Reserve Funding for Dedicated Roads?

Started by DeeS1 • 9 replies • 1538 views

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DeeS1 (Michigan)
Posts: 223

Posted:

I'm wondering what other communities do. Our MC is suggesting the we put some money in reserves to cover repairs on our roads such as pot hole filling, crack repairs, curb damage, etc -- not major resurfacing. Our roads are dedicated to the county and now fall under the county's jurisdiction.

Our governing documents list the roads as as a Common Element "until dedicated to the public ..." and go on to specify general regular preventative maintenance requirements (replaced, repaired, resurfaced, etc) as necessary to maximize their useful life "until such time as any roadways are dedicated ..."

My question is if it is valid for us to include this in reserve savings or any assessment since it is not a common element?

Our governing documents specify that we can set the annual budget to assessment for:

... such budget shall project all expenses for the forthcoming year which may be required for the proper operation, management and maintenance of the Condominium Project, including a reasonable allowance for contingencies and reserves. An adequate reserve fund for maintenance, repairs and replacement of those General Common Elements that must be repaired or replaced on a periodic basis shall be established in the budget ... "

Is it proper to collect money for this purpose? I'm thinking it's not unless you would consider it a function required for the "proper operation, management and maintenance" of the community even though it is not a common element. What do you guys do?

JohnB26 (South Carolina)
Posts: 1,569

Posted:

NO .. it is not proper for a HOA to maintain a county owned road UNLESS all the members are aware that such maintenance IS NOT required and vote to approve the funding anyway for their personal satisfaction (with county approval, of course).

Why would you wish to pay taxes and then do the work at your own (additional) expense?

? Property Manager ? .. more like Property Mis-manager

DeeS1 (Michigan)
Posts: 223

Posted:

The MC's argument is that here in Michigan, with all the budget shortfalls, minor road repairs on streets of our type are at the bottom of the list for the county and do not move "up" the list until there is significant deterioration. Ultimately, we could save the community money by doing these maintenance repairs in the interim and prolong the life of the road. The reality is that the road commision isn't going to come out here and seal cracks and small potholes.

I didn't actually see his suggestion as "mis-management," but questioned weather we could legitimately collect the money under the terms of our governing documents. He said that many of the communities he works with do this. I suppose it would be possible if were able to pass an amendment that would allow us to gather funds for this task?

DeeS1 (Michigan)
Posts: 223

Posted:

It might be worth noting that here, the major resurfacing of the roads would be done by the county, but the total cost would be assessed by the county to each home in our community divided equally

SusanW1 (Michigan)
Posts: 5,202

Posted:

We have private roads in our community. Every year, we allocate a certain amount for potholes, etc. but we do have a reserve fund set up for total re-surfacing to be done in 2012. So there is always a line item in the annual budget for this.

Your board should come up with a figure it feels is appropriate to keep your roads drivable. Filling pothole and cracks doesn't seem to be unreasonable. You don't need a special assessment of vote of the members. The board will find out quickly if the Members don't approve of your maintaining the roads.

Anything more than that would be the county's job. But you are right, don't depend on that. I have found that a phonecall campaign to any govm't agency is the best way to get action.

SharonB6 (Pennsylvania)
Posts: 70

Posted:

This is very interesting topic to me. We haven't done anything for our reserve yet which kind of ticks me off. We have two associations and I am a director on the sub association. The Master Association is responsible for a lot of the maintenance that is in our townshouse area. However, the builder is still in control of the Master Association and has bankrupted that association. So we can't reliably count on the Master to maintain these things that are directly effect the Townshouse Association. I suggested that we start putting some money in the reserve to repair things that might go in disrepair until the Master Association gets back on it's feet which could be a good 5yrs plus. If we don't use that money for repairs after the Master Association is on it's feet we can use that money towards our other expenses like redoing the landscaping in 10 years. Is this inappropriate?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Sharon - could you start another thread?
Your issue is interesting and needs its own format.
Thanks.

DorothyO (Washington)
Posts: 293

Posted:

Dee, either your community owns the streets or it doesn't. If it doesn't, it appears your Bylaws don't allow for expenditures which you don't own. The only way you can use Association funds to pay for anything you don't own, is to amend your Bylaws. If, and it is a big if, that happens, then next you typically will have to come up with an amount the Association could spend without additional approval from the members. Anything over that amount would need the 2/3, or 3/4 or what ever the percentage is used for the amending of the CC&R's. If you get that far, then you have to decide among a private loan or an LID (Local Improvement District), or Special Assessment. With each option, each homeowner will be liable for their share, whether through an monthly loan payment, an increase in property tax, or other equal payment options, whether they live on the street in question or not. It's a complicated issue to say the least.

We have been dealing with this ourselves, having deteriorating streets from the get-go because of a disreputable developer and contractor. Unfortunately, the statute of limitations for recourse expired over a decade ago. Now the city owns the streets and the city is broke. Because we are a new community (not even twenty years old), in a city that has an 100-year old infrastructure, and are low-volume, we are so far down on the list for repair, we'll be back to a nineteenth century road before we smell the glorious tang of tar! It is ultimately the responsibility of the city to fix the street. We cannot fix them unless we change the Bylaws.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Dee,

As others have said, if the roads belong to the County then they belong to the County and the Association is not responsible for them.

You MC had a good idea about expecting budget shortfalls. You had an excellent idea in actually checking the issue out. I see the following possible issues if you try to maintain a county owned road:

1. You would be violating your governing documents if you spent Association funds to repair non-association property.

2. There are liability issues that may need to be addressed if you decide to repair a county road (like you repair a section of the road, someone has an accident on that section and claims the Association has contributory negligence due to substandard work - granted not likely but possible).

3. The County might not want you working on their roads.

If there is a major concern about the roads, to do it properly, the Association should get the membership to amend the governing documents and take responsibility of the roads back from the county. Plan on a lot of discussion within the membership and a huge increase in Annual Assessments to cover the repair/maintenance/replacement of the roads if you get the measure passed.

Tim

SusanW1 (Michigan)
Posts: 5,202

Posted:

If I lived in that subdivision and pot holes prevented me from safely driving on the streets, I would not mind HOA funds being used to fill them. We buy bags of chip seal all the time to fill potholes.

But not to the extent of Building a reserve fund for this kind of project.

Again - a large group of people calling the road commission usually gets response.

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