How to deal with this? Serious issues

Started by ElizabethB2 • 21 replies • 1702 views

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ElizabethB2 (Michigan)
Posts: 18

Posted:

OK, I am the Treasurer of a small association of eight units. We are low income, and our monthly dues are $86.00 per month. These dues include: Maintenance of the grounds, roofing, replacement of decking, paving, snow plowing, liability insurance. This association is only 3 yrs old. We just sold our last unit 6 mths ago and now we have some major issues arising. We don't have much of a reserve fund for future expenses, only $2000. The Developer didn't put anything towards our reserve funds before handing it over. Well, after performing a reserve study on my own, I came to the realization that we need to increase our monthly dues to $125 per month. We chose to forgo lawn service and do it ourselves to save $1800 per year, and to save that for our reserve. Well, now some of the people are bitching because they think their $86 per month should cover all things, even though we have meeting minutes to prove that we had unanimous agreement to mow ourselves. One member went ahead, without consent, and hired a lawn care service to mow. She sent me an email telling me to expect the bill. I have emailed her back stating that since this action was not approved, she would be held responsible for this bill and if she refused to pay, we would seek legal action against her. The Developer has told me that he doesn't want to be present and that he has washed his hands of our problems. We are trying to find a lawyer to be present at this meeting, but what else should we be doing? We are at a loss! Help!

TimB4 (Tennessee)
Posts: 21,061

Posted:

Elizabeth,

It sounds like you are on the right track in resolving this.

Typically, developers keep assessments artificially low in order to sell the properties. Memberships who do not realize this when they are given control of the Association are typically in for a rude awakening in the future. I applaud you for doing a reserve study so early in the process.

The Board needs to read the governing documents and provide services for what they are required to provide services for. If the Board wants to transfer any responsibility to individual members then the documents will need to be amended.

As for the individual entering into a contract, I have a few questions:

1) Was the person who signed the contract a member of the Board? (if so in what capacity)
2) How does your governing documents specify grounds maintenance (just common area or all landscaping)?

Note: I'm actually concerned that your figure of $125 per month is low for only an 8 unit property based on what you did list that the Association has the responsibility to maintain. You may want to do a more through reserve study so the correct amount of funds are set aside to pay for the repair/replacements of those items (roofs/decks/roads). Here is a link to a thread in this forum that discusses how to do a reserve study that might be beneficial

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx

Since you also stated that you are in a low income area, the Board might want to consider a higher than average contingency fund. The typical rule of thumb for a contingency fund is 1/12 of the annual assessment.

Your Annual assessment should equal an amount that covers yearly expenses + the amount needed to be set aside for the reserve fund + the amount needed to be set aside to replenish the contingency fund.

Tim

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may want to take note of what your CC&R's says your HOA is responsible for maintaining. IF you read our CC&R's you find that the HOA is ONLY responsible for lawncare. However, of course there are other operational costs associated with running a HOA besides lawncare. You have to have insurance, accounting, reserves/savings, and possible various legal costs.

It sounds like your on the right track and correct with dealing with person who hired the lawncare. However, as far as needing an attorney, save the money until there is an actual lawsuit or need to lien. Most HOA issues can resolve themselves amongst the members and sticking with the rules of the HOA. A lawyer is really only needed to represent the HOA in court. If that does happen in a lawsuit situation, it's cheaper to counter-sue anyways.

Keep this moto running to help: If you sue your HOA, you are suing yourself and your neighbors...A HOA is only funded by it's members FOR it's members....If in doubt, read the CC&R's...

You live by the above motto, you are half way there...

