There's no getting out of paying a special assessment
Q: I am unemployed, 70 years old and have a reverse mortgage. My condominium is having a special assessment to repair our balconies. The special assessment is $25,000 for each unit. In January they want the first payment and a second payment later in the year. We do not have the money to pay these assessments. Will this jeopardize our reverse mortgage? Will they put a lien on our property? Can they foreclose our property?
A: Yes, you will be obligated to pay the special assessment, and yes, the board can lien your unit and file a foreclosure to evict you from your home. There is no way around a special assessment even with the reverse mortgage, which will close out. You will be on the street with no income from the mortgage. I would seek ways to borrow the money. The only gleam of hope is that your association and board have a reserve fund to pay for the repairs.
Word to the wise: Keep making all your debt payments
Q: When I heard the news about foreclosures frozen because of fraudulent documentations by bank employees, I decided to stop making payments to my mortgage company until I get some answers from them. Do I still need to pay my monthly maintenance fees, which include cable, water, parking, plumbing and electrical basic maintenance in my building?
A: Pay your debts on time. The mortgage problems were caused when mortgage companies sold the paper to others including government agencies. In doing so, the paperwork was split into "strips," meaning securitized and purchased by investors through investment vehicles such as mutual and pension funds. The entire process was problematic due to the way the paperwork was handled.
It was not the bank employees but investment brokers, government agencies (allegedly such as Fannie Mae and Freddie Mac) and their attorneys who created the problems. In order to fully understand the problem, the news will not provide all answers. To solve your problem, keep paying your payments. Two wrongs do not make a right.
Budget should be drawn up and approved by the same board
Q: Regarding homeowners associations, if a budget goes into effect the first of the year, is it prepared by the board of the preceding year or the board of the budget year?
A: In most associations, including condominiums as well as HOA, the financial year starts Jan. 1. If you use another date, then you would reset the dates that follow.
Work to draft the budget should begin in August or September. You begin to collect information on future expenses, contracts renewals, expected increases for expense and reserve studies. The proposed budget should be completed in October in time to mail out a proposed budget to the members. It should be approved at the November board meeting.
Some documents require a 60-day notice for the members and this may require the budget to be approved a month early. The board that is the standing board would approve the budget.
Would it really be a proper thing to have a new board approve the budget as they may not have the experience or knowledge of the expected expenses? Keep in mind that budgets must be approved but that does not mean that they are written in stone. Budgets can be modified at a future date with proper notices to the members. Normally it is not a good thing to change the fees in the middle of the year, but it is possible. The new board also can approve a special assessment if needed.
Directors, not members, vote on employees and contractors
Q: I think a board of directors can hire a licensed manager by majority of board votes without a vote by HOA members. Absent specifics in bylaws, can a board of directors, by a majority vote of the board, terminate the manager and replace it with another, also without a vote by the association members? Naturally, any contractual terms would have to be considered, but review the question as if the manager's contract has not been renegotiated and is no longer effective even though the manager continues to provide service and receive payments.
A: Members elect the directors to operate and manage the affairs of the association. To assist the directors and officers, the board can engage or dismiss qualified licensed persons. It is not the members' position to vote on issues of employees or contractors, but the directors' duties.
As to a contract expiring, the relationship can continue in most cases to automatically renew or continue month to month subject to the language in the agreement. I would advise that the board put in writing their intent to continue or not continue the contract in advance of termination date.
To avoid a possible lawsuit for wrongful dismissal, I would suggest that you have your attorney provide guidance and advice to the board before contracting for services or terminating services.
Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., No. 201, Winter Haven, FL 33884-4115. Please include your name and city.