Builder's use of dues questioned

Q. We had to pay two months of dues at the close of escrow to the builder. Where does this money go? Our development is still in the hands of the builder and the homeowners have asked to see the association's budget, but the builder has refused. How can homeowners protect what they are contributing?

Also, our clubhouse is used as a sales office, and the homeowners only have access to the pool area outside and the exercise room when the office is open. Can the builder use association dues to pay for the electricity and things at the sales office?

A. The two months of dues paid to the association after the close of escrow is referred to as a capital fund. It goes to assist in the operations of the association, especially during its conception. It is a form of "start-up" money. The practice stems from financing programs, such as those through the Federal Housing Administration, which require the developer to collect such funds for the association.

As for how funds are spent, the developer is required to prepare an operating budget and to include it in its package to buyers. If you cannot obtain a budget from the developer, you may want to file a complaint with the state Real Estate Division or with the ombudsman's office.

Most governing documents allow developers to use the clubhouse for sales operations. The developer should be paying all of the utilities, maintenance and janitorial services for the office from the company's account, not from the association's account.

The money that the developer collects in association dues is used for the cost of operating the association. Such expenses may include its common areas such as the pool, common area utilities, landscaping and other service contractors.

Q. Is it a law that our governing documents and bylaws have to be revised? An attorney contacted our association and said that it is needed, and he will complete an accurate, legal set of bylaws for us for $1,000. Please advise.

A. When SB 451 was passed two legislative sessions ago, the law required that associations amend their governing documents to reflect the changes that were passed by this law. The law also stated that even if an association did not change its governing documents that the state's new laws would take precedence over the association's documents.

If your association has an opportunity to revise its bylaws, it should so that all members know their rights and obligations.

Questions for Barbara Holland may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.

Barbara Holland, Certified Property Manager, is president and co-owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management and is the author of two books on the subject. Holland is a past president of the Greater Las Vegas Association of Realtors.

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