MISSION STATEMENT
To prepare for the transition of the HOA
from the Builder to the Homeowners in a fair and equitable manner
from the Builder to the Homeowners in a fair and equitable manner
LATEST ANNOUNCEMENT
Click Here to Download the Four Seasons Residents-Only Meeting PowerPoint Presentation held last November 11, 2024
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11/4/2024
There will be quite a bit of information presented by some of the friends and neighbors who have been working diligently to ensure that we have a fair and equitable transition.
We look forward to you attending and most importantly tell your friends and neighbors to come, especially those new neighbors that may not know about FS Community Voices.
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9/28/2024
The Eagles
A pair of eagles made a home in the Lowcountry. Then the tree, and their nest, disappeared. Twice.
Click on the photo to open the Article from The Post and Courier by Eva Herscowitz
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9/12/2024
Hello Friends and Neighbors
Please visit and see the Latest Information dated 9/12/2024 under our “Things You Should Know” webpage.
9/7/2024
Hello Friends and Neighbors
Some of the hard working volunteers at FS Community Voices felt that yesterday’s cryptic Townsquare announcement was aimed at them, but rest assured that if it was, it was misdirected.
FS Community Voices has never and will never pretend to represent the builder, the association or speak for or on behalf of the residents.
We are simply a group of residents who believe that we need to be aware of what’s going on in this community to ensure we get a fair and financially equitable transition when the time comes to shake hands and take over. We are not complaining, simply observing and documenting. We are not trying to start any trouble. We just want to make sure the streets, landscaping, amenities, waters, etc., are left to us in great shape and with enough money to maintain this beautiful community.
9/7/2024
Below is a response to the statement above on FB by 4Seasons resident, Mike Maccaro
“Well said!
I have worked in a corporate environment for 30+ years and view their behavior as an obvious attempt to manage the message and control the outcomes.
A good working relationship requires open communication, mutual trust and respect.
Their actions are clear…this relationship is financial and every action they take, is strategic and meant to mitigate costs and responsibility. My view may be incorrect, but I see:
- Financial transparency of costs and expenses is minimal to none. - Communication to resolve an issue is rarely acknowledged.
- Ownership of the repairs to numerous issues is lethargic or just ignored.
- Communication to the homeowners is “as needed” and in some or most instances vague.
Like many others who live here, I want a collaborative relationship that drives the right decisions and positive outcomes that will continue to make this a desirable community people want to live in.”
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5/21/2024
Hello Friends and Neighbors
Why is FS Community Voices (FSCV) Doing This?
Why are the dedicated and sincere volunteers at FSCV doing what they do on behalf of the community?
Why are the dedicated and sincere volunteers at FSCV doing what they do on behalf of the community?
The long and short answer is that we care about our future and the community that we call home.
Before we know it, the community will transition over from the builder to the residents. We will then be financially responsible to run and maintain everything in Four Seasons.
As the community ages, it takes more money to upkeep and remediate the infrastructure and common areas. Once we take over, this will be solely our responsibility to fund the needed areas within Four Seasons.
Recently another KHOV Four Seasons community that is of a similar age and size of ours, transitioned from a KHOV controlled community to a resident controlled model. (As told to us by a current Four Seasons resident, who at the time was living there, through that transition).
This served us with a working model of what we can expect. The residents organized and identified the areas that would need added funds to repair and remediate, which included roads, community buildings such as the sports complex, and clubhouse areas, as well as drainage and other aspects that are part of the community.
KHOV offered a two million Dollar addition to the reserve when they first negotiated the handover. While two million dollars sounded like a decent amount, the residents already had a detailed infrastructure study that was previously done.
The residents funded reserve study came up with a figure of 8 million dollars that would be needed to maintain and correct the deficiencies and needed upkeep of their community. Negotiations then started between the 2 parties. They settled on (+-) 5 million dollars to help fund the reserve.
History is a good indicator as to how the transition would fare for us. We are doing this to prepare ourselves with factual data, so we will know precisely what remediation is needed, and how much money we will need for the projects and areas that will need to be addressed once we take over.
