Please help me understand special assessments in California

Started by MichaelB44 • 24 replies • 1377 views

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MichaelB44 (California)
Posts: 33

Posted:

Hi, I am a board member in a 21 unit association in California. We have 17 townhouse and 4 single family homes. This is how our CC&Rs specify dues and special assessments be applied to the two types of structures:

section 6. Except as otherwise provided herein, both regular assessments and special assessments shall be fixed at a uniform rate for all Townhouse Lots and may be collected on a monthly basis or otherwise as determined by the Board. Except as otherwise provided herein, both regular assessments and special assessments shall be fixed at separate rates for all Single Family Lots. Said separate rates shall vary from that for the Townhouse Lots only to the extent that the Routine Structural Maintenance (see Article VII, Section 3, herein) varies for each Single Family Lot from that for a Townhouse Lot. A special assessment against a member to reimburse the Association for costs incurred in bringing the member and his Lot into compliance with the provisions of the governing documents shall be assessed only against that member and his Lot. An assessment not paid within thirty (30) days after the due date shall be delinquent and shall bear interest at the rate of six percent (6%) per annum, from the due date until paid.

Section 3. Routine Structural Maintenance. In addition to maintenance upon the Common Area and the Common Maintenance Area , the Association shall provide exterior maintenance upon each lot which is subject to assessment hereunder as follows: paint, repair, replacement and care of roofs, gutters, downspouts, exterior building surfaces, and other exterior improvements. Such exterior maintenance shall not include glass surfaces. For purposes of said Routine Structural Maintenance, an easement is hereby granted to the Association over the entirety of each Lot. If said Routine Structural Maintenance should require the entrance into or traversing through a Residential Unit, it shall only be done following at least 24 hours notification of and approval by the Owner of said Residential Unit. Said Owner approval shall not be unreasonably withheld.

We have three issues that are arising:
1. We have a single family lot owner who determined his porch was cracked to the point of replacement, asked a buddy of his who runs a cement business to fix it, then presented the bill to our past president who paid it directly from the Association's checking account without any input/discussion/votes from other Board members or homeowners. Our checks are supposed to have dual signatures from the President and Treasurer. I am the treasurer (and a board member). I was not presented the check or the invoice at the time. I requested the invoice and was finally given it with the explanation from the homeowner that his friend quoted him $1,600 but that he asked him to put his contractor's license on the bid and that's why it was $2,000.

My question on this issue is what can the Association do to recover the money or if we are even entitled to recover it? If we were supposed to repair or replace the front porch, were we supposed to request a special assessment from the members for the cost? Can we impose a special assessment now after the fact to replenish the checking account? Can any special assessment be directed at the specific owner who replaced his porch, or do we assess the 4 single family homes for this work, or do we assess all 21 units for the cost?

2. One of the single family homes was behind in its dues by over ten thousand dollars. The house was sold and the past dues were paid. During the time the homeowner was delinquent, however, the townhouse roofs were redone and the single family home was not done on the basis of the signifiant delinquency (our dues are $195/month). When the roof requires repair/replacement, do all 21 units need to be assessed, do only the 4 single family homes share that cost, or does the homeowner alone bear the cost?

I can't find any documentation as to how the roofing was paid for when the roofs were supposedly redone.

3. Our vice-president (and board member) is experiencing large cracking in her walls and along her ceilings in a townhouse. She showed me the damage that had been worsening over the past few years and then contacted our insurance company to determine coverage. If our insurance covers the foundation/wall/ceiling repairs, who is responsible for the deductible? Who is responsible if they deny coverage?

Thank you for your time in advance.

TimB4 (Tennessee)
Posts: 21,061

Posted:

1. If the payment was improper, you go after the Past President and the Homeowner.

2. Poorly choice. When capital components need replaced, they should all be done. There should be enough in the Reserves for this. However, it appears that you don't have adequately funded reserves. Based on a very quick glance of what you provided, I would say that the assessed on single family homes. However, the Association should have included those homes when they initially got the bid and (I expect) did a special assessment. So the question is, what happened to those funds?

