Post by Admin on Dec 22, 2015 11:32:18 GMT -7
The GLA faces serious financial problems which have become more severe over the past decade. As discussed on this Forum Glastonbury Property Assessments have exploded while past due assessments have skyrocketed. The percentage of delinquent landowners grows exponentially; it doubles approximately every 5 years and will eventually destroy the finances of the GLA. As of December 2015 almost 20% of the landowners are delinquent; they are not paying their assessments. Five years ago that figure was just 10%. If the same rate continues, 40% of the landowners will be delinquent by 2020, 80% by 2025 and 100% shortly thereafter. If we see more property assessment increases and/or the GLA Board lowers the cost of interest from 18% to 6% on past due assessments, we may reach the 40% delinquency point even earlier.
We already lost our Legal Liability Insurance and over $30,000.00 in landowner funds as a result of the O'Connell lawsuits. Were the changes they won worth the price?
Talk of curtailing services like snow plowing and road maintenance to sections of our community has been going on for years. Many miles of platted roads in both North and South Glastonbury have not seen regular maintenance for five and even 10 years. We are down to one, well worn and frequently repaired snow plow. How many roads are in such a state of disrepair that they are no longer safe?
This person slid off the side of Hercules Road in High South and rolled his truck down a steep, rock strewn embankment. There was no guardrail on the side of the road like there is on the northern approach to North Glastonbury via Capricorn Drive.
If anyone gets hurt on our roads they can file a claim with our insurance company. If they believe that the amount offered by the insurance company is insufficient they can sue the Association. We no longer have legal liability insurance and ALL landowners would be ultimately responsible for legal costs.
Many landowners live on sub-division roads yet they must pay full assessments and are told that the GLA is NOT responsible for plowing or maintaining the roads they live on. That is what they agreed to when they purchased their property. However that also makes their assessments feel more like a donation than an expenditure for services rendered. I wonder how many of them would or are willing to pay ever increasing property assessments?
So what happens when a majority of landowners stop paying assessments? I checked the web and found several answers. Here is the one that provided the most insight to our situation.
QUESTION: Most of the owners in our 12-unit association stopped paying their dues. The board is not holding meetings and the management company terminated the account. The insurance has not be paid, the landscape, trash, etc. are not serviced as the vendors haven't been paid. At this point I think the intent is for all the owners to stop paying dues. Do you know what happens next?
ANSWER: What you describe is quite serious. Corporations cannot operate without boards of directors.
Personal Exposure. Without insurance, all owners are personally exposed if someone is injured in your common areas. Each member could be sued and there will be no insurance to defend them or to pay any judgment. Each owner would need to pay out of pocket for an attorney and each could be liable for the entire judgment (joint and several liability).
Suspended Corporation. Your association has probably had its corporate status suspended, which means it cannot defend itself against lawsuits.
Deferred Maintenance. Deferred maintenance will accumulate, leading to more expensive repairs, as well as water damage and mold in the common areas, which means more litigation.
Director Liability. In addition to owners being vulnerable to litigation, directors from the last board of record could be sued for breach of their fiduciary duties for resigning without appointing replacements.
Market Values. Finally, the market values of your units will plummet to the point of being unsalable. Sellers must disclose to potential buyers the true state of your association's affairs, and who in their right mind would buy into your association?
Chapter 7 Bankruptcy. A Chapter 7 bankruptcy by your association would likely not be granted. Under this particular filing, a company goes out of business and a trustee is appointed to sell the company's assets to pay off debts. Associations have no assets of any significance to sell, and the common areas cannot be sold. Moreover, an association cannot realistically go out of business--someone has to maintain the common areas and associations are created specifically for that purpose. Finally, the court can simply impose a special assessment to raise the funds necessary to pay the association's debts. (O'Toole v. Kingsbury Court.)
Chapter 11 Bankruptcy. A Chapter 11 bankruptcy (reorganization) is possible if an association has debt and needs time to repay it. The federal bankruptcy court fashions a repayment plan which would likely include a special assessment against all owners to raise funds to pay those debts. It resolves debt issues but does not address the association's lack of management.
Receiver - Custodian. Another option is for one or more members of the association to petition the superior court to appoint a third party (a receiver or custodian) to manage the association as provided for in Code of Civil Procedure ยง564(b)(9). The receiver would have the power to run the association, including the power to assess the membership for all costs needed to pay for operations. The downside is that there are no restrictions on the size or frequency of assessments imposed by the receiver. The membership would have no say in what services were provided, what was repaired or when, or how much is paid for operations and repairs. All of that would be in the hands of the receiver. Moreover, the receiver would likely special assess the membership to pay for his/her services.