Former HOA President

ElizabethB2 (Michigan)
Posts: 18

Posted:

Thanks Tim,

The person who hired the lawn service is NOT a board member at all. She is just another condo owner. The assessments I did receive from a few different contractors included the roofing, the decking and the paving. I thought I covered the main basis of the most expensive items, but I am still learning. As far as the maintenance goes, we are responsible for maintaining the common elements. But we all agreed to the fact that we, as an association, were to be responsible for that maintenance since we couldn't afford to pay for lawn service. After reading our bylaws just now, I am realizing that our Secretary never brought our Bylaw amendment to the Register of Deeds in our County, so I don't know if that matters or not. We do have written documentation from our meeting minutes of the changes. We aren't really changing the bylaw, but just clarifying as to how we will maintain our common elements, as it isn't specified. I am so stressed by this...

ElizabethB2 (Michigan)
Posts: 18

Posted:

What is a CC&R?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A CC&R is the actual legal document that needs to be filed NOT the by-laws. CC&R's are the Covenants and Restrictions. It is the actual contract the owners are held to NOT the by-laws. A copy should be at the Courthouse Record's department.

I'd strongly recommend an effort to modify all your documentation from the CC&R's, by-laws, and Articles of Incorporation to remove the developer's name. It's also a good time to modify the documents for other changes as well. This may need a special meeting and attorney. A lawyer familiar with contractual/business/corporate laws is the best option. They can draft the documents for your HOA and file them. The process can cost upwards to $2K or more....

Former HOA President

ElizabethB2 (Michigan)
Posts: 18

Posted:

I think our CC&R is called the Master Deed. I see that it was certified with the register of deeds in our county. So is this the same thing then?

ElizabethB2 (Michigan)
Posts: 18

Posted:

After preening my Master Deed document, the only thing I see that addresses the Maintenance of Common Elements say this: "The costs of maintenance, repair, and replacement of all General and Limited Common Elements shall be borne by the Association." Since we have the means for all owners to maintain the common elements, and the assoc will pay for any maintenance of the mowers, gas, oil, does that suffice for fulfilling our obligation? Especially since this was unanimously agreed on over one year ago (that we would mow ourselves?)

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

We chose to forgo lawn service and do it ourselves to save $1800 per year, and to save that for our reserve. Well, now some of the people are bitching because they think their $86 per month should cover all things, even though we have meeting minutes to prove that we had unanimous agreement to mow ourselves.

You need to better educate the owners. Scan all your quotes, long term things you need to save money for, etc, and publish them on a blog for everyone to see. Explain why dues need to increase. Tell everyone. You just cant vote for something and have no hard evidence for people to see and expect everyone to just go along with it. You need to educate them.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By ElizabethB2 on 06/08/2011 1:51 PM

One member went ahead, without consent, and hired a lawn care service to mow. She sent me an email telling me to expect the bill. I have emailed her back stating that since this action was not approved, she would be held responsible for this bill and if she refused to pay, we would seek legal action against her.

Elizabeth,

I want to return to your more urgent issue.

Is the company still mowing the common area?

I ask because now that the Association is aware of it, the Board needs to send a letter to the company, via certified mail so there is a paper trail, stating that the Board noticed that they are performing services on the property. You should then specify that this contract was not entered into by any duly elected board member and that the Association will not be responsible for payment. You should follow up that since the Association has jurisdiction over the common area that the company is not to enter the property to perform services unless a proper contract is entered into with the Association and that currently the Association does not require this service.

Failure to do this could result in the possibility of the Association having to pay the bill. I say this because an argument could be made that the Association knew of this service being provided and by not cancelling the service the Association indeed entered into a mutual understanding (i.e. a contract).

Since you sent the e-mail to the member who signed the contract, you can not claim you were unaware of the services being provided. Based on your posting of what you said in the communication -

. . . she would be held responsible for this bill and if she refused to pay, we would seek legal action against her.

A smart attorney could probably argue that the Association accepted the contract by specifying that the Association would seek legal action against the member if the member didn't pay. The argument being that if the contract wasn't authorized why would the Association seek legal action for payment of something they don't have responsibility for, unless the accepted the terms of the contract after the fact and took responsibility for payment to the company providing the service.
(I am not a lawyer and I do not work in the legal profession - but I can see how the landscape company could argue this in court so the Association pays them for services rendered).

