Finance Articles from the Web

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Accounting

  • Cyber Risk – Your Data is Safe, Until It’s Not… March 28, 2017 You’ve undoubtedly read about the high-profile hacks and data breaches that have occurred over the past few years – millions of accounts compromised and credit card numbers stolen from Target, Home Depot, TJX, Yahoo, and other large companies. While big companies make big headlines, no business or organization is too small to be hacked – and hackers often find smaller businesses to be easier prey. That means community associations, property management companies, association banks, payment processors, and other community support ...
  • Condominium audits uncover four common issues February 14, 2017 With few exceptions, the Condominium Act of Ontario (the act) requires an independent auditor to perform an annual audit of the financial statements of a condominium corporation. Sections 60 and 71 underline the rights and responsibilities of an independent auditor.  It’s important for unit owners to understand that an independent auditor does not prepare the financial statements, nor is he or she responsible for the daily bookkeeping and management activities. These activities are the responsibility of management and the board. ...
  • New HOA Board Members – Get up to Speed on Your Community Finances October 28, 2016 Congratulations, and thank you for stepping up to serve your community on the board of directors! As an HOA or community association board member, you get to run a business and make key decisions that will impact your community now and in the future. While you may feel a little overwhelmed at the moment, serving on your community association board can be a very rewarding experience, and a great way to meet neighbors.       Read the article………….
  • HOA Funds Transparency August 12, 2016 Just about any situation can deteriorate when there is no transparency. This is true in any business setting, including an HOA. With good transparency, homeowners know exactly the direction in which their neighborhood is heading, which leads to less problems.   Read the article……………..
  • The Doctrine of Accord and Satisfaction May 9, 2016 Should you or should you not accept a payment for less that the full amount owed when it is indicated to be for full payment? It is always best to not accept a check for less that the full amount owed if there is any chance that it can be interpreted as being accepted as settlement in full. However, if you do, it may not mean that the debt is indeed settled in full by acceptance of the check.   ...

Accounting Archives

Audits

  • Condominium audits uncover four common issues February 14, 2017 With few exceptions, the Condominium Act of Ontario (the act) requires an independent auditor to perform an annual audit of the financial statements of a condominium corporation. Sections 60 and 71 underline the rights and responsibilities of an independent auditor.  It’s important for unit owners to understand that an independent auditor does not prepare the financial statements, nor is he or she responsible for the daily bookkeeping and management activities. These activities are the responsibility of management and the board. ...
  • Community Associations Countdown to Year-End! December 5, 2016 The end of the year is approaching and before long we will be setting New Year’s resolutions for 2017. But before that new beginning, we need to wrap up 2016. For those associations whose year-end is December 31st there are financial and tax items that need to be addressed by the board and/or management. Let’s count down the top 10:    Read the article…………..
  • 4 Things Every CAM Manager Should Know About Auditing June 3, 2016 A good audit can help identify and prevent fraudulent activity. It can prevent small mistakes from becoming big ones. It can provide peace of mind to the association members that their community’s financial security is in good hands.    Read the article…………
  • The “Rep” Letter: the Biggest Little Three-Letter Word in Your Annual Audit February 26, 2016 Before the accountant completes the annual audit of your co-op’s or condo’s financial records, the board and the managing agent will be asked to sign a letter acknowledging that they, not the accountant, have primary responsibility for the financial statements and that to the best of their knowledge the statements are correct.   Read the article………….

Audit Archives

Budget

  • Understanding Special Assessments April 18, 2017 There’s no way to sugar-coat it: everyone hates special assessments. Getting a notice that you owe more money to the association can not only put a damper on your day but also a dent in your wallet, both of which the board is sympathetic to. In a perfect world, there would never be a need for special assessments—or any other type of assessments for that matter—but sadly, they’re sometimes a necessary evil.     Read the article………….
  • HOA Fees — Hated or Just Misunderstood? April 6, 2017 Nearly every homeowner in a condo or HOA has asked themselves at one time or another “What do the HOA fees pay for”. The answer is different for every community but the fact is the average homeowner doesn’t know where HOA fees are spent. Heck, you probably have a better idea where the homeless guy is going to spend the 2 dollars you gave him this morning. But every member of the HOA should know where the money is going ...
  • Making Special Assessments Work: Fixed Incomes, Low Incomes, & Hard Times March 22, 2017 For residents on fixed incomes, or those who are already struggling to make ends meet because of a job loss, illness or divorce, any hit to their already-stretched-to-the-max budget can be devastating. So when a board levels an assessment on the residents of a co-op, condo, or HOA because of an emergency repair, an unforeseen tax bill, or some other outlay not otherwise budgeted for, it can spell financial ruin for those who can’t afford to pay their share of ...
  • How climate change could affect maintenance fees March 14, 2017 Summer 2016 was one of the hottest on record in the Greater Toronto Area, with experts predicting summer temperatures could soar to 44 degrees Celsius by 2050. In this rapidly changing climate, the city’s high-rise buildings are also feeling the heat, with the provincial government tightening up the Ontario Building Code to meet new global imperatives.  Increasingly erratic weather has a direct impact on Ontario’s residential building stock. Condo maintenance fees are based on predictable historic norms, stable benchmarks and ...
  • Follow the Money: Explaining to Residents How Their Funds Are Spent March 14, 2017 One of the most common questions homeowners ask board members and community managers alike is, “What are you doing with our money?” Understanding how to answer that question is important for all board members.    Read the article……………

