HOAleader.com - Tip of the Week - April 3, 2009
Published: Fri, 04/03/09
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HOA Finances: Don't Rely on Special Assessments for Major Repairs
If You Can Help It
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Because many people are hurting financially right now, your
homeowners association board might be considering whether or not
you should underfund your HOA's reserves.
As usual, there are differences among state laws governing
associations' reserve practices, so whatever approach you take,
you should start by checking your state law.
Boards who decide to underfund figure that if they ever needed to
undertake a major repair, they could make up for a shortfall
through a special assessment. No harm. No foul. Right?
For this week's tip, we spoke to David C. Swedelson, principal at
Swedelsen & Gottleib, a law firm that represents associations in
the Los Angeles area.
David pointed out the problem with this logic: "What happens if
homeowners don't fund the special assessment?"
Beyond that problem, David explained why the decision not to fully
fund reserves comes with unhappy consequences: "If I were going
to buy and saw that one association had somewhat healthy reserves
and the other didn't have much in reserves, I'd know the second
association was likely to special assess as it went along."
The bottom line? Underfunding reserves undermines property values
and could even be interpreted as a breach of your fiduciary duty to
the association. So if you really think it's right for your HOA, get
advice before you act.
For more discussion of the pros and cons of underfunding reserves,
see our just-posted article that includes a taste of how state laws
affect this decision in California and Florida:
http://www.hoaleader.com/members/259.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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HOA Reserve Funds: The Pros and Cons of Underfunding Reserves
Some boards stop funding--or underfund--their homeowners
association reserves as a way to easy the burden on homeowners
during difficult economic times. Is this a smart move for your
HOA?
Click here to read full article:
< http://www.hoaleader.com/members/259.cfm >
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HOA Finances: Best Practices for a Smooth Budget Process
Here, Sima L. Kirsch, a principal at the Law Office of Sima L.
Kirsch P.C. in Chicago, provides tips for creating a budget
process that works well for nearly all associations.
Click here to read full article:
< http://www.hoaleader.com/members/258.cfm >
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Buyer Asserts RICO Violations to Void Condo Contract
GULF SHORES, Ala.--Purchasers of a condo in Island Villas at
Sunset Bay on Plash Island has sued Bon Secour Development LLC,
real estate agent Shirlee Poulos, appraisal firm Thomas Bealle &
Associates, and Mortgage Solutions South. James and Janice
Boatwright allege the defendants schemed to pe
Click here to read full article:
< http://www.hoaleader.com/members/257.cfm >
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Man Sentenced for Harassing Condo Neighbors
An owner at the Stevenson Commons Condominiums has been sentenced
to a year in jail, along with two years probation--and ordered to
stay away from his condo--after being convicted of harassing his
neighbors.
Click here to read full article:
< http://www.hoaleader.com/members/255.cfm >
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HOA Sues Developer for Money Owed; Developer Says, "Pursue
Insurance"
The Wisconsin Tower condominiums has sued its developer, City
Real Estate Development LLC, claiming it owes the association
more than $46,000.
Click here to read full article:
< http://www.hoaleader.com/members/254.cfm >
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