3. Your governing documents should specify who is responsible for what. If the walls are the responsibility of the Association, then the Association is responsible regardless if Insurance kicks in or not. The only way the member would be responsible would be if the reason for the cracking was caused by them.

RichardP13 (California)
Posts: 3,868

Posted:

I will defer to Kerry, the expert in California. Besides it appears she is more friendly and less divisive.

SheliaH (Indiana)
Posts: 6,964

Posted:

Issue 1 – This doesn’t have anything to do with a special assessment - the real issue is that the porch repair wasn’t authorized by the board and the past president didn’t follow the procedure in paying the bill. Make sure you talk to your bank to ensure the past president is off the account so he doesn’t have any access to it and have your attorney send a letter to the homeowner and the past president asking that they repay it – if they refuse to do it, sue them. Let the homeowner explain why he didn’t discuss any of this with the board, and the president can also explain why he didn’t follow policy.

In fact, I might ask the attorney to check if the president’s behavior constituted criminal activity – if so; file a complaint with the prosecutor’s office.

Issue #2 – do your assessments normally cover roofing of ALL the buildings or just the townhouses? All homeowners, especially board members and officers should already know the answer to this from reading your documents – if you don’t, pull them out and get started.

While you’re at it, note what’s considered common area (covered by the association) vs. what’s considered homeowner responsibility. Remind the homeowners of all this so when repair questions come up, you’ll have a place to start to make decisions. Personally, I would think single family homes would be responsible for their own roofing, but if your documents say otherwise, you’ll have to pay for the work.

Issue #3 – I don’t know why your vice president hasn’t brought the cracks to the board’s attention before now, but….you might want to start with letting the insurance company handle this, especially as someone needs to determine what’s causing the cracks. That may determine who pays the deductible and it sounds like you don’t have a policy.

In my association, the homeowner would be responsible if damage to the common area resulted from his/her negligence or abuse. That’s written in our master policy (I also live in a townhouse community) and it’s why we’ve always encouraged homeowners to ensure their individual homeowner’s insurance has the appropriate coverage – I can’t remember what that coverage is called, but she should discuss that with your agent.

Having read all this and as a former board member and treasurer, I think you and your board need to take a long hard look at your finances because you’ve got a lot of holes that need to be plugged up – quickly. You’re the treasurer, but it sounds like there’s a lot of basic information no one’s told you about. You and your colleagues should know what’s in the master insurance policy, you should have a reserve fund that pays for future major repairs and replacement of the common areas, such as roofing and if you don’t have that, I bet you haven’t had a reserve study done to see how much you should be depositing.

When there are no reserves or they're underfunded, that's usually when special assessments become necessary, so depending on what's needed, the expense is usually split evenly among the homeowners. Generally, the need for special assessments means the association hasn't managed its money properly because they should be rare. Which brings us to your assessment - depending on what the association is supposed to cover, $195 a month might be too low.

Since if your past president was able to get money from the Association account for his friend’s porch repair, I have to wonder what else may have been paid for that no one knows anything about, so you may want to consider having an audit done. In the meantime, start looking for the Board meeting minutes to see what’s been done – if you’re new to the treasurer spot and your predecessor is still around, grab him or her and have a long discussion (or several) about what’s been done.

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

MichaelB44 (California)
Posts: 33

Posted:

Thank you for your responses, Tim.

1. The past president and homeowner are claiming that they did not know the rules in the CC&Rs and Bylaws but that they were operating under "good faith" because the homeowner asked the President and the President told him it was ok. Is that a correct interpretation of "good faith?"

2. I agree this was a poor choice. I didn't live in the association when this occurred. I don't know how the homes were assessed or what happened to the money. I can only assume the other homes were assessed and the delinquent home was not included in the bid. We don't have adequate funds but at least we do have the funds from the delinquent dues that were paid when the house sold. I am having difficulty finding any paperwork at all, let alone these bids or when the roofs were done, or how they were paid for. I have asked numerous officers and homeowners and the best I've been able to come up with is that the roofs were supposedly done somewhere around ten years ago but they're thirty year roofs so we should be good for a while. As you can imagine, it's a frustrating and concerning situation.

