Q: I live in an association that will eventually have 95 homes. The development is about 2 years old. Currently, there have been 52 homes sold. Given the current economical condition, the remaining units are estimated to take another two years to sell. Our covenants, conditions and restrictions indicate we must have a three-person board of directors, of which we are entitled to one seat when the community is 25 percent sold. The remaining two seats will come to us when 75 percent of the community is sold, perhaps toward the end of this year. Additionally, the association appears to be cash strapped with only 52 homes paying monthly dues.
We have had several landscaping issues, mainly an entry-gate palm tree that died. It will cost about $6,000 to replace it. Our management company told us in November that we can’t afford to replace the tree. We have since had two additional pine trees die and have additional damage from recent snow storms.
According to the management company, the builder does not pay monthly dues on the models or standing inventory, but rather will subsidize our operating account if we run short of funds. At the last quarterly association meeting, I suggested that we move forward with the palm tree issue but was told that the builder would not authorize the expense.
It was hinted that if the issue were pushed, the association (controlled by the builder) would increase the monthly dues or issue an assessment to cover the shortfall. I feel as though the builder should pay (all or part based upon ownership percentage) for the expense of the tree since they still control the development and are still actively selling homes.
Their position is that the association needs to pay 100 percent of the replacement. The board agreed to remove the tree and temporarily replace it with a bush until association funds are available to replace it.
I feel as though we are being held hostage by the builder since they control the board. Once we get to the 75 percent point, the builder will turn over the association to us and we will get stuck with the entire cost of replacing the tree. — Tyrone
A: NRS 116.31032 pertains to the developer’s control and transfer of control to the homeowner association. Subsection 3 states that 60 days after the conveyance of 25 percent of the units, that at least one member, and not less than 25 percent of the members of the board, must be elected by the unit owners other than the developer. After 50 percent of the units has been conveyed, the homeowner members on the board must represent no less than 33 1/3 of the director’s positions. Since you only have a three-person board, you will have only one homeowner member on the board until the 75 percent conveyance has been reach, or five years after the builder has ceased to offer units for sale in the ordinary course of business, whichever comes first.
If you have trees that were damaged by the wind storm, your community manager must check the association’s insurance policy. Many insurance policies do in fact cover landscaping claims. If there is coverage, the manager needs to contact the insurance company immediately before 30 days have expired, as some insurance policies will not accept claims after 30 days. This may save the association money if in fact there is coverage, less the deductible.
If there is no coverage, your community manager could try to negotiate some payment plan with the current landscape company. Another suggestion is to see if there is money in the reserve account and if there is money, determine how much can be used for the replacement of the trees.
Even though the builder still has control over the association, it does not mean that the company is responsible for the replacement of the landscaping. Most landscapers only provide a 90 -day warranty on plants and trees. Unless you can show that the trees died because of the landscaper’s negligence, the association would have to pay for the replacement of the trees.
State law recognizes subsidy options initiated by the developer. Your governing documents and your public offering probably state that the builder has the option of subsidizing the association’s expenses. There are some subsidy agreements that state the developer doesn’t have an obligation to pay any more money than what it would cost if the company were to pay the monthly normal assessments on each unit that was annexed to the association in lieu of subsidizing the difference between the income received from the homeowners less the operating expenses incurred.
Your 2009 operating budget should have reflected the projected subsidy amount if the builder was not paying the same monthly assessments as the individual homeowners.
Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q.&A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by e-mail at email@example.com.