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Letter to the editor

Increase your condo board reserves, not your debt

By Richard White, Special to the Times
Published September 8, 2007

A: In recent weeks I've received many questions about whether boards should borrow to pay expenses. I never recommend taking on debt.

In your case, I'd suggest that the budget include a reserve fund to cover deductibles and other catastrophic events. It may take a couple of years to build up that reserve, but I think this is the best way to protect the association's future. The board can modify the budget at any time to start collecting the funds. If you sustain a catastrophic loss before your reserves are built up, levy a special assessment.

Rules are rules

Q: I'm an investor-owner. The condo rules say I can have only one tenant in a two-year period. My tenant lost his job and left town. I tried to sell the unit to another investor, who would have leased it to a tenant, but the documents say investors can't lease during the first two years of ownership, so that fell through. I listed the unit for sale but got not one nibble in six months. The president says, "Sorry, we have to abide by the rules." For a year I've been paying the mortgage, monthly fees and special assessments. I can't afford to do so any longer, so the unit is going into foreclosure. My lender ignores my letters. If the association had allowed me to sell it to the investor or lease the unit again myself, I wouldn't be in this situation. What can I do here?

A: My mailbox is full of similar questions from investors who bought a few years ago when the market was hot, figuring they could flip a unit quickly for a big profit, and now face big losses. The bottom has dropped out of the market and you're stuck.

I'm sorry for your situation, but the documents and rules were laid out for you when you bought the unit. You can't hold the association responsible. Drastically lower the price and hope you can unload the unit and move on.

Get it in writing

Q: The board approves all sales and rentals in our 55-plus community, and routinely rejects any applicant under 55 years of age or with a poor credit rating. Since tenants have no financial responsibility to the association, why should their credit matter? Is the board within its rights to have such a strict policy?

A: First read your documents to see what the requirements are for screening applications. The federal laws governing adult communities are based on residency, not on ownership. Anyone of any age may own a unit, but one resident of each unit must be 55 years of age or older, and no child under age 18 can live in the home permanently. Some documents have different age restrictions.

Your documents may provide for other requirements, such as credit checks and criminal background checks. The thinking behind the credit check is that if the tenant can't pay the rent, the unit owner may not be able to pay the mortgage and fees.

I strongly suggest that if your board is going to screen sales and rentals, you have a written policy that has been approved by your attorney. Rejecting a qualified candidate may open you to a discrimination lawsuit.

Richard White is a licensed community associations manager. Write to him c/o Community Living, St. Petersburg Times, P.O. Box 1121, St. Petersburg, FL 33731. Sorry, he can't take phone calls or provide personal replies by mail, but you can e-mail him at CAMquestions@cfl.rr.com. Please include your name and city.

[Last modified September 6, 2007, 17:21:12]