Pending assessment

Started by KrisJ4 • 9 replies • 328 views

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KrisJ4 (Hawaii)
Posts: 16

Posted:

I became a resident of our condominium approximately two years ago. During the purchasing process, I inquired about any impending assessments. The response I received, presumably from the property management company, was negative. However, a few weeks post-move, I was informed about an assessment conducted on the waste lines, which is projected to cost around $4 million. It seems that I am required to pay a flat fee of $32k for this re-piping project.

In light of this situation, I have a couple of queries:

- In future real estate transactions, what specific questions should I pose to avoid or minimize the impact of such assessments? This is not my first experience with unexpected assessments post-purchase.

- Considering that the current project has been in the pipeline for over five years, at what stage can a new owner initiate legal proceedings if discrepancies arise during the assessment disclosure process?

-I have reviewed the cost breakdown and noted that the actual pipe replacement, as per the Statement of Work (SOW), is estimated to cost no more than $5,000. Given that I will be undergoing a kitchen remodel during the project timeline, all pipes will be readily accessible for replacement. Therefore, the contractor's responsibilities will be limited to pipe replacement only, eliminating any additional tasks. This situation leads me to question the justification behind the substantial assessment fee. There are several condos in the same situation as me so it appears the contractor will be getting paid the same for less work. In everyone experience, is a flat rate fee typical? Can they not calculate the actual work done in a unit and reimburse the owner later?

Any guidance would be greatly appreciated.

CathyA3 (Ohio)
Posts: 6,299

Posted:

There is a lot we don't know about this.

* What is the scope of the project? Does it include only certain buildings, or all buildings in the community? Does it include work outside of the buildings (ie. piping to connect the buildings to the main sewer lines? If so, what's the extent of this?

* Does the project include pipe replacement inside units? If so, what's the extent of this? (Since you mentioned condos, I expect some portion of your unit's waste system will probably be owned personally by you, and some portion will be common elements (which will probably be association responsibility). Do you know where the dividing line is?

Without knowing these things, we can't tell if the costs are reasonable or not. Condos are complicated, the dividing lines between Unit and Common Elements are sometimes not clear (although your governing documents should define these things). Generally pipes that serve only a single unit are the considered part of the unit and condo owner's responsibility - but there are always exceptions to this.

It may or may not be reasonable to charge a flat fee. The contractors may have bid the job at a flat cost per unit, so that's what the association will have to pay. It can be more difficult for workers to handle an exception rather than doing exactly the same thing in multiple units. They may not be doing more physical work, but they may be doing more planning and fiddling around. Oddly enough, the planning and fiddling can actually take more time and cost more money than the physical work - just depends on the circumstances.

As for the legal questions, you'll have to talk to a lawyer. It's possible that at the time you asked your question, the board had not approved the special assessment and so it didn't exist at that point. Or the community manager - assuming that's who you asked - hadn't been told. Or it was a new manager who didn't know what they were doing yet. There are a number of possible explanations for what happened besides someone lying to you - but without knowing the details, it's hard tell. Real estate and community association laws also differ from state to state - so something that passes muster here would be an issue in your state.

As for what else you could have done to avoid this, in my area all assessments for a home are listed on the county treasurer's web site, along with information about property taxes, sales history, and the like. It's another potential source for finding out this information.

KrisJ4 (Hawaii)
Posts: 16

Posted:

The SOW is all the buildings are to have the waste lines and vents replaced. The overall cost of $32k covers the demolition (%15 of the cost), pipe replacement(%25 of the cost) and restoration(%60 of the cost) My question isn't necessarily the $32k, rather the fact everyone is expected to pay the flat rate rather then having it based on the actual amount of work. My condo for instance the contractor only has to cut out old pipe and replace it with new so the actual cost would only be the 25% of the $32k. Because the HOA decided to do flat rate, the contractor walks away with 100% of the money with only having to do 25% of the job in my unit. Is Flat rate charge standard in these situations? Are there other options?

DouglasK1 (Florida)
Posts: 2,046

Posted:

I assume this is a special assessment from the HOA, not a local government project, correct?

