Tuesday, February 2, 2010

Just how much can associations charge for use fees?

Does your association charge a fee to use the community pool, the clubhouse, the service elevator or other common elements or association-owned property? Are there fees attached to the use of the boat slips and/or that second parking spot? Have these fees been around so long no one can remember how they got there and why?

Section 718.111(4) of the Condominium Act provides that an association may not charge a use fee against a unit owner for the use of common elements or association property unless such a fee is provided for in the Declaration of Condominium, such fee has been approved by at least a majority vote of the members or the fee relates to expenses incurred by an owner having the exclusive use of the common elements or association property.

Under these guidelines, it's obvious that a fee for that second parking space or boat slip falls under the third category of charges relating to the exclusive use.

If your Declaration is silent on the matter of fees for the use of other common elements such as the pool and the clubhouse, you must then ask whether or not a majority of the membership approved such a fee. Let's assume that you find the proxies and ballots used by the membership to approve the implementation of a $150.00 cleanup fee every time the pool is used. Does this mean the association can charge such a fee because it followed the statutory procedure and obtained majority membership approval to do so?

Boards are tied to a reasonableness standard and the business judgment rule. Under the latter, boards must exercise the prudence of a "reasonable business man" when making decisions on the community's behalf. Under the former, the board must have a legitimate business interest in taking an action and the methods used must not have a disparate impact on certain members. The board's actions must be reasonable.

Under my scenario above, the board's decision to enforce a $150.00 cleanup fee every time the pool is used would most likely not pass either of the tests above. Unless the pool must be drained and cleaned each time a person uses it, why such a high fee? In a case out of Michigan, a community passed such a fee not really because they needed to clean up the pool each time but because they wanted to discourage pool use. The mostly elderly community's decision to charge the fee had a disparate impact on the younger residents who were most inclined to use the pool.

Knowing you can do something under the statute or your governing documents is only 1/2 of the equation. As a board and a community, you must still discuss with your association counsel whether or not your proposed action meets the guidelines of both the business judgment rule and the reasonableness tests set by the courts.

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