Don't buy property that has a HOA

It sounds to me like there was/is a huge conflict of interest here - the owner, who redeveloped the property, appointed themselves head of the HOA (which should be an elected position), then gave themselves the job of Property Manager ...?

...

Also, if I were the person who had bought that last unit? Suddenly tripling his fee for managing the property would be a gigantic red flag, and I would be very inclined to cancel the sale on the spot.

Certainly by what you describe, managing that property is NOT a $1500/month job. $500/month was probably being overly generous, in fact. I mean, what exactly are the fees covering? Lights in common spaces, maybe heat in those spaces, water and sewer bills if not somehow separately metered, snow removal from the front steps/walk, basic liability insurance, and money put into savings against future repair or renovation needs (e.g. repairing a roof leak, etc).

Condos always have an HOA. Some entity needs to be responsible for repairing the roof.

when is his contract to property manage up? I'd be surprised if he could raise his rates in the middle of a contract term? He may be doing it as cash grab OR, he may be raising his rates to get out of managing a property he has no ties to anymore. Either way elect someone else as trustee and hire a new property manager or if someone volunteers just self manage.

Who is the trustee? Is the position selected? You need to review your HOA bylaws to understand what your options are.

So I asked before buying what the $500/month included and was given this response:
Complete coordination for all services related to ( securing insurance on the building, hiring contractors for any maintenance issues, hiring contractors for cleaning sidewalk snow plowing, manage billing for water and sewer and bill each unit owners depending on their use, maintaining the book keeping of all cost

We each pay our own water and sewer which is an additional expense. I was the only one to shovel this winter (we barely got any snow and only have to worry about the sidewalk). There have been a few maintenance issues--mostly due to the crappy work done by the builders, plumbers etc..

My 24 Unit building pays $50 per month, Per Unit...

So yeah you're getting hosed.

Most small buildings are self-managed. The condo fee covers Master Insurance, Water, Snow Plowing, etc. and then they do an assessment for any project that is needed. My friend 3 unit building condo fee is $220, and they alternate who is in charge of the bills.

Meh. I have an HOA on my house. Fees are only $50/month, the only rule for the entire development (of 100 units) is "do not park commercial vehicles weighing over 6 tons", and that's mostly because the roads weren't built to handle vehicles like that (meaning, they'd cause damage we have to pay to repair - private roads).

Honestly, at our next annual meeting - my first, since I only just inherited the house - I'm possibly going to suggest raising those dues slightly, to start putting money aside towards repaving those roads ... :)

He is the sole trustee and the earliest that his term can end is 4 months after the last unit is sold (just the other day). In the condo docs it says that (A) the unit owners shall have no power or right to remove the Initial Board nor to appoint an additional or successor Trustees until the expiration of the Initial Board has expired and (B) during the term of the Initial Board, any vacancy in the office of a Trustee, however caused, shall be filled only by the designation of the Declarant of the Master Deed. Maybe (B) gives us an out if he wants to quit being trustee than newly elected board can fire him.

Yes, he told us he has no interest managing this property, so it might just be a cash grab. I don't think there was a contract as he hired himself and chose his own rate. He had to keep it low enough to sell the units, but now that they are sold he could care less.

Yes, I completely agree with a larger building you need a property manager. Considering we have no amenities, it seems like it's easiest to come together and assign the few tasks to each unit (water/sewer, Insurance).

To our HOA $500 is a lot and $1,500 is outrageous, but to the property manager $500 is nothing for the headaches that could come from it.

This is bad advice. Are you my mother, lol? The majority of non-single-family homes have HOAs in Boston and the greater Boston area.

I was part of two HOAs where the residents met together and decided how to use funds or adjust the HOA fees and so forth. It was chill. We'd all gather outside and bring a few beers and talk through what we all that was needed and prioritize it. We divvied up work for those that wanted to do something and had them expense items against the HOA if they wanted. It just works as a shared savings account. It also helps to dilute the total cost of major repairs which is also nice. The enforcement of it was also up to the owners...

The better advice is to avoid having shitty members part of the HOA.

Now that the developer has sold the last of the units the owners sit down and have a condo board meeting and vote him out as property manager. It takes all of twenty minutes.

My experience with a triple decker condo is that nobody is involved except the owners. One person manages the account & routine bill payment, but otherwise it's a pretty simple "best of three" on any decision making.

It sounds like you're getting hosed though. If I were you I wouldn't rock the boat now, but make sure that you're going to kill whatever relationship you have once that term is up.

Meanwhile you can also figure out how much he's collected from you all and if it's worth filing in small claims court for him abusing the position he put himself in to line his pockets.

Why would you buy under those terms? He gave himself full unchecked power until 4 months after the last unit sells and you willingly agreed to that. That's wild.

We had a similar issue buying our condo in a two-family that had been recently flipped by an absentee investor who used a property manager company. The property manager was charging about $350 per month, but to be honest, that seemed about market rate. The issue is that with triple deckers in Boston, you are only splitting that cost 3 ways instead of more at a bigger building where it would be affordable.

