESTION: I own a condominium in a four-unit building. The roof is divided into two parts. Only the front part of the roof has leaks.

We called a meeting of the owners and all four attended. We couldn’t come to an agreement about the responsibility for paying for the new roof. The two owners in the front of the building paid for the new roof, while the other two refused to share in the cost.

How can we settle this kind of problem when an even number of units oppose each other? Can the two owners who paid for the roof take legal action against the other two?

ANSWER: Legal action should only be considered if you can show that all the owners were responsible for paying for the roof. First, read your association’s legal documents. Usually, the condominium’s declaration of covenants, conditions and restrictions (CC&Rs;) will clarify maintenance responsibilities. If you have difficulty understanding the documents, consult an attorney who specializes in community association law.

Apartment Conversion Won’t Raise Taxes

Q: Our homeowners association in Brentwood was formed before condominiums became so popular with developers. Our corporation papers call us “a community apartment house project.” We currently function like a condominium but it is difficult to get a mortgage loan because many lenders are scared off by this form of ownership.

The board of directors speaks about “converting” our apartments to condominiums. That doesn’t seem to be the correct terminology, since we purchased the right to occupy our specific apartment unit.

Can the corporation papers be changed to reflect that we are condominium owners without a change in property taxes?

A: Yes. The change usually does not alter your tax base at all. The value of the property will probably increase but that would not affect the taxes until you sell your unit.

A community apartment project, sometimes called an “own-your-own” apartment project, is often misunderstood by lenders. It is harder to find mortgage loans, so therefore the property is less desirable. That affects the value of each of the units.

Your “own-your-own” association can be converted to a condominium. It takes coordination with attorneys who rewrite the legal documents, engineers who must prepare the condominium plan and other documents to be submitted to the city for approval and the title company that will revise the grant deeds to reflect the new form of ownership.

Many community apartment projects and co-ops have been very satisfied with the increase in value that results from conversion. The increase will usually more than compensate the owners for their portion of the cost of the conversion.

What Goes Into an Association Budget

Q: How do we know whether our condominium association’s budget is accurate? Assessments seem to vary a great deal from one association to another. Our treasurer feels that he is being personally attacked if we question any expenditures.

A: Don’t make the mistake of assuming that the board is squandering the association’s money. In comparing budgets with other associations, you must look at the type of amenities, number of employees, type of management and the amount of landscaping that requires maintenance.

Many associations are still ignoring in their budget the reserve funding for future repair and replacement of major items such as roofs, boilers, air-conditioning equipment, elevators, plumbing and common-area carpets. The board of directors is required by California law to identify and plan for the replacement of these big-ticket items.

Check your public library’s legal reference section for California Civil Code Section 1365. You will find that prior to the beginning of each fiscal year, the association must distribute an operating budget and a reserve budget to all owners.

Withhold your criticism until you have looked into the situation in detail. Have a friendly chat with your association president and treasurer or the management company representative. Volunteer to serve on the budget committee if you have the experience and the time to do so.

Stay the Course on Funding Reserves

Q: One of the homeowners in our 40-unit condominium association proposed that our association pay back all of the reserve funds to the owners and stop collecting reserve funds as part of our monthly assessments.

He feels that the association should then bill the owners on an “as needed” basis for any major expenses. He says that lower assessments will make the property more attractive to prospective buyers. Owners could put the difference in their own bank accounts and accrue interest until it is needed.

Our legal documents state that reserves are to be set aside. We have a small shortfall in the reserves right now, based upon the professional reserve study. Our association is very well maintained, and our monthly fees are in line with other complexes in the area. Any time a unit is put on the market, it seems to sell very quickly.

Should we consider this owner’s proposal to refund all of the existing reserve funds?

A: No. It sounds as if your association is very well run. It may be that the units are selling well because your reserves are almost fully funded. Buyers are becoming educated. They know that an adequate reserve fund means no surprises in their monthly statement.

There are very good reasons that your CC&Rs; require that the association set aside reserve funds. The funds should be accessible when the need arises. If you have a large emergency expense, it would be very difficult to collect the money immediately.

Unable to accumulate the needed funds, the association would have to borrow the money. Not all associations have the authority to borrow money, and relatively few lending institutions get excited about lending money to a poorly run association.

The owner who favors collection on an “as needed” basis shows a lack of understanding of human nature. No one likes special assessments and, ideally, boards should run their associations in such a manner that there is never a need for one.

Minutes Mailed With Names of Delinquents

Q: The management company has advised our association board to not mail the board minutes to everyone, since they show the names of owners who have not paid their monthly assessments. The board decided to have the minutes mailed anyway. What does the law say about distributing minutes with the names of delinquent owners?

A: I am not an attorney, but I have heard of associations that have been sued by owners who were incorrectly listed as delinquent.

State law does not require distribution of minutes. I believe minutes should be made available to any owner who wants a copy. The board obviously wants the minutes distributed, because they disregarded the manager’s advice.

If the management company feels that the delinquent list should not be disclosed, then don’t put the names of the delinquent owners in the minutes. However, this is information that any owner has a right to obtain.