3. Our governing documents state we are responsible for the structure. My apologies for the poorly worded question. It was meant to be along the same lines as the others in that if there is a deductible, does that get divided among the townhouses or all 21 units? If we have to repair the foundation without insurance assistance, does that special assessment get divided among the townhouses or all 21 units?

The way the documents split the dues begs the question of how we implement a special assessment vote. They require a majority of all the members to impose special assessments. Finally, should we be implementing two separate bank accounts for these two classes of members?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By MichaelB44 on 06/14/2017 7:02 AM
Hi, I am a board member in a 21 unit association in California. We have 17 townhouse and 4 single family homes. This is how our CC&Rs specify dues and special assessments be applied to the two types of structures:

section 6. Except as otherwise provided herein, both regular assessments and special assessments shall be fixed at a uniform rate for all Townhouse Lots and may be collected on a monthly basis or otherwise as determined by the Board. Except as otherwise provided herein, both regular assessments and special assessments shall be fixed at separate rates for all Single Family Lots. Said separate rates shall vary from that for the Townhouse Lots only to the extent that the Routine Structural Maintenance (see Article VII, Section 3, herein) varies for each Single Family Lot from that for a Townhouse Lot. A special assessment against a member to reimburse the Association for costs incurred in bringing the member and his Lot into compliance with the provisions of the governing documents shall be assessed only against that member and his Lot. An assessment not paid within thirty (30) days after the due date shall be delinquent and shall bear interest at the rate of six percent (6%) per annum, from the due date until paid.

Section 3. Routine Structural Maintenance. In addition to maintenance upon the Common Area and the Common Maintenance Area , the Association shall provide exterior maintenance upon each lot which is subject to assessment hereunder as follows: paint, repair, replacement and care of roofs, gutters, downspouts, exterior building surfaces, and other exterior improvements. Such exterior maintenance shall not include glass surfaces. For purposes of said Routine Structural Maintenance, an easement is hereby granted to the Association over the entirety of each Lot. If said Routine Structural Maintenance should require the entrance into or traversing through a Residential Unit, it shall only be done following at least 24 hours notification of and approval by the Owner of said Residential Unit. Said Owner approval shall not be unreasonably withheld.

We have three issues that are arising:
1. We have a single family lot owner who determined his porch was cracked to the point of replacement, asked a buddy of his who runs a cement business to fix it, then presented the bill to our past president who paid it directly from the Association's checking account without any input/discussion/votes from other Board members or homeowners. Our checks are supposed to have dual signatures from the President and Treasurer. I am the treasurer (and a board member). I was not presented the check or the invoice at the time. I requested the invoice and was finally given it with the explanation from the homeowner that his friend quoted him $1,600 but that he asked him to put his contractor's license on the bid and that's why it was $2,000.

My question on this issue is what can the Association do to recover the money or if we are even entitled to recover it? If we were supposed to repair or replace the front porch, were we supposed to request a special assessment from the members for the cost? Can we impose a special assessment now after the fact to replenish the checking account? Can any special assessment be directed at the specific owner who replaced his porch, or do we assess the 4 single family homes for this work, or do we assess all 21 units for the cost?

2. One of the single family homes was behind in its dues by over ten thousand dollars. The house was sold and the past dues were paid. During the time the homeowner was delinquent, however, the townhouse roofs were redone and the single family home was not done on the basis of the signifiant delinquency (our dues are $195/month). When the roof requires repair/replacement, do all 21 units need to be assessed, do only the 4 single family homes share that cost, or does the homeowner alone bear the cost?

I can't find any documentation as to how the roofing was paid for when the roofs were supposedly redone.

3. Our vice-president (and board member) is experiencing large cracking in her walls and along her ceilings in a townhouse. She showed me the damage that had been worsening over the past few years and then contacted our insurance company to determine coverage. If our insurance covers the foundation/wall/ceiling repairs, who is responsible for the deductible? Who is responsible if they deny coverage?

Thank you for your time in advance.