We also need the quantitative data to help us negotiate a fair settlement with the builder, so that the handover settlement is in line with what we need from a future allocation standpoint.
This is our community, and we all want what is best for all the residents of Four Seasons, as this is the place where each and every one of us call home.
Harvey Drill
Click on the link below from Associa about 6 HOA Reserve Study Tips
HOA Reserve Study
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5/9/2024
We received an amazing amount of great feedback from the community about our recent town hall meeting last April 29. Below is one from resident Bruce Reirden:
This was my first Community Voices meeting. To me, the most important thing that was conveyed at the meeting was that FS Community Voices is NOT anti-KHOV and is NOT anti-Associa. FS Community Voices is simply a group of residents whose interest is protecting their investments in property and assuring a high quality of life now, and into the future at Four Seasons at the Lakes of Cane Bay. There appears to be negative feelings about this group and animosity towards it, but nothing at the meeting gave me any indication that negativity or animosity is justified.
Going forward I sincerely hope that FS Community Voices, Associa and KHOV can all work together to make Four Seasons at the Lakes of Cane Bay the best community it can be.
5/9/2024
Kudos to two residents Victoria Parmentier and Pam Bateman that have volunteered to help with the Infrastructure Assessment Team to look at ADA compliance and fire hydrant markers.
Thank you! The community needs more people like you to step up and help.
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4/29/2024
The PowerPoint presentation of the meeting can be viewed below under “File Manager” Page header
Questions & Answers from the Resident-Only Town Hall Meeting
Q: What is the status of the independent audit of the Four Seasons financials?
A: The last independent audit was done for 2018. We understand that an auditor has been retained, and is working on audits for 2020, 2021, 2022 and 2023; those should be available later this year. The finance team will review as soon as they are available. As to 2019 … it is unclear, as the prior ’19 audit was suspended, and the records are in question.
Q: Recently we saw significant flooding on Tupelo Lake Drive. Is that normal? Should we expect it in the future?
A: We can’t comment specifically on that flooding, as it wasn’t investigated at the time. However, we have observed that the drainage system is not being properly maintained and there is significant silt buildup at the outfalls into the lake. That could be a contributing factor, as the silt will keep the drainage system from working as designed.
Q: How do we know what KHOV is responsible for (remedying) prior to handover?
A: The Infrastructure Assessment team is continuing to inspect and document issues – like we showed this evening. Also, we will continue trying to get access to the approved plans and specs which spell out what the county signed off on; we have already verified instances where the plans and specs have been ignored – like the pedestrian walkway.
Q: We’ve noticed the lake filling in and grasses growing at the lake edge along Fish Creek. Who has the responsibility for clean up?
A: We need to research this a bit more, but we do know that KHOV has a maintenance contract for the ponds (actually retention ponds). That might cover this; alternatively the lake/canals could be a Grambling Brothers (the master developer) responsibility.
Q: How do the 3 HOAs – Four Seasons, Lakes of Cane Bay and Cane Bay Plantations – work? Who does what?
A: This deserves a comprehensive answer. We’ll pull one together.
Q: Who represents us – the residents – at transition?
A: There will likely be a transition team to represent the residents. We hopefully will have significant input into its composition. That team, along with professionals (engineers, attorneys) that they will engage – if necessary – will negotiate for our interests.
Q: At what point will the transition take place? When the last new home is sold? At 75-80% build out?
A: Look for a comprehensive answer on this.
Q: Who is responsible for roofing issues after year 1? Is it the homeowner, or is there an extended liability for the builder?
A: We’ll need to research further
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Note from the WEBMASTER:
Information under the header Latest Announcement will be move to the appropriate content header or remove after a few weeks.
WHO WE ARE
FS Community Voices is a volunteer group of concerned residents who are working together to insure a fair and equitable transition from the HOA to resident ownership. We are looking at the current financials, state of the physical structures and the reserves that are in place.
All of this work is being done to be sure that when the transition takes place, homeowners are not left owing egregiously large assessments to cover a lack of proper planning.
There are several committees that are working on this process. We will be introducing them each week. We encourage residents to get involved. There is much talent in our community and lots of work to be done.
