BOD provides no capital budget - sends invoices for owner responsibilities

I am a fairly new member to this site and this is the first time participation in this forum, however, I am at my wits end trying to find some guidance/answers. We are a 20-year old, 118 unit condominium association in Georgia. The association is run by an elected (I use that term loosely as many times there is no one who volunteers, therefore, there is really not an election!) Board of Directors. A licensed Community Association Manager (CAM) is also utilized.

Per our governing documents, a capital budget is supposed to be prepared annually, which should take into account the number and nature of replaceable assets, the expected life of each asset, and the expected life of each asset, and the expected repair or replacement cost; set the capital contribution; and be distributed to each member in the same manner as the operating budget.

No capital budget has been provided by the Board (current and past) for four (4) years! For the past two years I have asked the CAM about the capital budget and voiced my concerns…even referencing the section of our governing documents. I have gotten answers such as “Approx. 4 years ago, a reserve study was done for the assoc. The BOD is using that for projected allocations. Every owner should have received a copy of this study.” I know of two owners (me and another former Board member) who have printed out the 38 page document which is not easy to decipher.

My concerns are as follows:
Last year (2007) the Board spent approximately $8000 out of reserves, without an approved capital budget, to pay the balance for parking lot seal coating. This year (2008) with a capital reserve balance of about $87,000, the Board has decided to paint the entire property a different color for $36,315. A set of outside stair cases will also be repaired and another set replaced however no cost was provided for these items. The cost of this endeavor is at least 40% of our reserves, not including the staircase repair and replacement. All this spending without the Association members being provided and/or approving a capital budget.

A Painting Information and Schedule was put in everyone’s door on Friday and Saturday 9-5 and 9-6-08, which states that “Each owner will be invoiced as follows and will have until November 30th to pay. You may choose to pay in one payment or three payments.”

The items which will be invoiced are unit front doors and unit balcony railings….both of which, according to our governing documents in the Units and Boundaries section, are included as part of our unit. The condos do not open to an enclosed hallway. The Maintenance Responsibly section of our documents state that both items are an owner’s responsibility. The same section contains those items which are the Association’s responsibility and the process for the Board to follow in a “failure to maintain” situation, including 10 days for an owner to complete what the Board says needs maintenance, repair or replacement.

My questions:
Is it “legal” for capital reserves to be spent without a capital budget having been presented, voted on, and approved by the Association?

Is it “legal” for the Board to paint a unit’s front door / balcony railings even if they are considered part of the unit?

Any ideas / suggestions on how to address this situation…Painting starts Sept 15th.

Other info to note: When several Association members first heard about this painting initiative (through the grapevine), they followed our by-laws and gathered signatures on a petition to request a special meeting. Although a meeting was held, the special meeting notice specifically stated that no vote would be taken…the issues would be decided by the Board. Only the CAM spoke and answered questions at the meeting. The Board didn’t speak, take minutes, or any other notes about the concerns voiced, even about the capital budget. It was very disheartening to many in attendance

I'm not up on Georgia law regarding the reporting of a Capital Budget, but if I were you, I'd be running for the board myself and firing the Property Management Company. You hire them to do the work of keeping you legal since you are all volunteers and don't have the time to keep up on the rules and regs. If they are not following the law, something is wrong.

A reserve study can be dificult to decipher. Here's a hint. Reserve study companies like to give you mountains of paper to justify their charges, but usually the important information is only on the 2 pages that list your assets, years remaining before they need to be repaired/replaced, and the projected cost of repair/replacement of the assets. In California, a new reserve study is required every three years.

It sounds like you need to get involved. Homeowner Associations are only as good the activity of their membership.

KimC4
First, it’s always hard to believe that in a community of over 100 units like yours, there aren’t 5 or 6 individuals who can combine clear-headed thinking with the willingness to spend a bit of time volunteering for Board responsibility. That said, your association is clearly not functioning well and it will take a few people, like yourself, to take over and apply some rational thinking to your situation.

Once you have your people lined up (and the sooner the better) I believe you should scrap the old reserve plan and embark on getting a new one prepared, pronto. The new one should not only conform to all the principles of a good plan, but in your case special attention should be given to what constitutes common property and what doesn’t. You simply can’t have a plan that’s at all fuzzy in regard to what kinds of repairs and painting are the responsibilities of the individual unit owners and which are deemed common property, to which everyone contributes.

The two main elements in all plans are (1) a professionally-created schedule of repairs and replacements needed for 30 years showing the timing and the anticipated costs, Number (2) is a schedule of funding required to pay for the repairs. And the funding should be sufficient to create reserves balances that will not only pay for the repairs, but, in addition, create a cushion for unanticipated changes to the repairs schedule. With cushions “the thicker the better” is usually the best approach.

Once all of this is done, then your next job is to sell it to the unit owners at large, and once accepted by everyone, they pay, you collect, you repair, it’s all orderly and everyone sleeps soundly from that point onward.

A fairy tale? Actually no. Well run communities that go about these things in a businesslike manner can and do run their operations smoothly. It’s a step-wise approach that works. Is it easy? No. But the rewards are worth it.