HOA tossed $80K of mine in an incinerator

Started by JohnS43 • 28 replies • 1852 views

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JohnS43 (Colorado)
Posts: 24

Posted:

I’m probably just stuck with 1) tricking someone else to buy it, 2) pay massive overages on assessments until death or 3) defaulting on the mortgage and take my lumps, but can anything legal be done to address inequitable bylaws?

My 40-year old HOA has three tiers of ownership/liability at 2%/3%/4% based roughly on unit sizes. Within tiers the sizes/values/rights are very similar, but across tiers the 2% units are denied a few services others and only represent approximately 1.25% of the living space and closer to 1% of value while the 3%/4% units represent nearer their assessed numbers (3% = 3.1% living space). This implies every assessment hits the 2% units 60-100% more than “standard” HOA division methods would suggest.

A recent vote that will assess 2% units nearly their entire value saw nearly 80% approval from 3%/4% units (paying closer to 1/3 their total value) and 0% from the 2%ers. This and the math above speak to some basic inequity that an idealist would hope the law might intend to correct and coupled with some minor denial of otherwise common services might be a case. Is there any legal recourse or was Murphy an optimist?

Thanks,

John

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

I dont understand whats going on, perhaps you can explain it in a different way using an example.

DonnaS (Tennessee)
Posts: 5,671

Posted:

John,

Your post reminds me of why I flunked Trig. Could you perhaps make this a little easier to follow, maybe labeling the units by A, B and C? I am sure that there is someone out there who can help us get thru this but I am still vague on what has happened in the assessment differences. Thanks.

EllieD (Vermont)
Posts: 446

Posted:

Are you a Condominium Association?

JohnS43 (Colorado)
Posts: 24

Posted:

Thanks, Steve and sorry. I've been over this so much it's all-too-clear in my head--but not in my writing.

The core problem is from the idea that most HOAs determine assessments and voting weight mainly by dividing a unit's size by the total living space. There are additional considerations that sometimes come into play, but this is the largest single factor. However, my HOA assessments are 2% of the total, yet my square footage is only about 1.25% of the toal living space. This implies I'm paying 60% more than my share.

The impact is twofold. 1) Every month I pay $100+ over what would be paid in typical condo associations. 2) When special assessments occur, a large one-time bill is inflated by 60%. So in this case, I just got voted into a $220K assessment, when normal divisions would actually say that my portion should be around $140K. So the incinerator is a metaphor but essentially I'm paying $80K more than my share.

JohnS43 (Colorado)
Posts: 24

Posted:

And sorry to you as well, Donna. I'm a bit of a math geek, too. @Ellie, I am part of a condo ass'n.

DonnaS (Tennessee)
Posts: 5,671

Posted:

John,

I just knew that you were into math when you got me with the percentages. I have a couple of comments for you. Everyone's documents normally say that all units are assessed proportunately but if I followed you correctly, yours is not. That is issue number one.

Number 2, you said--" Every month I pay $100+ over what would be paid in typical condo associations. This cannot be even considered as all condos are not the same, not even similar and you can only compare apples to apples" so that is not a valid arguement.

Number 3. Is there any explaination on the inflated 60% amount. A breakdown or anything? Is everyones assessment inflated as well? Do you have a copy of the annual budget to compare the assessment purposes against the annual expenses. Do you have a Reserve Fund?

EllieD (Vermont)
Posts: 446

Posted:

John,

If you are a Condominium Association your Documents, the Declaration and/or the Bylaws will state how you Percentage of Ownership was determined.

EllieD (Vermont)
Posts: 446

Posted:

John S,

Can you explain in more detail your statement that “A recent vote that will assess 2% units nearly their entire value saw nearly 80% approval from 3%/4% units “

Percentage of Ownership determines percentage of common expense liabilities.

TimB4 (Tennessee)
Posts: 21,059

Posted:

John,

look within your governing documents to see how the assessments are to be applied. Usually, there is something that specifies that annual assessments would be applied equally based on percentage of ownership.

