Every month for the past five years, Catherine Johnstone faithfully paid the monthly home-owner-association dues for her two-bedroom condominium in Virginia Beach.
Johnstone's monthly payments alone add up to nearly $9,000 over the five years. She assumed a portion would be held in reserve in the event any major renovations were needed at River Cove Point, her community, situated on the banks of the Lynnhaven River's Eastern Branch.
In April, however, the condominium association sent letters to homeowners saying that a major renovation was needed at the 138-unit complex, built nearly three decades ago. The community board wanted to have about $2 million of work done to replace siding on the buildings and repair wood structures that had been damaged by rainwater.
Each homeowner would be required to pay a special assessment ranging from $12,000 to $15,000, the letter stated. Home-owners would have just three months to start making payments.
A special assessment is a common method used by condo boards, co-ops or home-owner associations to pay for expenses not provided for in the annual budget. The tactic also is frequently the subject of much contention between members of the community and a source of angst for individual home-owners who must come up with the money.
The Select Group Inc., a Virginia Beach-based firm hired to handle the day-to-day operations of River Cove Point, sent several letters to home-owners explaining that city code enforcement officials had cited the community and threatened "strong legal repercussions" if the buildings weren't brought up to code.
The firm encouraged home-owners to refinance their condos or take out a home equity line of credit to pay for the special assessment.
Finding $13,000 tucked away somewhere is a difficult proposition for Johnstone. The $660 monthly mortgage payment was hard enough for the 51-year-old single mother, who was laid off recently from a nearby T.J. Maxx.
"This couldn't come at a worse time, with the way the economy is," Johnstone said. "I called several banks to try to get a loan, but they turned me down. One of the neighbors told me God will take care of it. Don't get me wrong, I believe in God, but God's not going to give me $15,000."
After she missed the initial installment of $4,057 due July 10, The Select Group dispatched a letter threatening legal action against Johnstone if she failed to pay. Ultimately, the condo association could foreclose on her property.
"I couldn't understand where the money I've been paying every month went," she said.
Johnstone is looking for a job but said she and her daughter Michelle, 16, might have to move in with her parents if she cannot find the money.
Complaints from home-owners about special assessments are somewhat common, said Heather S. Gillespie, ombudsman at the Common Interest Community Board in Richmond, a state office created to help settle disputes between associations and condo owners.
"If I lived in a condominium and the board said I'd need to pay $15,000 in three months for a special assessment, I'd have a stroke," Gillespie said. "This is a tough, tough time. Many people don't have jobs, and they're just trying to make ends meet. This can be devastating."
Virginia law requires that condo communities have a study of their reserves done every five years. The associations are tasked with setting aside money in case of any unexpected expenses, Gillespie said. In many cases, however, associations don't keep enough in reserve.
"If a condominium is adhering to the law and is having the reserve studies done, and they're looking forward and taking into account some sort of major renovation needed in the future," the need for a special assessment should be rare, Gillespie said.
At River Cove, the association's annual budget covers only normal building maintenance, legal advice and payment for the management company, said Jeanne Lauer, the association's attorney. Last year, the community's annual budget was just shy of $327,000.
Most condo communities have the option of taking out a loan to pay for repairs and renovations, avoiding the need of a special assessment.
River Cove's governing documents, however, did not give the condo association the power to apply for a loan, Lauer said. Last fall, the board tried to change the rules but did not get enough homeowner support. So they moved forward with the special assessment.
"When a property goes up for sale, you have to disclose that Virginia Beach code enforcement says this place is uninhabitable," Lauer said. "Pretty soon, you're going to see property values go down."
Lauer said it's unlikely that the association would move to foreclose on any homeowners who don't pay the assessment.
"It's a terrible time to pay out this sort of money, and we didn't ask for the timing certainly," Lauer said. "The bottom line is, the work had to be done."
Code enforcement officials inspected the community in February and cited the buildings for having peeling paint, rotting siding boards and rusted fireplace caps, said Wells Freed, the administrator for the city's housing preservation office. The office's inspector also found some buildings where staircases had pulled away from the exterior walls.
In several letters this year, The Select Group told home-owners that renovations were urgent and, as result of the citations, could not be delayed.
While home-owner associations are responsible for keeping buildings up to code, punishment for being out of compliance typically amounts to a few hundred dollars in fines for the first offense, Freed said.
