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ParrisG (North Carolina)
Posts: 9
Posted:
We have some residents who wish to make significant changes to a common area in our development.
They know that the cost could be significant and want to pay for all or a portion of the changes.
Of course, the changes must be voted on. But these residents want to help by funding the changes.
So, what are the ramifications of allowing residents to fund these changes?
KerryL1 (California)
Posts: 14,550
Posted:
You'd definitely want your HOA attorney's advice on this one. And your CPA's. There seem to be many angles to such a proposition re: the owner's obligation to care for the items and how the Assoc. needs to word future maintenance costs responsibility and placing the relevant parts of the Improvement in the reserves study. .

I assume this isn't the case, but let's say they want to donate a swimming pool and are willing to pay for every aspect of installation, design, etc., etc. But the much bigger expenses come over time after installation.

Hope the owner doesn't think of this as a charitable donation write-off.

You're ise to get owner feedback, Parris, if such a thing becomes real.
DavidG45 (Delaware)
Posts: 994
Posted:
Quote:
Posted By ParrisG on 07/10/2023 10:44 AM
We have some residents who wish to make significant changes to a common area in our development.
They know that the cost could be significant and want to pay for all or a portion of the changes.
Of course, the changes must be voted on. But these residents want to help by funding the changes.
So, what are the ramifications of allowing residents to fund these changes?


Funny timing - I was going to ask the same question. Some ideas people have floated include:

* Pay to have trees planted on common areas
* Pay for a swimming pool heater to extend our swimming season

This might be a case where a resolution would be needed that specifically excludes those owners from liability or responsibility of future costs. The heater, for instance, many people would like but they don't want the up-front cost.
KerryL1 (California)
Posts: 14,550
Posted:
With a pool heater, as I tried to suggest above, it'd need to be placed in the reserve study for replacement/repair. I don't think they last super long, so the HOA Owners also nees to feel OK by the estimated replacement cost. In addition, there'd be operating budget expenses to maintain it on a regular schedule and to run it.
ND (PA)
Posts: 792
Posted:
In addition to the initial cost of purchasing/installing an improvement, you must also consider continued/recurring/future maintenance and repair costs as well as eventual replacement costs. So you must understand who will burden all of those costs (likely the entirety of the HOA membership) and whether or not they are all willing participants in the decided-upon course of action.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By ParrisG on 07/10/2023 10:44 AM
We have some residents who wish to make significant changes to a common area in our development. They know that the cost could be significant and want to pay for all or a portion of the changes. Of course, the changes must be voted on. But these residents want to help by funding the changes. So, what are the ramifications of allowing residents to fund these changes?
I am glad you understand the owners must vote on the changes as described in the covenants. But if I were you, I would humbly caution the owners: if these changes would increase the assessment beyond what it would be without the changes, and if a vote to make the changes is successful but does not have approval of all owners, then count on it, someone is going to object. This someone may very well sue.

Amendments have to be reasonable. Do not expect a court to approve a majority forcing a minority to accept costs that are not delineated in the current covenants.

Furthermore, whoever is researching this should talk to the insurer. Today insurers are looking for any excuse to drop clients or raise rates and by a lot. If these folks are talking about say a pickleball court, I think the blessing of the insurer will be essential. Why? Because the current covenants likely do not speak of a pickleball court.

I also wonder how this plan would go forward. I think the vote would have to happen first. But the vote is clearly going to be conditioned on the money being available from this sub-group of owners. Formulating an agreement seems perilous.

As an owner or director, I would vote to reject pursuing this. If owners are all upset, have the HOA attorney address them.
CathyA3 (Ohio)
Posts: 6,299
Posted:
Don't do it. Leaving aside the issue of the required vote, if you allow this, then the resident will come to view that portion of the common area as "theirs" and conflict will probably follow. If your CC&Rs are like mine, they will probably contain language stating that all owners are entitled to use all of the common areas for their intended purposes, and no one can interfere with others' enjoyment of these areas. (I'm in a condo community, and we owners are tenants in common. We own an undivided interest in all of the common areas, with the important word being "undivided". Nobody can say "this bit is mine" and make changes to it - for example, fencing in the area around their patio.)