Budget Archives

Collections

  • Florida appeals court reverses decision in condominium lien case April 27, 2017 A Florida appeals court recently reversed a lower court’s decision in a case involving liens on condominium units.  The Florida 2nd District Court of Appeals ruled in favor of Business Law Group, et al, reversing the Circuit Court for Pasco County’s decision on AGM Investors LLC’s third-party claims of abuse of process and related torts.    Read the article…………..
  • A New Tool in the Condo Collection Kit (NY) April 25, 2017 Co-ops have more leverage, but there are ways for condos to collect arrears.  At a luxury Chelsea condominium called the Heywood, the condo board used an ingenious strategy to collect from a unit-owner who owed $100,000 in unpaid common charges, late fees, and interest. After filing a foreclosure proceeding, the board got the courts to appoint a receiver, who had the power to set and collect rent from the unit-owner. When he failed to pay the rent, the receiver was ...
  • Case Update: Wing Street CA v. Kiss the Chef, LLC (IL) April 25, 2017 In the case of Wing Street CA v. Kiss the Chef, LLC, the Illinois Supreme Court will review an issue pertinent to the collection of up to six months of a foreclosed owner’s assessments from a subsequent purchaser under Section 9(g)(4) of the Illinois Condominium Property Act. Under 9(g)(4), if the Association initiates collection activity against an owner in foreclosure, then a third-party who purchases at the sheriff’s foreclosure sale, or the third-party who purchases from the bank (mortgagee) after ...
  • Recent court ruling could mean millions for evicted condo owners (HI) April 19, 2017 Condo owners in Hawaii are raising alarms over a recent federal court ruling that found condo associations used the wrong part of the law to file hundreds of foreclosures, some going back nearly ten years.  Those owners fear the ruling will force their condo associations to return millions of dollars to former owners, resulting in huge increases in monthly association fees.   Read the article………….
  • The Legality of Post-Bankruptcy Condo or Homeowner Association Assessments April 18, 2017 A recent bankruptcy case illustrates how bankruptcy affects condominium or homeowner’s association assessments. The Bankruptcy Court for the Southern District of Florida ruled that a condominium association was not in contempt when it attempted to collect post-bankruptcy assessments from debtors who had been discharged in bankruptcy. See, In re Ramirez, 547 B.R. 449 (Bankr. S.D. Fla. 2016).   Read the article……………..

Collections Archives

Reserves

(Association Reserves has a list of state laws regarding reserves at this location;  Capital Reserve Analysts has an interactive map regarding state reserve requirements)

  • The Homeowner Association’s Future Forecast April 25, 2017 Preparing for and overseeing a homeowner association’s finances are perhaps the most important board responsibilities. It takes money and careful planning to maintain and preserve common area property. One of the best forecasting tools is a “reserve study” is needed to identify common element components, their useful lives and cost of repair or replacement. Unlike the weather, this is one forecast that actually happens pretty much as predicted.  Reserve plans cover a 30 year projection period so that roofs, decks, ...
  • Association Deficits Don’t Excuse Developer From Funding HOA Reserves (FL) March 17, 2017 For the developer of the Sullivan Ranch community in Mount Dora north of Orlando, it appears that its decision to stop funding reserves after it established the account and began funding it in 2007 has significantly backfired. The Fifth District Court of Appeal recently overturned a lower court’s summary judgment, which concluded that the developer was excused from funding reserves while it remained in control of the association and was funding deficits in its operating expenses.    Read the article……………
  • Ensuring You Don’t Over Plan Condo Association Major Projects March 16, 2017 Planning for a major project in a Condo Association is a big deal. You have to bid out projects, work with vendors, educate Owners, and execute. You want the project to go as smoothly as possible, of course. And an ounce of prevention is worth a pound of cure. However, there is such a thing as going too far when you are preparing. If you spend hours and hours trying to plan every possible permutation of every possible problem, you’re ...
  • Best practices for condo boards to plan for future building repairs February 22, 2017 Q: We live in a condo building of 56 units. We have a reserve fund marked for separate items like the elevator, roof, parking lot, painting, etc. If we didn’t have enough money to replace the elevator, can we use some of the money from the roof reserve fund?    Read the Q&A…………..
  • Funding Reserves For the Common Good February 15, 2017 Subdivisions, planned community, and condominium owners are different types of community and offer different types of amenities and surrounding. However, there is one common denominator that people living inside these communities are obliged to conform with to ensure the common good of everybody while accessing or using the amenities of the community, and that is paying dues to the homeowner’s association’s reserve fund.   Read the article……………..

