Re: HOA acting as distributor
From: normangauss (normangausscharter.net)
Date: Sat, 18 Dec 2004 13:42:29 -0800 (PST)
Sharon:

    If the HOA contracts with an outside firm to have all the private
"Separate Interest" residential HVAC systems serviced, it is acting as a
wholesale buyer who then distributes on a retail level.  If no profit is
made on the deal, then it is a non-profit enterprise.  If the entire
membership is OK with the HOA engaging in wholesaling and are prepared for
the responsibilities that the role entails, then each member benefits.  Of
course, if there are any extra expenses entailed by this activity, the
membership is prepared for the expenses to come out of the HOA dues fund or
a general special assessment.  My guess also is that your contract is on a
short-term basis, easily terminated by either party.

    But if a wine club asks the HOA to sign a 5-year contract costing
$75,000 over the life of the contract (these people like Chateau Lafitte,
1820), this is not in the best interests of the community.  If people lose
their taste for this wine before the contract is up, then somehow the HOA
has to deal with  terminating the contract, not the wine club, since the
wine club did not sign the contract.  Also, the HOA has to find the money
even if the wine club is defunct.  If the HOA is acting as an agent for the
wine club, then the relationship should be decided upon before the contract
is signed by the HOA.  If the money to settle the contract comes out of the
general HOA dues fund, I think the general membership would be very unhappy,
since only the wine club incurred this debt.

In our case, the contract was to deliver Cable-TV and Internet for 5-years
to only people who were willing to pay for it.  The financial obligations of
the entire HOA were burdened as well as its credit record because of a
buyers club venture.  This is where I do not feel comfortable and so far
have been unable to get definitive answers.

I don't know of any legal advice sought out before the signing of this
contract.  The entire community consensed such an arrangement over a
week-end. So I remain a doubting Thomas.

Norm Gauss
Oak Creek Commons
Paso Robles, CA

----- Original Message ----- 
From: "Sharon Villines" <sharon [at] sharonvillines.com>
To: <normangauss [at] charter.net>; "Developing cohousing - collaborative 
housing
communities" <cohousing-l [at] cohousing.org>
Sent: Saturday, December 18, 2004 11:34 AM
Subject: Re: [C-L]_ HOA acting as distributor


>
> On Dec 18, 2004, at 2:00 PM, <normangauss [at] charter.net> wrote:
>
> > Rob:
> >
> >    The way you described it, each club makes its own rules, decides
> > how to
> > spend money it has coming in, but arranges to have the billing and
> > collection of funds performed by the HOA.
> >
> >     Is anyone aware of a situation where a contract is made between an
> > outside vendor and the HOA on behalf of the buyers club?
>
> In the first instance, I think you can make a case for using your group
> accounting and billing structure for the convenience of members. Our
> treasurer would draw the line at getting involved in a lot of
> transactions that would not involve everyone. And the IRS might look a
> little wary of homeowners who are deducting for home office charges if
> they include association fees that include payments for wine or
> truffles.
>
> In the second instance, the whole association would have to agree to
> assume this responsibility and be sure it is within the laws of your
> state and city for your specific legal structure. Our bylaws would
> prevent the board from making such a commitment without the consensus
> of members, and our lawyer I think would say this is shaky -- you are
> not operating within what condo law intends to regulate.
>
> We just negotiated a contract for the biannual maintenance of HVAC
> units in each household for which we will each pay $165 a year as added
> to our condo fees. Doing it this way (one check, all units serviced
> twice a year at the same time) allowed us to get a significant discount
> on maintenance individually and also for the commonhouse units. But
> this includes everyone, and HVAC maintenance is directly related to
> homeownership. One would have a hard time making that case about a wine
> club.
>
> Sharon
> -----
> Sharon Villines
> Takoma Village Cohousing, Washington DC
> http://www.takomavillage.org
>


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