RECOMMENDATION: You should immediately seek legal counsel to determine your best course of action. A court-appointed receiver may be the quickest way to limit your exposure, especially since the association has no insurance. If the membership were smart, they would promptly restart association operations.
Here is the original link and article.
What are your thoughts? Post them below.
We already lost our Legal Liability Insurance and over $30,000.00 in landowner funds as a result of the O'Connell lawsuits. Were the changes they won worth the price?
Talk of curtailing services like snow plowing and road maintenance to sections of our community has been going on for years. Many miles of platted roads in both North and South Glastonbury have not seen regular maintenance for five and even 10 years. We are down to one, well worn and frequently repaired snow plow. How many roads are in such a state of disrepair that they are no longer safe?
This person slid off the side of Hercules Road in High South and rolled his truck down a steep, rock strewn embankment. There was no guardrail on the side of the road like there is on the northern approach to North Glastonbury via Capricorn Drive.
If anyone gets hurt on our roads they can file a claim with our insurance company. If they believe that the amount offered by the insurance company is insufficient they can sue the Association. We no longer have legal liability insurance and ALL landowners would be ultimately responsible for legal costs.
Many landowners live on sub-division roads yet they must pay full assessments and are told that the GLA is NOT responsible for plowing or maintaining the roads they live on. That is what they agreed to when they purchased their property. However that also makes their assessments feel more like a donation than an expenditure for services rendered. I wonder how many of them would or are willing to pay ever increasing property assessments?
So what happens when a majority of landowners stop paying assessments? I checked the web and found several answers. Here is the one that provided the most insight to our situation.
QUESTION: Most of the owners in our 12-unit association stopped paying their dues. The board is not holding meetings and the management company terminated the account. The insurance has not be paid, the landscape, trash, etc. are not serviced as the vendors haven't been paid. At this point I think the intent is for all the owners to stop paying dues. Do you know what happens next?
ANSWER: What you describe is quite serious. Corporations cannot operate without boards of directors.
Personal Exposure. Without insurance, all owners are personally exposed if someone is injured in your common areas. Each member could be sued and there will be no insurance to defend them or to pay any judgment. Each owner would need to pay out of pocket for an attorney and each could be liable for the entire judgment (joint and several liability).
Suspended Corporation. Your association has probably had its corporate status suspended, which means it cannot defend itself against lawsuits.
Deferred Maintenance. Deferred maintenance will accumulate, leading to more expensive repairs, as well as water damage and mold in the common areas, which means more litigation.
Director Liability. In addition to owners being vulnerable to litigation, directors from the last board of record could be sued for breach of their fiduciary duties for resigning without appointing replacements.
Market Values. Finally, the market values of your units will plummet to the point of being unsalable. Sellers must disclose to potential buyers the true state of your association's affairs, and who in their right mind would buy into your association?
Chapter 7 Bankruptcy. A Chapter 7 bankruptcy by your association would likely not be granted. Under this particular filing, a company goes out of business and a trustee is appointed to sell the company's assets to pay off debts. Associations have no assets of any significance to sell, and the common areas cannot be sold. Moreover, an association cannot realistically go out of business--someone has to maintain the common areas and associations are created specifically for that purpose. Finally, the court can simply impose a special assessment to raise the funds necessary to pay the association's debts. (O'Toole v. Kingsbury Court.)
Chapter 11 Bankruptcy. A Chapter 11 bankruptcy (reorganization) is possible if an association has debt and needs time to repay it. The federal bankruptcy court fashions a repayment plan which would likely include a special assessment against all owners to raise funds to pay those debts. It resolves debt issues but does not address the association's lack of management.
Receiver - Custodian. Another option is for one or more members of the association to petition the superior court to appoint a third party (a receiver or custodian) to manage the association as provided for in Code of Civil Procedure ยง564(b)(9). The receiver would have the power to run the association, including the power to assess the membership for all costs needed to pay for operations. The downside is that there are no restrictions on the size or frequency of assessments imposed by the receiver. The membership would have no say in what services were provided, what was repaired or when, or how much is paid for operations and repairs. All of that would be in the hands of the receiver. Moreover, the receiver would likely special assess the membership to pay for his/her services.
RECOMMENDATION: You should immediately seek legal counsel to determine your best course of action. A court-appointed receiver may be the quickest way to limit your exposure, especially since the association has no insurance. If the membership were smart, they would promptly restart association operations.
Here is the original link and article.
What are your thoughts? Post them below.