Legal Question in Real Estate Law in Ohio

My wife and I are trying to sell our condo. We had a buyer who was preapproved (FHA Loan) and all lined up to purchase to the condo. 2 days before closing, we were advised that the loan would not be able to go through because the condo association was not allocating enough money into the reserve funds. They require 10% of the budget be allocated to the reserve fund and the condo association was only allocating about 3%.

The condo bylaws, and the Ohio Revise Code section 5311.081 (A) (1), both state that that "...the amount set aside annually for reserves shall not be less than ten per cent of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners association." We have spoke with the condo association and they acknowledge that they are not allocating enough to the reserve and also are aware that they did not take a vote from the unit owners.

Based on our conversation with the lender, it will be very difficult for a buyer to get a loan approved based on the condo associations allocation of funds. It appears that our only chance at selling the property now is by hoping that someone puts in a cash offer. We pay $220 monthly for our condo fees and are extremely frustrated with this situation. Do we have any recourse against the association for violating the by-laws? What are our options?


Asked on 8/05/15, 2:45 pm

1 Answer from Attorneys
Thomas Sacerich Thomas J. Sacerich, Attorney at Law

You mentioned that they did not take a vote of the unit owners however I will bet you that the way they did it was they had a quorum at the annual meeting from proxies that they obtained. They then voted those proxies to waive the 10% requirement.

I know you don't want to hear this but you have to get involved on the board to get any change.

If they did not use the proxies as I mentioned and just ignored the law you could have a cause of action against them for a breach of their fiduciary duty. You would be able to sue them personally for their breach.

I have owned a condominium management company, lived in a condo and represent condo associations. I would be surprised if they did not use the proxies to waive the required reserve minimums, but it is worth looking into.

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Answered on 8/14/15, 6:48 pm


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