DEAR BENNY: I am a condo owner in a 200-unit building. Recently there was an assessment broken down into four payments. There are many people who have not paid. Do I, as an owner, have the right to know who these people are? The president of the condo association will not discuss this with me. Is this common knowledge? –Richard
DEAR RICHARD: This issue is perhaps one of the most hotly debated subjects among unit owners, board members, property managers and even association attorneys. There is — and must be — a delicate balance between privacy and freedom of information. We often see this at the federal level, but the issues apply to associations as well.
If I am delinquent in paying my condo fees, I don’t want the world to know; but if I am a condo owner, I want to know the financial situation of my association, including the number of delinquencies.
One compromise position that boards have taken is to provide the number — but not the names — of delinquencies. Some associations actually publish those names in their community newsletter — but this has to be absolutely factual or a lawsuit for libel could be filed against the board and the association. For example, if the report said that John owed $400, but by the time the newsletter was published, John had already paid some money, then the information was inaccurate.
Personally, I have mixed opinions on this. But I have no problem with the board advising members of the number of delinquencies in the association and the amount collected over the past year. Keep in mind, however, that if a collection lawsuit is filed against a delinquent owner, that information becomes public, and privacy is lost.
DEAR BENNY: We are considering making an offer on a home built in 1887. It appears to be in good shape, but of course we will be hiring an independent home inspector. One of our major concerns is that the house, which sits on 5 acres, is not hooked up to the city sewer, although it is within the city limits.
It has a septic system, but the current owners who have lived there more than 25 years said they don’t know where the tank is located, and that it has not been serviced at all since they took ownership. There are other concerns, including a one-lane gravel driveway that slopes up at least a quarter mile to the home. A plumber’s estimate on removing the septic system (assuming he can find it) and putting in piping to hook up to the city sewer lines (around 400 feet) was about $12,000.
The house has been on the market since April 2006, and to our knowledge has not had an offer made on it. As this move would be from the East Coast to the Midwest, this is a major deal for us. How appropriate is it to request the house inspection before an offer is made, and if so, and the request is denied, should I be even more concerned than I am? I understand any offer would be contingent on the inspection. –Sally
DEAR SALLY: When it is a seller’s market, I generally do not recommend having an inspection before you sign a contract. You may spend a lot of time and money on the inspection, only to find that the house has been sold out from under you. On the other hand, if you are not concerned that you may lose the house, because the market is slow, then it might make sense to have the house inspected before you enter into a sales contract.
Actually, if you sign a contact with an inspection contingency — i.e., if you don’t like the house after the inspection, the contract is void and you get your money back — you accomplish the same thing as if you had the inspection first.
Clearly if the sellers refuse to allow an inspection — either before or after you sign a sales contract — then I would be very concerned.
You and your husband are obviously city folks used to city water. Do you know anything about septic systems, how they work and how to maintain them? I would be very careful and cautious before you make the final decision to buy this house.
DEAR BENNY: I have just been elected president of a seven-year-old homeowners association. There are only 12 separate (moderate-sized) fee-simple homes. There isn’t any common ground. The monthly $110 fee covers lawn services, snow removal and exterior window washings. Our treasury balances runs $8,000-$10,000.
A new homeowner submitted a request to build a gazebo that was not approved at our annual meeting. This homeowner, who is a new board member, sells insurance. He has proposed our homeowners association get directors and officers liability insurance to protect us against disgruntled homeowners suing the association for something like his gazebo rejection. The policy is a $2 million "condo director’s liability" with a $350 annual premium. It covers errors and omissions. He says he won’t be on the board without it. I will solicit all the homeowners’ votes rather than it being a board decision. …CONTINUED
Do you think this insurance is applicable in a small association like ours? I’ve received conflicting opinions (even from another insurance representative). –Shelley
DEAR SHELLEY: First, as I tell all newly elected association board presidents, "you have my condolences." However, I am a little confused. You state there are no common grounds. If so, why do you need lawn service and snow removal? Shouldn’t those things be the responsibility of each homeowner?
But to answer your question, yes, every association should have directors and officers liability insurance (called "D&O"). We live in a litigious society, and board members must have this insurance protection. I don’t like the idea, however, that your board member is trying to sell you that policy. It is not illegal — or even unethical — so long as there is full disclosure, but you must shop and compare prices and terms and conditions with other agents.
You should also carefully review the legal documents of your association. I suspect that those documents spell out the level of insurance you must carry.
DEAR BENNY: I am in a partnership in a duplex in which we both live. We each have an undivided one-half interest in the property. My partner might retire and want to sell in two years. Will I be forced to sell my interest? We are co-workers. –Deb
DEAR DEB: Hopefully, you and your partner will be able to reach an agreement whereby he/she sells his/her share to someone — either directly to you or to a third party — or you both may have to sell. If you can’t reach agreement, your partner can take you to court, file what is known as a partition suit, and the judge will require that the property be sold. You will have an opportunity to buy, but it will be more expensive for you.
There is a lesson to be learned here. Any time you buy property with a friend (or a stranger for that matter), you must reach agreement on a number of issues before you sign a sales contract. Some lawyers call this a partnership agreement; others refer to it as a co-ownership agreement.
Whatever it’s called, however, here are a few things the agreement must contain: What happens if one owner wants out? What happens if one owner dies? What happens if one owner cannot make the share of the monthly mortgage payments?
I would rather enter into such an agreement while the two of your are still friendly and talking to each other than wait until there is friction between you.
DEAR BENNY: Can I rent my home if it has a reverse mortgage? –Janet
DEAR JANET: The short answer is no; a reverse mortgage is limited to people who actually live in their home and are aged 62 or older. Lenders (and the federal government where that kind of loan is federally insured) take a risk that you may live so long that your mortgage balance will be higher than the value of the house. So lenders (and the federal programs that insure those loans) do not want you to be a landlord.
However, in recent months, I have heard that there are a couple of lenders who are willing to provide reverse mortgages to investors. I don’t know any names, and I cannot provide any endorsements because I don’t know more about those programs. Perhaps you can find such a lender on the Web.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@sandbox.inman.com.
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