Q: At our quarterly association meetings, board actions are taken with board members present. My question: When a board member makes a motion, there is a second and the president declares it passed. Shouldn’t there be a vote? I have attended many board meetings and they always take a vote. The current board, however, holds private meetings and they discuss matters they plan to bring to the members and agree ahead of time how to vote. I’ve only seen opposition once and it obviously was not what they preplanned. I would just like to see each board member vote on each matter.
A: First, in most states, it is not legal for the board to hold meetings in private for the purpose of deciding how to vote. If your state law — or your association’s legal documents — require open board meetings, it is most likely a violation to hold those private meetings. Typically, a board can meet in private for limited purposes, such as discussion of litigation matters, personnel issues or dealing with delinquent owners who want to propose payment plans.
Many associations require meetings to comply with Robert’s Rules of Order. Jim Slaughter, a colleague — and fellow member of the College of Community Association Lawyers — has written a very helpful book titled “The Complete Idiot’s Guide to Parliamentary Procedure.” According to Slaughter, the chair must put the motion to a vote. It could be unanimous, but then you still know how every board member voted.
I suggest you discuss your concerns with the association’s legal counsel. That lawyer — while taking instructions from the board of directors — is still the lawyer for the association, and should be able to answer your questions.
Q: I am 61 years old and the sole owner of a single-family house. The home is paid in full. I am considering giving title via a quitclaim deed to my daughter and son-in-law. Is this a good idea?
A: Please consult an attorney or a financial adviser before you go forward with your plans. In most cases, it is not a good idea to give real estate to your children.
We are dealing with a legal concept called the “stepped-up” basis.
Let’s assume for this discussion that you bought your home many years ago for $50,000. It is now worth $750,000. If you give the property to your children while you are alive, their basis for tax purposes is your basis — namely $50,000. Should they sell it — and if they have not lived in and owned the house for two out of the five years before sale — they will have to pay a lot of capital gains tax. Ignoring improvements and such items as real estate commissions, their gain in our example is $700,000. At capital gains tax rate of 20 percent, they might have to pay as much as $140,000 to Uncle Sam, and perhaps some more to the state in which they live.
But if you die, and they inherit the property, the value of the house on the date of death becomes the basis of the person who inherits from the deceased. In effect, the basis is “stepped up.”
Let’s go back to our example. Your children inherit the house valued at $750,000 and sell it at that price. They have made no profit and thus do not have to pay any capital gains tax. Of course, if they sell for more than $750,000, they will have to pay tax on the difference; but that’s a lot less than if they received the property by gift during your lifetime.
Remember this legal concept: The basis of the giftee is the basis of the giftor.
There is another way for the children to have the house now. They can buy it from you. If there is no mortgage, you can take back financing and they can pay you monthly — as if it were a bank loan. If you have a mortgage, they will have to get a new mortgage loan to pay off the existing obligation.
But please discuss all this with your attorney.
Q: I have lived in my condo (23 self-managed units) for 24 years. For more than 20 years, I have been feeding the birds during the winter months with no problems; in fact several other owners have also done so. One couple even contributed some money to help defray the cost, which I greatly appreciated.
This past year I continued feeding and some residents complained of mice problems, which they attributed to the bird seed. I was asked to stop feeding, which I did. I discussed this with other people in the next block (none of whom had bird feeders), and they all said they were experiencing mice problems which was unusual.
Now the condo board has issued new “house rules” that prohibit me from doing what I have done for over 20 years with no objections. Many of the so-called rules — such as taking dogs out via the rear entrances, limiting laundry hours to name a few — have been totally ignored.
The board received no complaints from other owners. No vote, no polling of residents, nothing. Just saying no.
Does the grandfather rule apply? I am tempted to hire an attorney. I said I would revert to feeding November through March only. Also, people are complaining about mice in their units fully six months after I have ceased and desisted. Can you help?
A: In many states, the board is protected by what is known as the “business judgment rule.” Judges say that even if the board made a mistake, we will not challenge it, unless there is a clear violation of law, or an abuse of power. So “grandfathering” will not work. Just because you have been feeding the birds for a very long time does not mean you have the right to continue that practice.
Let’s look at the abuse of power issue. Your board allegedly is not enforcing all of its rules. Selective enforcement is a no-no in condominium law. But typically, that is used as a defense when the board files a lawsuit against an owner claiming certain violations of the association rules. The courts have made it clear that a board cannot pick and chose which rule it will enforce.
I am not sure what you can do short of filing a lawsuit against the board. That is time-consuming, expensive and always uncertain. You can, however, try to get a petition signed by other owners, urging the board to allow you to feed the birds under certain limited conditions, such as only during winter months.
Q: We have just paid off our mortgage, which we held for 17 years. During that time we refinanced twice. We are in our 70s. Our health is good, and we hope to live in our condo for many years. In the interest of downsizing, however, I want to discard the stacks of paperwork from that period. What should I keep? And what can I shred?
More Top Picks Best Police Scanners
A: First, I would keep all of your settlement statements (called HUD-1s) and contracts for any improvements you made, for at least three years after you sell your condo. You and your husband can take advantage of the up-to-$500,000 exclusion of gain if you have lived and owned the property for two out of the last five years before it is sold.
But because you have owned the property for a long time, there is a possibility that your gain (your profit) may be over $500,000. In that case, you want to increase your tax basis. Let’s say you paid $100,000 and it is now worth $700,000. Your basis for tax purposes is $100,000, and your profit is thus $600,000 ($700,000-$100,000). But there are items that can increase your basis so your gain will be less. For example, were there any capital improvements, such as installing a new room or adding central air; did you pay any legal fees to file for a reduction in your real estate tax?
You must be able to prove these items and thus keeping those records is your best approach.
As to other records you should keep, I suggest going to the IRS website, and type in “How long should I keep records.” There is a very helpful document on that topic. (www.irs.gov).