What you need to have if not already done is a Reserve Study for the Townhomes and the Single Family homes. This will help determine future maintenance and Regular Assessments adjusted so money can be put aside for future repairs into a reserve account. In the future if possible you want to avoid Special Assessments as these in many instances indicate a poorly ran HOA and place a hardship on owners and their personal budgets.

1. How long ago did this take place? In some states you may have to watch how far back in time, because it is not a consumer fault no action was properly taken at that time. In reading only what stated above it looks like the HOA is responsible for Routine Structural Maintenance which includes "other exterior improvements" and I contend would have included the cracked front porch. This even if HOA repaired should then be paid out of the funds set aside for the Single Family homes.

While Section 6 states ... "A special assessment against a member to reimburse the Association for costs incurred in bringing the member and his Lot into compliance with the provisions of the governing documents shall be assessed against that member and his lot". The question is what is considered "compliance"? Potentially that could only be referencing items which the homeowners are responsible for such as "glass" which is excluded above. If a homeowner has a broken window and does properly replace, the HOA replaces, then the owner is the entity who will have the Special Assessment. However, this might be a question for your HOA attorney.

2. Same as members are not allowed to withhold dues because of any HOA issue ... the same goes for HOA withholding proper maintenance against any one unit. Were the other single family homes also roofed along with the townhomes? If so, then the one home not completed should be roofed as soon as possible, so that in future it will be on same timeline for future repairs. If the one home only needs to be roofed it needs to be paid same as others recently were paid ... otherwise you could open a HUGE can of worms if new owner pays for past owners transgressions. In the future within 20-25 years you need to have enough set aside in a Reserve Fund to pay for future new roofing. Again, you want to avoid Special Assessments as those should really only be used for emergency situations.

3. From what you posted it appears the HOA is the entity responsible for any payments to fix.

MichaelB44 (California)
Posts: 33

Posted:

I have a bid on the porch dated 7/7/2016 but I think the check was dated sometime this year (I don't have it in front of me at the moment).

We have never had a reserve fund nor an audit. When I was looking into those two options a couple months ago, it seemed like they were going to be prohibitively expensive. We are located in San Diego. If anyone has any recommendations in that area I would appreciate the information.

We don't have a separate account for the townhouse or family homes. We don't have a separate reserve fund, either. We have a checking account and it doesn't have very much in it. I don't know where to begin in terms of all the issues that are being uncovered.

Going forward, it is sounding like we need to have four accounts: a checking/reserve fund for the single family homes and a checking/reserve fund for the townhouses. Possibly a fifth account that co-mingles funds proportionally for road/pool/landscaping costs? Am I looking at this correctly or overcomplicating it?

RichardP13 (California)
Posts: 3,868

Posted:

You need only 2 accounts, one operating, the other reserve. Based on my experience, there should be at least two different assessments, one for the townhomes, the other for the single homes. The budget that is used should have variable costs, mainly, as I have to assume, the single homes pay for insurance and roofing on their own, while the townhomes will have more common charges.

How assessments are done should be in your CCRs, either within or as an amendment or exhibit.

If you have a reserve study, whether old or not, it will list whatever components the HOA is responsible for and from there you can determine how much is needed to properly fund.

My suggestion, get some professional help, as it isn't as difficult fixing as you think.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Michael

My first blush and I did not read in depth, is that your association does not seem to have clear lines nor guidelines drawn between the two types of structures. I believe there might be a need for 3 Reserve Accounts. One for the multi unit buildings, one for the standalone homes, and one for mutually shared items like roads, pools, landscaping, etc. Shared items should be shared equally like let us say $20 per unit/home per month for the General Reserves such as the pool. roads, etc.

Their should be two dues levels. One for the multi unit buildings and one for the standalone units.

If an assessment is required to build the reserves for either group, it should be proportional based on the needs of each group. If an assessment is necessary for the common items then it could be the same for each unit.

About that bone in your teeth concerning the patio/porch repair. Granted it might have been done/authorized improperly but if such repair is within the scope of yours docs (meaning the HOA was responsible for it) and the price was reasonable, then drop the issue.