"The Select Group had already started working on a plan to bring things up to code before code enforcement ever inspected the community," Freed said.
In a bid to fight the special assessment, several home-owners there hired Norfolk attorney Scott Konikoff, who declined to comment or offer any insight into what recourse the home-owners might have.
Gillespie said there is little home-owners can do to avoid a special assessment without banding together and calling a special meeting within 60 days of the notification.
"If I would ever say something to people who move into these associations, they need to know that these things could happen," Gillespie said. "It needs to be part of the thought process when they're buying."
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
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wow....
This is a nightmare. This association should have had ample reserves. Was there no audit or reserve study in ANY of those 30 years? This should be investigated.
The Select Group Needs to be Investigated
Who oversees how the Select Group manages its properties and the money of their associations? Does the Select Group do its job by following up on all repairs? Does The Select Group mismanage association funds? It sounds like they are not doing a very good job managing thier properties. I've heard all kinds of horror stories about special assessments on Condo Communities that are managed by the Select Group. Perhaps the Virginian Pilot should do an expose on that property management company. After all, we're talking about families and their homes! It is scary! And these condo owners can't even write off a portion of their condo fees on their income taxes. Perhaps some of the association should start filing lawsuits against the Select Group for mismanagement of funds or at least mismanagement of properties! They're obviously not following up on prior repairs. Someone needs to be held accountable.
Transparency And Disclosure
I have attended one or two meetings over the years to know nothing gets accomplished,many issues ARE tabled and the BOD runs to "executive" session. They have also canceled many meetings and have not had one since June !With the state of the community spirialing, I am thrilled to see other owners posting comments.The issues within this community run much deeper than what was pointed out in the article.One might believe, from the article, that the owners were not in favor of obtaining a loan on behalf of the Association to aid in the expense.Ms. Lauer stated, " Last fall,the board tried to change the rules but did not get enough homeowner support".But what Ms. Lauer failed to further disclose to the public ,with her statement,was that the loan was the second line item on the "proposed" amendment.The first line item,and the most important,would be that the owners were also approving the board to have complete power of the governing documents!No, I don't think you would generate much support.The board and management of this community are very difficult to work with.Transparency and full disclosure to the members within the association,is the only way to keep the community on solid gr
Condominium Living!
Norm and Final Word you hit the problem right on their head - people want to live in Condo's with no responsiblity - they want everyone else to do the work - and they want to come home and kick back and enjoy everything around them -they don't want to know who takes care of what --until something goes wrong you will never hear from them - It is a thankless job to manage and make sure that these complexes are taken care of properly - because no matter what you do (damned if you do and damned if you don't)-
River Cove Point
Some homeowners (seven buildings, I'm told) were notified in June that they're now in a flood zone. Flood insurance must be covered in the master policy. When the Select Group finally got around to obtaining coverage (Select Group was notified in late June, and in late August got coverage on seven buildings) they failed to get coverage on building 3. Homeowners in building 3 were the first to notify Select Group of the flood zone changes. Because of their oversight, one homeowner now owes the mortgage company over $800 because the homeowner was given 45 days to get the flood insurance. Had The Select Group obtained insurance on building 3 when they obtained insurance on the other seven buildings, this cost would never have taken place. I can say this about The Select Group - they don't return calls, they are extremely rude, and they're incompetent.
I don't own a condo, but I do have a question.
You said:
..."I can say this about The Select Group - they don't return calls, they are extremely rude, and they're incompetent."
If what you say is true, why don't you fire them, and hire a company that does return calls, is pleasant to talk with, and above all, is competent?
Follow the money, Josh!