Interested? Reach out to fscommunityvoices@gmail.com or go to the STAY ON THE LOOP header section below.
All of this work is being done to be sure that when the transition takes place, homeowners are not left owing egregiously large assessments to cover a lack of proper planning.
There are several committees that are working on this process. We will be introducing them each week. We encourage residents to get involved. There is much talent in our community and lots of work to be done.
Interested? Reach out to fscommunityvoices@gmail.com or go to the STAY ON THE LOOP header section below.
FINANCE
KHOV currently controls all financials for the Homeowner’s Association and won’t relinquish control of the Association until all the homes are nearly sold.
The Finance volunteers review the monthly Homeowner’s financial statements issued by Associa on Town Square. This includes the recent issuance of a letter (see below) coordinated by John Lisée to KHOV/Associa Finance Board covering the Team’s review of financial statements with detailed questions relating to their review. KHOV’s 2023 budget included approximately $2 million of Operating expenses and $183,000 of planned reserve fundings as laid out in a Full Reserve study.
In addition, the Finance volunteers reviewed the Full Reserve study dated January 21, 2020 and the impact and relationship of it to the financial reserve transactions on the Homeowner’s financial statements. Our HOA dues will eventually pay for ongoing operating expenses of Four Seasons as well as fundings into a reserve fund which are projected to meet anticipated expenditures for the community over a 20 year period.
The Full Reserve study needs to be updated soon with new estimates for future capital repair and replacement costs (and probably higher) and new site improvements including all streets completed after the January 2020 study. The total projected cost of future capital repair expenditures in the initial Full Reserve study totaled over $7.6 million.
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Questions for HOA Four Seasons Annual Budget Meeting 12/8/23
1) The 2022 column is mislabeled and should be 2023 and the 2023 should be 2024.
2) Will you provide a breakdown of the assessment income by account? Does the budget number indicated include account 4120 Initial Sale Working Capital and does this account represent the $1,000 received at each home closing?
3) Will you provide a non-summary full line item budget version and/or budget spread by department report on Town Square?
4) The January 2020 Reserve Study (based on May '19 assessments) concluded "the current level of funding is not projected to maintain a positive balance" and recommended either a $40,000 increase in funding every other year, or a 10% per year funding increase, with either approach beginning in 2020. Was either of these recommendations acted upon, and beginning at what time?
5) You indicated in your budget letter that “with inflation and the increasing rate of professional services, it was challenging to ensure that we properly fund for upcoming expenses.” When the 2024 Reserve Study is completed will there be a catch up contribution made by KHOV to fund the reserve at the recommended current amount? The reserves are also affected by inflation and increased costs.
6) What funding to the reserve account was made in 2022, and has been (or will be) made in 2023?
7) What percent of the reserve funding for '22 and '23 comes from the monthly resident dues?
8) The 2020 study also recommends an update "every three to five years". May '24 will be five years, during which there has been considerable inflation. When will an updated reserve study be completed, who will conduct it, and what are their qualifications?
9) What is budgeted for 4905-Reserve Contribution Income? Note it was budgeted in 2022 but not in 2023. Why?
10) Gatehouse budget is listed at $217,441. This is an increase from the 2022 budget of $51,840 and from the 2023 budget an increase of $11,043. What the high increase?
11) Administrative Payroll increased by $69,858. In your budget letter you stated that you eliminated the janitorial service and added a second full-time maintenance. What was the amount of the deduction in the 2024 janitorial service and now allocated to Administrative payroll?
12) Landscaping budget increased by $293,500. Can you detail this budget to explain the increase?
13) How many homes are budgeted to close in 2024 and how is it reflected in the assessment income?
14) Where is the income received on our reserve funds budgeted and what is the amount of that interest income?
15) The Master Association fee increased by nearly 17%. Can we get a copy of that budget and explanation for the increase?
16) The budget for taxes and insurance at $90,200. What is our deductible per incident and is it included in this budget?
17) The professional fees are budgeted at $94,960. What is allocated for the CPA audits and how many years are budgeted?
18) When will updated actuals for 2023, June thru November be published?
