Question: We have 35 units at our association, and the owners want the board to stop spending. For at least five years we tried to get prior boards to substantially cut back on expenditures and live within our budgets. The old board cronies have finally been voted off. Now the new board is left to drastically cut expenditures, and we want to know how to do it. We want to lower our fees and accounts payables. Our management company makes unnecessary work for us, costs us more money every month and insists the association pay its expenses and insurance. For example, is it mandatory to paint our buildings every year or rip out our existing landscaping and replant? Do we have to give holiday bonuses and gifts to our vendors? Do we have to throw a pool party every year if it's written in our CC&Rs? Do we have to donate association money to councils or programs in our city? Do we have to have an association attorney on our payroll who demands a minimum of a $5,000 retainer each Jan. 1 and refuses to negotiate his hourly rate? Must we have a management company?
Answer: No laws force boards to hire management companies, but those associations that do should not be paying management insurance costs. A professional business provides its own insurance, and contracts to the contrary should be rejected. If needed, hire an accountant to handle the accounts receivable and payables and to invoice owners for all assessments.
Maintenance is a function of preparation and need, not overreaction. Roofs may be needed on an average of every 10 to 20 years, painting may be required every five to 10 years. Steps that an association needs to take to "repair, replace and maintain" common property, as required by Civil Code Section 1364, become obvious as the need arises. Whether it's landscaping, which doesn't require annual replanting, repairing sewer lines or repainting buildings, the need is determined through due diligence, which includes making periodic visual inspections. Vendors should be individually vetted and selected on the basis of competence and reputation, not merely because management recommends them.
Titleholders pay assessments because they are mandatory and meant to fund operating expenses. It's not the board's job to solicit donations for holiday bonuses or any gifts whatsoever. To do so might jeopardize the association's tax status, as will donating money to other councils or city programs unless specifically mandated in the association's covenants, conditions and restrictions (CC&Rs). That money flowing out of your development is a waste of association resources that adds nothing to your development's value.
The CC&Rs should provide details for any mandated events, including the pool party and whether the association funds it.
Attorneys are vendors just like management companies, plumbers, gardeners and electricians. Your association should hire an attorney only when one is needed. Having one on retainer wastes association assets. When boards hire an attorney, it should be on an item or transaction basis, at an hourly rate clearly spelled out in advance with a cap on the expenditure. Have several attorneys submit bids for service, including the hourly rate to be charged.
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