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ASSOCIATIONS
Suspect fees imperil their nest egg
By Stephen Glassman and Donie Vanitzian, Special to The Times
Question: In July 2003, we purchased a Marina del Rey condo for
$630,000 with low monthly dues. At the time of purchase, both
salespeople said no major repairs to the unit or buildings were needed
in the near future, and none were noted in escrow disclosures. We
learned the seller's salesperson owned many units here and seemed to
be a permanent board director whose agenda was to keep the monthly
fees very low.
As seniors, we planned on retiring in two years, but once we moved in,
the monthly fees kept increasing. In December 2003, the board
circulated an announcement demanding mandatory owner attendance at a
meeting. It said all the planters lacked drainage and must be rebuilt
with new drains and waterproofing. It said mold was found in all the
storage areas and deemed the work "necessary" and an "emergency."
In February 2004, the planters were torn out at an initial cost of
$6,500. Today, it all remains in disrepair with no projected
completion date. No work has begun on the mold problem.
In July 2004, the board called a meeting for yet another emergency. It
announced that the entire complex's cedar paneling was rotted, with
estimated repair costs beginning at $45,000 per owner and "no
guarantee where it will end."
Some skeptical owners hired an independent investigator, who
discovered that the paneling isn't rotted but that several
influential salespeople who live here want to upgrade all their units,
then sell and move. We learned that the same group has dominated board
positions and is responsible for many poor decisions while wielding
heavy-handed influence over owners.
We've now spent thousands on the unit, are faced with paying the
$45,000 assessment and have been warned that "more unexpected
expenditures" are coming. These expenses have jeopardized our
financial stability and retirement plans. Do we have any recourse?
Answer: Many residential deed-restricted buyers fail to understand the
depth of investigation that must be performed to protect their assets
before a purchase. For seniors on a fixed income or approaching
retirement, condo ownership isn't always affordable. Association
assessment payments are always increasing and special assessments are
never more than a board vote away.
Because there are more titleholders than board directors, stopping
runaway emergency assessments isn't impossible. Civil Code Section
1363.05(h) defines "emergency" as circumstances "that could not have
been reasonably foreseen, which require immediate attention and
possible action by the board." Neither of the situations described
constitutes something unforeseeable by a board. The fact that the
board has warned homeowners to expect more unexpected expenditures
automatically removes these expenses from the definition of emergency
by law.
What it does indicate is a lack of due diligence and a breach of the
duty directors owe to all titleholders by virtue of being elected to
the board. Civil Code Section 1365.5(e) requires that at least once
every three years the board of directors "shall cause to be conducted
a reasonably competent and diligent visual inspection of the
accessible areas of the major components which the association is
obligated to repair, replace, restore or maintain as part of a study
of the reserve account requirements of the common interest development."
The board must conduct this inspection in good faith, and its failure
to do so may be cause for removal of one or all directors or subject
them to liability.
Any change approved by the board made for the benefit of a few board
directors and not the entire membership would constitute a breach of
duty and, if proven, could also result in individual liability for
those directors who approved the change.
If the special assessments in any fiscal year total more than 5% of
the budgeted gross expenses of the association, a majority of the
titleholders must approve those special assessments.
Making the decision to buy a deed-restricted property requires
pre-sale investigation. Do not rely on statements made by third
parties, including salespeople, management personnel or board
directors. Regardless of who makes the representation, each assertion
must be independently investigated and verified in writing to your
satisfaction. Any request for information made and not timely complied
with is a warning against purchasing that property.
Questions can be sent to P.O. Box 11843, Marina del Rey, CA 90295 or
e-mailed to noexit@mindspring.com
http://www.latimes.com/classified/realestate/printedition/la-re-
associations19jun19,0,6641340.story?coll=la-class-realestate
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Suspect fees imperil their nest egg