We ended up just volunteering ourselves as the HOA trustee and handling all the paperwork to get rid of the property manager ; the other resident has been cool with it. It was a little bit of a pain with getting all the paperwork where it needs to be at the beginning but things run on autopilot for the most part now. You should do the same because there is no reason to pay a property manager that much on a smaller place. Our fees for a two family are $250 per month, which includes water, common area electricity, snow removal (most expensive cost in the budget), landscaping, and $1k in reserves per year.

P.S I would advise you to read through your HOA bylaws. I am not a lawyer, but my understanding is that it is not ethical for a trustee to essentially award money like that to themselves. If they had a legitimate cost, such as they bought lightbulbs for common areas, that’s one thing, but the developer should not be reimbursing themselves for lost time. Do your bylaws also not state anything about automatically becoming a trustee? Ours makes each unit owner a trustee within 30 days of purchase automatically.

I lived in a small 6-unit building in JP for 8 years and right before I bought the owners basically came to the realization that they were being hosed by their so-called property manager. We didn’t have a plow guy, no trash service etc- the only thing was coordinating insurance renewals, paying city water/sewer, collecting the monthly fee, and keeping up the books. Our fees were $190/mo and when we switched to doing everything ourselves, our reserves were so easy to replenish! If you think you and your neighbors are interested and willing to take on the duties, for a small association I highly recommend doing it yourselves.

I think you should contact a lawyer. There should be no reason owners can't terminate the contract and fire the trustee.

MA regulates condo boards fairly well.

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Did you get that in writing or did someone tell you that verbally?

You might be confusing HOA's that govern a neighboorhood of single family houses and condo associations that govern shared buildings. (Or maybe you are saying never buy a condo, it's unclear. But condos are pretty commonly the only way for regular joes to afford a place in the city.)

Is there hopefully some limits on what the Initial Board is allowed to do? This sounds like a really bad agreement for you and the other buyers. If I read this a buyer I'd be scared. Is this a normal agreement for new developments? I'm in an already established building so I'm not sure. In our setup, a simple 51% majority can spend money that's already in the condo account, but it takes 75% to make an assessment (raise the monthly rates or do a one time charge to all units)

Reading between the lines, it sounds like they are asking to be fired/non-renewed in more words.

This. I've lived in 2 and 3 unit condo buildings and our dues have been VERY low, nobody's getting paid for the work. The tasks for the head of a small HOA are:

• Track dues coming in and common area utility and insurance bills going out (approx 1 minute per month, everything should be on autopay)
• Coordinate whose turn it is to shovel/weed/garden/vacuum common areas or hire someone to do that.
• Buy new trash cans when damaged (if the city doesn't issue municipal trash cans).
• Keep an eye on the checking account to save up enough for the inevitable repair of the roof/siding/etc. in a few years.
• Every few years get a rebid on the master insurance policy to see if you can find a better rate.

There's no reason for any HOA officer to be paid anything in an HOA that small. All of your dues should be going directly to the HOA checking account, and nothing should be coming out of it that isn't paying for insurance or specific services that everyone agrees upon.

that was in writing -- my real estate attorney forwarded my list of questions to their attorney and that was their written response. (I added in my input in the 2nd paragraph).

That property manager is a thief. Its probably like 30 minutes of work a week, tops. Don't pay because a building of that size obviously does not need a property manager.

>P.S I would advise you to read through your HOA bylaws. I am not a lawyer, but my understanding is that it is not ethical for a trustee to essentially award money like that to themselves. If they had a legitimate cost, such as they bought lightbulbs for common areas, that’s one thing, but the developer should not be reimbursing themselves for lost time. Do your bylaws also not state anything about automatically becoming a trustee? Ours makes each unit owner a trustee within 30 days of purchase automatically.

I am going to read over them tonight, but I think he still has control for 4 months. I don't know if he will stick to those 4 months though. There are still some maintenance issues from the last storm a couple weeks ago that he was "fixing". The unit that was being sold flooded and we probably need a bigger sump pump. I hope he will close out these projects before quitting.

I am willing to put in my fair share, but 1 unit owner is out of state (doesn't seem like he is going to help). The other unit owner has been quiet as well. Maybe the new owner will be willing to chip in. I can set up autopay for water/electricity and so on, but I don't want everything to fall solely on me.

Tell him to quit then. He can just add easily fire your condo association as a customer. If he doesn't want to do work then his option is to quit rather than to gouge the rate.

New Benz ain’t gonna pay for itself.

Personally, I feel that he is violating his fiduciary duty as a trustee. As long as he is a trustee, he is supposed to be acting in the best interests of the HOA. All of the things that were mentioned in the $500 are the basic tasks that a member of an HOA. Was he contributing anything toward that $500 cost when he owned the unit or was he expecting you and the other unit to split between yourselves?

The remaining unsold unit was the biggest, so had the highest HOA fee of $425, so he would deposit $425 and withdraw $500 each month.