Lesson Learned: An Association should never threaten legal action until they consult with an attorney to discover the legal options available and then the threat should be done by having a letter sent from the attorney of record.

Tim

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Tim, we don't know the situation. Don't know if this is a high story condo or single separate units. An individual could hire their OWN lawncare person/company to handle their responsibility area. It wouldn't be for the whole common area. However, the bill wouldn't be the responsibility of the HOA but the owner.

I would NOT make any contact with the landscaper they hired. The contract isn't with the HOA but the individual. The individual may send the HOA the bill which they don't have to pay. That means the lawncare company would sue the individual for the money owed. Granite the person who hired the lawncare will try to go after the HOA for the money. Remember it's cheaper to counter-sue than to pursue a lawsuit. If it was my HOA, my reaction would be "Go ahead and sue". Until I got that paperwork, I wouldn't threaten legal actions or take it to that level. Just make sure you have it documented somewhere that the member have agreed to mow their own lawns...

Former HOA President

TimB4 (Tennessee)
Posts: 21,061

Posted:

Melissa,

Granted we might know everything but I do believe that the OP did provide enough information for me to make that recommendation.

Based on the OP postings we do know that:

1. the development is a condominium
2. there are 8 units in the development
3. Per there documents "The costs of maintenance, repair, and replacement of all General and Limited Common Elements shall be borne by the Association"
4. That this includes maintenance of the grounds, roofing, replacement of decking, paving, snow plowing, liability insurance.
5. That the Association chose to forgo lawn service and rely on members to do provide the labor.
6. That this was agreed upon by a majority of the membership.
7. However, One member went ahead, without consent, and hired a lawn care service to mow. She sent me an email telling me to expect the bill.

It is true that we don't know how the areas of responsibility was divided up. It is also logical to expect that if a member did not want to do the work themselves, that they could hire someone to do it for them providing it was their own property. Per the OP the controlling document, the master deed, said that the expense for maintaining the common area "shall be borne by the Association".

Based on all of this information one could logically expect that the area being maintained is the common area and the responsibility of the Association. That one member didn't think that they should have to do the mowing for one reason or another. Therefore, they hired someone to have the section of common area the Association said they were responsible for to be mowed. This same individual had communications saying that they believed the bill for this service should be paid by the Association.

Therefore, based on the controlling document specifying that the Association should pay - I do believe that the Board should be proactive in letting the company know that now, rather then later, that they are not responsible as they did not enter into the contract.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Big mistake to communicate with the lawncare. The HOA doesn't want any contact with that company as this will give them a completed route to the HOA. so it's best they stay out of it and make sure all responsibility falls onto the owner who did the hiring.

We will have to agree to disagree on this one. Just like what the owner did by overstepping their bounds, so would the HOA. Don't give the lawncare service a direct route to some way of getting their money I say.

Former HOA President

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By TimB4 on 06/08/2011 5:31 PM

From the email the I received from the co-owner she said to expect the bill from the lawn service provider. We don't really have our own areas of lawn, we have two large common areas. I did specify in my email that her actions were without the consent of the association and that since she was the one to hire the company, she would be responsible for that bill.

I appreciate your insight and thoughts on all matters. Thanks

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By MelissaP1 on 06/09/2011 4:35 AM
Big mistake to communicate with the lawncare. The HOA doesn't want any contact with that company as this will give them a completed route to the HOA. so it's best they stay out of it and make sure all responsibility falls onto the owner who did the hiring.

We will have to agree to disagree on this one. Just like what the owner did by overstepping their bounds, so would the HOA. Don't give the lawncare service a direct route to some way of getting their money I say.

Ok, but what do I do when I actually get the bill from the lawn service provider? I will eventually have to make contact with them to tell them we didn't hire them, won't I?

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By MelissaP1 on 06/08/2011 5:54 PM
Tim, we don't know the situation. Don't know if this is a high story condo or single separate units. An individual could hire their OWN lawncare person/company to handle their responsibility area. It wouldn't be for the whole common area. However, the bill wouldn't be the responsibility of the HOA but the owner.