If the resident has a good idea and the association attorney says it's OK, then poll the entire community and see if people are willing to pay to install and maintain the whatever-it-is. If it looks like you'd have enough interest that the item would be approved in the formal vote, then you can go for it. But otherwise, no way.
KerryL1 (California)
Posts: 14,550
Posted:
Ah Cathy can be so concise: "If the resident has a good idea and the association attorney says it's OK, then poll the entire community and see if people are willing to pay to install and maintain the whatever-it-is. If it looks like ... the item would be approved in the formal vote, then you can go for it. But otherwise, no way."

With the attorney's wording I'd want to make sure that once the donation is incomplete(let's say it includes some sort of construction or installation,) the owners who donated have no further voice or usage than any other owner--in the appropriate legalese. "Polling may be adequate vs. a formal vote. Need attorney's option on that too.

While you're at it, I can't off hand see reasons why whatever-it-is would requirement and amendment to the covenants. Common areas are improved all of the time. Components are added too without Owners voting to amend anything. Our HOA several months ago installed 2 new fire doors on every floor of out 25 story twin towers, one on each side of the elevators vestibule. They stay open all of the time, but close automatically in cases of fire or smoke. The original doors always were required to be closed. Very expensive and very much loved by all. No amendment needed to any documents (except th reserve study).
ElleN (Idaho)
Posts: 4,420
Posted:
For one: Any "significant changes" that change the plats also changes the CC&Rs. An amendment is necessary.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
A HOA is funded by it's owners for it's owners. There is no reason you can't vote to have a special assessment and do the project. What is wrong with that? You want something done, then best to raise the money and get it done. That is the purpose of a special assessment or raise in dues. It is to pay for the items the HOA needs. Why should it be a "special group" who will probably ask for reimbursement. It won't be a tax deduction for them. The HOA isn't a charitable non-profit.

My advice is everyone decide what they want done. What the cost will be to get it done. Who will do the work. How to get a special assessment if needed to pay for the work. Once you all collect the money from ALL the members (not the few but ALL pay a special assessment) do the project.

Our HOA we had an issue with our pool deck. We raised $8K for it to be redone. Everyone contributed $125 in a special assessment. It was done. You get what you want in a HOA as long as everyone contributes their fair share...

Former HOA President
CathyA3 (Ohio)
Posts: 6,299
Posted:
Quote:
Posted By ElleN on 07/10/2023 4:09 PM
For one: Any "significant changes" that change the plats also changes the CC&Rs. An amendment is necessary.

Yes. We don't know exactly what sort of improvement the resident has in mind. Minor things won't require an amendment but capital improvements would - which is why I suggested polling the community first before the association goes to the expense of having the lawyer draft an amendment, only to see it fail in the formal vote. In my experience, a failed amendment costs just as much as one that passes.

Example: a 55+ community in my area created a "memory garden" where family members of residents can donate benches, pavers, and other items in honor of the homeowner who'd passed away. It's a lovely spot and a lovely idea. The creation of the garden required a vote since it's pretty large and requires upkeep by the HOA. But adding a new paver or other item probably doesn't, just the approval from the board. If someone wanted to donate a large sculpture or other art installation, I'm guessing that would also require a homeowner vote since art installations have financial value and would probably be considered a capital improvement.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By ND on 07/10/2023 12:17 PM
In addition to the initial cost of purchasing/installing an improvement, you must also consider continued/recurring/future maintenance and repair costs as well as eventual replacement costs. So you must understand who will burden all of those costs (likely the entirety of the HOA membership) and whether or not they are all willing participants in the decided-upon course of action.

Sound advice.
KerryL1 (California)
Posts: 14,550
Posted:
Parris needs to read his own documents about "capital improvements," how they're defined, and to what extent, if any, amendments to the covenants are required. His steps statutes might matter as well.

What Cathy asserts, for example, is not the case in my condo HOA. First, in. our CC&Rs, Article 2, Definitions: "CAPITAL IMPROVEMENT. The term 'Capital Improvement' means any discretionary and new addition to the Common Area of a substantial improvement (costing greater than 5% of the gross Association Budget) that did not previously exist within the Project."

Under Art. 4, Powers of the Association," the Board or owners gathering 2/3 of voter's signatures on a petition, and then 2/3 of owners voting for approval may get a capital improvement instructed, installed, etc.

No amendment to the covenants is required (assuming no change to the Condo Plan).
MikeB23 (Louisiana)
Posts: 109
Posted:
The residents of our condos pay property taxes based on their portion of the assessment for the Common Area. In Louisiana at least, upgrading the Common Area will result in increased taxes for all owners.

Owners should be aware of this before the vote if it applies.

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