requiring bond/trust account

Started by JimA19 • 15 replies • 291 views

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JimA19 (Georgia)
Posts: 54

Posted:

floida HOA considering requiring a trust account/deposit of 5000 for new entrant, to reduce the irritation of requiring adherence to covenants. after sufficent notification, improvement would be paid out of trust account.
do you see any problems

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By JimA19 on 03/20/2022 3:26 PM
floida HOA considering requiring a trust account/deposit of 5000 for new entrant, to reduce the irritation of requiring adherence to covenants. after sufficent notification, improvement would be paid out of trust account.
do you see any problems

Both your covenants and Florida Statute FS 720 likely prohibit whatever bone-headed, undoubtedly rogue board, scheme this represents, for several reasons.

Your board needs an education by a competent HOA attorney on what the purpose of covenants and bylaws is.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Sounds like you have some real brain power on your Board.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Top marks for creativity, but otherwise... nope.

The board needs to have a talk with the HOA attorney. The cost of an hour of the attorney's time will be less than the cost of the lawsuits that would follow any attempt to do something like this.

Yes, enforcement of the covenants is a pain in the posterior. If that board is lucky, the covenants will allow for fines and will also allow homeowners to take action against neighbors who don't follow the rules.

JimA19 (Georgia)
Posts: 54

Posted:

the comments were most helpful. we have a good board and president who have spent years upgrading covenants and bylaws. we have a sound enforcement/fining component prepared by a HOA lawyer and we have had to utilize those provisions. the community looks good.
however, some feel that the future crop of Board members will not care to enforce covenants since they will have to enforce on their neighbors and friends ( one future board member has already allowed major covenant violations years ago, when president)
we are looking for a less onerous means of ensuring covenant enforcement, that would increase the chances of covenants being enforced as we move through time with different Boards......perhaps that is bone-headed.

would appreciate any success stories in that regard

CathyA3 (Ohio)
Posts: 6,299

Posted:

You have limited ability to control what future boards do. In fact, I'd argue that you shouldn't be able to do something like this. With enforcement of covenants, you have something that's obviously positive, so it obscures the fact that future boards should have the right and ability to figure out what works for them. Responsible and reasonable directors can disagree about what is an appropriate level of enforcement, and it can boil down to judgement calls.

You've already gotten off on the right foot, so lax enforcement in the future will fall under the heading of selective enforcement - and homeowners will be more likely to push back.

Ultimately, the authority is going to lie with the homeowners. If at some point they feel that their board is letting the place fall apart, they already have the tools needed to do something about this: elect different directors who see things more their way.

KerryL1 (California)
Posts: 14,550

Posted:

Your concern is legitimate, JimA, and congrats on a Board seems to be doing a good job. We have, indeed, seen posters here whose board s had made fine progress, new directors came a long, and, in various ways caused setbacks to previous prof press. It's one reason some directors serve arm after term. fear things would fall apart if they leave.

In your case, though, and assuming your covenants give owners the right to request that violations be cured, or even make steps to cure them, those of you who leave the Board and neighbors who liked your policies can step up and place pressure on a lax Board.

KerryL1 (California)
Posts: 14,550

Posted:

Your concern is legitimate, JimA, and congrats on a Board seems to be doing a good job. We have, indeed, seen posters here whose board s had made fine progress, new directors came a long, and, in various ways caused setbacks to previous prof press. It's one reason some directors serve arm after term. fear things would fall apart if they leave.

In your case, though, and assuming your covenants give owners the right to request that violations be cured, or even take action to cure them, those of you who leave the Board and neighbors who liked your policies can step up and place pressure on a Board IF it's lax.

JimA19 (Georgia)
Posts: 54

Posted:

again i did not describe the situation carefully enough. we have a small community with an extremely low HOA fee, mainly because homeowners volunteered for most community level projects. this saved the community money, kept the fees low.
the community is getting older and many of the long timers are too old to provide a wide range of volunteer effort.
we also have a new crop of homeowners, many escaping mobile home parks, now owned by private investment interests and their rapidly escalating fees. they like the low fees however, when asked to volunteer for community work, the response is......"not my job, i pay fees, never had to work in the mobile home park" the result will be escalating hoa fees, raised recently but not sufficient to cover anticipated future costs ( we have a rudimentary reserve fund analysis)
do we raise everyone, of do we reward the old timers for their past efforts?
anyone have a success story to share in this regard?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By JimA19 on 03/22/2022 2:27 PM
again i did not describe the situation carefully enough. we have a small community with an extremely low HOA fee, mainly because homeowners volunteered for most community level projects. this saved the community money, kept the fees low.
the community is getting older and many of the long timers are too old to provide a wide range of volunteer effort.
we also have a new crop of homeowners, many escaping mobile home parks, now owned by private investment interests and their rapidly escalating fees. they like the low fees however, when asked to volunteer for community work, the response is......"not my job, i pay fees, never had to work in the mobile home park" the result will be escalating hoa fees, raised recently but not sufficient to cover anticipated future costs ( we have a rudimentary reserve fund analysis)
do we raise everyone, of do we reward the old timers for their past efforts?
anyone have a success story to share in this regard?

