Community needs to look at financial records

Q: I read your articles all the time and they are so informative. I live in a small, 70-unit condominium project, and we are having terrible money problems, mainly stemming from the misappropriation of funds from the management company.

We are having a meeting Oct. 3, where the company wants to ask for a third assessment in two years.

The homeowners' association has sent letters to all owners asking them to vote for no new assessments, and to get a new management company. What is the percentage of votes that we need?

A: You always want to be careful when making statements that the management company has misappropriated funds from the association.

Such a statement needs to be made from actual facts that are obtained from an audit.

If this was the case, an immediate complaint should be filed with the Nevada Real Estate Division.

Your board sets the priorities as to where the money will be spent and most of your funds are probably being spent on insurance, utilities, annual financial report from a certified public accountant, management fees and maintenance contracts.

In a condominium project, communities tend to have higher operating expenses, usually because of the maintenance and repair and or replacement of the roofs, exterior painting and plumbing/mold/water leaks.

In addition, state law requires that the association properly funds the reserve account. It would not surprise me if your association has a delinquency issue which is contributing to the financial deficit.

What you need to do to make an intelligent decision is to have a copy of the projected 2012 budget, 2011 year-to-date financial report, an accounting of the total dollars owed to the association and an estimate of how much of the debt is collectable.

In addition, you will need the reserve study and, more specifically, what is the projected ending balance for the reserves for 2011 and 2012, plus the anticipated capital expenses for 2012.

Also, the board will need to look at the monthly contractual expenses for the association for 2011 and projected for 2012.

After reviewing these documents, you may discover that without an increase in assessments, you may have to cut services or find your association not able to pay its regular operating expenses.

Assuming that an increase is not warranted, you would need a majority or more (look at your covenants) members to reject the proposed budget or increase at a meeting in person or by proxy.

If the proposed budget is rejected, then the previous budget remains in place until a new budget is prepared by the board, to be either ratified or rejected by the membership.

If you do not have the percentage of owners to reject the budget at the ratification meeting, then by state law the budget is ratified.

As to changing the management company, it is the authority of the board to select, hire and fire its contractors.

You would need to either convince the board to make a change using membership pressure or elect new board members who would make the change.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.