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Ask the HOA Expert: Bulk Billing For Electricity

Written by on Tuesday, 22 November 2016 2:54 pm

Question: Our HOA is billed in bulk for electricity. Each unit has a submeter which is read monthly and billed to each unit owner. Subtracting the total unit usage from the bill leaves the total usage for the common areas. Currently, we are adding 3 cents per kilowatt hour to each owner's bill to pay for the common area cost. So, owners who use more electricity pay for a larger percentage of the common area electricity. All other HOA costs are shared equally. Are we doing this correctly?

Answer: If HOA costs are shared equally, this applies to common area electricity. The board has no authority to do otherwise. To correct this, an accounting of common area electricity charged to units should be done and credits or charges processed as appropriate.

Question: Recently, our HOA members approved substantial amendments to the governing documents which include:

1. Sidewalks are now deemed common area even though the subdivision plat indicates that the sidewalks are located within a utility-and-sidewalk easement located on private lots.

2. An HOA landscape easement was created over the front yard of the privately owned lots.

3. The HOA claims authority to enter lots to inspect for compliance with architectural design restrictions.

Can the HOA legitimately claim these rights?

Answer: The HOA cannot vote itself ownership of property belonging to private owners without their consent. In this case, all lot owners would need to agree to relinquish ownership to the HOA. A majority vote can't force it. Same answer for the landscape easement. The HOA has no authority to commandeer private property by member vote.

The third item is different. As long as the HOA has the right to dictate architectural design standards, it has the right to inspect for compliance.

Question: I've heard that special assessments have to be kept in an escrow account and cannot be used until all owners have paid. Is this true?

Answer: It depends. Special assessments should be kept in a designated account if they are to be used for a specific purpose, like repairing roofs. If the special assessment is simply to build reserves, the funds can be put in the general reserve fund. There is no requirement that an entire special assessment has to be collected before it's spent however, if all the money is needed to pay for a specific project, the board needs to be careful about starting a project without the money to pay for it.

Question: Can the HOA offer discounts to those who prepay their HOA fees or special assessments?

Answer: The HOA should not offer discounts since the budget requires payment of full fees to fund it and offering discounts would create budget shortfalls. It is appropriate, however, to charge late fees to those that pay late. The budget should not anticipate extra revenue through late fees although there will likely be some. By the same token, there could be a shortfall in revenues if collections are not successful or take a long time to collect.

Question: Is it permissible for individual condo unit owners to pay for their own roof replacement?

Answer: Condo owners typically don't own their roofs unless the condos are stand alone units. Virtually all common wall condo roofs belong to the HOA. As such, roof repairs should only be paid for by the HOA according to a prescribed schedule. While lack of funds may force doing only a portion of the condo roofs, for example two of five buildings, doing the roof over one condo makes little sense since the same unit owner is responsible for a share of the repairs of all unit roofs.

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  About the author, Richard Thompson

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.