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SAVE the DATE
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John Lisee is offering short sessions to current homeowners providing a clear understanding of the most current financial statement issued by KHOV/Associa (May 2023 as of this writing), the 2023 Operating Budget and the Full Reserve Study dated January 21, 2020. The first session is scheduled for Thursday, November 2nd from 6:30p to 7:00p at the Lake House coffee counter area.
Future sessions will be provided based on feedback from the first session. Please come to find out where your dollars are being spent.
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Below is a Financial Letter from the Finance Team to KHOV Board/Finance Committee Members dated August 29, 2023
John Lisée
378 Tupelo Lake Drive
Summerville, SC 29486
August 29, 2023
Krista Dorris
K. Hovnanian Four Seasons at Lakes of Cane Bay
322 Four Seasons Blvd
Summerville, SC 29486
Krista Dorris (via certified, return receipt),
Please share this letter with the Board/Finance Committee members for K Hovnanian’s Four Seasons at Lakes of Cane Bay(“KHOV”).
As a result of the January HOA meeting where the homeowners were informed that an audit of the community’s financials has not been performed for four years, a group of us (see list below) with a finance background reviewed the latest issued financials. The lack of an audit or an independent review of the Associations financial operations is of concern to many homeowners and has created a situation that does not reflect favorably on either KHOV or Associa. The following issues/feedback represent our collective review.
The following comments relate to our review of the Balance Sheet Report and Consolidated Income Statement Report and are in no particular order:
1. Please advise the residents of the timeline for completion of the 2020, 2021, and 2022 audits. Also, can you please post the 2019 financial statements along with a description of the outstanding discrepancy(ies) between end of year 2019 and start of year 2020 that will be addressed in conjunction with the 2020 audit as per the Feb 2, 2023 BOD meeting minutes?
2. We noticed that the signs of the Year to Date Budget Variance column are not consistent with best practice reporting. Typically, favorable variances are reported as positive numbers and negative variances are reported as negative numbers such that the sum of these equate to the sign of the total. Using this approach, the financial reader can quickly ascertain the nature of variances. The signs for the Year to Date Budget expense variances are reversed (income line items are OK). Actual expenses at a lower amount are a favorable variance but are shown as negative. Please consider changing the variance reporting to be consistent with best practice reporting.
3. The Reserve Funds are an important component for a successful turnover when the community is completed.
a. We applaud your decision to use CDARS. Can you please confirm that all other CDs for the Reserves are below the limit of $250,000 for FDIC Deposit Insurance?
b. Please explain why there are two Owners Equity-Prior Years (#3000 and #3005) accounts with a negative balance of $199,972 as of May 31, 2023. Will this equity adjustment amount be funded by KHOV?
c. We understand the Current Asset Refundable Deposits Account #1700 is a placeholder for CDARS purchased for Reserve Funds but do not understand why it is a negative amount. Did the monies deposited in Account #1700 come from a loan from KHOV that we will have to repay?
d. We recognize that the reserve funds may be affected by a previous and now outdated reserve study. What are the future plans to update the reserve study to ensure that the reserves are being adequately funded on an on-going basis?
4. Regarding Payroll & Benefits expenses, Accounts #5330, 5340, and 5399 show zero Year to Date Actuals versus Year to Date Budget of $13,616 at May 31, 2023. Have these expenses been incurred but are not yet reflected on the Income Statement?
5. As Four Seasons continues to be developed, there is a concern that the entirety of the complex is adequately covered by insurance. Does the Board/Finance Committee use a schedule of assets to ensure that the insurance coverage is adequate?Per the April 4, 2023 Finance Committee minutes, Jared Carter was asked for information regarding the insurance coverage on the reserve study. Has the information been received and acted on?
We appreciate the opportunity provided at the Annual Meeting to submit questions. We also appreciate that you posted the Dec 2022 through May 2023 financial statements and hope this practice will continue. It will greatly assist KHOV, Associa, and the homeowners to better understand the financial status of the community and prevent misinformation as we move closer to a community turnover.
