By Deborah Goonan, Independent American Communities
Today’s blog is for my Canadian readers, but also serves as a reminder to U.S. owners of Association Governed condominiums or cooperatives that the very same problems exist worldwide, wherever Common Interest Development is prevalent.
The following article, written by a Canadian attorney, illustrates that point quite well.
In British Columbia, condo owners have been dealing with water infiltration for 20 years. Over that period of time, excessive moisture has created mold and deterioration of the exterior of the building. Also during that period of time, condo owners have been at odds over how to deal with the problem.
Some owners have been reluctant to pay for necessary repairs. This has been a problem, since B.C. law requires a 3/4 vote of approval to issue a special assessment needed to fund reconstruction of the exterior cladding of the condo building.
As a result, no repairs have been made, despite previous court orders requiring the Association to do so. In the end, a B.C. court has imposed a $16.8 million assessment on condo owners, and has appointed an administrator (also known as a Receiver in America) to take control of the association and ensure the work is finally completed.
Some U.S. Associations face a similar problem if their governing documents require owners to vote on annual assessment increases exceeding say 5 or 10%.
Most U.S. Associations – like Associations in Ontario – give the board of directors sole authority to implement a special assessment.
But that does not ensure that Association boards are actually willing to issue a special assessment! Nor does it ensure that the board will take on the expensive task of making appropriate repairs. Quite often, Boards will instead make short-term or partial repairs, kicking the can down the road, so to speak.
Look no further than Celebration Town Center for a prime example.
BC Court Imposes $16.8 Million Levy on Condo Owners to Remediate Water Leak Damage
http://www.lashcondolaw.com/bc-court-imposes-16-8-million-levy-on-condo-owners-to-remediate-water-leak-damage/
Why is this conflict so common?
One reason is because most Association Governed Communities are corporations with at least two competing factions of owners or shareholders.
One group, the owner-occupants, is concerned with quality of life and a long-term, stable investment in their home.
Another group, owners or shareholders who do not live in the condominium or cooperative, are primarily concerned with their short-term investment, driven by cash flow and profit margins. Most rent their units to tenants, and, in a growing number of Associations, engage in short-term rental through AirBnB, VRBO, and similar internet-based services.
Even among owner-occupants, there can be competing factions. One group may be retired and on fixed incomes, therefore unable or unwilling to invest large amounts of money for the long term. Another group may plan to live in their units for many years.
You can see how owners with opposing priorities often end up in a stalemate when it comes time to fork over substantial sums of money to maintain the common infrastructure.
Ultimately, the group or faction controls the Association’s board is in control of the fate of the Association! Competing owners face an uphill battle attempting to defend their legal rights.
…or otherwise misappropriated. Some owners also report that the cost to repair or renovate seems inflated, and that the association may fail to obtain competitive bids for large projects.
Yep. HOAs are a flawed concept. Even if an association had reserved funds over time for capital maintenance, who’s to say it would not have been stolen?