Property Manager that refuses to properly account for our money

We are under declarant control, with a board president who is completely disengaged, so I am at a loss as to what I should do.

We are a community in which everybody pays a general monthly fee to pay for amenities and common areas. A portion of our community is set aside as a 55+ community. We have our own clubhouse and pool, and we pay a separate, additional monthly fee that is only to be used for our amenities.

Unfortunately, our property manager refuses to report our money separately. There is only one Balance Sheet and one Bank Account. They do, after my demanding, provide a separate P/L statement for our fees. At the end of 2021 our fees exceeded expenses by over $8,000. I repeatedly told the property manager that since we do not have a separate bank account or balance sheet, I fully expected our January 31 P/L sheet to show $8,000 in income, as carryover from the prior year.

Today the statements came out, and naturally that did not happen. Our $8,000 was moved into the community wide balance sheet. This is, btw, not the first time they incorrectly accounted for our money. The property manager bought a $9,000 golf cart and charged half of it to our 55+ amenities last year. Only at my insistence did they move it to a single line item in the general budget.

So my question is, is there any way that we residents can force the property manager to properly account for our money? They should be fired, but we are powerless to do so. Is here a legal recourse here? Do we have to lawyer up? Because in that case we would probably spend more money on an attorney than the $8,000. What are our options?

I have no idea what you are trying to say. Our governing documents specify what the funds can be used for. Our 55+ fees cannot be spent on anything other than our amenities. What I expect, is exactly that.

I don’t think I explained. These are single family homes. I don’t have a relationship of any kind with the developer - he has become totally disengages. He does not return text or emails. I have not physically been in his presence in over a year and have not spoken to him in two months. Since he is the board, and I am just the sole resident board member, I cannot get him to do anything.

As far as the finances, it’s pretty simple. All 500 homeowners pay $95/month, which pays for a clubhouse, pool, maintenance of common areas, property manger, etc. The 150 of us who live in the 55+ section pay a separate $25/month, which pays for our own clubhouse and pool. The governing documents are quite clear that our $25 can only be used for our clubhouse.

However, at the end of the year, when our 55+ fees exceeded our 55+ expenses, the property npmanager swept it all into the general fund, so it can be (improperly) used for items other than our clubhouse and pool.

With no functioning board to make the property manger correct this, I don’t know what I can do. Can I go to the attorney general in our state?

I believe you are incorrect. They can’t for instance, drain our bank account. We are operating under a contract and laws. They cannot violate the contract or laws that apply.

Also, the board President can make all decisions. He is the only one that can make decisions, as he is the developer.

Ahh...... your new here. Happens all the time. Start reading the archives.....

The Developer OWNS the HOA. The owners do NOT. So what is happening in your HOA is in the hands of the Developer till turn-over. What is or is not "legal" is subjective. Your allowed to see the records you got. Not allowed to manipulate it to what you think it should be.

Again a HOA is ONLY funded by it's members for it's members. There isn't a "magical" tree of money funding a HOA somewhere. So to be upset that there wasn't more "income" means there wasn't any more collection of dues by the owners. If you have 100 owners and each is charged a $10 dues, then the HOA income is $1000. Anything else in the budget is most likely what the Developer has funded out their own money. Most HOA developers under charge the first few years to attract buyers. It is usually after turnover the dues increase as expenses increase the HOA has to pay.

A HOA is typically a non-profit but NOT a charitable one.

btw, since you seem to believe the developer can do whatever he wants with our money, do you agree that as party to a contract filed with the town and the federal government, he must adhere to standard accounting practices?

I agree with Kerry's take on this.

Even though you are under declarant control and you can't force that person to do anything, he needs to be aware of the rules governing 55+ communities (*) and the fact that he may lose that designation if the rules aren't followed. It would be a good idea if others in that section were also aware of these rules, since at some point you'll be in control and will need to know these things. I think pooling your money and buying a few hours of a knowledgeable lawyer's time would be worth it.

(* The 55+ designation is an exemption from Fair Housing laws that allow these communities to legally discriminate based on age. In exchange for that, the communities have some strict procedures that must be followed, such as periodic re-certification that residents are in the correct age group. I'm far from an expert on this, but I would also be concerned about keeping money separate - it may have more consequences beyond just annoyance.)

I guess spending money on an attorney is our only resolution. To be clear, though, the issue is not that the subsection of our community that is 55+ could lose our designation. The issue is that our property manager, likely through incompetence and not malice, is taking money from the 55+ assessment and giving it to those who do not live in the 55+ side.

Well, that is the conundrum I identified earlier, and that is why I posted my question. The PM absolutely misappropriated $8,000 of the 55+ people's money. This is not a question. But hiring an attorney would probably cost more than $8,000. So I am curious if there is some other solution. Say, get the state involved. Is there a state board of some kind that would intervene on our behalf?

