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ASSOCIATIONS

After two decades of calm living, it's condo chaos

January 14, 2007|Stephen Glassman and Donie Vanitzian | Special to The Times

Question: I'm an 88-year-old retired professor who bought a town house more than 30 years ago. I expected this type of housing, with no amenities and only 32 units, to be uncomplicated and affordable on my limited income.

For the first 20 years, the association stuck to its budgets, managed its own property and raised dues only twice. In the last 13 years, I've lost count of the increases in dues, special assessments and extra fees each board and management company has caused. Unit sales turnover is chronic, and we're mired in internal politics, board one-upmanship and back-biting.

New boards lack sound judgment skills so they rely heavily on advice from management employees or lawyers. Decision-making culminates in hiring sprees for experts, financial advisors and consultants. Compared to unrestricted real property in my area, my deed-restricted town house hasn't held its value, and I can't find an unrestricted property in my price range -- which means, due to my tax base and income, I can't afford to move. What do you advise?

Answer: Separate the tax problem from the problems of your association's functioning.

Rising home prices and tax basis may make it difficult to find a property that's not deed restricted. However, under Propositions 60, 90 and 110, you may be able to transfer your "tax base" to another property. To qualify for the transfer exemption, a seller will need to find a replacement property within a participating county for the amount of sale or less and buy within two years of sale.

Seven California counties have an ordinance allowing the inter-county tax base transfers provided by Proposition 90. Those counties are San Diego, Orange, Ventura, Santa Clara, Alameda, San Mateo and Los Angeles. To confirm transfer details, contact the State Board of Equalization (916) 445-4982 or go to www.boe.ca.gov.

An association's effectiveness affects all titleholders. Rising costs are borne by the individual titleholders, posing a predicament with few realistic solutions for someone like yourself.

Just because a board says it is acting in the best interests of the association does not make it so. Board members have an obligation to understand their duties, perform independent due diligence and act in good faith.

Part of the board's fiduciary duty includes addressing association issues affecting any owner, including those on fixed incomes. It also entails independent thinking and a resolve to avoid succumbing to undue influence from others.

Incompetence on the part of a board can constitute a breach of the fiduciary duty it owes to the association and titleholders.

Effecting noticeable change at your association will require the efforts of more than one owner to replace the board members and attempt to take back control of your project. Even a coalition of like-minded owners may not be enough to bring about the type of changes you would like to see. There is also a risk that a new board may be no better than the one before it.

Selling your property may be advantageous under federal tax laws allowing an exemption from tax on a significant portion of the gain. Renting may also be an option, as would buying in a retirement community whose residents must be at least 55. Often, such communities have more restrictive conditions than expected. Carefully investigate before making any decisions.

Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or noexit@mindspring.com.

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