Contingency fund helps protect association from expenses

Q: Our association was established in 1982 with 259 single-family manufactured homes. We have just completed our reserve study and have discovered they were significantly over funded. My question concerns how to handle it. Do you have any suggestions in this regard?

A: Prior to reducing your assessments or refunding any excess money (which could require 1099s issued to homeowners), make sure you have a contingency account of at least two to three months of assessments. As you are aware, you cannot utilize reserves for normal operations.

By having a contingency fund, you are protecting your association from costly unexpected expenses, increases in current operating expenses or for special projects. It also helps to insulate your association in case your delinquency reaches a higher rate than normal for your association.

You may also want to check with your financial advisor or certified public accountant. Once the above has been achieved, send a notice to your membership that assessments will be reduced by X amount of dollars in 2007 and will be re-evaluated for the 2008 year when the budget is prepared.

Q: For the past year, I have written, called and faxed my management company regarding repairs outside my second-floor unit to no avail. I am especially concerned about the shaky railing and bulging floor deck.

I have enclosed a copy of recent correspondence from management regarding anticipated projects around the community that have been given priority. To date they have not replied to my certified letter. I have since moved out of the unit and have signed a management agreement with a rental company to lease it.

I am concerned that these repair problems could hinder renting the unit. Would it be beneficial to contact the ombudsman; or to just find an attorney who handles this type of complaint? Who would be responsible for the attorney cost?

A: It is always a difficult task to balance the needs of the community with the needs of the individual homeowners. There is always a finite amount of money to be utilized at any given time.

It appears that your association is first trying to ready their swimming pool. The Southern Nevada Health District does have strict requirements for communities with pools and will not let them open for the season without compliance. In addition, it appears that there is a serious plumbing problem, which has caused leaks throughout the community. This is a major maintenance concern as water leaks lead to other serious maintenance issues, such as remediation of mold.

The association should have replied to your letter, even if the response were that the funds were not available. You could contact the local governmental housing code enforcement agency to see if they would be willing to site the association. Also, you could contact the association's insurance agent to see if he or she would send an inspector to determine if a liability issue exists. Prior to contacting an attorney, you could contact the ombudsman's office to see if they would arrange a meeting between the two parties to attempt a resolution.

If all else fails, you could send written notice that you will make the repairs if the association fails to make them within a certain time limit, and then sue the association in small claims court.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management and is the author of two books on the subject. Holland is a past president of the Greater Las Vegas Association of Realtors. Questions may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.