In my state, it is typical for closing agents/title companies to send an "estoppel request" to the association prior to closing. This request normally includes current dues status, current violation status, any expected upcoming special assessments, etc. Was anything similar to this sent to your association before closing? If so and they responded no, I would make a records request for the last couple of years of board meeting minutes. Something this large must have been in the works for a while so it should have been known way more than a few weeks ahead of time.

You might have a claim against your title insurance or possibly a case against the association if they were asked about expected special assessments and didn't disclose. Unfortunately, you would likely need to get a lawyer involved to get any recovery. It also would have been better to pursue this back when you first found about the assessment.

As you asked about what to do next time, I would suggest sending something like the attached redacted estoppel example. FL law requires associations to respond to this request and to be bound by the response, not sure about your state law. Some of the requests have more questions, such as violation status.

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Escaped former treasurer and director of a self managed association.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By KrisJ4 on 10/03/2023 10:22 AM
Is Flat rate charge standard in these situations?

I would expect a special assessment to be assessed the same way regular dues are. If all units pay the same dues, then the same for a special assessment. In some condos, dues vary based on square footage or some other variable, in that case I would expect the same of the special assessment.

Escaped former treasurer and director of a self managed association.

KrisJ4 (Hawaii)
Posts: 16

Posted:

You guys are awesome, thank you so much for the responses! I wish I had found this forum years ago!!

LoriM15 (Florida)
Posts: 1,009

Posted:

You are certainly taking this more calmly than I would have. I am not a lawyer, but I would check with your attorney and see if you can figure out if this was in place before you bought and somebody just forgot to tell you, because you might have a legal action against the previous owner or the real estate agent. Also, you might want to see if this is covered by title insurance because of a mistake with the estoppel or escrow before closing.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Douglas

I do not like the question is their any planned on up coming assessments for two reasons. First is that a PM may not know if the BOD is discussing an assessment. Second is that until approved there is no special assessment.

I know of one case in MA where a person purchased a townhome and a Special Assessment ($30K) was approved by the owners (85% approval) several months after he purchased. He took his seller to court claiming as she had been on the BOD up until the sale, she had to know the assessment was forth coming. Judge disagreed basically saying no on knew for sure until it was voted on.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By JohnC46 on 10/03/2023 12:42 PM
Douglas

I do not like the question is their any planned on up coming assessments for two reasons. First is that a PM may not know if the BOD is discussing an assessment. Second is that until approved there is no special assessment.

I know of one case in MA where a person purchased a townhome and a Special Assessment ($30K) was approved by the owners (85% approval) several months after he purchased. He took his seller to court claiming as she had been on the BOD up until the sale, she had to know the assessment was forth coming. Judge disagreed basically saying no on knew for sure until it was voted on.

John,

I agree that the question might not catch every case, but as treasurer I handled these estoppel requests and it was on most of the ones we received. That's also why I suggested reviewing BOD meeting minutes for the past couple of years. If this was actively discussed for a year and not disclosed on an estoppel request 2 weeks before closing, I think the buyer has a good legal case, even if the final assessment amount wasn't known at that point.

Escaped former treasurer and director of a self managed association.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KrisJ4 on 10/03/2023 9:11 AM

- In future real estate transactions, what specific questions should I pose to avoid or minimize the impact of such assessments? This is not my first experience with unexpected assessments post-purchase.

In addition to the governing documents:

I would ask for minutes of the last 6 board meetings and last 2 annual meetings (will tell you what has been talked about).
Copy of budget
Copy of reserve study

Quote:

Posted By KrisJ4 on 10/03/2023 9:11 AM

- Considering that the current project has been in the pipeline for over five years, at what stage can a new owner initiate legal proceedings if discrepancies arise during the assessment disclosure process?

From my reading of the Hawaii Condominium Property Act, specifically [§514B-94] Misleading statements and omissions; remedies:

A complaint should be brought within 2 years of purchase (can be longer but makes it harder).

The remedy is to get the purchase price back and lose the property.

Obviously, consult with an attorney first.

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