HOA management firms worth it? Update CC&Rs after 40 years?

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Submitted by CafeMoto on January 11, 2022 - 7:53pm

Our 8 unit condo complex has some original owners who have largely run the HOA very simply: low dues, few meetings, no large reserve nor accurate reserve study (imo). The roof was done 15 years ago and I don't think the place has been tented in about the same time. Nobody wants to be the president. Should I push for a management company?

Do the Piggs have any prior experience and simple advice? I could step up from Secretary to lead as the President but the CC&Rs are so old they don't cite any current civil codes and I feel if a dispute arose it could be a fiasco.

As it is now some units have repaired their own external decks at their own cost that I believe the HOA should have "assessed" and repaired; dividing the cost equally or better do needed wood replacement for all units. So this activity is already unusual or against the legal norms.

We have a few new owners that I don't believe captured the recent history in the minutes provided during escrow. Last year I was quoted around 4K to have an HOA law office work up an optimized and current CC&R template. There was little appetite for this but I feel it is worth the update given the recent appreciation for 6 of the 8 units. Cheers, thanks for reading and any quick thoughts. -CM

Submitted by Hobie on January 12, 2022 - 7:09am.

40 year old complex with maybe a couple of original owners on Board. A couple of owners who paid for their own deck maintenance. Does everyone pay their dues?

I say you are revving up to be shunned by your neighbors. Management co's are no magic pill. Same with updating CCR's for such a small association.

Those who have already paid for their own units repair will resist paying a special assessment to fix everyone's else deck. Yes,they are legally bound, but unless you find an atty to work pro bono, the association does not have any $ to enforce. And the newer owners who paid will be pissed if there is not enough collected to fix their unit- and you will become the villin!

Keep in mind, having a reserve account funded to 60-70% or greater will really be helpful if you someday want to sell. So many condos are underwater with people not paying dues that reserves are seriously underfunded and makes it hard to sell if major repairs are being deferred.

Rather than make them spend a bunch of the reserves, look at this as where you can do your own thing (unfeddored). ie. fix your own deck and when you sell, the reserve account looks good, there are not legal actions pending, and your monthly assessments are low.

Recent appreciation is paper profits and what you are proposing affects cash flow of each owner today.

However, if you work with your other owners, you might get them to increase the dues and put together your own plan of increased maintenance.

Submitted by CafeMoto on January 12, 2022 - 11:45am.

yes everyone has been great about paying the modest monthly HOA fee, five of eight have had some deck repairs paid by each owner (self included), thank you for the valued feedback. The fees collected exactly cover the annual spend, some years its a different item (tree, spa heater, painting, minor roof repair) that takes a quarter of the budget but so far we've never gone into the red or assessed. Looking forward it just seems that if things continue 'as is' there will one day be an assessment (total roof replace for two buildings) that all units may not be able to handle. All you SFH owners should rejoice! I think I'll simply push for moving the dues up every year like you call out. Again, thanks for your input and any further remarks.

Submitted by The-Shoveler on January 12, 2022 - 5:23pm.

From my experience it would surprise me if the HOA did not spend all the money every year no matter how high the dues are.

Submitted by Hobie on January 12, 2022 - 6:13pm.

Reserve studies are just estimates. In these times of inflation and high construction costs you would be prudent to get an more accurate estimate for roof replacement. Then approach the board and decide if there is enough reserves to cover it when it is deemed necessary. Depending on the roofing material, guessing flat roof with tar and asfault, you may be approaching its end of life.

Technically, the reserves should be funded to pay for replacement per the reserve study without a special assessment.

Have you been using the same reserve study people? Maybe it is time to use someone new and ask for a full in person (level 1??) review and do not provide them with anything from past review companies. Reserve study folks tend to base things on past reviews. Easier for them.

Sounds like you actually have a well run association. Nothing wrong with pointing out some areas that need a bit more $.

Final thought. Yes, annual budgets are net zero. You are actually supposed to collect and spend and not make a profit nor incur a loss. In practice some years you may go over budget just because. Trees need more trimming, pool equipment gets abused or doesn't last as long as expected. I'm looking at you pool pumps and filter cleanings!!

Termite tenting is often overlooked and may not be in reserve study. Some think this should be covered in operating account. Several thousand dollar cost, I think should be reserved for.

Nothing wrong with beefing up the reserves. Not only roof, but spa refinishing is getting expensive. So, it sounds prudent to up the assessments a bit earmarked specifically for reserves. People tend to be more compliant if they feel they are getting a benefit.

I didn't mean moving up dues every year. That pisses people off. Do a one time increase. Not huge but back it up with data ;). Better to keep assessments same (politically) for several years.

Submitted by CafeMoto on January 12, 2022 - 6:59pm.

thank you for the clarification, I hear what you are saying now about increasing fee once adequately and not yearly. I was told at one time there is a 10% increase limit from the owner that sold their unit. The HOA only holds a balance of 25K in one single account (no separate reserve fund). The reality is we will continue to rely on an assessment if things don't change. Much appreciated for the experience and unofficial advice provided. It helps!

Submitted by Hobie on January 12, 2022 - 7:22pm.

Most likely the 10% should be in your original CCR's. That is the amount assessments can be raised without 2/3 +1 majority of members. ie. just a board meeting vote.

If they have done reserve studies in the past, then there should have a separate reserve account. 2 Accounts, operating and reserve.

Self managed associations are not a bad thing, but may not be up on the, 'big picture'. My suggestion would be to take a look at what was included in your old reserve study and there will be a dollar amount for each year to be in the bank. Open a new bank account for that amount and separate operating expenses from reserve expenses.

Sounds like no one really cared that much and simply paid for some things outside of a common area expense. ( deck repairs )

If you are businesslike and present the facts that you are underfunded for common area upkeep, you can probably up the monthly assessments to be more in line with actual future replacement costs.

Definitely do not need to spend $ on legal or management. Just show other owners they have 'overlooked' some area and we are going to deal with it now.

Submitted by gzz on January 15, 2022 - 3:56pm.

The HOA manager firm at my condo seems to be wasteful.

If you can avoid having one, do it. We’re too large to avoid it. The old owners occupants are getting to be too old and the newer owners are investors or busy professionals, so nobody really can audit or check them.

To take one example, they pay top dollar for every possible maintenance contract. Repainting the small laundry room that’s about 12x16 cost like $2500.

Submitted by gzz on January 15, 2022 - 4:00pm.

Low HOA monthly dues but big special assessments for major items I think is better for property values than high regular assessments and a big reserve fund.

I also think a big reserve fund tempts the board to pay too much for the regular contractor rather than shop around or consider deferring repairs.

Submitted by CafeMoto on January 15, 2022 - 7:08pm.

wow, ok, I see the points you are making now. much appreciated everyone

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