QUESTION:
Our association recently recovered funds from a lawsuit which the homeowners were charged a special assessment. The board opted to place the funds in the reserve account rather than reimburse the homeowners for their payments. Is this ethical or legal?
ANSWER: Unless the board promised to reimburse owners or somehow made it a condition of the special assessment, it is neither illegal nor unethical to put the money in the reserve account.
Reserve Funding. In fact, not doing so may be imprudent if your reserves are badly underfunded. Failing to fund the reserve account now could result in special assessments later when large repairs are needed and reserves are insufficient. Then everyone would rail against the board for not funding the reserves.
Who Gets the Money? Also, for those units sold after the special assessment but before the recovery, who gets the money? Does it go to the ones who paid it but no longer have a legal interest in the association or the ones who bought units and lay claim to the reimbursement? That could get messy.
RECOMMENDATION: Prudent fiscal management is one of the duties of the board. If you disagree with how they are handling the association’s money, you should consider running for the board.
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