HOAleader.com - Tip of the Week - June 17, 2022
Published: Fri, 06/17/22
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HOAleader.com - Tip of the Week - June 17, 2022
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In this week's tip, we answer an HOAleader.com reader's question: "In reviewing our HOA's financials for the past year, I discovered that a check for $5,000 was written out to cash (not to a particular individual) and categorized under the account of bonuses by our property management firm.
I asked who this cash was given to and whether there were 1099s filed if any person received at least $600. No response. Any thoughts about this practice of writing large checks to cash and the tax and accounting implications?"
A community association manager in the trenches daily thinks this sounds hinky.
"Our systems would prevent anyone on our staff from writing a check to cash," says Isaiah Henry, CCAM®, CMCA®, AMS, CEO of Seabreeze Management based in Aliso Viejo, Calif., which manages about 500 associations throughout California. "It's a huge red flag."
That's the precise term our other experts also used in responding to this reader's question. "It does raise red flags," according to Molly Peacock, counsel at Rees Broome in Tysons Corner, Va., who has represented condos and HOAs for 16 years. "It's unacceptable. It's a clear negligent practice at best. And at worst, it shouldn't be allowable by that contract between the management company and its client."
Exactly the phrase used by Scott D. Weiss, CCAL, a community association lawyer at Ortale Kelley in Nashville, Tenn., who represents more than 650 condos/HOA communities throughout the state, who added: "It's highly unusual. It would need to be included in the management agreement that the management company or staff are entitled to a bonus. But even if that were the case, the bonus checks wouldn't be written to cash."
Let's be clear: It's not that bonuses are a bad idea or improper. Read our new article, https://www.hoaleader.com/members/4530.cfm, to find out the bigger-picture issue this community faces.
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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Were These HOA Board Members' Terms Improperly Extended?
An HOAleader.com reader asks: "In 2020, with COVID, our property management and then current board canceled/postponed the annual membership meeting until the following year to 2021. They extended each board member's term limit an additional year. However, some board terms didn't expire until 2021. Was this valid to grant those who had terms expiring in 2021 another one-year term to extend until 2022??"...
Click here for more:
https://www.hoaleader.com/members/Were-These-HOA-Board-Members-Terms-Improperly-Extended.cfm
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Imagine facing an owner who blows up and tries to bully you into backing down when all you're doing is trying to enforce the rules that very owner agreed to follow...
Click here for more:
https://www.hoaleader.com/members/HOAleader-Video-Forcing-Combative-Owner-End-Auto-Sales-in-HOA-Guest-Parking.cfm
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How to Begin the Condo/HOA Amendment Process
Readers submitted great questions for HOAleader's recent Ask Us Anything webinar—so many we couldn't address all of them. Among those submitted was this question probably very common among our readers...
Click here for more:
https://www.hoaleader.com/members/How-Begin-Condo-HOA-Amendment-Process.cfm
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The Pros and Cons of Unincorporated Condo/HOA Associations
At HOAleader.com's webinar on board fiduciary duties, the topic of unincorporated associations arose. Are those a thing? Is it even legal for community associations to be unincorporated? Is there a legal risk to board members if their association is unincorporated? Why would an HOA be set up this way, and should those that are unincorporated incorporate?...
Click here for more:
https://www.hoaleader.com/members/Pros-Cons-Unincorporated-Condo-HOA-Associations.cfm
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Has This HOA's Last Board Member Standing Overstepped?
An HOAleader.com reader asks: "I'm in an association in Florida governed by statute 720. The governing documents specifically state, 'The Association may contract for the management of all or part of the common Properties and such other Association duties as it desires, for purposes of carrying out all or a portion of the maintenance services provided for in this Declaration.'...
Click here for more:
https://www.hoaleader.com/members/Has-This-HOAs-Last-Board-Member-Standing-Overstepped.cfm
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