Best Regards,
John Lisée (liseejl@gmail.com)
Cynthia Rice (cynthialrice@gmail.com)
Tracy Sprainer (tsprainer@hotmail.com)
cc. Steve Galek (sgalek@aol.com)
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INFRASTRUCTURE AND ASSESSMENT
It is our intention to collect communitywide information regarding the various amenities and common public improvements, listed or not identified in the reserve study compiled by Giles Flythe Engineers. This will include, but not limited to, tennis courts, boat launch, dog park, Lake House, pools, landscaping, roadways, and stormwater conveyance systems.
Note: It is a common practice by HOA’s to update reserve studies every three to five years. The controlling factors for more frequent reviews would be years of dramatic increases in projected inflation, poor useful life performance of items listed in the study, inadequate or non-existing maintenance procedures and a significant increase in projected size of original development. We believe all these factors are present in our situation and impact the amount of money that should be held in the Reserve Fund. In this light, we will conduct an overall assessment of the current reserve study then recommend where the Fund should be adjusted.
Tim Traynor
John Battaglia
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From the Infrastructure and Assessment Group
11/23/2023
As part of the Infrastructure and Assessment Group’s research, I would like to ask you, our friends, and neighbors, to monitor and report any flooding or standing water that you witness over the next year. This would include your residential property as well as the streets and common areas throughout our community. Photographs and/or videos are most helpful along with an address or specific location, date, and time of day, as well as a brief description for each incident. Indicating how long these conditions lasted would be a great help as well in determining a recommended course of action.
I have received photos and videos from several residents illustrating flooding conditions and standing water. One particularly troublesome area noted has been the 10-foot space separating our homes which often fills with water because of poor soil drainage and improper pitch. I personally have witnessed this and other areas where these conditions exist leading to overall concern.
To remind everyone, we are collecting this information to encourage the developer to make the necessary modifications or repairs to the community prior to the transition from developer-controlled HOA to property owner’s control. This effort is intended to minimize any costs to homeowners for defects, missing or incomplete work before we assume the responsibility to maintain our community. From time to time, we will add to this list to include other items of concern. Stay tuned for updates and reports of our findings in the coming weeks.
Please send your observations and attachments to FSCommunityVoices@gmail.com
Thank you,
Tim Traynor
IAT Team Leader
SOCIAL MEDIA
We are the FS Community Voices social media administrative group. We are responsible for managing the Community’s presence on Facebook. Our objective is to facilitate an interactive and informative platform that is respectful and inclusive of all Four Seasons homeowners.
Additionally, the team will curate and share relevant content, such as community updates, events, important announcements, and resources, to keep homeowners informed and engaged, while promoting a sense of community.
Abby Mittelmann
Dave Green
Maggy Green
Visit our new Facebook Page
Click Facebook.com
Login Facebook and Then Search FS COMMUNITY VOICES
Then Join
THINGS YOU SHOULD KNOW
Things You Should Know will be a regular addition to Community Voices, where the objective will be to keep everyone informed on what is individually and collectively important to all the residents in preparation of our eventual transition to a resident managed HOA.
As stakeholders in our community, we all have a vested interest in a smooth transition, with minimal financial liabilities going forward.
As stakeholders in our community, we all have a vested interest in a smooth transition, with minimal financial liabilities going forward.
Harvey Drill
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Things You Should Know
September 12, 2024
Hello Four Seasons
With reference to the theme Things You Should Know, I felt we should clarify our position, our end goal, and our core competence concerning what we are striving to achieve and why.
We are inclusionary in our quest, and we are not trying to divide the community in any way, shape, or form. People will agree with what we are doing, and people will disagree with what we are trying to achieve. That is fair, and that is where freedom of choice comes into play. We do not represent the builder, the HOA, or any entity affiliated with KHOV or Associa. We do look after the best interests of like minded residents, who have a vested interest in a seamless transition from a builder managed community to a resident owned and managed community.
We do have our own set of interests that differ from the builder and it's representative, Associa.
KHOV is a builder, Associa is a management company hired by Khov. Their job is to build homes, and when completed, move on to the next development.
Associa is to manage the community that they have been contracted with, and work within the guidelines given to them from the KHOV managed Board. FS Community Voices (FSCV) is comprised of "Like Minded Residents" who have bought into this community, and wish to make the most of our community that we all live in and call home. We want to maintain the high quality of life that living at Four Seasons allows us to have.