Lauer said "It's unlikely that the association would move to foreclose on any homeowners who don't pay the assessment" - so what, they'll just garnish the homeowners wages until they can't keep their mortgage current and are foreclosed by the bank...same dif, lady! Are you going to send a written letter to each homeowner guaranteeing the assoc. won't f/close due to it's own follies?? In addition, I'm no mathmetician, but if the one lady paid almost $9G in five years and there are 138 units, that'd be approx. $248,400 per year total in condo fees; therefore, if the budget is running $327,000, by golly, why didn't someone raise the condo fees in a timely manner so that the shortfall would not cause undue hardship? What exactly is $327G's paying for? Also, were the condo owners given the #'s on the top three contenders for the bid? Isn't that the law?? Don't the homeowners get to VOTE on who will imminently do the work or approve of the bids in any way?? Two million dollars worth of work doesn't just 'grow overnight' or even within a year's time..Issues had been ignored for quite some time and were eventually cited by the city!
run-a-round
To make matters worse, I can't seem to get a straight answer in the scheduling of repairs.. I own a unit in this community, paid my my assessment in full and on time, only to hear that those buildings in which everyone paid in full will be treated top priority in repairs/siding, meanwhile, my $12,500+ is being held hostage and accumlating interest for another. Asked about when my building would be in line for repairs and told "the time frame of expected completion is 18 months". I feel that I am being penalized for being proactive and very frustrated that there is no communication regarding the status of this project.
Where's the Accounting??
Probably as fishy as the accounting over at ODU's "Training Center" - huh? Is anyone really doing anything in the 'office' at River Cove Point?? Does anyone know what time it is??? Just one casual look at the outside common areas should jolt you back to reality! Isn't anyone else curious as to why the board is using monthly condo fees to pay for legal advice? And what kind of legal advice was it? How to avoid providing accurate and timely accountings on how owner's condo fees were being used? From what I know of 'boards', most just like to spout off about how they're voluntarily 'on THE BOARD', but the work remains undone in most incidents and the homeowners are now paying a mighty high price for having let 'the BOARD' handle their maintenance. I would be embarrassed to say I was on the board if the place I managed looked unkept - The city is just doing their job, citing what looks like 15 years disrepair...is someone on the board driving an Escalade??? Lawn care and an office bimbo is NOT all that was to be provided for owner's monthly fees!!!
Too bad
I feel bad for the people of that community. Condo associations and the possibility of such assessments are why I never bought a condo in the first place. I hope that no one in that community really thought that something like this couldn't happen. I also wonder how many of the residents in the community were involved in the association. I bet the first poster who said they lived there didn't get involved. I'm also willing to bet that the things the city cited them on were pretty noticeable and the residents chose 1) "not" to notice 2) not to go to the committee and ask why those things weren't being taken care of. If no adequate response was given, and getting involved in the association doesn't help, sell and get out of there before the assessment gets levied.
As I said, I feel bad for the residents of the community. But the items in question don't happen overnight and they chose not to do anything about it earlier on or to be involved in the process. if anyone out there sees this article and are considering buying a condo, I hope they do so very cautiously. Ask questions and look at the budget of the association. Then if they do buy, get involved!
Cost of ownership
It sounds like people bought these thinking they were an apartment with a tax deduction. Large expenses for roofing, siding, and windows are a normal part of ownership. The only problem is the short notice. I'll plan something like that a couple years ahead of time and save the money.
Man, when I buy my nice
Man, when I buy my nice contemporary house (2K sqft sounds nice) with inground pool and room for a 4000sqft garage, for less than $200K, it will be free from any HOA. You can hire someone to mow the grass and pay your own insurance for less.
Do the builders somehow get income from the HOAs of the communities they build? I know the builder spawns new companies for each project to help isolate them from lawsuits, and I know they often use HOAs so the roads can be smaller so they can cram in more shacks in the neighborhood (meaning those owners have to pay to repave the roads, even though they pay taxes like others who get that handled for them). Oh yea, and those HOAs that sign those agreements with the cable or phone company to provide all services to all residents at a set fee, and the resident can't cancel they can only upgrade.
Then you get to fight some power trippin' nutty neighbor who's on a warpath against people she doesn't find attractive or something. Finally gets power and it goes to her head.
You can have that drama.
Special assessments
I am a general contractor in North Carolina, and I have seen somewhat ridiculous special assessments before. (A 27,000 per unit assessment to replace 13 windows for example.)
It seems to me that a 2 million dollar price tag is out of line with the amount of work that was outlined in the article. I cannot say for sure as I am not familiar with the specifics, but I would definitely look closely at the bid and see if there are other contractors that might be able to do this work for less.
It may also be that the work that they are doing goes beyond what was cited by the city and may not be required at this time.
I agree
I agree it's very high by what's listed here, but I'm not going to assume they quoted the work right in the article. For my house, $14K would be about right if I were to replace siding, roof, and windows, but they only mention siding.