I would NOT make any contact with the landscaper they hired. The contract isn't with the HOA but the individual. The individual may send the HOA the bill which they don't have to pay. That means the lawncare company would sue the individual for the money owed. Granite the person who hired the lawncare will try to go after the HOA for the money. Remember it's cheaper to counter-sue than to pursue a lawsuit. If it was my HOA, my reaction would be "Go ahead and sue". Until I got that paperwork, I wouldn't threaten legal actions or take it to that level. Just make sure you have it documented somewhere that the member have agreed to mow their own lawns...

The co-owner doesn't have any personal area. We only have areas that are common grounds. She hired the company to mow the entire West side of our association. (We are divided in half by a road and very long drives, thus East Lot and West Lot). We, on the East side, have had no issues with mowing and just take turns doing so. The West side are having issues. The reason why they are upset is because even though the Developer told them that mowing was included, he had already voted to mow ourselves, prior to those units being sold. So now we are cleaning up the mess that he made because he lied to them. Our meeting is next Tuesday June 14.

ElizabethB2 (Michigan)
Posts: 18

Posted:

When the issue to mow ourselves came up all of those things were presented to them. The problem is this: the Developer still had 2 votes at that time, since then those two units have sold. He lied to them and told them that lawn service was included in their monthly dues. He didn't mention the fact that we agreed to use our funds to purchase a lawn mower to mow ourselves. We didn't vote in the dark by any means. Believe me, at our next meeting on June 14, I will have ample options, quotes, estimates and long term budget plan laid out in great detail.

JonD1
Posts: 2,350

Posted:

Elizabeth:

With all due respect sounds to me like you are lost.

Where are the other members of this board? Just what role are they playing?

Lets get to the bottom line. If in your documents the association was responsible for lawn care you cannot just simply agree to do away with that provision by a vote of the cureent owners. What happens when a unit is sold and the new owner doesn't wish to mow there own property or cover this cost. To do so would require you change the governing documents.

As far as this single homeowner hiring on their own a landscaper. They have no right to do so or represent themselves as having the authority to do so. My guess or standard practice would be some contract was agreed to and signed off on.

As the association had no role in this IMO you have no reason to pay for this service.

If and when the bill arrives you simply inform the provider that since no one from the board authorized this contract you are not responsible and they should seek payment from the person who ordered the service.

Your problem is IF the developer misrepresented the fact the lawncare was included to this new buyer and your documents support that than a simple vote does not change the documents or their requirments. You would still be on the hook for covering the lawn care.

And IF this matter were to end up in court IMO you would be found responsible.

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By JonD1 on 06/09/2011 6:28 AM
Elizabeth:

With all due respect sounds to me like you are lost.

Where are the other members of this board? Just what role are they playing?

Lets get to the bottom line. If in your documents the association was responsible for lawn care you cannot just simply agree to do away with that provision by a vote of the cureent owners. What happens when a unit is sold and the new owner doesn't wish to mow there own property or cover this cost. To do so would require you change the governing documents.

As far as this single homeowner hiring on their own a landscaper. They have no right to do so or represent themselves as having the authority to do so. My guess or standard practice would be some contract was agreed to and signed off on.

As the association had no role in this IMO you have no reason to pay for this service.

If and when the bill arrives you simply inform the provider that since no one from the board authorized this contract you are not responsible and they should seek payment from the person who ordered the service.

Your problem is IF the developer misrepresented the fact the lawncare was included to this new buyer and your documents support that than a simple vote does not change the documents or their requirments. You would still be on the hook for covering the lawn care.

And IF this matter were to end up in court IMO you would be found responsible.