The time is coming when the residents will take over the management of the community, HOA, and all of the financial responsibilities of maintaining the Four Seasons in its entirety.
FSCV, through its talented team of unpaid volunteers is busily preparing for the day, when the responsibility of running and maintaining our community falls squarely with us. The team is skilled in the specific disciplines needed to identify the areas of concern. We will always take the high road, and quite honestly, we are all a bunch of nice people, who want the best for the community, and we do not have a bone to pick with anyone at KHOV or it's assignees.
While KHOV is an excellent builder and developer, there are issues that we are currently identifying that will need remediation and bringing the specific areas up to the building codes that were set in place by Berkeley County when they approved plans for Four Seasons. We do not want to be hit with a large increase in HOA fees when we take over, because we did not properly identify areas that need to be corrected or will age out when we do take over. The concept is to identify any and all deficiencies, so we hopefully do not see a major increase.
We need the support of the residents, as we will one day in the near future have a newly appointed KHOV board set up to handle the transition would then be presented with our findings, and it is our hope that any findings would be presented in a manner that we would be compensated proportionally for correcting what needs to be corrected.
We want to make sure, that at that time, we have identified as much as we can, in areas that need remediation, and what that will cost to bring it into compliance, so that we do not get short changed and then see our HOA dues raise significantly to fund any potential shortfall.
FSCV's goal is to be proactive, and not reactive in identifying areas of concern on behalf of like minded residents. Quite simply....We all live here and have paid good money to live here. We are looking at the best interests of the residents only. The builder is primarily looking at the best interests of its shareholders. That is the fundamental difference.
So, we ask our community to rally around FSCV, as we will make every effort to always act in good faith, and only in the best interests of the residents of Four Seasons. Clearly, we do not represent, nor make any illusions that we are affiliated with KHOV, the Board, or Associa. We are strictly like-minded residents who share a common concern in that we want what is best for every homeowner within the community as we prepare for the changeover to a resident owned community.
Harvey Drill
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Things You Should Know
January 1, 2024
Happy New Year to all fellow Community Voices!
As we plan and prepare for the eventual transfer of Four Seasons from KHOV to the community, and take on the sole responsibility of managing, funding, and the upkeep of our community, we need to be aware of what that entails. Any "surprises" or areas that need remediation or replacement will be entirely funded by all the residents, with no subsidized funding by Khov.
By way of example, my Sister in Law lives in Miami Beach. Each household was assessed $40,000 to remediate the leaking of their pool, and underground parking structure, as well as updating the common area. No one in their development will have a choice, but to pay or sell their residence to fund the repairs and modernization project. Clearly this type of assessment is an exceptional event, but wear and tear, and aging out of our infrastructure is not an exceptional event. We are trying to avoid such a surprise when we do take over, as we are actively reviewing and assessing the infrastructure here at Four Seasons.
In South Carolina, the HOA can and likely would place a lein on your property if the assesment is not paid. This would preclude you from selling the house until the lein, late charges, interest, legal fees, etc are satisfied.
As mentioned previously, we are looking to protect us from such assessments and the need to outlay large expenditures once we take over. In addition to limiting any exceptional items, we also are cataloging and identifying areas that are not in compliance to county and state codes, such as storm drainage issues etc.
While this is a few years out, identifying and cataloging potential areas of concern is in all of our best interests. What was cited above is an extreme example of what could occur. Collectively we can insure that the transition process is beneficial for all of us, and that we avoid being saddled with such a situation similar to what my SIL is now going through.
Wishing everyone a Happy and Safe New Year!
Harvey Drill
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Things You Should Know
Nov 9, 2023
Hello Four Seasons
Our quest is to educate and make everyone aware that we are well prepared to transition Four Seasons from a Builder subsidized HOA to a resident owned HOA.
We are working towards this goal not in an us against them mentality, but rather focused on what is in the best interests for each and every home owner that live within our community.