Reserve Archives

Banking & Lending

  • Co-op and Condo Financing: A Market Overview April 17, 2017 Today, some eight years after the economic devastation of the Great Recession first began to gather steam, financing for co-op and condominium buildings and individual unit purchases is again widely available. The market is overall quite healthy, and though there have been some systemic changes to this part of the financing world as a result of that financial meltdown, today’s co-op and condo financing instruments are remarkably similar to what was typical before the bursting of the housing bubble sent ...
  • Are HOAs Taking Advantage of Mortgage Servicers? April 7, 2017 While Homeowner Association (HOA) liens for unpaid assessments typically have priority over second mortgages and other junior liens (because the HOA liens may “relate back to” the HOAs’ previously-recorded declarations), first mortgages receive special treatment in various states, such as Minnesota. Despite that special treatment, HOAs often demand payment of substantial bills by lenders foreclosing first mortgages. In addition to the regular monthly dues, the HOA bills may come riddled with line items for special assessments, attorneys’ fees, late charges, ...
  • Are condo & HOA bank deposits fully insured by Uncle Sam? March 20, 2017 Condominium and homeowners associations (HOAs) currently have an estimated $50 billion on deposit nationwide in banks to stash operating account and reserve funds, experts say.  Is it possible that hundreds of millions of dollars on deposit by the estimated 50,000 condo associations and HOAs in Illinois could be at risk if these accounts are not protected by Uncle Sam – the Federal Deposit Insurance Corporation?  “My homeowners association bank accounts are titled in the name of the management company and ...
  • Need a loan? Show lenders your association is a worthy investment February 21, 2017 As spring weather approaches, big-ticket construction and repairs are coming up at many community associations. So is taking out a loan to pay for them. If associations qualify, that is.  Associations will be denied if their finances are in disarray. Until they rectify the situation, the roofs will keep leaking and the sidewalks will keep crumbling.  Here’s how to show lenders your association is a worthy investment:    Read the article…………..

Banking & Lending Archives

Taxes

  • New Jersey Superior Court Holds Condominium Association Was Not Entitled to Redeem Tax Sale Certificate on Condominium April 5, 2017 The Superior Court of New Jersey, Hudson County, Chancery Division-General Equity Part recently held that a condominium association’s attempt to redeem a tax sale certificate on a condominium on which it held a lien was not valid because it was neither a mortgagee nor the owner of the property. See JNH Funding Corp. v. Ayed et al., F-8704-14 (N.J. Ch. Div. March 21, 2017). In the case, plaintiff purchased a tax sale certificate on the subject property in 2006.   ...
  • Paris Meadows, LLC v City of Kentwood: Objecting to the Taxation of Common Elements (MI) March 29, 2017 In Michigan the question of whether the common elements of a condominium are taxable appears to be well-settled. In Paris Meadows, LLC v City of Kentwood, 287 Mich App 136; 783 NW2d 133 (2010), the Michigan Court of Appeals held that pursuant to Section 131 of the Michigan Condominium Act, MCL 559.231, property taxes may only be assessed against individual condominium units, not the total property of the condominium project. Paris Meadows, supra, at 149. Accordingly, common elements may only ...
  • Taxes and Your HOA Community – To File or Not March 4, 2017 If you live in a planned community, there is a good chance questions have come up about taxes and if your community needs to file them. We’ve heard many people admit that they didn’t realize their community needed to file tax returns. Even though it isn’t an uncommon problem for self-managed associations, depending on how your community is legally organized, it can lead to problems with the IRS. We know no one wants problems with the IRS, so we’ve put ...
  • IRS Revenue Ruling 70-604 and MCL 450.2541(2)(b): The Value of Expert Advice February 16, 2017 Many individuals and corporations, including community associations, are currently preparing their tax returns. For associations with excess revenue this process most likely involves a determination of whether to exercise an election under IRS Revenue Ruling 70-604. A proper election under Revenue Ruling 70-604 can be used to reduce an association’s taxable income by deducting from taxable income any excess assessments refunded to members or carried over to the next year’s assessments. In making such an election, however, an association should ...