You should also check your States condo laws to see haw they are to be applied.

Tim

JohnS43 (Colorado)
Posts: 24

Posted:

@All, thanks!

@Donna,
I guess I’m speaking generally when I speak to "typical". My difficulty is that everyone I've spoken to thus far has indicated that their portion of HOA assessments is pretty close to (sorry, math coming

) either 1) their unit's square footage divided by the total living space (excluding common areas) or 2) their unit's value divided by the total value of all units (again as common areas wouldn't be sold individually). There are tweaks based on costs that can be directly tied to individual or subgroup usage (like larger lawns may use more water in a detached homes covenant), but while there's no SINGLE EXACT method, most end up very close to your portion of total space or value vs. the total of the association.

Mine on the other hand is three tiers. Units around 1350 sf pay 4%, units of 1040 sf pay 3% and units like mine (416 sf) pay 2%. For the first two, the difference in size pretty closely matches the difference in share paid. But my condo is 2/5 the size yet paying 2/3 the costs of the next tier up. Paying at two-thirds yet owning two-fifths as much works out to overpaying by 60%.

Basically, I know there are different ways to divide things up and can easily be talked into my 60% figure may be off or be impossible to say is exactly right, but so far I seem to be comparing apples and oranges to sea turtles. If I could reconcile the disparity to being somewhere in the tree fruit category, I'd be happy.

@Ellie, I'll see what docs I can get my hands on.

About the recent vote for a major renovation and expansion project, I suppose I'm mainly just making the case there's inequity. The smaller units that are paying more than their share ALL voted against it. But the remaining units voted like Trident dentists (4 out of 5 recommended). It just seems that if we weren't severely overpaying, at least ONE of us would have voted for it (like me for example).

@Tim, I'm sifting through the laws and I may be out of luck. It looks like so long as the bylaws don't stipulate illegal things (people on second floor receive bi-weekly beatings) once they are established they stand. My general issue is not that the bylaws aren't being followed, but that their proportions are very far off of space/total for one minority group.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

You should go back to the original HOA declaration and see what the breakdown of % of each ownership is listed as. Its possible, all these "votes" on what percentage people pay that have been changed over the years are all invalid and may need to revert to the original % as listed on the declaration.

EllieD (Vermont)
Posts: 446

Posted:

John S,

I am not an attorney nor do I work in the legal field – but IMO there is no point in trying to figure out if the percentages are based on square footage or whatever – unless you just like to “play with numbers.

Typically the basis for the various percentages was established when your Condominiums were built and are most likely stated in your “top” document – typically the Declaration (not in the Bylaws).

Look for a listing of each Condo by Unit number vs % interest assigned. It could be in an Exhibit attached to your Declaration.

Here it will state how the percentages were determined – typically “by dollar value” set by the developer, back in “yesterdays dollars” when your Units were built.

The authority for doing this comes from your State Act(s) or Statutes. The words probably were different back 40 years ago, but should be similar to the current Act.

Here are a few excerpts from the current "Colorado Common Interest Ownership Act".

38-33.3-103 Definitions. As used in the declaration and bylaws of an association, unless specifically provided otherwise or unless the context otherwise requires, and in this article:

(2) "Allocated interests" means the following interests allocated to each unit:

(a) In a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association;

(6) "Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 38-33.3-207.

(7) "Common expenses" means expenditures made or liabilities incurred by or on behalf of the association, together with any allocations to reserves.

(9) "Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of the separate ownership portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

38-33.3-207 Allocation of allocated interests.

(1) The declaration must allocate to each unit:

(a) In a condominium, a fraction or percentage of undivided interests in the common elements and in the common expenses of the association and, to the extent not allocated in the bylaws of the association, a portion of the votes in the Association;

(2) The declaration must state the formulas used to establish allocations of interests.

(5) Except for minor variations due to the rounding of fractions or percentages, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units shall each equal one if stated as fractions or one hundred percent if stated as percentages.

