Adding Bylaws on association fee for resale of houses

Started by CherylS • 7 replies • 2330 views

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CherylS (Pennsylvania)
Posts: 3

Posted:

I neeed to add a section in my bylaws to inform new buyers of the initial contribution to the capital funds of the association. I need some advise on wording does anyone have advise or experience when adding a section to the bylaws about fees. Here is what I thought.
Section 3a. Subsequent Funding. Subsequent funding, at the time of conveyance of each Lot from an Owner (i.e. Seller) to a new Owner (i.e. Buyer), shall be provided on the basis of a lump sum payment of $1,000.00, from each purchaser from an Owner (i.e. Buyer), payable at settlement. All sums collected as subsequent funding will be treated the same as Initial funding as set forth in Article III, Section 3 immediately hereinabove.

GeraldT1 (<Not Specified>)
Posts: 519

Posted:

CherylS,

If an initial contribution to the capital funds of the association is not already in your by-laws, is there a procedure that needs to be followed to amend that requires more than just one person adding it to the existing by-laws? What is the amount already stipulated in the initial funding set forth in your Article III, Section 3?

GeraldT1
NNJ

CherylS (Pennsylvania)
Posts: 3

Posted:

I am sorry this is in the declaration of covenants,restriction,charges Section 3 is basis of annual assessment and initial funding at time of purchase from the builder. But nothing about resale of house and what happens, people are selling there house and we need to make sure the new people buyers pay into the capital funds a section called Seller/Buyer adding something in the laws requires we can add something in there with 30 days notice does this make sense.

RogerB (Colorado)
Posts: 5,067

Posted:

Cheryl, this would require amending your Declaration. Since the Buyer is paying for the equity, which includes the Seller's previous payments into the association's capital funds, why do you want to add this? If you really want to try to get this approved as an amendment, and I doubt you can get sufficient approvals, then I would state the amendment so that the payment will made at the time of closing. It could be a negotiated item between the Buyer and Seller.

HaroldS (Arizona)
Posts: 906

Posted:

Why are you trying to make buyers(sellers) pay for your capital assessment shortage? You should have been collecting adequate assessments all along to build the necessary funds. You apparently kept the assessments low and now think you can soak the new owners - well it actually soaks the seller because the value of their property just went down $1,000. (This amount would have to be disclosed to the buyer before the sale.) And everyone knows it is the function of an HOA to maintain property values!!!
Roger is right: you will need to change your documents by vote of the members to be able to charge this fee. This is not something 'you" can do. A buyer is already buying and paying for the seller's paid in equity to the HOA. At the beginning the first buyer pays to build up a non-existent capital fund. Thereafter a diligent board should have set up proper assessments to maintain the needed funds. If your capital assessment fund is short you will have to raise your assessments by the allowed amount each year until you get it where it should be. Or try to get a special assessment to cover your shortage. Harold

CherylS (Pennsylvania)
Posts: 3

Posted:

The "Declaration" is part of the set of documents which the buyer is given before settlement for review, as per the Planed Community Act of 19xx. They can recind the entire agreement of sale and get all their money back it they want, and if they are not given it, can realy raise a problem.

My intent in the wording was that is would be payable at settlement, and paid by the buyer as they would have a stake in the long-term care of the development. If they negotiate a lower price in order to make up for the $1,000 - so be it. I doubt anyone even thinks of the prior contribution as equity they are buying. They look at the house and lot as the tangible asset they are buying.

The expansion of the capital fund is neecded for three reasons. First, it generates interest used to offest routine expenses. Secondly, when repair is needed for capital items like the bus shelter, tree replacement, guard rail replacement, or something in the retention basin(s), the future cost could be very high. A special assessment for this may not cover the bill. Lastly, when money is used for eventual repairs of capital items, once the $33,000 is gone, there is no provision to rebuild it.

As far as approvals, everyone that I'v explained it to thinks the new folks should have some "skin in the game" too. The only issue I see is objection from the owner of a a house currently for sale. as this can't even be in effect for 6 months - not a big issue.

JulieS (Georgia)
Posts: 412

Posted:

Our developer charged a one time initiation fee of $100 to the original home buyer of each home. No fee was ever collected from re-sales in the neighborhood because of the way the developer set up the covenants. We just amended our covenants to allow for an initiation fee equal to the current years dues. We needed a 2/3 majority vote and got it in about 6 months (July). Currently, our dues are $450/year. This money will go into our reserve account and will help to keep the annual assessment from going up so much each year. So far, no one has said anything about paying the fee when they bought in the neighborhood. There are additional postings on this site related to this issue....

HaroldS (Arizona)
Posts: 906

Posted:

once the $33,000 is gone, there is no provision to rebuild it. >>>
Yes there is - it is called reserve funds. You need a study done for suggested amounts to set aside each year to cover projected future capital expenses. Your yearly assessments will probably have to be raised to fund those reserves. They can generate interest too (but I am curious why you are relying on interest income for day to day expenses.) You are skating on thin ice if you are expecting resales to fund your capital expenses - if you manage to get the required % of votes to do so. Actually if you have $33,000 now sitting there without a specific plan for using it, IRS would be very concerned about your non profit status.
Your comment is cavalier and flip regarding if the sellers end up paying the $1,000 -"so be it". You have then failed your fiduciary duty by reducing the value of your seller's property by $1,000. (And in today's deteriorating market, you know the seller will probably have to eat it.) The seller has supposedly been paying his fair share all along and perhaps also the original entry fee and to be socked with another $1,000 at sale is not fair - but of course he is moving out and is no longer a concern of yours. I'm glad you aren't running my HOA!!! Harold

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