Capital Improvements

Question: Do you think the installation of a lawn sprinkler system would be classified as a capital improvement or maintenance. I’m President of a small HOA (12 units); our CCRs state that a capital improvement requires an approval vote of 60% before a special assessment can be issued. If it’s a maintenance issue, the BODs can just approve it and do a “special assessment” for it. Each owner will be charged a one time fee of around $1600 and then the monthly water bill will be covered under the annual assessment fees. Our meeting is in 1 week, so I just wanted to know what some of you think—would it be a “capital improvement” or “maintenance”—the BODs and I think it’s a “capital” and should be voted on but some of the owners think it’s “maintenance” because it will be used to maintain all the lawn areas and they want it installed without a vote and just hold the meeting to “discuss” it. Information on cost has already been passed out to the owners and I think we’ll have the 60% anyway as we have had very good feed back but you never know until you get in the meeting and we really need the sprinkler system. I think we have 1 owner who will not vote for it—and maybe 2 (one real new owner and 1 owner who is trying to sale their unit) more that could go either way. However, if it is passed (either by the 60% owner votes or by the BODs) and any of those 3 refuse to pay the assessment, I want to make sure the BODs and I have done everything correctly just in case we have to go to the extreme of taking out a “lien” to collect the money----thoughts????

thanks

Rita:

I would classify as a capital improvement. Do your docs specify a certain dollar amount as a capital project, I know a lot of public institutions and entities do. But to me the installation is a capital, repairing or replacing equipment once it is installed would be maintenance.

thanks to all--that was our thinking too--

thanks again--

Rita,

I would also consider this a capitol expense since it is a new system. If your 60% vote approves and some owners do not pay, you can lien. After it is approved send out the assessment notices, don't forget due and past due dates. After the past due you have to follow FL720 for collections.

I belong to an HOA in CA. I am wondering if there is a statute of limitations when defining "replacement" and "capital improvement."

Our current BOD has voted and approved a 94k+ park area to replace a park area that was taken out over 7 years ago due to broken, run-down equipment. The equipment was not replaced. Only sand and a swingset remain at this time.

The monies will be drawn from the reserve account (an account bordering on an unhealthy state.) It has not yet been determined or communicated whether money will be raised via special assessment or a raise in dues. We have 330 units.

I am not against having a beautiful park area. My concern surrounds our current reserves.

Any input would be appreciated.

VickiB1,
I agree with Brad, no question, it has to to capitol expense.
I read from your post, the monies will be drawn from the reserve account.
If so, why the need for a special assessment or raise in dues. Something confusing here. Your documents should address all of this. In general:

1. Any expenditure this large has to be made by the members, no matter what it is used for except in rare cases that has to do with disaster conditions.

2. If the Board takes the money from the reserve account, they need a vote, a valid reason, and define how the money will be replaced.

3. Unless you are the exception this kind of money is going to call for some adjustments to your Budget and Long Range Plan.

4. If the Board does not call for a special meeting to discuss this whole business and come up with a proposal that addresses all the above, I would try as hard as I could to stop them. You should have procedure for owners to call special meetings.

I am with you about reserve funds and do not approve of using them except for what they were designed for; Emergency use.

After saying all that, anytime I have be involved using any reserve funds and a meeting is called and either the Board recommends we spent the money and gaither proxy votes or the measure will be made as a motion and the majority of homeowners will vote to spend the money.
Why, I believe many HOA's and Condo's are owned by investors (flippers), used as rental property income, don't expect to be an owner next year, purchased the property as a second home and immediately put it on the rental market, and sad to say, most of these folks are money motivated and instant gratification seekers.
I bet if you can force them to have a members meeting, it will still pass, and a special assessment will be made.
We are presently paying a special assessment for the last six years, lots of folks that voted for that are gone, we are now going to talk about another special assessment, and the justification is good, but all it really amounts to is poor planning and bad management in the past, way past.