Spending on Holiday Party a Way to Build Community
Question: I live in a 250-lot development of homes. The developer turned over control of the association to the homeowners about a year ago at our first annual meeting. The five board members unanimously voted to have a social gathering during the holidays. The party will be held in the association’s recreation facility and will be paid for with association funds.
Our budget doesn’t have money set aside for this purpose. I asked the treasurer why the association was spending money on a party that not every homeowner would be interested in attending. She said that the party is to build goodwill and encourage people to get acquainted so that the owners will be interested in serving on the board in the future.
Our next annual meeting will be in January but I think it’s just an excuse for the board members and their friends to get the association to pay for their holiday party.
Should the association’s funds be spent for social events?
Answer: The board has the authority to spend association money according to the governing documents of the association. The budget is a financial road map but it is not meant to keep the board from spending funds for something that is beneficial to the association.
In general, the board can spend money on a party if it is for “building community.” All of the owners should be invited, of course. Not every homeowner will want to attend; however, owners should want to be involved in their association and this is a good place to start.
I think this is an appropriate use of association funds if the amount spent is within reason. In fact, I often suggest social gatherings as a means of dealing with owner apathy or in preparation for an annual meeting. Owners are more apt to attend a meeting or run for a board seat if they know other people in the association. In a large association like yours, some people probably don’t even know their next-door neighbors.
New associations need to generate some interest and make the owners aware that the destiny of their association lies in the hands of the volunteers who give their time to serve on the board or on committees. The board should keep all of the owners informed and involved as much as possible.
Owners Share Costs of Special Assessments
Q: Our association has fewer than 20 units. Some of the units need to have the roofs replaced. We need to know how to allocate special assessments based upon square footage of the units that need repair.
A: All of the owners share in the cost even though all units are not going to be repaired. The association’s method of allocating special assessments can be found in the declaration of covenants, conditions and restrictions (CC&Rs;). If the declaration states that assessments are apportioned according to square footage, then the apportionment pertains to all of the units in the association. Some owners do not understand this concept of shared costs.
The following scenario is an example of the lack of understanding that exists in some associations:
A condominium owner purchased a unit on the ground floor of a three-story building. When the roof needed to be repaired, he complained that he should not have to share the cost because the leaking roof did not affect his unit.
The association board approved a special assessment and billed all of the owners appropriately for their share of the cost of the roof repair work. No one could convince the stubborn owner that he was obligated to pay the special assessment for the roof.
After three months, the association filed a lien against the unit because of the unpaid special assessment. The owner was adamant. He came to every board meeting to protest the unfairness of the assessment. After several months, he finally hired an attorney who reviewed the association’s CC&Rs; and explained that he would have to pay the special assessment plus the association’s collection costs.
By the time he understood the meaning of the CC&Rs;, he owed several hundred dollars of late fees and attorney fees in addition to the special assessment.
This illustrates the importance of communicating with all of the owners regarding the purpose of the special assessment and how the allocation of the assessment is dictated in the association’s governing documents.
The association’s attorney should be consulted. If the special assessment is less than 5% of the annual budget, the board has the power to approve the special assessment without a vote of the owners.
Notification of the special assessment must be sent to all owners at least 30 days, but no more than 60 days, before the date that the special assessment is due.
Group Offers Seminars on Management Laws
Q: I have been a property manager for many years but I haven’t managed homeowners associations. I recently acquired two new clients--a condominium association and a planned development. There are many requirements in the governing documents that I need to understand, and your column has made me aware of some of the state laws that pertain to associations. Could you give me more information about the California Assn. of Community Managers?
A: This statewide organization is a nonprofit educational group. Its headquarters are in Irvine. CACM offers seminars and courses on association management, including reserve funding, finances, assessment collection, rule enforcement, legal aspects and many other topics. CACM promotes professional standards and ethics for community association managers.
The Certified Community Assn. Manager designation denotes a specific level of education and experience in the field of community association management. To learn more about the resources available from CACM, visit its Web site at https://www.cacm.org or call (949) 263-CACM.
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Jan Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions. Send questions to: Condo Q&A;, Private Mailbox 263, 4790 Irvine Blvd., #105, Irvine, CA 92620-1998.
