Road Maintenance Fees

Started by JohnP9 • 12 replies • 2904 views

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JohnP9 (North Carolina)
Posts: 16

Posted:

First time posting so bear with me. We are 140 lot (some developed and some not) HOA in North Carolina. Our BOD has for the last 3 years put before the owners a ballot measure that reads "For new home construction, a Road Maintenance Fee of $3,000 shall be paid by the owner to (Name of HOA). This measure has been approved by a majority of voting members each time. My question is: Is this legal or does it need to be in the by-laws? Also there is a cover letter to the ballot that say's People paying this fee are except from any future road assessments for a period of 7 years. This exception is not mentioned on the ballot itself. Is this legal and binding or can the BOD someday change thier minds and resind the exception?

Thank for any and all help

JoeW1 (New York)
Posts: 728

Posted:

JohnP9 - In many associations there is a one-time working capital contribution owners pay to join the associations. $3,000.00 sounds excessive, but maybe not. The one-time working capital fee is written into my By-laws, not sure about yours. I know you said the ballot measure has been going for 3 years, but how old is the association you live in?

GloriaM (North Carolina)
Posts: 829

Posted:

John:

We manage an HOA that did not have the road maintenance in their CCR's. We did do an amendment to the CCR's by majority vote of all the Owners who 100% participated and the CCR's were amended to now collect a annual fee every year to fund the road reserves (the streets are private and will remain that way.)

I would suggest you first look in your CCR's, not the bylaws and see if its there. Or ask the board for the amendment that was passed. It would have to be recorded in the County.

Bylaws are the duties and offices that are held by the officers. The CCR's are your Covenants, Conditions and Restrictions, they are the documents that are recorded. Bylaws usually are not, especially here in NC.

JohnP9 (North Carolina)
Posts: 16

Posted:

Thank You Gloria and Joe.

Our HOA is about 30 years old and the roads are private and will remain private. As to the CCR's there is no mention of this fee. The board has decided to use the ballot method instead of changing the CCR's or By-Laws. I agree it should be in the CCR's or BY-Laws and am worried they may rescind the 7 year excemption on those who have paid it when it suits them, since it is not on the ballot only in the cover letter. Can they say it is not legally valid since it was not on the ballot therefore it was not voted on and passed by the people?

Thanks
John

JoeW1 (New York)
Posts: 728

Posted:

Quote:

Posted By JohnP9 on 09/14/2007 4:36 AM
Thank You Gloria and Joe.

Our HOA is about 30 years old and the roads are private and will remain private. As to the CCR's there is no mention of this fee. The board has decided to use the ballot method instead of changing the CCR's or By-Laws. I agree it should be in the CCR's or BY-Laws and am worried they may rescind the 7 year excemption on those who have paid it when it suits them, since it is not on the ballot only in the cover letter. Can they say it is not legally valid since it was not on the ballot therefore it was not voted on and passed by the people?

Thanks
John

JohnP9,

Just to clarify, what you really mean is that the part that is not on the ballot/voted on is that people paying the $3,000 fee are exempt from any future road assessments for a period of 7 years. And that this measure has been voted on for the last 3 years for new construction only?

The concept of a one-time contribution exempting owners from any future assessments, especially road assessments, is IMHO very shortsighted. I don't mean to be controversial but my guess is that for the first 27 years of your association there has been inadequate reserve funding. I could be wrong of course but it seems that the hefty $3,000 fee is trying to compensate for an inadequacy in reserve funding for the roadways.

Third question, how many units have closed in the last 3 years the $3,000 ballot measure has been in effect? In other words, how much revenue has been generated by the new construction residents?

What is wrong with the roadways, what is the cost of repair or replacement? How did the Board arrive at the $3,000 figure. And last but not least, why should those who've lived in the HOA not have to pay their fare share of any assessment for roadways since they've gotten the most use out of the common element?

JohnP9 (North Carolina)
Posts: 16

Posted:

Joe
You are correct. The exemption is not on the ballot and the fee is for only new construction. In the last 3 years 12 homes have paid this fee and are exempt from road assessments only any other assessments they are required to pay.
Yes it is a measure to compensate for past boards poor planning.
The roads are 30 years old and do need paving shortly. We have funds from past supluses and things that currently leave us about 10,000 short of the cost to repave. The BOD is proposing a special assessment for the shortage on all property owners except those that paid this fee. My concern is that the BOD could recind this exemption by saying it was not on the ballot and therefore is not valid. Can they do that legally?
John

JoeW1 (New York)
Posts: 728

Posted:

My math shows you're talking about a relatively small assessment amount per unit owner that did not pay the fee.

If the BOD does not rescinds the promise than 12 homes paid the fee, 128 homes did not. Is this correct?

If correct $10,000 divided by 128 homes (140-12)is $78.13 per household.

If the exemption matter wasn't voted on, probably yes the BOD could rescind it. Your gov. docs. may detail emergency assessments and the BOD is granted some latitude. My BOD promised no increase in maintenance for the subsequent year and still had to raise the fee anyway. No one expected this promise to come to fruition anyway so it's the BOD that looked rather foolish.

In the event the BOD rescinds, the cost per 140 households to cover the $10,000 is $71.43. Honestly, the difference is negligible and the new construction homeowners contributed $36,000 to the kitty which was a good lump sum to gain some interest. It only seems fair to me that the owners that did not contribute the $3,000 should pay the $6.70 each ($78.13 less $71.43).