JohnS43 (Colorado)
Posts: 24

Posted:

Yeah, the statutes just look to lay out ground rules but make no mention of what I assume would have to be a precedent case. As far as they read to me not only is there no barometer compeling any righting of inequity once established, there's nothing preventing preventing the HOA from voting to fill my unit with concrete and walking away.

Off to look into the damage done by bankruptcy or defaulting on loans, I guess...

GlenL (Ohio)
Posts: 5,491

Posted:

John what others have been politely trying to tell you is you need to read your documents, something IMHO you should have done before you purchased the condo to begin with. In the Declarations it should be spelled out exactly how the fees are to be computed, we for instance have eight different unit sizes and they all pay a different amount but when the Board decides to raise assessments the assessments for ALL UNITS go up. This would also apply to any special assessments or in the event the owners voted to disband the COA and sell the property, how any profits or losses are distributed.

The way you keep describing the other 2/3's of the units ganging up to "punish" 1/3 with a fee increase simply doesn't compute. What would stop the 2%'s from joining forces with the 4%'s to stick it to the 3%'s? What EXACTLY is this fee increase for? Raise in assessments? Special Assessment? Or a fee allowed under the CC&R's that you failed to read before you bought? I suspect that rather than being as upset as you purport over the supposed inequity you were already looking for a reason to walk away; hence your readiness to destroy your credit. Quite frankly and this is only my personal opinion; you sound like a six year-old who when the rest of the kids won't play what you want, wants to take your ball and go home.

Studies show that 5 out of 4 people have problems with fractions

JohnS43 (Colorado)
Posts: 24

Posted:

Thank you for responding Glen, but it appears I've not well stated my point. But first, I'm not thrilled with/proud of my naivite when I entered into it, but quite frankly I would've married my wife regardless of her affiliations with the association. What I've been reading and acknowledging (I thought) was that yes, I need to get my hands on the HOA docs. My questions are not about what I should've done as time travel is out of the question, but if there is anything to be done and whether proportional space/value are the prevailing division methods. I understand that my concrete example is hyperbole, but aside from there being benefit to others to do it, there appears to be nothing preventing it.

The assessment is for a major renovation--knocking out walls, relocating elevators, parking structures exterior facelift, plumbing upgrades and adding space to the units proportional to their existing space--to the point that it was considered to scrape and rebuild. I am not complaining that there is an assessment. I am realizing--far too late--that my monthly dues all along and now this one-time assessment have, are and will be charged at a much higher proportion than my portion of the building. The 3's/4's are being assessed about 40% of their unit's value while the 2's are being assessed nearing 90%.

What is to keep the ganging up from happening is apparently nil, legally speaking. In practice though, both the 3's and 4's have roughly 3% and 4% of the living space so are the ones being collectively subsidized by the 2's--if my logic is plausible. Also, there are only 4 2% units, one owned by someone also owning a 3. That leaves only 11% of the total vote paying the subisdy--leaving not enough of us to gang up for a 2/3 majority anyway. I've had some very good suggestions here and in other research/posting but thus far have seen little to indicate that square footage or unit value PROPORTIONAL to the total living space is not far and away the most commonly used basis of division.

Your suspicions of my reasons are simply wrong. I did not say $220,000 dollars--the amount I'm being assessed--was tossed. I am saying, and yes, checking that roughly 60% more than the amount of space I own in proportion to the rest of the living space is being charged for anything and everything. While financially, I'd prefer to find an answer that gives legal footing for my point, I'd still be much more at peace if someone could demonstrate that this is not an uncommon and futile situation. I doubt that it will come to defaulting, but it is prudent to run the numbers. Pay dearly immediately to divorce myself from this and 7 years from now have a clean slate or pay substantially and continue to pay more than $1000 a year beyond what I strongly suspect to be done in 80-90% of all other HOAs in perpetuity.

EllieD (Vermont)
Posts: 446

Posted:

John S,

There might well be something “wrong”, but you are not giving us enough information to work with. For example, what is your monthly maintenance fee structure? The “Special Assessment” fee structure?

