Why it pays to serve on your condo board

Volunteerism spares association expense of court-appointed property manager

Benny Kass
Inman News®

DEAR BENNY: My condominium association always has trouble getting owners to serve on our board of directors. One of the board members has threatened that if people do not volunteer, we all may be charged with a monthly special assessment. Is this legal? –Juan

DEAR JUAN: Absolutely not. I know of no law and have never seen such a requirement in any condominium legal document that will penalize people for not serving as a volunteer board member.

But, this is a serious problem nationwide. Many people buy into a condo so that others can shovel the snow, cut the grass and even pick up their newspaper while they’re on vacation.

Serving on a board of directors is a thankless job; the hours are long and there is no pay. But the condo unit you own is your investment, and you want to make sure that all appropriate steps are taken to preserve and enhance that investment.

Many associations are suggesting that board members be paid for their service. I am absolutely opposed to this. Why? Because I don’t want someone making decisions for me just because he is getting paid.

What should boards do if no one wants to serve? In the final analysis, the association can petition the local court to appoint a receiver to manage and operate the condo. But this will be an extra expense, and hopefully some owners will recognize that service on the board is in their best interests.

Some boards — to entice owners to serve — will agree to send them at association expense to conventions dealing with community associations. For example, the Community Associations Institute, located in Virginia, is a national association dealing exclusively with all kinds of associations: condos, homeowners associations and cooperative housing. CAI holds periodic seminars and an annual conference.

DEAR BENNY: My husband and I live on a fixed income and have accumulated 794,000 time-share points since January 2008. We have tried selling our time share only to be taken twice and left holding the bag. Do you know of any place that is legitimate where we can get rid of our time share without hurting our credit? –Betty

DEAR BETTY: I have been struggling for years to come up with a simple solution for getting out of a time share. The only thing I can do is warn potential buyers that it is difficult, if not impossible, to divorce oneself from a time share.

I do not recommend walking away because it could come back to bite you if the time-share operation decides to file suit against you.

However, as you can see from the next question, Jay was lucky.

DEAR BENNY: I bought a time share on the Outer Banks of North Carolina from a private party at a good price. The complex changed hands and under the new ownership I couldn’t show my unit to potential buyers except during my ownership week. So, I stopped paying my dues.

After a bunch of notices and a few years, I received a "lawyer letter" giving me three choices: I could pay up, deed my unit back to the ownership company, or face a lawsuit. I promptly deeded my unit back to the company since I owed them far more than my asking price for the unit. Hey, I really made out. –Jay

DEAR JAY: You are more than lucky. I have heard from many other owners who were actually sued for the moneys owed. Typically, the legal documents you sign say that any litigation can take place in the state where the company is located, which may be far away from where you live.

Should time-share owners stop paying? As a lawyer, I cannot recommend this since that would be recommending violating a legal document that you sign. However, that’s one option, which Jay took, and he was successful.

DEAR BENNY: What rights do homeowners have against dead, overhanging branches that threaten adjoining property owners? –Edward

DEAR EDWARD: Tree law is evolving around the country. You can find a more exhaustive discussion in some of my articles (as well as others) by typing "tree law" into your favorite search engine.

In general, however, every homeowner has the absolute right to trim overhanging branches and to cut tree roots that are spreading onto his property. This is often referred to as "self-help." However, there is a caveat to this: If the action you take damages the tree, in some jurisdictions you may be responsible for reimbursing the tree owner for his loss. More importantly, if you cut the roots and this causes the tree to fall and hurt someone or damage property, once again, you may be held responsible.

In a case I handled several years ago, my client’s neighbor had a large walnut tree and walnuts were constantly falling onto my client’s property. The tree roots were damaging my client’s rear sidewalk and garage. My client was quite concerned that self-help would cause the tree to fall, and cause damage to person and property.

Accordingly, when the next-door neighbors refused to cooperate, we sued them. One of the legal complaints we raised was that the tree was a private nuisance and must be removed. The neighbor’s attorney argued with the judge that self-help was the only remedy. However, the judge agreed and upheld the count for private nuisance.

I don’t necessarily recommend litigation, since it should be the last resort. In many other tree situations in which I have represented clients, we usually work out a satisfactory resolution between the neighbors.

DEAR BENNY: I would like to add my daughter’s name to the deeds of properties that I own. What is the process and cost involved in doing this and how should it be worded so that she owns the property free and clear once I am deceased? –Doug

DEAR DOUG: I have to assume that you have not been reading my column, since I have on numerous occasions indicated that in my opinion it is not a good idea.

Let’s take this example: You bought the house many years ago for $100,000 and for this discussion we will ignore any improvements you may have made. Your basis for tax purposes is $100,000. You put your daughter on title. She is not buying this from you so the law treats this as a gift. And the law is clear that the tax basis of the giver of the gift becomes the tax basis of the gift receiver.

Now the house is worth $500,000 when you die. You owned one-half of the house so your daughter’s tax basis is $300,000. Why? Her basis was $50,000 when you gifted it to her (i.e., half of your basis). On your death, she will take advantage of what is known as the stepped-up basis, namely the value of the property on the date of death. The property was worth $500,000, so the stepped-up basis for half is $250,000.

If she sells the property for $500,000, she will have made a $200,000 gain ($500,000 minus $300,000), and will have to pay capital gains tax.

However, if you leave her the house in your will, she will get the full stepped-up basis and will not have any capital gains tax to pay if she sells for $500,000. Of course, if she sells for more than that, there will be tax on that additional amount.

So, in most cases, it does not make sense to gift your children the family home.

There is one possible loophole: If she will have owned and lived in the house for two out of the five years before it was sold, she can exclude up to $250,000 of any gain.

My suggestion: Please talk with a financial adviser before you take any action. You may not be doing a favor to your daughter. And if in the final analysis that is what you want to do, have a lawyer do the entire transaction.

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@inman.com.

Contact Benny Kass:
Email	Letter to the Editor