Pfft.

RTFC.

(Quit making up contractual terms. Read the freakin' covenants.)

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Simply say you get what you pay for in a HOA. It's okay if you all decide you don't want to volunteer anymore. However, that comes at a price. That price is raising dues to cover the expense of the new "hired" services people want. The good news is that is to split evenly amongst ALL members. Which lowers the individual costs. The bad news is that requires more management and/or expense to your HOA.

So simply saying your fees will cover it means pay more fees...

Former HOA President

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Reward the old timers? No disrespect needed but you need to go back to square 1 and educate yourself on HOA's and how they are run and the constraints that a Board has based on your governing docs, state laws, federal laws, etc.

CathyA3 (Ohio)
Posts: 6,299

Posted:

You've got bigger problems.

If you've been relying on volunteer labor, not only have you been misleading owners about the true cost of ownership, you've almost certainly been taking on significant liability risk without sufficient insurance. You've been one uninsured trip to the ER away from financial disaster. (*)

You've also made it much harder for yourselves to raise assessments to where they should be, because everyone has been living in a fool's paradise.

So forget about "rewarding the volunteers" - you haven't got the budget for it. What the board needs is a Come to Jesus meeting about finances, followed by a Come to Jesus meeting with the homeowners to explain all this.

(* Cathy's Rules for Life #7: Why You Shouldn't Rely on Volunteer Labor in HOAs/COAs

- You don't get professional quality work, you don't get any warranties or guarantees, and workers can walk off the job at any time.

- Volunteers aren't "free". You need to carry additional insurance equivalent to workers comp, plus additional beefed up liability insurance. See your insurance agent.

- Using volunteers isn't sustainable. Just because you have willing workers now is no guarantee that you'll have them in the future.

- Using volunteers hides the true cost of ownership, and makes it more difficult to raise assessments to proper levels in the future. This is especially bad if your CC&Rs require homeowner approval of assessment increases.

- You've made future boards' jobs much more difficult.)

CathyA3 (Ohio)
Posts: 6,299

Posted:

Oh, and when you finally get around to doing a reserve study, you'll see the consequences of all of that cheap volunteer work. Poor quality maintenance shortens the useful life of physical assets, meaning you'll need to replace them sooner, meaning your expenses will be higher than they needed to be.

Using volunteers for this sort of work is a Very Bad Decision for which the community will pay.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By CathyA3 on 03/23/2022 5:47 AM
You've got bigger problems.

If you've been relying on volunteer labor, not only have you been misleading owners about the true cost of ownership, you've almost certainly been taking on significant liability risk without sufficient insurance. You've been one uninsured trip to the ER away from financial disaster. (*)

You've also made it much harder for yourselves to raise assessments to where they should be, because everyone has been living in a fool's paradise.

So forget about "rewarding the volunteers" - you haven't got the budget for it. What the board needs is a Come to Jesus meeting about finances, followed by a Come to Jesus meeting with the homeowners to explain all this.

(* Cathy's Rules for Life #7: Why You Shouldn't Rely on Volunteer Labor in HOAs/COAs

- You don't get professional quality work, you don't get any warranties or guarantees, and workers can walk off the job at any time.

- Volunteers aren't "free". You need to carry additional insurance equivalent to workers comp, plus additional beefed up liability insurance. See your insurance agent.

- Using volunteers isn't sustainable. Just because you have willing workers now is no guarantee that you'll have them in the future.

- Using volunteers hides the true cost of ownership, and makes it more difficult to raise assessments to proper levels in the future. This is especially bad if your CC&Rs require homeowner approval of assessment increases.

- You've made future boards' jobs much more difficult.)

Well said.

BancsS
Posts: 269

Posted:

Quote:

Can you be specific about what projects the volunteers do?

In my previous HOA, volunteers mowed the common areas and repaired fencing. They also did minor cleanup around the main recreational pond and put out the swim platform. For anything more complex, professionals were called in. Mowing the common areas is an ongoing, seasonal project. The HOA owns a tractor/mower and the shed that it is stored in. I do not know about any insurance coverage for the volunteers. There are about 3-4 mostly retired gentleman doing the mowing. Some are also board members. There could be a potential issue when and if these retired gentleman become unable to do the work. My husband mows on a golf course where the oldest mower is in his 80s. But there are some younger folks in the neighborhood who may be able to fill in that gap if necessary. This arrangement seemed to me to be very successful and it did save the HOA a lot of money because the amount of mowing required is quite substantial.

It is important to keep the HOA in sound financial shape. Do not reward the old timers with lower dues. You could recognize them with an appreciation potluck or something like that. Raise the dues for everyone.

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