How many units do you have? How many different buildings? If more than one building, how many Units per building?

Is there a statement in your documents something like - ALL common expenses must be assessed against ALL the units in accordance with the allocations set forth.

Typically percentages are designated to three decimal places – example, 2%s, might be 2.846% - So rounded off, your monthly fees, dues, might be something like, the 2%s $180 per month, the 3%s $200 per month, the 4%s $225 per month.

The Special Assessment amount should follow the same proportions, rounded off.

Trying to follow your reasoning, are you saying that the “Special Assessment” amount is not being assessed according to the percentages?

RogerB (Colorado)
Posts: 5,067

Posted:

John, it appears to me you are not using the same criteria to determine equitable tiered assessment amounts as were used to determine assessments when the association's Covenants were establish. Perhaps you are using only square footage as a criteria; whereas, that may not the only criteria used to prorate the tiered assessment amounts in your Covenants.

JohnS43 (Colorado)
Posts: 24

Posted:

Sorry, all, but I think I’ve not stated the questions well enough. While I’m going to look into the bylaws and track the numbers (I am a math geek after all), my question is not whether they are being followed. I assume they are. I’m questioning their sanity/fairness and legality. This, statute review and other discussions lead me to believe that they are legal. So at this point, I feel as though I have done the conceptual equivalent of legally purchasing a car for $80,000, only to realize too late I could’ve bought the same thing at most any other lot for $50,000. No matter how out of whack that one dealership may be, I signed and drove away so now I’ve got the car. Caveat emptor.

Fairness and sanity are more subjective points. I find a good barometer to be what is commonly done in similar situations. The information I do have is that 5% of the living space pays 8% of any assessments, be they monthly, one-time, installment or other. That same 5% has no exclusive amenities nor causes any additional burden to common resources than any other units and actually is excluded from a few amenities that the remaining 95% has access to. Their location detracts from value in regards to the remainder. In short, there are no mitigating factors that inflate value to anything closer to 8% of the total.

How do the associations you are in / know of assess portions of the total assessments?

Thanks again and sorry again for having apparently misled the direction I was heading.

JohnS43 (Colorado)
Posts: 24

Posted:

Specific to your questions, Ellie, I take their point but I do not (today) have most of that data. But in regards to percentages, a close approximation from what I’ve learned is the square footage breakdown is something like 4.1%, 3.1%, 1.25%, with assessments set at 4%, 3%, 2% and makes the assessments $600, $450, $300, respectively.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

The 3's/4's are being assessed about 40% of their unit's value while the 2's are being assessed nearing 90%.

I've never heard of such a thing. Who is determining this "unit value" and how often does it get reassessed? Appeal process for assessment? Etc.

EllieD (Vermont)
Posts: 446

Posted:

John S,

Apparently your 2%, 3%, 4% are the actual whole number percentages (and not rounded off percentage values) used to determine the amount of your monthly fees, dues.

If true: then when you multiply 2% by the number of Units at that rate, PLUS 3% x no. of Units at that rate PLUS 4% x no. of Units - does that add up to a whole (1 or 100%)?

The percentage schedules that I have seen, when three or more different percentages of ownership, were all computed out to three decimal places so as to get the “total ownership” to equal 100% (as close as possible).

I am curious how yours works out to be “whole number” percentages.

JohnS43 (Colorado)
Posts: 24

Posted:

@Steve. The numbers are estimates based on county assessment values and square footage. I wouldn't claim to say they are precisely perfect but are a pretty solid indicator of why I see it as an issue. Our assessments are calculated with the standard "your percentages" x "total cost of the project".

@Ellie, the numbers per tier are as follows...
2% - 4 units
3% - 16 units
4% - 11 units

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

That is the weirdest thing I've seen.

RogerB (Colorado)
Posts: 5,067

Posted:

John, you stated "Our assessments are calculated with the standard "your percentages" x "total cost of the project". Is this a quote from your Declaration of CC&Rs? If not, quit 'beating around the bush'. Quote your CC&Rs state with regard to assessments rather than your opinions if you really want informed opinions of responders.