Also the re-roofing all the homes except one home was very short sighted. It will have to be done sooner or later and the cost might have been less if done at the same time as the others.

I am not an accountant but I think a good accountant can set up a system that co-mingles funds yet shows where and what the money is for. I think in your situation, a professional accontant is needed to keep it all straight.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By RichardP13 on 06/14/2017 2:30 PM
You need only 2 accounts, one operating, the other reserve. Based on my experience, there should be at least two different assessments, one for the townhomes, the other for the single homes. The budget that is used should have variable costs, mainly, as I have to assume, the single homes pay for insurance and roofing on their own, while the townhomes will have more common charges.

How assessments are done should be in your CCRs, either within or as an amendment or exhibit.

If you have a reserve study, whether old or not, it will list whatever components the HOA is responsible for and from there you can determine how much is needed to properly fund.

My suggestion, get some professional help, as it isn't as difficult fixing as you think.

Based on my experience and your size of complex, your dues should be at least $350.00 or more per unit. I believe you mentioned you are at $195.00 now. The smaller the complex, generally, the higher the dues.

MichaelB44 (California)
Posts: 33

Posted:

Thank you all for your responses.

Richard,

Do you have suggestions (or are you allowed to make them) in regards to someone who can do a reserve study (one has never been done) and possibly an audit (the expense may not be justified if we can simply move forward with a clean slate from here) in the San Diego area?

Also, under California law, and recognizing my fiduciary responsibilites as a board member, may I (and other board members) simply drop issues, such as, possible mishandling of funds that come to our attention? That is, what are my obligations to the association in regards to recovering money that was used from our general fund for the family home and the money previous officers were paying to their family members?

If we can simply move forward, all three board members are wiling to do so. It sounds like we need to do some heavy spending to get in good standing and that might require some dues adjustments and/or special assessments. Is this something we can put before our members and, if so, how can I structure the explanation of what has transpired without opening myself or the board to a slander or libel claim?

RichardP13 (California)
Posts: 3,868

Posted:

Try these two links:

http://www.davis-stirling.com/Vendor-Directory

https://www.cai-sd.org/business-directory/wpbdm-category/reserve-studies/

As far as the money issues, chalk it up to bad choices.

Get together as much of the records of the association. If you had a management company, they are required to turnover all records.

As far what is said to the Members, if you are going to use a management company, get them on Board first. They can backup what you are trying to do moving forward.

MichaelB44 (California)
Posts: 33

Posted:

Quote:

Posted By RichardP13 on 06/14/2017 3:39 PM
Try these two links:

http://www.davis-stirling.com/Vendor-Directory

https://www.cai-sd.org/business-directory/wpbdm-category/reserve-studies/

As far as the money issues, chalk it up to bad choices.

Get together as much of the records of the association. If you had a management company, they are required to turnover all records.

As far what is said to the Members, if you are going to use a management company, get them on Board first. They can backup what you are trying to do moving forward.

Thank you very much for your helpful advice.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Keep in mind money used from general fund for the family home would have been an HOA responsibility so that is not really an issue. Sure the owner should have gone through the HOA and the association pay vs paying himself and getting reimbursed. But it was an HOA item to pay with regards to Miscellaneous Maintenance. Also, these items happened last year and the roof was as you noted 10 years ago.

I have found honesty is the best policy. Simply state it has come to our attention that mistakes were made over the last 10 years and we as an association need to ban together and move forward the right way in the future. The mistakes appear to be pretty much honest and not purposely done to cause harm, so I would not worry about fiduciary duty. Keep in mind it was other individuals duty in the past to prevent the issues, your current BOD is great in finding and recognizing the past issues and can avoid in the future.

To help you feel better let me tell you a story ... will make it short version:

My last HOA was a royal mess with developers violating laws including some criminal laws and we ended up in a lawsuit. Last year we sold and purchased in a new HOA subdivision. About 8 months after purchase before our annual meeting there was an HOA issue that needed to be addressed and which was a bit of another mess. However, our HOA President in the new subdivision went around to the 23 owners and met with everyone one-on-one with information from attorneys, county, etc. and what the recommendation was to fix. Because I had been in a royal mess and royally learned my state HOA statutes I pointed out that the fix may slightly violate a law. However, after reviewing all the information and our CCR's I also had determined same as the attorneys that the fix was about the only viable option. I also considered the fact if the issue ended up in court that most likely a judge would also see it as the only viable option.

