HOAleader.com - Tip of the Week - November 28, 2014
Published: Fri, 11/28/14
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How to Manage and Account for Your HOA's Budget and Reserves--and
Is This Manager Out of Line?
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In this week's tip, we answer a reader's two-part question: How should HOA
reserves be treated on a budget? And is it hinky for a manager to do work and get
paid out of reserves while the board sits idly by and lets the manager take
charge?
Texas doesn't even govern what reserves must be used for, let alone how
they're treated in a budget. "There's no absolute requirement about what
they're to be reserved for," says Gregory S. Cagle, a partner at Savrick
Schumann Johnson McGarr Kaminski & Shirley in Austin, Texas, and author of
Texas Homeowners Association Law, written for homeowners and association
leaders. "An association has the authority under the Texas condo act to
establish reserve accounts. But the law doesn't get into what those funds
are earmarked for."
"In Florida, reserves are earmarked for specific purposes," explains
Alessandra Stivelman, an associate attorney who specializes in community
association law at Eisinger Brown Lewis Frankel & Chaiet in Hollywood, Fla.
"But I don't know how they should be treated on a budget."
There's no law in Illinois that dictates how the manager should account for
the reserve funds in the budget. "In Illinois, there are no detailed
accounting rules for how you necessarily account for reserves," says Barry
Kreisler, founder of Kreisler PLLC, a Chicago law firm that represents
70-100 associations, most of which are condos. "In fact, in smaller
associations, it's usually the amount of cash left over in a checking
account after the bills are paid."
The lack of guidance for how to treat reserves on a budget is likely because
Illinois law doesn't even require associations to have reserves. "Under
the Illinois condo act, in most cases, boards must consider reserves as part
of a budget," explains Kreisler. "It's actually part of a line item in an
actual budget. The exception is where, if you take a vote of unit owners, you
can vote to be an association without reserves. In addition, there are no
standards for townhomes; Illinois law merely provides that reserves can be
part of an annual budget. So there's no law in Illinois that says you have to
have a separate reserve account or that puts particular restrictions on
it."
The manager's behavior is a little trickier to assess. Read our experts'
opinions in our new article:
http://www.hoaleader.com/members/1099.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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How to Treat Your HOA's Reserves--and Is This Manager Going Rogue?
An HOAleader.com reader writes, "I am in a dispute with the management
company as to how the reserve funds should be handled. He insists that the
monthly minimum of 10 percent of gross income that should be set aside for
reserves not show up … as an expense. Please verify if you can, when a check is
written to fund the reserves should it be posted as an expense or against the
'Other liability' [line]?
Click here to read full article:
http://www.hoaleader.com/members/How-Treat-Your-HOAs-Reservesand-This-Manager-Going-Rogue.cfm
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HOA, Owners Association, and Master Association: What's the Difference?
An HOAleader.com reader writes, "Our community consists of 13 buildings,
each with its own CC&Rs, bylaws, etc. In 1974, 100 percent of the owners
formed an owners' association (note: NOT an HOA; this would be under
different rules and regulations, and we aren't incorporated). We believe
this is referred to as a master association.
Click here to read full article:
http://www.hoaleader.com/members/HOA-Owners-Association-Master-Association-Whats-Difference.cfm
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Buildout of Vacant HOA Lots: Does the Board Have Any Control?
An HOAleader.com reader writes, "Is there someone on this forum who serves
on an association board in Minnesota who has dealt with an investor building
out the remaining vacant lots in their association, after the original
developer/builder defaulted? [An i]nvestor acquired the vacant lots from
the bank in 2009 and is now planning to market the lots this fall and begin to
build. What issues might the owner-controlled board want to be aware of and
address before this process gets underway?"
Click here to read full article:
http://www.hoaleader.com/members/Buildout-Vacant-HOA-Lots-Does-Board-Have-Any-Control.cfm
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Is This Board Member Getting the HOA in Big Trouble?
An HOAleader.com reader writes, "A woman recently purchased a condo in our
community saying it was for her disabled son, who is a quadriplegic in a
wheelchair who came to look at the property with her. However, for the past
five weeks, only [she] and her 15-16-year-old daughter (not disabled) have
been living there. When asked about her son, she was belligerent and said it
was none of the HOA's business. Can this be true? Sounds like a real scam of my
taxpayer dollars to me!"
Click here to read full article:
http://www.hoaleader.com/members/This-Board-Member-Getting-HOA-in-Big-Trouble.cfm
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Feeling Ignored? How to Be Heard at Your HOA Board Meeting
In this week's tip, we listen to--and help--a reader who's been feeling
ignored. Our reader piped up during an executive session of the board to
offer an amendment to a motion--and was utterly ignored and even chided
afterward for interrupting the meeting. What happened? And how can he be
heard next time?
Click here to read full article:
http://www.hoaleader.com/members/Feeling-Ignored-How-Be-Heard-at-Your-HOA-Board-Meeting.cfm
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