Owner Overpayments

Started by NancyA4 • 8 replies • 4665 views

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NancyA4 (Florida)
Posts: 17

Posted:

We recently changed management companies. In reviewing the outstanding Accounts Receivable/Prepaid Fees account, there are credits that go back to 2005 and the even-more-previous mgt company. Some units have been sold and the credit resulted from a prior owner's overpayment. Some estopple letters mention a credit (but paid thru date is the month the letter was written, so no attempt was made to show a prepayment.) Sometimes there is no copy of the estopple letter in the file. Is it reasonable to say that these credits should all have been accounted for at the closing, allowing us to refund the current owner with a clear conscience? Any insight would be appreciated.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

What makes you think they want a refund? Maybe they are paying 1 month in advance on purpose? There are some bills am a month or so in advance so I can never possibly be late. A HOA is one of those bills you never want to be late.

You could always issue a statement to all owners showing them they are a month in advance, but there is no need to issue a refund/credit.

NancyA4 (Florida)
Posts: 17

Posted:

Some of our owners pay up to 6 months ahead. These overpayments are not paying ahead.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Nancy

Not that you say such, but it seems your financial records are a bit "shaky" shall we say.

Refunds to some and not others could open a Pandora's box.

Unless asked for refund/credit, I suggest you drop it and move forward with better records.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Why would the current owners get a refund? Confused? The new owners start paying when they buy the property and become HOA members. They do NOT pick up the previous owners tabs nor credit. The previous owner may get a refund of sorts if dues are paid yearly and they sell the house 6 months into the year. They could get the remaining 6 months back. It doesn't get transferred to the new owner records.

I don't know how you collect your dues. That's important to know and understand. I don't know if it's monthly with a late fee after 10 days late or they are paid yearly with a 3 months late fee. Have you any accounting experience? Just curious.

Former HOA President

BruceF1 (Connecticut)
Posts: 2,535

Posted:

It appears to me that some people may not have read your original post carefully. I agree that some people may pay their assessments one or more months in advance, and that this does not necessarily represent an overpayment requiring a refund. However, if I understand your OP correctly, you indicated that in some cases people have sold their homes after having made payments in advance and have therefore had a credit on their accounts at the time of sale. It seems clear to me that these people have paid more than they were obligated to.

I would suggest that you check your CCRs, or Declaration, and your state laws to see whether or not retaining overpayments in such cases is legal. In Connecticut, for example, Section 47-456 of the Common Interest Ownership Act requires that excess payments be either refunded or credited towards the following year's assessments. Obviously, if a person has sold his home it is not possible to do the latter. Furthermore, Section 47-257 requires that assessments be in accordance with the allocations in the Declaration. Thus, combined, this could be interpreted as requiring that excess payments be refunded when the home is sold. I do not know what applies in your case.

It is also possible that an adjustment for any advance payments to the HOA may have been made between the buyer and seller at the time of closing, much in the same manner as adjustments are made for heating oil in tanks (up here in the north) and for any payments already made, or to be made, for property taxes. If this is the case there may not actually be any refund by the HOA due to the former owner, nor would the HOA necessarily be aware of any such adjustments made at closing.

My conclusion is that it is not clear, at this point, whether these "overpayments" are truly overpayments, or whether or not any refunds are required, either ethically or legally. I think more research into the matter is required.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

I might add that Melissa is correct in that the new owner is not responsible for any unpaid assessments due from the former owner, nor should any overpayments or credit from the former owner be applied to the new owner. What should have happened is that any credit should have been refunded to the former owner at the time of closing and the new owner should have begun paying assessments as of that date. Consider it similar to a utility. The electric company reads the meter on the closing date and bills the former owner for the electricity used up until that date and bills the new owner for the electricity used from that date forward.

However, it is entirely possible that the former and current owners were not aware of this and may have made adjustments between them at the time of closing as I stated in my previous post. If this is the case the money may have come out right, but the accounting has been messed up. You still need to determine the situation more precisely as I suggested in my previous post before you can decide what needs to be done, if anything.

DonnaB12 (Texas)
Posts: 6

Posted:

The only refund we make are
(1) to developers, when they sell the home and lot to a new owner. If they are buying another lot for construction, they usually request the refund be credited to the future fees on the new lot.
(2) If an owner sells his home and does not give up his balance over to the new owner, his remaining portion is refunded and the new owner is prorated.

HOA Secretary/Treasurer

KellyM3 (North Carolina)
Posts: 2,239

Posted:

The HOA should close one account - issue a repayment of early payments (which is a liability on the budget sheet) - and open a new account. It gets too convoluted for an HOA to be so flexible during home sales where some transactions could request account transfers and others would need one account closed and new one opened under the new owner's name.

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