I stated I did not have an issue with the proposed fix as long as we get 100% of owners to agree. If we get everyone to agree then that would protect the HOA and owners against any potential lawsuit (if everyone agrees then nobody can sue anybody). Also, we were amending the CCR's at that time and I pointed out additional changes to prevent the same issue in the future. The point is due to the open honesty we had 100% of owners participation in the meeting and 100% vote to agree and amend our CCR's. The new HOA also did not have any reserve and when I pointed out at the meeting the reason to have reserve and why ... we ended up with 100% agreement to increase our dues for our reserve until such time as the irrigation system can be paid for to replace. At that time another study will be made for the future.

Instead of a mess ending up in a costly lawsuit we all banned together in an open and honest atmosphere and made a choice to fix an issue and just move forward for the best interest and benefit of everyone. Sometimes it is better to move forward than to cry over spilled milk ...

MichaelB44 (California)
Posts: 33

Posted:

Thank you for that story.

I called a conference of the old board members, candidates for the new board, and all the officers and was able to facilitate a conversation that resulted in unanimous agreement that we would move past the issues without penalty to anyone.

JanetB2 (Colorado)
Posts: 4,219

Posted:

You can do a search on the site regarding Reserve Study because if I remember in the past Tim has posted some great links regarding Reserve Studies which could help you make initial determination yourselves vs paying large sum to independent company until your HOA gets back on its feet. Essentially you determine the costs to replace or repair items, then how long until needed to be replaced and make calculations. For example ... on your roofs how much was the cost in past, the roofs are currently 10 years old, they are 30 year roofs, so within next 20 years you will need X amount + estimated future cost increases + cost of potential minor repairs (if needed) = amount needed in reserve account within 20 years for new roof replacement. My new HOA has not had a reserve study, we did the calculations ourselves. However, ours is not as complicated and yours

. However, it will give you a starting point until your have money built up to pay for a proper Reserve Study. Bite everything off in small chunks so you do not get overwhelmed or in a future financial bind.

As far as the accounts your HOA needs to choose which would be easiest and best for yourselves. I would recommend at minimum three or you can have as you stated. Keep in mind you can have line items for each account so the regular checking can note X amount for townhomes and Y amount for single family homes, but you need to be sure to be accurate. The same goes for the reserve account. Then as John noted above you potentially need an account for your other items such as road, pool, etc. which all owners would contribute to equally.

I have a friend who has done HOA accounting for the past like 30 years and who I wanted to run your scenario past to see what she thinks, but she is currently out of town. She is supposed to be back in the next couple of days so I can ask her and see what she says. LOL ... when in any doubt ask he or she who knows ...

MichaelB44 (California)
Posts: 33

Posted:

Thank you, Janet. We would very much appreciate that kind of advice.

Richard, our old property manager has stated that he is willing to give us copies of anything but that he has to retain the originals for X amount of years.

JanetB2 (Colorado)
Posts: 4,219

Posted:

My doubt regarding the accounts is in your situation what would be best and easiest to avoid mistakes, especially when you are self managed.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MichaelB44 on 06/15/2017 12:09 AM

Richard, our old property manager has stated that he is willing to give us copies of anything but that he has to retain the originals for X amount of years.

Sorry, that is not true. The records are the sole property of the Association. There are certain records that must be retained by the Association, not the management company for a period of years.

KerryL1 (California)
Posts: 14,550

Posted:

Janet's suggestions for researching reserves are good ones, Michael. Do note that there's an excellent section on this topic at davis-stirling.com. It even gives you estimated lives of certain reserves components. Importantly, a doc in there discusses which times in your HOA are not reserves items, e.g., components that'll last longer than your buildings, etc. It sounds to me like you l need two reserves accounts: One for all owners and one for the houses. OR you need three: one for components that all may or must use, e.g., the pool, and one each for the homes and for the rest IF th latter may/must use compionest that the homes may not.