That is the thing, we haven't done away with lawn maintenance, but have all agreed that it would be dealt with by the association, ourselves. Our documents do not say that we have to pay a lawn care service to do it. We pay for the maintenance of the mowers, pay for gas, oil and whatever other expenses that are related, the only thing the association agreed to was that instead of hiring someone to do it, we would put ourselves to work. We are in a small town, and a small association, I think we originally thought that with only being 8 units we could definitely come together and work together in order to save money and not increase our dues. It is becoming more obvious to me that we will end up getting lawn service in the end because the newest members are pissed that the developer didn't inform them of our changes of lawn care.

The President doesn't know what to do, and the Secretary is refusing all phone calls, emails and any form of communication, even from the board members, until the meeting June 14. This whole thing started two years ago in order to save money as no one wanted to pay more than what they were already. Its really quite funny because after doing a reserve study they are all going to be rudely awaken with the possibility of much higher dues.

CarolynL2 (Florida)
Posts: 73

Posted:

I agree with Tim that you should contact the business who is mowing your common area and inform them that the person who hired them is not authorized to contract or hire for Association maintenance. If you see the workers out there you should ask them to stop immediately. I would think any business knowingly mowing common area would make sure the person hiring them is authorized to do so.

Carolyn

JonD1
Posts: 2,350

Posted:

Elizabeth:

Even with just 8 members you can have and seem to have about 8 to many opinions.

While it was a good idea to keep costs down by doing the lawn care that would depend on if all of those in agreement were to live there forever. Not the case likely.

I would also be concerend if the liability you might expose the property to in using residents to do this work would be worth the savings in the end.

And I'm sorry to hear the other members of the Board seem to think burying their heads in the sand is the way to go. Some people are just not cut out for service on a Board. But with just 8 units that gives you very few options.

Sad to say they are not the only ones who operate in this manner.

With just eight units and with what I would guess limited common property just what amount are we talking about to cover this cost?

How long has the lawn been mowed by the contractor hired by the unit owner?

Some bill out weekly others monthly just wondering when they might submit their first invoice.

Hard to beleive anyone would agree to provide a service without verifying the payment has been authorized.

Best Wishes and Good Luck

Seems like no matter what the monthly charge most people can never see their way clear in understanding the amount of money they are paying does not cover expenses or future costs. That will be an uphill battle from now till the end of time.

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By JonD1 on 06/09/2011 1:57 PM
Elizabeth:

Even with just 8 members you can have and seem to have about 8 to many opinions.

While it was a good idea to keep costs down by doing the lawn care that would depend on if all of those in agreement were to live there forever. Not the case likely.

I would also be concerend if the liability you might expose the property to in using residents to do this work would be worth the savings in the end.

And I'm sorry to hear the other members of the Board seem to think burying their heads in the sand is the way to go. Some people are just not cut out for service on a Board. But with just 8 units that gives you very few options.

Sad to say they are not the only ones who operate in this manner.

With just eight units and with what I would guess limited common property just what amount are we talking about to cover this cost?

How long has the lawn been mowed by the contractor hired by the unit owner?

Some bill out weekly others monthly just wondering when they might submit their first invoice.

Hard to beleive anyone would agree to provide a service without verifying the payment has been authorized.

Best Wishes and Good Luck

Seems like no matter what the monthly charge most people can never see their way clear in understanding the amount of money they are paying does not cover expenses or future costs. That will be an uphill battle from now till the end of time.

We have a significant area to maintain. We live in the country and so we have LARGE common grounds. It takes one person about 3 hrs or so to mow the entire areas. Two years ago we paid over $1800 for mowing. When I told them that we would have to increase our dues at least $20.00 per month to cover that, that is when everyone in attendance wanted to forgo lawn service. The lawn service has only been done once. We saw them up there mowing this week and wondered what was going on. We had used this provider in the past, maybe that is why he didn't verify who was asking him to mow.....I don't know, I always use my position title when setting up any type of service for our association.....I find it hard to believe that he didn't ask the co-owner her position within the association. The previous statements I had gotten two years ago were monthly.....but I don't know if the co-owner asked for this service just once or how the agreement was made. Like I said, no one is communicating further on this until our meeting.....very frustrating.

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