Who's responsible for this mess?
I'm not sure if it was the condo association, or the management company, but somebody dropped the ball in a major way.
If this is a 30 year old complex, it doesn't take a genius to figure out that some major repairs and renovations are going to be necessary at some point in the future. To ignore that fact for 30 years, and then to hit the current owners for $12,000 to $15,000 each, (payable in three months?) is beyond belief. The two million dollar expense should have been pro-rated, in monthly fees, for the last thirty years, not dumped on the current owners, and demanded in three months.
Who's the "cop on the beat"? The Association? Select Group? Both? It sure looks like somebody was not doing their job. If I were in that condo complex, I'd be organizing a group to contact Lowell "The Hammer" Stanley. The condo owners shouldn't "roll over" and take this. I hope they fight.
Hire The HAMMER
Agreed. Did someone say "fiduciary responsibility"??
Though I am not an attorney, by practice, I have passed pre-law at UVA with honors and know somehing about CONDO law having also served on many board of directors. I also live in a CONDO association I quickly came to realize after I moved in that my condo board is run by a bunch of arrogant, mean-spirited, cowardly elderly with control issues. I watch their actions closely. Once the self-appointed architecural committee "sherrif" falsely accused a home owner of breaking civil and criminal law because she was feeding the wild life. Puuleease!! I advised her to call the old man's bluff. There is no law. And to think the arrogant cowardly board put this "gentleman" to this task.
good question. . .
sadly the very people complaining are at fault in many cases. I have owned many condos over the years, still have one but once it is gone, never again. Problem is that I will never be able to sell because of a similiar situation; owners refuse to vote for a fee increase to cover the reserve study and anticipated future repairs. (I am however saving up money that I will need for a major special assessment in about 3 more years, maintenance/repairs can only go undone for so long!.)
In my experience no one wants to get involved, most meetings fail to even reach a quorum. That is unless you are voting on a condo fee increase, then everyone shows up to explain their hardship and votes against that very increase that will cover the routine maintenance and would have prevented some of these major repairs or at least prepared a reserve account for them. Low condo fees are a good selling point, developers keep them low to get rid of their units, original owners keep them low cause there is a good 15-20 years before they need to think about major repairs. (Who wants to pay for repairs that will be needed long after I/you sell???)
Granted there are well managed condos out there.
River Cove Condos
The financial and legal conditions of this community association have affected the quality of life and the value of the property.I reside in this community and I believe the homeowners do not receive honest,fair,nor respectful treatment from the Association leaders,management,or other paid advisers and vendors.Homeowners in my community do stand to lose their homes through no fault of their own due to the assessment.There are many stories to tell.The assessment could not come at a more detrimental time.The state of the economy, the rapid rate of job loss,and the looming possibility of foreclosure,by many,have some in my community scared to death!The owners interest in the community need protecting,only evidenced in the citations by the city.Condo board members,,management companies and law firms,through our government,are in positions of authority that regularly handle large amounts of money,as well as, association documents,with little supervision and oversight.The effects of this have been devastating on the homeowners association.We are at a property crossroads leading to potentially catastrophic consequences.
association meetings and documents
I do not live in that community, and would never live anywhere governed by a HOA, but I have friends that do live in such communities. When they start complaining about their HOA, my questions to them are: 1. Do you have a current copy of the HOA Articles and Bylaws? 2. Have you read them? 3. Do you attend EVERY HOA meeting and take personal notes, even recording the proceedings if necessary? 4. Do you speak up at EVERY HOA meeting so the current Board members know you? 5. Why don't YOU run for Board membership? The answers I usually get are: No, No, No, No and I don't have time.
Apathy among the community residents is what usually causes problems like these. The Board members have guidelines within which they must operate, as spelled out in the Articles of Association and/or Bylaws. Although there have been some that defraud HOAs of money and services,by and large most are honest people who are also faced with this Special Assessment.
If you don't like it, GET INVOLVED! Bring your neighbors to ALL of the HOA meetings. Offer alternatives. Or just keep quiet and pay up!
excellent post and....
excellent advice. I believe most HOA's and board members WANT and WELCOME homeowners at the monthly meetings. Sadly, most drag themselves out of the closet for annual meetings if an assessment increase has been proposed.