We have three areas to our high rise HOA: Base; Towers & Commerical. We have three reserves accounts, one for each. All Owners contribute to the Base for components that all may or must use, e.g., cooling towers (HVAC); roofs. The Comm. owner contributes to its reserve account for components that only he may or must use--a certain kind of plumbing valve, their street side awnings. The Towers contribute to their reserves account for components that only they must/may use, e.g., hallway carpeting, wall covering & paints + a couple of mechanical components.

We all also contribute to our operations budget, with Comm. contributing to their proportionate (5%) share of, our security, management & custodial staffs, etc. The Towers (80%) also contribute more due to the extra custodial services needed in the hallways, stairwells, etc.

this all was finally straitened out with the help of a social budget analysts, our reserves firm and our HOA general counsel. But we have 80+ reserves comments, so in a less complex HOA, you truly might be able to figure out reserves contributions for yourselves.

It makes sense to drop th past issues and move ahead, Michael. Good that so many of you agreed.

RichardP13 (California)
Posts: 3,868

Posted:

Michael

I would highly recommend using only 2 accounts, one for operating and one for reserves. California laws doesn't state you have to have a reserve account, BUT if you do, it MUST be separate. Having more than that, especially for just 21 units, well, make it more complicated than it means to be.

If the Association has never had a reserve study done, which I find hard to believe, then a new one would cost the Association somewhere between $1000-$1500. If one doe exist, a competent person can upgrade the numbers.

The key to all of this is the budget and how it is set up for the type of units on your complex. First, the CCR's will define how assessments to be divided between the two entities. It will also spell out what responsibility the HOA plays in the maintenance of the two entities. The budget should be laid out for both the day to day operations and the reserve components and the share of each line item of the unit owners.

For example, if two operating accounts are set up for townhouses and single family and you have to pay bills such as a water bill, do you write two checks, one from each account? KISS

An insurance company is not going to write a policy without reviewing your CCRs. They need to know what limits you are required to maintain, they want to know what common area elements the association is responsible for, etc. As a management company, especially if there is a mixed use situation, to see if the assessments in the past were done correctly, I review all the governing documents available. Best to correct things upfront than deal with a mess in the future.

Best of luck to you and your association.

KerryL1 (California)
Posts: 14,550

Posted:

While the Towers & Comm. each contributes to the Base water bill, for the operations budget, for example; only one check, of course, is written to the water co. Same with the many vendors we pay monthly from our Base operations budget. BUT, comm, for instance may not use our recreational amenities, e.g., the pool. So they do not contribute to the Base op. budget for pool service OR into reserves for surface relacement etc. of the pool.

I have NOT carefully read you CC&Rs excerpt, Michael, but at first glance it looks like the homes and TH reserves should be in two separate accounts. Keeping it simple might be a luxury in your case.

AmyB8 (California)
Posts: 9

Posted:

Richard, there hasn't ever been a reserve assessment. We bought our condo from an original owner and our neighbor is an original owner. There aren't many left, but I've spoken to them and tried to reconstruct as much of the association's history as possible. There is not a single piece of paper indicating an election or board meeting ever. The best we have are the original officers' names submitted to the Secretary of State decades ago, and keep in mind our status as an association has been suspended for nearly a decade.

I'm going to message you with our location because I don't think posting it would be appropriate but it would probably give you an idea of why any of your normal expectations aren't likely to apply.

AmyB8 (California)
Posts: 9

Posted:

Well it doesn't look like we can message people privately but suffice to say our community is small and doesn't have typical access to those kinds of services or expertise so we are often billed extra that usually results in doubling the cost of a service.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By AmyB8 on 06/15/2017 10:20 AM
Well it doesn't look like we can message people privately but suffice to say our community is small and doesn't have typical access to those kinds of services or expertise so we are often billed extra that usually results in doubling the cost of a service.

I can be emailed at [email protected]

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