Right now, KHOV subsidizes the monthly fees we pay. When we take over, the subsidy is gone and we are fully responsible for the upkeep and maintenance of Four Seasons.
We aim to educate everyone in areas of concern and what is needed to minimize any unnecessary increase in our monthly dues when the handover occurs.
We do not wish to cast judgment, alienate, or point fingers.
Collaboration with all parties in the spirit of inclusion is what we seek.
Future Things You Should Know will point out specific areas that we should be aware of, as they directly impact all of us living here.
Harvey Drill
FILE MANAGER
Meeting
Resident-only Town Hall Meeting PowerPoint Presention
USEFUL LINKS
(note: click on the Titles to open links)
Difference between a POA, HOA and COA
South Carolina HOA Laws and Resources
South Carolina Dept of Consumer Affairs
SC Code of Laws - South Carolina Homeowners Association Act
Contributors:
Diane and Steve Wright
ARTICLES
HURRICANE GUIDE
CLICK HERE
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4/9/2024
Note from the WEBMASTER:
Information under the header Latest Announcement will be move to the appropriate content header or remove after a few weeks.
CLICK HERE
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4/9/2024
Note from the WEBMASTER:
Information under the header Latest Announcement will be move to the appropriate content header or remove after a few weeks.
STAY IN THE LOOP
- Summerville, South Carolina, United States
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FEATURE
The use of homeowners' association reserve funds is a topic of much confusion and controversy within homeowners' associations.
Because of the importance of maintaining proper levels of homeowners' association reserve funds, they are afforded protections by state laws and/or an association’s governing documents and HOA board members and management personnel should be familiar with all requirements that are imposed on the use of reserve funds before making decisions relative to their use.
What are reserve funds?
It is critical to understand that an association’s reserve funds are not to be used for the payment of normal recurring operating expenses of the association.
Reserve funds are funds that are set aside in a separate account (reserve account) that is established as a source of funds that are available for specific purposes of repair, restoration, replacement, or maintenance of major components that are part of the common areas that the association is responsible for.
Examples of the proper purposes for the use of reserve funds include: (i) the replacement of common area roofs; (ii) the replacement of wood siding on common area building exteriors; (iii) repaving of community roads; (iv) painting or remodeling community facilities such as a clubhouse.
The restrictions imposed by state laws and/or governing documents may also permit the use of an association’s reserve funds for funding litigation that involves the repair, restoration, replacement, or maintenance of such components (i.e. construction defect litigation). To maintain the separate identity of the reserve funds, an association needs to maintain one or more separate bank accounts for the holding of reserve funds and the reserve funds should never be commingled with an association’s operating funds.
Furthermore, it is common for state laws and/or governing documents to limit those who are authorized to withdraw reserve funds from the accounts to board members and/or officers of the association. Thus, retained management personnel should never be authorized to withdraw funds from an association’s reserve bank account.
Where do the reserve funds come from?
The source of the funds that go into an association’s reserve account is the dues and assessments that are periodically (usually monthly or quarterly) paid by the association’s members. Associations that are relatively new, and under the control of a developer, may also require contributions to the reserve fund from the developer for lots, homes, or units that have not yet been sold.
A specific portion of each payment made for dues and assessments is allocated for contribution to the association’s reserve account. The remaining portion is for payment of ongoing operating expenses.
Determining how much to set aside for reserve funds.
A determination of how much money should be allocated to an association’s reserve fund requires the creation and periodic updating of a reserve study.
Because the preparation of a reserve study requires knowledge and expertise that is beyond the capacity of the typical board member or management person, associations should retain outside third-party vendors who are in the business of preparing association reserve studies. The preparation of the reserve study necessitates the identification of virtually all components that exist within the physical properties of the association’s common areas and an assessment of the useful life of each such component and the cost of maintaining and replacing it.
A properly prepared reserve study will enable an association’s board of directors to know exactly what components must be properly maintained and periodically repaired and/or replaced.
The reserve study will also specify the amount of funds that should be allocated to each such component for maintenance, repairs, and replacements.
With this information, the association’s board of directors can determine the amount that should be on hand in the reserve account and how much additional funds should be contributed on a regular basis out of the dues and assessments paid by the members.
