- How do I know whether an audit of my HOA is required?
- How much will an audit cost my HOA?
- Does an HOA have to pay income taxes
- Who is responsible if HOA records are not properly maintained?
- Are homeowner association assessments tax deductible?
- Any suggestions for properly conducting meetings of the
board of directors?
- What does "nonjudicial foreclosure" mean?
The originating documents of the Association determine whether an audit is
required. These documents include the declaration of covenants, bylaws, and
the articles of incorporation.
The cost of an audit depends on several factors such as whether the
association is professionally managed, the frequency of assessments, the number
of homeowners, the quality of records, etc. Most of the needed information can
be obtained over the phone. Call me for a free estimate.
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Yes. Most homeowners associations must pay federal and state income taxes.
Sometimes local taxes are required. However, the amount of tax due can be
minimized by implementing certain procedures. Many associations are paying twice
the the tax they should. Others are not paying sufficient taxes, which
subjects them to additional penalties and interest. Federal taxes are due March
15th for calendar year taxpayers.
The Board of Directors (and specifically the treasurer) of the association
are responsible for properly maintaining the records of the association.
Dues are not deductible by a owner-occupant. Theoretically, the portion of an
owner's assessment which has been earmarked by the association for it's
reserves, if done properly, can be added to the cost basis of the owner's home.
However the additional recordkeeping required of the owner and the small amount
of money involved make this not cost effective, in most cases. On the
other hand, if an owner rents out his residence, association dues are deductible
as "ordinary and necessary" expenses on Schedule E of the owner's tax return.
All meetings must be open. However,
certain subjects can be discussed in private if:
specifically qualifies i.e. relates to personnel matters, consultation with
legal counsel, pending or probable litigation, contracts, rules violations.
specific procedure are followed for going
into executive session (i.e. a motion is made, adopted and recorded in the
minutes; the session is limited to subjects covered in the motion)
members vote on any motion in open
session, not in the executive session.
Work sessions are treated the same as
meetings, and so are informal gatherings of board members where issues are
Directors must receive notice of meetings
per the requirements of the bylaws.
Notice to owners of meetings must be
"published where it is reasonably calculated to be available to a majority
of the lot owners" and sent by mail to owners filing an annual written
Agendas and board packets must be
available to owners at the same time as they are available to board members.
BOD meeting must include an owners forum.
Reasonable rules regarding it can be adopted.
Minutes of meetings must be taken and
made available to owners upon request. Minutes must state when the meeting
was called to order, who was present, any motions made, who made them, who
seconded them, who voted which way on them, and when the meeting adjourned.
Owners may record any open meeting.
If a meeting is done by telephone or
video conference, at least two members must be present at the meeting site,
and the equipment must allow owners to hear the remote directors.
Secret ballots at board meetings are not
allowed except when electing officers.
Voting should not be done by e-mail and
no decisions should be made outside of meetings, except in extreme
The homeowner association is able to foreclose the lien recorded against the owner's home without going to Circuit Court to obtain a court
order to authorize the sale. The Property Owners' Association Act
§55-516 provides the process that must be
followed. The Act requires that a lien be recorded within 12 months of the
delinquency and that foreclosure be brought within three years from the date of
recordation. The Association's governing documents should be examined for
further restrictions of the association's lien rights.
There are many factors to consider
before commencing nonjudicial foreclosure proceedings, including:
- The amount owed to the
- Whether the owner been
referred to legal counsel for collection more than once
- Whether the Association has
gone to court to collect assessments more than once
- Whether the association paid
more in cost and legal fees for past collection action than what was
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