DavidW5 (North Carolina)
Posts: 565
Posts: 565
Posted:
In 2007 our HOA ran a budget surplus of $102,000. This was due to the developer controlled board unnecessarily raising the monthly assessment, poor budgeting, failure to carry out maintenance and repairs, and lower than expected snow removal expenses. These excess funds have been allowed to remaine in the operating account. The HOA checking account now has a balance of over $300,000! This, of course, greatly exceeds the FDIC insurance limit.
First question: Has the management agent failed in their fiduciary duty by allowing those funds in the checking account exceeding the FDIC insurance limit to be at risk? The FDIC is expecting a significant number of bank failures this year. The management agent has also allowed several CD's holding replacement reserve funds to accumulate interest which raises their principal over $100,000.
Second question: What should happen with the surplus funds from 2007? Can they properly remain in the operating account? If they are not placed in the replacement reserve fund, do they create a tax liability for the HOA?
On a slightly different topic: Here in Virginia a developer controlled board can choose to pay the assessments on the unsold lots or pay any year end deficit. Our developer chose the option to pay any deficit. In 2006 the HOA ran a deficit of $40,000. Despite being billed for that amount by the Management Agent, the developer still has not paid the deficit. Is the HOA entitled to interest on that unpaid amount? How can we force payment by the developer? The developer controls the board and therefore, directs the actions of the HOA attorney so that avenue is not available. Any suggestions?
Dave
First question: Has the management agent failed in their fiduciary duty by allowing those funds in the checking account exceeding the FDIC insurance limit to be at risk? The FDIC is expecting a significant number of bank failures this year. The management agent has also allowed several CD's holding replacement reserve funds to accumulate interest which raises their principal over $100,000.
Second question: What should happen with the surplus funds from 2007? Can they properly remain in the operating account? If they are not placed in the replacement reserve fund, do they create a tax liability for the HOA?
On a slightly different topic: Here in Virginia a developer controlled board can choose to pay the assessments on the unsold lots or pay any year end deficit. Our developer chose the option to pay any deficit. In 2006 the HOA ran a deficit of $40,000. Despite being billed for that amount by the Management Agent, the developer still has not paid the deficit. Is the HOA entitled to interest on that unpaid amount? How can we force payment by the developer? The developer controls the board and therefore, directs the actions of the HOA attorney so that avenue is not available. Any suggestions?
Dave