Because the preparation of a reserve study is based on estimates made by the preparer of the study, it is not an exact science. The association’s physical components can fail sooner, or last longer, than anticipated and maintenance, repair, and/or replacement costs can be more or less than had been estimated. To accommodate for such variations, it is common for association boards to make periodic adjustments to the various line items contained within their reserve study.
With a properly prepared reserve study, an association can create a meaningful and accurate annual budget for circulation to the association members that should provide for payment of the normal operating funds of the association and the additional funds that will periodically be required to repair, restore, replace, or maintain common area components.
What if we don’t have the reserve funds that are required by a reserve study?
It is common for homeowners' associations to be underfunded in their reserves. This typically occurs because accurate reserve studies were never prepared and/or the required regular contributions were not made to maintain the appropriate level of available funds in the reserve account.
The reasons insufficient amounts are collected vary but frequent underfunding results from shortsighted thinking on the part of the association directors who, in an effort to avoid an increase in dues or assessments, decide to cut costs and forego required maintenance, repairs or replacements.
Association boards should have a realistic plan for the funding of the association’s reserves.
Decisions to avoid necessary maintenance, repairs and/or replacements should not be a consideration. Instead, HOA boards should take immediate action to increase dues and/or levy special assessments in amounts that are sufficient to build the level of reserves to appropriate levels that will provide for funds that are needed for proper maintenance of the association’s common areas.
Use of reserve funds for unauthorized purposes.
In the real world there are unexpected occurrences that result in expenses that were not anticipated and, as a result, associations can experience cash flow shortages. As a result, they may lack sufficient funds on hand in their operating accounts that are required for the payment of operating expenses.
When confronted with such shortages, state laws and/or governing documents typically allow for the temporary borrowing of funds from the association’s reserve account. If it becomes necessary to borrow reserve funds, the board members who make the decision to borrow the reserve funds must be aware of the borrowing restrictions and requirements that must be complied with before the funds may be utilized.
For example, in California, before boards can borrow reserve funds, they must provide notice to the association members of their intent to borrow as an agenda item for a board meeting. The notice of the meeting must include a statement of the reason that the desired transfer of funds from the reserve account is needed along with a stated method of repayment and an indication of whether a special assessment will be considered to generate the funds required to pay back the reserve account.
If, when acting on the agenda item at the board meeting, the board of directors authorizes the borrowing from the reserve fund, it must then make a written finding that is documented in the minutes of the meeting which includes the reasons for the borrowing / transfer from the reserve account and a description of when and how the borrowed funds will be repaid to the reserve account.
Conclusion: Homeowners' association directors have legal, contractual, and fiduciary responsibilities that require the proper handling of association funds. The importance of being aware of all state laws and requirements imposed by an association’s governing documents relative to the maintenance and use of reserve funds cannot be overstated. The proper allocation and use of reserve funds will ensure that the homeowner's association has necessary funds available when needed and will facilitate the association’s operations while at the same time minimizing conflicts within the association that frequently result from the improper conduct relative to the collection and use of reserve funds.
COMMENTS from our RESIDENTS
11/10/2022 Construction Entrance, (FEELING SAFER?)
11/10/22 from friend and neighbor Lynn Brown:
"The contractors for the Phase 7/8 infrastructure are supposed to be blocking the construction entrance when not working to thwart random access to our community. This was our “security” at 10 pm last Saturday night. I notified Associa the next day. The entrance looked the same at 6 pm this evening."
11/10/22 From friend and resident Ralph Sprainer:
"The construction entrance was chained up last night. I didn’t get a picture since I was riding my bike when I saw the chain up."
GUESS IT'S HIT OR MISS?
"The contractors for the Phase 7/8 infrastructure are supposed to be blocking the construction entrance when not working to thwart random access to our community. This was our “security” at 10 pm last Saturday night. I notified Associa the next day. The entrance looked the same at 6 pm this evening."
11/10/22 From friend and resident Ralph Sprainer:
"The construction entrance was chained up last night. I didn’t get a picture since I was riding my bike when I saw the chain up."
GUESS IT'S HIT OR MISS?