Unorganized HOA - What to do!

Started by LucyK1 • 4 replies • 1259 views

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LucyK1 (California)
Posts: 2

Posted:

I recently joined the board of my HOA - a 10 unit complex in Los Angeles. I find out that tax returns have not been filed for 10+ years, accurate records have not been kept and everything is a complete and utter mess. There is no list of what each owner owes in dues and I know a few of the owners have not been paying their dues for years now. One of the properties is now being foreclosed and an auction sale is going to take place. What do I do to try to collect the delinquent dues? The previous Treasurer said she "thinks" its about 5 years worth of delinquent dues but I have no way of proving it as bank statements are missing and deposit records don't give me any information as to who paid and who did not. The old Treasurer now sold her property and moved on and I am stuck with this mess. There isn't that much in funding available for me to go retain attorneys or hire a management office since not every unit holder pays month to month. What should I do about the tax returns and the property being sold at auction? Is there any hope? I'm afraid that if I file the returns now, the government will send a heavy fine for all delinquent returns for all the years and that is not something we can afford.

SheliaH (Indiana)
Posts: 6,964

Posted:

You already know this, but…this won’t get fixed overnight and will probably require a special assessment or several to pay for all this mess. And then you still have to look into getting a reserve study to see where you are as far as saving money for future major expenses like roof replacement – and I’m betting some of your board members don’t know what that is, let alone had one done.

Your previous treasurer was a dingbat at best and possibly a crook, especially since the records are a mess. And what in the hell were the other board members doing? Don’t they know they can be held personally responsible for this mess? If you still have any who were around when this treasurer ran things, the association may want to consider investigating them as well.

You will need a formal audit of what paperwork you have and the Association will have to prepare to go to the IRS and explain itself (it may be better to approach them rather than the other way around). You also need to send the previous treasurer a strongly worded letter requesting all records and if she doesn’t have them, she needs to be prepared to explain why. Keep a copy for an association attorney – and yes, you’ll need one to help navigate through this steaming pile of caca. If there is evidence of wrongdoing, don’t hesitate to talk to your local prosecutor about criminal charges.

Normally, I'd say your HOA is too small for a property manager, but you may need to consider getting one to help you organize and clean up the mess until you get a board with people who are willing to be trained on how to run a HOA properly. Good luck - you'll need it!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

LucyK1 (California)
Posts: 2

Posted:

Thanks Sheila. I'm actually an Accountant, which is why I took on the role as Treasurer to help get things in order. We actually do need a new roof but I keep explaining that we don't have enough money to be able to pay for one. Most of the unit owners are not paying their monthly dues and from that I know a special assessment will not work in my favor either.

The President was extremely shady himself - digging through files I saw notes he had written to the Treasurer stating that in lieu of the monthly payment he performed certain chores around the complex (which is in reality illegal). A meeting was not held for years and once I stepped in, I made sure to get more involved to slowly help clean up the mess created. When I asked her for files, she just shrugged her shoulders and said she just did not have them and claimed she was supposed to be an interim Treasurer. She also claimed she did not have the proper knowledge on how to keep proper records but that seems like a bunch of bull. When she went to sell her property, she didn't bother telling me so whatever paperwork I had to put together was rushed and now that I am thinking of it, the prior treasurer probably did that intentionally.

I took the boxes of papers and organized them to the best of my ability but it is still no where near done.

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By LucyK1 on 06/02/2016 1:28 PM
What do I do to try to collect the delinquent dues? The previous Treasurer said she "thinks" its about 5 years worth of delinquent dues but I have no way of proving it as bank statements are missing and deposit records don't give me any information as to who paid and who did not.

I think you know the answer here. How can you collect what you don't know? Recreating the past may be more problems than it is worth.

Go forward, and write off the old debts that may or may not be.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MarkM31 on 06/02/2016 5:55 PM

I think you know the answer here. How can you collect what you don't know? Recreating the past may be more problems than it is worth.

Go forward, and write off the old debts that may or may not be.

Regardless of how an Association wants to proceed (escalate collections or write off amount owed), the Association must first get a good set of books together to determine where they are (as this allows the Association to make an informed decision on moving forward).

I would also suggest that a collections policy be adopted if the Association doesn't have one. This can help prevent a repeat of the same issue in the future.

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