Normally the developer runs the HOA until they sell the last unit. An election before they sell at least half the units would be pointless - they own the majority beneficial interest. But usually they hold control until the last unit sells in case they need to do something like fix an error in the condo docs.

Now that he is no longer a majority owner the other owners can and should call for an election and oust him. And they can self manage or put the contract out to bid and hire a management company.

OP: read your condo docs. They’re usually quite readable. If you arent sure about anything you can check with your closing attorney about what you can or should do - you paid them to review all this before closing.

chapter 183a section 10 says you can fire a property manager with ten days notice

I'm amazed a lawyer didn't have issue with this.

He's playing you

Yeah, f that guy. He is trying to pull a fast one. It depends upon how far you want to take it, but you could just refuse to pay and have him sue you, at least that leaves the decision about whether it’s owed up to the judge. He would also have to explain how he arrived at that exorbitant fee. That’s my initial inclination, but it depends upon how you and the other HOA members feel. At the amount of money we’re talking about here, it could be worthwhile for you and the other owners to split an initial attorney consultation.

I bought my condo from a developer who converted a triple decker, except he didn't buy any of the units. Our docs have identical wording except that the initial board ended when one unit sold.

I think it's clear you're getting screwed. Our condo is self managed and requires almost no work. Our HOA fees are all under $200 and covers master insurance, water and sewer, common electric, and maintenance. All bills are on autopay and I monitor them.

When maintenance needs to be done one of us volunteers to take the lead and we don't get paid for that. We might each do about 30 min of "work" per quarter which usually consists of changing light bulbs, ordering items on Amazon, phone calls/emails, and being there when the maintenance person gets there. It's certainly not something that should be compensated $1500/mo.

I pulled up chapter 183a since it was listed in the legal docs--there are lots of sections and lots of details to read through.

One question--Property manager is currently sole trustee and there was never a contract for him being the property manager. He is the only one who has access to the bank account so how would we even fire him? I don't think we have that power?!

The unit owners pick the trustees

Yes, but in the condo docs he is sole trustee until 4 months after last unit sells. It sold last week, so unless he is willing to step down early, we have him for 4 more months!

That is very unusual for you to have no powers for 4 months... Was just looking at my friends and it says 4.1.1: Upon the conveyance of all the Units of the Condominium ... the Unit Owner(s) then of record each shall have the right to appoint one (1) Trustee.

Maybe this is all part of his scam....quick $6k before he vanishes on us.

What does it say about Conflicts of Interest? The one I have says basically that the sole trustee can't contract with himself since there are no other trustees to ratify his action... but IANAL

Section 4.6. Self-Dealing and Trustees' Bonds and Liability. ....

Provided, however, that such contract, transaction or act shall be duly authorized or ratified by 100% of the Trustees who are not so interested and to whom the nature or such interest has been disclosed.

For a triple decker that’s absurd.

If only it was written in plain English, so the average person could understand it. This is an excerpt from the conflict of interest section that seems to me like he can do whatever he wants..

It is understood and permissible for the Initial Board hereunder and any other trustees designated by the Initial Board or who are employed by or affiliated or associated with the Declarant, to contract with the Declarant and any corporation, firm, trust or other organization controlled by or affiliated or associated with the Declarant without fear of being charged with self-dealing.

Yep, completely agree. Our HOA fee would have to be about $700/month to cover this expense. This guy is out of control....

Sounds like it, hope he doesn't demand your first born child these first 4 months....

Good thing I don't have a child to give!!

Usually the hoa covers insurance policy for exterior. You should be able to see that master insurance policy and costs.

Yes, I have a copy of that and see it being deducted from the HOA account. It’s around $3,300 annually and he financed it at 12% because there wasn’t enough in reserves to pay for it up front and cover his property management fee.

So that is about the minimum that your expenses should be. When you meet as a hoa and remove him, you can reset dues to be 1100 each if you'd like. I'd recommend targeting a balance of about 1% of property value raised in excess to the hoa to help manage external repairs. From the history you could see your annual maintenance and calculate who owes what to hit that.

Yes the property manager suggested getting to $10k in reserves which seemed reasonable. He wanted us all to pay additional 2 months of fees to pad the reserves (after we already did that at closing). I am soo glad we declined that suggestion because it would have been more money for him to take!!!

Completely agree. Get him out of there.

This screams "we need a lawyer". Especially since the sales are so new and, I am certain, one of the reasons you all purchased is the low $500 a month property maintenance fee that the seller (now self appointed HOA property manager) told you about. The bait & switch stinks of fraud.

In the interim, if I were an owner I would call a meeting of the other two owners and make a collective agreement that the monthly condo fees will be paid after the group can vote in a new HOA manager (4 months from the last sale) so he can not enrich himself in the interim.

>Normally the developer runs the HOA until they sell the last unit. An election before they sell at least half the units would be pointless - they own the majority beneficial interest. But usually they hold control until the last unit sells in case they need to do something like fix an error in the condo docs.

TIL. :)