Condo board secretary fired after uncovering fraud scheme

DEAR BOB: I am a five-year resident of my condo complex. My father-in-law holds the title to my condo. I have been attending the board meetings, questioning the budget and working to reduce expenses. To become a member of the board, I collected a majority of signatures for an amendment allowing resident non-owners with approval of the owners to serve on the board. The board unanimously appointed me the secretary. But when reviewing our documents and budget, I found gross negligence, illegal dues increases (30 percent last year), theft by the management company, and more. After I pointed out these errors and questioned expenses, the board president kicked me off the board. Our complex is in need of major repairs, which are ignored. I believe the board president and the management company are profiting from our dues. I really love my condo home and don’t want it to deteriorate further. What should I do? – Tabatha W.

DEAR TABATHA: As a non-owner, you are not legally secure trying to challenge the entrenched condo president and the management company.

Purchase Bob Bruss reports online.

Although you collected a majority of owner signatures to be elected to the condo board of directors, I question if that entitled you to be elected as a non-owner. It would be much better if a condo owner on the board of directors raises the objections you listed.

I understand your frustration with the bad management but, as a non-owner, I doubt you have legal standing to complain. Please consult a local attorney experienced in condo law for full details.

HOW LONG MUST PROPERTY ACQUIRED IN TAX-DEFERRED TRADE BE RENTED?

DEAR BOB: We recently sold our rental property and are in the process of doing an Internal Revenue Code 1031 tax-deferred “Starker exchange.” We eventually plan to move into the rental condo we are acquiring to complete the exchange. How long must we rent the condo before we can move in? In a recent article, you recommended six to 12 months. What does the law require? – Anna and Vladimir G.

DEAR ANNA AND VLADIMIR: Not even the IRS knows the exact answer to your frequently asked question. Every time I talk with my contacts at the IRS in Washington, D.C., I ask if there has been any ruling on this important issue. The answer is always “no.”

To prove investment intent at the time of your tax-deferred IRC 1031 exchange, the property you acquire must be held as a rental or business investment property. Most CPAs advise renting for at least six to 12 months to show rental intent at the time of the exchange.

I am not aware of any tax court decisions or IRS rulings on this issue. To be safe, you should probably rent the acquired condo for at least 12 months before converting it to your personal residence. For more details, please consult your tax adviser.

MUST NEARBY RENTAL HOUSE BE DISCLOSED AS A NUISANCE?

DEAR BOB: We live in a neighborhood of well-established homes 20 to 30 years old. Recently, an out-of-town person purchased one of the houses, which he rents to weekenders and short-time vacationers who enjoy the nearby lake. If we decide to sell our home, must we disclose to the buyer that the rental house is used for business purposes? – Dr. A.W.

DEAR DR. A.W.: Living next-door or near a rental house is not considered a nuisance. There are millions of rental houses and condos throughout the nation.

If the rental house is adjacent to your home, and if the renters often cause disturbances, you and your neighbors should contact the police.

Should a prospective buyer of your home ask if there are any nearby rental houses, then you must disclose. But unless the rental house is a nuisance, there is no need to disclose unless asked. For more details, please consult a local real estate attorney.

The new Robert Bruss special report, “The 10 Key Questions Condo Sellers Hope Buyers Don’t Ask,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

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