Jessica's Clothes Corner

In January of 2016, the law firm that represents the Amherst Place Condominium Association (the “Association”) informed the Association’s management firm of the possibility of charging a yearly assessment when renters rather than owners occupy homes within the Association.  Like other associations, the Amherst Association and its management firm had experienced additional costs as a result of renters occupying homes within the Association. In May of 2016, the Board of the Association met at a regularly scheduled and noticed meeting to discuss a proposal to charge a fee of $250/year to any home within the Association if the home were occupied by renters.   The proposal contemplated that the management firm would bill and collect the $250 fee on behalf of the Association and that the Association would pay the management firm an amount equivalent to 40% of the fee after the fee was actually collected.  The Board discussed the proposal in open session followed by an opportunity for Association members to ask questions or make comments.  Afterward, a motion was made, seconded and carried to adopt the fee proposal.  The Board noted its approval of the fee proposal in the minutes of the May 2016 Board meeting, which were approved in the normal course at its next regular meeting held in July of 2016. At that same July meeting, the Board reviewed the written opinion of the Association’s legal counsel (dated July 6, 2016) who confirmed that the fee proposal had been properly noticed and considered at the May board meeting and that the Board’s decision to adopt the fee proposal was exercised consistent with the Board’s responsibilities to the Association pursuant to California’s Business Judgment Rule.  When an Association member still raised concerns about the $250 fee at the July meeting, the Board asked the Association’s legal counsel to provide further input on the appropriateness of the fee proposal.  The Association’s legal counsel responded in writing on August 15, 2016, again confirming that the Board had acted properly on the fee proposal, that the matter had been properly noticed for consideration and that the fee was consistent with California law and the Association’s CC&Rs. Thus, after discussing the $250 fee at two regularly scheduled board meetings and twice confirming with the Association’s legal counsel that the adoption of the $250 fee was lawful, the Association directed its management firm to implement the fee effective August of 2016.   The management firm pursued billing and collection of the $250 fee for the next three months.   As fees were collected, the management firm deposited them in the Association’s account.  At the close of each month, the Association paid the management firm a management fee that included an amount equivalent to 40% of the $250 fees collected, as contemplated by the original proposal adopted by the Board in May of 2016. In August of 2016, [redacted] joined the Board.  Mr. [redacted] is an offsite homeowner who rents his home.  He opposed the $250 fee. In November, Mr. [redacted] attended his first Board meeting as a new board member and proposed that the Association cancel the $250 fee.  The Board adopted his proposal.  Thereafter, the Association directed the management firm to discontinue billing the $250 fee, which it did. Mr. [redacted] now demands that Michael & Sons return the amounts that the Association paid to Michael & Sons implementing the $250 fee as directed by the Board.  While Mr. [redacted] may have acted within his discretion to persuade the Board to discontinue the $250 fee, neither he nor the Board have the unilateral authority to retroactively reverse financial commitments and payments made to third parties, like Michael & Sons, who performed as directed by the Board. Simply put, the Board acted properly when it adopted the $250 fee.  Michael & Sons acted properly when it collected the $250 fee at the direction of the Board.  The Association acted properly when it paid Michael & Sons consistent with the terms of proposal adopted at the Board’s May meeting.  And Michael & Son acted properly in keeping the monies paid to it by the Association.Best Regards, [redacted] Michael and Sons

Michael & Sons, a family-owned property management firm, has been the property management company for Amherst Condominium Association for nearly four years. Prior Amherst HOA boards, homeowners, and residents have been very pleased with our services. In our 30 years of managing homeowner...

associations – during which time Michael & Sons has a stellar record with the Revdex.com – we have come to understand intimately the extra challenges that come with managing units with renters, rather than homeowners, occupying the units. The dumping of excess trash and unwanted furniture into dumpster enclosures is only the tip of the iceberg. Renters are more likely to be involved in parking violations than homeowners. Renters are more frequently the subject of complaints from other residents than are homeowners. Renters are more likely to treat common area amenities carelessly. Because the property manager generally needs to deal with complaints by going through the offsite homeowner, rather than working only with the alleged offender, it takes significantly more work for the property manager to resolve these complaints. It seems logical that offsite owners should bear a larger proportion of the property management costs, since their units require significantly more resources to manage. In 2016, the highly respected law firm of [redacted] & [redacted], which specializes in owner association law, informed Michael & Sons of a court ruling that would allow an HOA to charge offsite owners an extra fee. On May 25, 2016, at a duly and properly noticed Board of Directors meeting with the subject of an offsite owner fee on the agenda, the Amherst HOA Board voted to institute an annual $250 offsite owner fee. Although Michael & Sons incurs some 90% of the extra expense involved with offsite owners, we readily agreed that Amherst HOA would retain 60% of the offsite fee, and Michael & Sons would receive 40% of the fee – and only upon actual payment of the fee by offsite owners. This fee, in the opinion of legal experts, does not violate Amherst’s CC&Rs. Amherst’s 60% share was a windfall for the HOA. Offsite owners were first billed the fee in August 2016. In August financials, the gross fee was listed in revenue. There was a line item in administrative expenses for the Michael & Sons’ 40% of the fee. Since Michael & Sons was not paid until the fees were actually collected, there was a disconnect between the timing of the recognition of the fee revenue for the HOA, and the reporting of the expense of Michael & Sons’ portion. In September 2016, in an effort to remove this oddity from the income statement, we re-stated the financials to show the net HOA revenue (Amherst’s 60%) in the revenue section. At the request of the Amherst HOA treasurer, we reverted to the original reporting method in October 2016. All of this has been explained timely to the Amherst HOA board. In November 2016, the Amherst HOA board voted to rescind the offsite owner fee. The board instructed Michael & Sons to post a $250 credit to each offsite owner’s account, which we completed in December 2016. We recognize the Amherst Board of Directors’ prerogative to give back their portion of this offsite owner fee. However, when the Board voted for this fee and the money was collected, that 40% belongs to Michael & Sons. We consider this payment for services already rendered. The Board then asked Michael & Sons to return the $7,400 of its portion of the offsite owner fee. Ultimately, Michael & Sons, as a gesture of goodwill, offered to return that money over time in the form of a $500/month reduction in management fees. The board’s response was to give notice of termination of the management contract.