JohnS43 (Colorado)
Posts: 24

Posted:

Roger, thank you for responding, but I simply do not have them in hand. More importantly, they are not germain to the two questions:

1. Is there any basis to challenge legally established bylaws that can be shown to inequitably distribute cost. Answer: No, because statutes speak more to mechanics of how to establish and what must be included than any definition of fairness or equity AND further there seems to be no precedents to assign such definitions.

2. More amorphous and philosophical, what is fair? When most of the building is paying slightly less than [their space divided by total living space] and four units are paying [1.6 times their space divided by total living space] am I off-base to find this unfair?

I'm sorry that my initial reactionary posting and admittedly attempted attention-grabbing title didn't state these well. I have no questions around what my bylaws define and whether they were followed.

JohnS43 (Colorado)
Posts: 24

Posted:

Correction, I meant applicable (germane) not Michael Jackson's brother (germain)

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By JohnS43 on 06/08/2011 8:15 AM

1. Is there any basis to challenge legally established bylaws that can be shown to inequitably distribute cost. Answer: No, because statutes speak more to mechanics of how to establish and what must be included than any definition of fairness or equity AND further there seems to be no precedents to assign such definitions.

The basis would be if there is a conflict with a higher document controlling document. Typically if there is a conflict between the Bylaws and the CC&Rs, the CC&Rs would control. This is why the specific language from your CC&Rs concerning assessments was requested.

If you do not have a copy, you should obtain one from the county courthouse or the Board.

Quote:

Posted By JohnS43 on 06/08/2011 8:15 AM

2. More amorphous and philosophical, what is fair? When most of the building is paying slightly less than [their space divided by total living space] and four units are paying [1.6 times their space divided by total living space] am I off-base to find this unfair?

What is fair does not always relate to what is legal. Just as what is legal is not always fair, ethical or moral. The Association must do what is legal based on the laws of the land and the governing documents. The Board and/or members can try to do what is fair providing that it does not violate what is legal. In those cases, they must do what is legal and, if desired, change the legality to make things fair (i.e. amend the documents).

The largest problem when trying to be "fair" is that fairness is usually based on a perception. Depending on an individuals perception of an issue they may consider it fair or unfair. As an example: Personally, I don't believe that a smaller unit should pay a smaller percentage of the assessment and I believe that each unit should pay an equal amount - as this would be fair in my eyes. Others might say that if I have a unit that is half the size of others, then I should pay less. Both points of perception are valid and a reasonable argument can be made for each view. No matter how the issue is resolved, someone will have the perception that the issue was resolved unfairly. Hence the requirement that things must be done legally vs. fairly.

Tim

JohnS43 (Colorado)
Posts: 24

Posted:

Well said, on both points, Tim.

To the docs, yes I am trying to line them up but at least getting some groundwork understanding was more pressing and admittedly cathartic. While I will be looking for the sort of things you speak of, knowing how closely another 2%er has reviewed the docs along with other conversations and happenings through the years, I have little expectation of finding conflict within them. This is much of why, after reviewing statutes, etc. I’m ready to accept this is not a legal battle.

On the fairness, the idealist in me hopes that the law intends to land as close to a common definition of fair as can be attained. Pragmatically and closer to your point, it can be pretty challenging if not impossible to define fair. My concept of fair in this case is partially based on my personal history and other considerations within the building. I’d be lying to myself if I tried to claim that there’s not some component in me (most everyone?) that looks first to what I want then taints the final definition by that.

In this specific situation, I find it hard to feel unjustified in my doubts when there is a distinction made between three classifications of units that for 27 of the 31 very closely align to their square footage in comparison to the whole while the four remaining do not. Also, this is a condo-hotel scenario where units are primarily purchased for vacation rental. With considerations of ROI indicating that at a likely rental value of 40% of the next guy’s but expenses of 67%, it makes some case. Conversely, I must also admit I’m surprised to learn that size/value based division is not as overwhelmingly common as my previously limited view had believed.

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