Taxes Archives

General Financial

  • Understanding Special Assessments April 18, 2017 There’s no way to sugar-coat it: everyone hates special assessments. Getting a notice that you owe more money to the association can not only put a damper on your day but also a dent in your wallet, both of which the board is sympathetic to. In a perfect world, there would never be a need for special assessments—or any other type of assessments for that matter—but sadly, they’re sometimes a necessary evil.     Read the article………….
  • Condo Association Special Assessment Preparation for Owners April 18, 2017 One of the scariest and impactful things that can happen to a Condo Association Owner is the dreaded Special Assessment. Special Assessments are caused by a number of things – poor budgeting, unexpected repairs or perhaps deferred maintenance from a Condo conversion. This can be a very disruptive time, but as an Owner, you have some options. Here are steps to help you with Condo Association Special Assessment preparation.    Read the article…………….
  • I’m a Manager, Not a Magician April 10, 2017 Our management company was referred to a property that had not performed regular preventative maintenance for at least a decade or more. We accepted the account. Unfortunately, they also had a board that has always partially funded the reserves (with owner’s consent, of course). Needless to say, this is a recipe for creating a large special assessment at some point (read: pay now; or pay more later).   Read the article…………..
  • Money Doesn’t Grow on Trees, or Does It? March 31, 2017 What can a condominium do when it is facing a large deficit or an unexpected repair project has depleted the reserve fund? Typically, the condominium would levy a special assessment or increase the monthly fees. In some cases, a loan might be the best option for the condominium and its owners.  Some condominiums have found creative ways to generate extra revenue to offset expenditures and avoid (or reduce) deficits. Some of the ideas work better when the deficit is small ...
  • The unwelcome surprise of a condo special assessment and why the fee is needed March 25, 2017 We often welcome things that are special – birthdays, gifts, events. But condominium special assessments? Not so much.  While monthly condo fees are an ordinary part of condo ownership, special assessments represent an unanticipated expense that is levied on all owners to cover an extraordinary and unforeseen problem.  Take the example of a sinkhole. You can’t see the gradual process of underground drainage and soil eroding, and you can’t predict where one will occur or ensure against a surface collapse. ...

General Financial Archives

Fraud & Embezzlement

  • Woman accused of taking $100,000 from NH condo association April 27, 2017 A woman has been arrested after she was accused of embezzling more than $100,000 from a town condo association over 18 months.  Police said Lynne Barry, 53 of Intervale, stole the money from the Northbrook Condominium Association from April 2014 through October 2015.  She was charged with two counts of felony theft by unauthorized taking and one charge of misdemeanor tampering with public/private records.    Read the article…………
  • After arrest, Home Owner’s Association dues theft serves as example April 26, 2017 It has been almost four years since allegations arose about the Belair Homeowners’ Association possibly falling victim to Laura Kozma, a former employee.  Monday, the AG’s Office arrested Kozma for theft over $25,000, money laundering over $20,000 and bank fraud.  “We’re relieved as homeowners that we finally got results,” said Harry Simmons, who took over as the Home Owner’s Association President when the allegations against Kozma surfaced in 2013.  But the arrest raises questions about how no one noticed the missing ...
  • Slidell woman arrested for stealing from homeowners’ association (LA) April 25, 2017 Attorney General Jeff Landry’s Office has arrested a Slidell woman for felony theft in excess of $25,000, Money Laundering over $20,000 and Bank Fraud.  Laura Kozma was booked into the St. Tammany Jail Monday following an investigation by the Louisiana Bureau of Investigation.    Read the article…………..
  • PCSD: HOA treasurer admits to stealing $180,000 (AZ) April 14, 2017 The treasurer for Canoa Seca Estates II walked into the Green Valley substation of the Pima County Sheriff’s Department on Thursday afternoon and told deputies he was guilty of stealing $180,000 from the homeowners association, according to a PCSD spokesman.  Wendell Odean Byram, 79, was booked into the Pima County Detention Center on a single count of theft, Lt. Eric Johnson said.  Bill Copeland, the HOA’s incoming president, said he went to Chase Bank with past-president Carl Schuster on Thursday ...
  • Condo Deposit Fraud results in Criminal Conviction for Developer’s Lawyer April 11, 2017 A Toronto lawyer, Meerai Cho, was recently convicted of criminal breach of trust and had her licence to practice law revoked for her part in facilitating the theft of $13,000,000 by her client, a condominium developer. We previously blogged about this in May 2015.  The stolen money was comprised of deposits paid by over 140 purchasers of units in a mixed-use commercial/residential condominium to be built in North York, Ontario. As reported by the Law Society of Upper Canada (the ...

Fraud & Embezzlement Archives

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