NancyD1 (Florida)
Posts: 447

Posted:

Quote:

Posted By JohnP9 on 09/13/2007 4:57 PM
First time posting so bear with me. We are 140 lot (some developed and some not) HOA in North Carolina. Our BOD has for the last 3 years put before the owners a ballot measure that reads "For new home construction, a Road Maintenance Fee of $3,000 shall be paid by the owner to (Name of HOA). This measure has been approved by a majority of voting members each time. My question is: Is this legal or does it need to be in the by-laws? Also there is a cover letter to the ballot that say's People paying this fee are except from any future road assessments for a period of 7 years. This exception is not mentioned on the ballot itself. Is this legal and binding or can the BOD someday change thier minds and resind the exception?

Thank for any and all help

John, I would question the legalities of only charging new home owners for these roads. Was an attorney consulted before this recommendation was made or did the BOD just decide this was the easiest way to get the monies for the lack of reserves? I would also question a ballot for this. The only people who would be included are the members that already have a stake in the roads but have not paid; verses the new construction members who had no vote.

The HOA is not the builder and they are charging newly built homeowners for roads that are already part of the HOA. Were these roads part of the CC&R's document that the original developer turned over to the HOA? Why is the builder not charging or why is the cost not built into the construction costs? Are the roads a part of your reserves and is it a line item in the budget? Are the new owners, that have paid exempt from paying this line item, even though it is part of your annual dues?

Is it legal? NO! An attorney should have been consulted. I would present this to an attorney and ask for his opinion, in writing. The situation you described and the way it was handled may open a Pandora's box and that evil may come back to haunt the HOA for years.

JoeW1 (New York)
Posts: 728

Posted:

NancyD1 - The old owners were charged as well, in their payment of maintenance fees for 30 years. Unfortunately they were not charged enough as time went on. In a way the $3,000 is a penalty of sorts but I see it as a one-time working capital fee. That they are exempt from a road assessment for 7 years may equalize things. I agree that this is not proper however 12 owners already contributed $3,000 each. I doubt the HOA will give them a refund and assess everyone equally. LOL.

NancyD1 (Florida)
Posts: 447

Posted:

Joe, The HOA may not give the new homeowners a refund but I am sure that they will win more than $3,000 each in a court of law. There re only two ways this would have been legal:

1.)if these lots and the new roads were not a part of the original declaration (plots and plans). Then the present HOA could institute an merger and aquisition of this new property. If the land has been common to the original declaration and the HOA maintained this land for the past 20 years, they have a contractual liabilty for it and the fees should have been apportioned throghout the community.

2.)If the new members have a special class of membership, and it is in the doc's, OK. If there is no special class, it is reverse discrimination.

I don't know if there is a common swimming pool, but say there is, and that pool was constructed poorly and has to be replaced. Would the new owners pay a additional fee because the HOA was shortsighted in charging for the past 20 years, or would just the old owners pay because they have lived there for the duration. What about the person who bought 4 or 5 years ago? He has only been paying on those tennis courts for a few years verses a person who has lived in the community for 20 years. I realize these roads are new, but they are a common element.

If the roads are part of the reserve and the reserve is used in the calculation of the Maintenance fee, are these new homeowners paying this or is it deducted from the fees for those that have paid already?, the BOD said they would not have to pay anything for seven years.

The HOA must have violated there restrive covenants and by-laws. I don't think that these doc's said that they can apportion special fees to new homeowners.

JohnP, were these lots owned by the HOA, individuals, or a developer? A quick check on Lexis shows that the first purchasers of that lot since 10/1975 have to be given a Subdivision Street Disclosure Statement. If they were given this statement these new members would not have paid this additional fee.

JohnP9 (North Carolina)
Posts: 16

Posted:

Nancy D
The lots are owned by individuals. The BOD thinking on this road maintanance fee is that as new homes are being constructed the traffic damage of heavy trucks and equipment on the roads is offset by this fee. I agree with all other posters that the BOD has been very shortsighted over the years and now that the roads need repaving they are waking up to the fact they need to budget for capital improvewments. I for one do not trust our BOD, thier self-serving and hidden agendas are well known here. That is why I asked if they could recind the exemption since it was not on the ballot, only mentioned on the cover letter. They are now talking of putting in a by-law that requires new constrution to pay a IMPACT FEE (renaming the Maintanance fee). That way they can use the money for any project they want. Such as pool or landscaping.

NancyD1 (Florida)
Posts: 447

Posted:

John, I hope your BOD has a good D&O policy. They should check with an attorney before they try to change any doc's to wording this type of transaction. NC will not accept a change that is selective in nature to a particular homeowner or their emissary. You would have to charge everyone for the use of the roads.

You cannot charge Impact Fees or whatever you want to call them in a private community for travel on roads in NC. The impact fees for new home construction are paid when the permit is issued. I glanced at the NC laws on HOA's. They are vague at best. They do refer to the use of private and public roads and their use.

These new homes and the abuse of your streets should have been reserved in your budget a long time ago. I don't know if I answered your question, can they rescind the exemption; yes they can, it was not on the ballot, not voted on and illegal to procure.

A quick search on Lexis Nexis (Superior Court Cases)shows five cases (1 in NC) of private communities that charged selective fees in private communities. In all of these cases the communities returned the money and 3 of them had interest attached to the orders.

I hope that the money already collected is in an interest bearing account. Your HOA is going to need it when they try to impose it on the first homeowner they charge, that checks the legality of this.

JoeW1 (New York)
Posts: 728

Posted:

NancyD1 - My understanding of John's post is that the 7 year fee waive is for road assessments only. Other assessments are not exempt. The docs most likely won't say they can apportion special fees to new homeowners, not everything is contemplated within the original docs. I don't see anything wrong with a one-time working capital contribution from new owners to join and live in the community. However, as I've said repeatedely, $3,000 sounds excessive. There needs to be some serious reserve budgeting, rebudgeting and I doubt John's Board has the capacity to handle the concept and requirement to do so.

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