Note, though, that we cannot use HOA money to sue him - because we don't control the HOA and could not get approval for the expense. We would have to pool our money as individuals. Again, not a good option.

Also note that the issue with the golf cart is that he used 55+ people's money to pay for it. This is the entire point of my issue, and one that seems to be escaping people. There are 150 people in the 55+ side, and 350 people who are not. The 55+ folks pay a separate assessment that is to be used to pay for our clubhouse and pool. The PM is using it for other things, which violates our governing documents.

I dont see it as misappropriated. If the developer visits the clubhouse 1 time with the golf cart, it would be a justified expense for "maintaining" the 55+ clubhouse. I'm not saying its right..... just saying its legal.

State wont care. Nothing criminal. No smoking gun.

I dont believe you would be in danger of loosing 55+ status of your community because its still under construction, and developer control. So legally its not even finished.

Not the advice you want to hear......

When the HOA is turned over to the people who live in the HOA you can make whatever changes you want.

Yes, that is exactly what this thread is about. We pay a separate assessment for those amenities. But the PM took $8,000 of that money and moved it into the general fund.

I have been arguing for a year that the 55+ assessment needs its own bank account and it's own balance sheet. I do see your point, though, that in addition to this misappropriation having a financial burden on the 55+ residents, it could endanger our FHA standing.

Master and Sub Association discussion follows. The 55+ community is the Sub.





DavidG45, would you please quote the covenants that state the 55+ fees may only be spent on the 55+ community's amenities? Also please pay particular attention to any covenant that might possibly give the still-in-control Declarant the right to move money from the 55+ side to the non-55+ side.

I think the following is one amazing observation:I may have more to say in this vein. I am gathering my thoughts to see if I think there is a bona fide violation of the FHA's provisions on 55+ housing here, and right now. As CathyA3 says, such a violation may be in the form of how the 55+ community is advertised. Or CathyA3 will maybe post a further profundity on the point.

DavidG45,

Can you please quote for me the sections of the Master's and the Sub's Declarations (one for each) that state how the assessment is supposed to be calculated?

Also is there any verbiage in the two Declarations about excess funds and what should be done with them?

I know what common sense says. Plus I agree with your concerns. But so far, I do not quite see the language that nails this. I tend to think it is there. But we (you) have not quite put your finger on it.

Is the Sub association here its own corporation, with the latter corporation being distinct (at least per the Delaware Secretary of State's records) from the Master Association's corporation?

I am still pondering CathyA3's point. So far all I have is the following: if the Master and Sub mix their funding, does this violate boundaries set out in the law that say where the 55+ community ends and where the Master non-55+ community begins? I am going to start by reviewing what the definition of a 55+ community is.

Where I am struggling with

FHA law

a non-55+ Master

but a 55+ Sub subject of course to the 55+ provisions of the FHA

is my belief that, sure, a 55+ Sub can lawfully have some portion of its assessments be payable to the Master and still be a lawful 55+ community under the FHA.

The federal government enforces the FHA via direction from the Code of Federal Regulations. Here's the meaty part of the CFRs as the CFRs pertain to 55+ communities:

https://www.govinfo.gov/content/pkg/CFR-2017-title24-vol1/xml/CFR-2017-title24-vol1-part100-subpartE.xml

Section 100.306 refers to covenants demonstrating that a 55+ community intends to operate as housing for folks 55+ or older (as the latter is defined by law). But this section does not say paying a portion of the 55+ community's assessments to a master is disallowed.

Still, the Sub is advertised as a 55+ community that complies with certain, recorded covenants. Some of the Sub's covenants pertain directly to supporting 55+ people's needs. Arguably a separate "55+ only" pool directly supports older people. Because it's a 55+ community, the senior citizen swimmers are allowed to say, "We do not want kids in our pool" and face no repercussions from HUD. If the Declarant is, say, taking money away from the 55+ pool's reserves, then could one argue that the Sub and Master are violating covenants, that are well advertised, that make the Sub a 55+ community?

I feel like my argument is strained. I cannot quite nail it. I do think the point about the FHA here and 55+ community does deserve a mention. But the bulk of the argument against what the OP described may lie more simply in what the covenants say about how assessments are to be used, both post-declarant and while the Declarant is still in control.

If you cannot persuade the developer to instruct the property manager to do as you wish (which I think is both right and reasonable) you can either file a lawsuit or wait until the association is turned over to homeowner control.

All the things the developer "can't" do are contingent upon someone holding them accountable. That someone is the membership.

There is no government oversight of HOAs.

Your governing documents are a private contract, enforceable by the parties involved, through the court.

There is no government body, no attorney general, no ombudsman, no city council, etc that will force a board (developer or homeowner) to obey their governing documents. Even in states with laws about what an HOA can and can't do - there is no government body, AG, ombudsman, city council, etc who will investigate and enforce those laws on behalf of the membership.