HOA president & vice president problems

My south Florida townhome and villa HOA is almost 24 years old. Our community is an HOA under F.S. 720. The Association owns and is responsible for maintaining the roads. The Association is responsible for landscaping and exterior pest control. It also provides regular roof maintenance and replacement (except after casualty), and is responsible for maintaining and painting the building exteriors and fences (except after casualty). We have 2 tennis courts, a basketball court, a pool, with sauna and barbeque, and a clubhouse.

We are an aging community on several levels and there are problems on the horizon. Reserves have never been funded properly, roof maintenance has been done on a reactive basis, if at all, and there is a $1.4 million improvement loan (for building mansards) that we'll be paying off for the next 20 years that is reflected in a monthly maintenance increase which began in 2006.

I've been an owner here for almost 3 years, and this year I am on the board as a director. My husband is also on the board and is treasurer. Until this year, no former treasurer has been involved in examining the financials. Everything was entrusted to the property manager. Needless to say, after close scrutiny, the PM has not been providing accurate accounting and many corrections have been requested.

Problems with the PM aside (and there are many, sloppy accounting, unlicensed and inexperienced personnel, double billing, conflicts of interest with contractors...I could go on) the real issue is with the budget.

Our monthly maintenance fees are not funding reserves the way they need to be. As part of the financial committee we've electronically compiled and corrected the financials (since the PM has not done it) and, since there was resistance to a reserve study, attempted to compile our own for budgeting purposes. The results were as expected - grim. We would need to raise monthly maintenance by at least 75% or make a special assessment for anywhere near proper funding based on our rough estimates. Our Association Docs limit us to a 5% maximum increase in maintenance fees per year.

So we created a budget based on a 5% increase and delivered all the caveats regarding the potential for serious assessment in the short term. We have 20 (of 78) flat roofs that are well past their useful life and have never been maintained, and nowhere near enough in reserves to cover them. The president and vice president said 5% was too much and would create a burden on the older residents. They are also against any special assessments for the same reasons. Their philosophy is, literally, that someone else in the future should have to worry about it. The rate of inflation in Broward County, FL as of the end of 2006 was 4.7%, our vendors - including our PM - raise their fees by 5% annually. Yet even faced with hard numbers, they refuse to see the reality.

This type of thinking, to me, is not only myopic, but fiscally irresponsible, and while I sympathize with our older residents and certainly don't enjoy the possibility of having to pay more, isn't the Board responsible to all owners for the proper management of the association?

I am at a loss as to what to do.

EW,
I can sympathize with you concerning the older folks with the "let someone down the line pay for it" attitude but if every person who thought like that had the rights and powers to ignore Reserve Funding requirements, then all of the HOAs would go belly up in no time.
Florida Statutes 720; 303, section (6) a thru h have been added this year to insure that Reserves are duly figured on an annual basis. Like it or not, you guys are in dire need to redo your reserve funding. And I hate to say it but you may have to do the special assessment. You truely need a financial expert to get you back on track. And the longer this gets put by the wayside, the worse it will become when those roofs need replacing or your roads need redoing.

I guess that all that is left is to try and get other resident support, one by one. If showing the other Board members the new Statute and they still do not understand that they are far behind in funding, can you talk with your association attorney? Send him an e-mail stating your valid concerns. Sometimes it takes David to kill Goliath.

It is the BOD duty to ensure that the reserves are properly funded. A complete reserve study must be done and all the facts MUST be presented to the association members. They have to vote on the increase. If the membership fails to accept the proposed rate increase for funding they could be sued bt future owners buying into the association only to have a large assessment dropped on them because of unproperly funded reserves. As long as the BOD presents them to the members they can not be sued for failing their responsibility, but the association can. It is not easy to pass but it must be presented in a fashion that shows the results if not funded. Good Luck. Larry

EW1,

Could it be? Could I have read a post from what is my Florida counterpart, just that I've read the post now in the infancy of my HOA/COA, 24 years premature? Hmmm.

My COA portion of the community is underfunding reserves by apprx. $18,000.00 yearly, and has been doing so for 2 years. So in 24 years we'll be underfunded by at least $432,000 and more for lost earnings in interest unless someone like me has more influence over the powers that be. If construction costs do not increase in 24 years (an impossibility) I predict a $432,000.00 assessement will be necessary and mean $3,456.00 per townhouse owner (at least). However, what chance do you think I stand of getting anyone to fund now for a future they won't be a part of? Slim chance.

Now to your post. In addition to paying off your current loan of $1.4 million, you still need to be setting aside maintenance transfers to reserves for the replacement of all common elements that the Association must maintain. Factor that into the equation.

Capital Reserve Replacement Analysis studies by and independent qualified Engineering Firm need to be updated typically every 5 years. Has your Association ever had one, if so, when was the last time it was updated?

Board members have a fiduciary responsibility to fund for the replacement costs of the elements their Association must replace. Anything less is a breach and could wind up in litigation.

My recommendation is for you to take Small Steps. Getting the Board as a collective group to transer anything more to reserves than they are currently setting aside is a victory. In other words be willing to compromise. A jump in transfers from 5% to the 75% is unlikely so be willing to settle for anything more than 5% but less than 75%. Document in minutes that your wish that an increase would be more however you are satisfied that the Board recognizes the challenges that the Association faces. Bees with honey EW1, not with salt.

Sounds to me like the Pres. and VP are grandstanding to the older community and therefore wish to be in it for the longhaul. Scary. Maybe you could orchestrate someone to take at least one of their seats?