HOAleader.com - Tip of the Week - August 2, 2019
Published: Fri, 08/02/19
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Why Condo/HOA Special Assessment Funds Are Typically Not Fair Game
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In this week's tip, we answer a reader's question about the treasurer's decision to pull special assessment funds aside to pay old bills, particularly when there were reserves available.
Is that OK?
The answer will depend on state law and the community's governing documents, reports Molly Peacock, counsel at Rees Broome in Tysons Corner, Va., who's represented condos and HOAs for nearly 15 years.
"Look at your state's law and see if it has 'notwithstanding' or 'subject to' wording related to special assessments," she states. "Those words will guide you on whether the state code rules over the governing documents or whether your governing documents have the final say. If your governing documents are silent, then refer to your relevant state laws.
"Typically, if you collect a special assessment, it may be spent only on the purpose identified to the membership as the reason for the special assessment," says Peacock. "It would be unusual to say you're collecting a special assessment for X and then spend the money collected on Y.
"Generally, however, what happened in this reader's community seems off," she states. "It would be appropriate to ask the board directly: 'Why did you spend that special assessment money on items you never told us about?'"
If the reader were in Colorado, this wouldn't be proper. "It's to be used solely for what was specified in the special assessment," according to David Firmin, managing partner at Altitude Community Law PC in Lakewood, Colo., with satellite offices in Loveland and Colorado Springs. "If it's passed to defer unanticipated costs, it's got to be spent for that reason earmarked unless you get it approved again for the different use."
And then there's Michigan. It's complicated, and it's a good case study for why the answer to this question isn't always so straightforward. Find out more in our new article, Can You Use Condo/HOA Special Assessment Money for Reasons Other Than Those You Stated? https://www.hoaleader.com/members/3960.cfm
Best regards,
Matt Humphrey
President
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