Condo homeowner's association hit with 'groundless' lawsuit

Who should take responsibility for an indoor plumbing leak?
By: Robert J. Bruss: Inman News
DEAR BOB: I am on the board of directors of my condo homeowner's association. When I was asked to run for election, I considered it an honor. Because of my legal and business background, I felt I could contribute. But now that I've been on the board for about eight months, I consider it a curse. I will not run for re-election. Most of our 78 condo owners are wonderful people. But three or four are horrible people. One is suing the association for refusal to repair her kitchen floor and cabinet when her kitchen plumbing sprang a leak within her condo unit. This is clearly her responsibility, not the association's. But she is suing her own homeowner's association for the $7,500 repairs to her floor and cabinets. To defend this groundless case, we had to hire an attorney at about $200 per hour. Why would she sue us? – Edward G.

DEAR EDWARD: Now you know what a thankless job condo homeowner association directors often have. However, many condo associations never encounter hostile owners such as the one you describe.

Some condo owners have a bad attitude toward their homeowner's associations, feeling it is "me" against "them." There could be lots of reasons for the lawsuit, including mental instability.

Congratulations to your condo homeowner's association for defending that groundless lawsuit rather than paying a claim for which there is clearly no association liability. I am surprised any ethical attorney would even file that lawsuit.

SHOULD OWNER OF "SMALL ESTATE" HAVE A LIVING TRUST

DEAR BOB: Not long ago, you had an item about the advantages of a revocable living trust. I showed it to my attorney. He said that any estate (like mine) under $600,000 doesn't need a living trust. Do you agree? – Herbert S.

DEAR HERBERT: No. Most states have statutes exempting small estates, usually under $100,000, from costly probate court expenses and delays. I have no clue where your attorney came up with that $600,000 net asset number.

The primary purpose of a revocable living trust is to avoid probate costs and delays after you die. A secondary advantage is to provide for the situation where the principal trustor becomes incapacitated, such as with a severe stroke or Alzheimer's disease.

In my humble opinion, everyone who owns a house or condo, and other significant assets such as stocks, bonds, and investment real estate, needs a revocable living trust to avoid probate. Perhaps your attorney just wanted to probate your assets when you pass on so he could receive substantial fees then.

IF YOU DON'T LIKE BAD TAX ADVICE, SEEK A SECOND OPINION

DEAR BOB: My problem is I recently married. My husband and I file separate tax returns. My tax adviser says I cannot deduct the tax loss from depreciation on my rental property since I am married and filing a separate tax return. Is this true? – Cynthia L.

DEAR CYNTHIA: No. But there might be another tax reason. I suggest you seek a second opinion from another tax adviser.

Your adviser might be correct. To illustrate, if you earn over $150,000 adjusted gross income, then your passive activity tax loss from the rental property cannot be deducted from your ordinary taxable income. However, it then can be "suspended" for future use, such as when you sell the property to reduce your capital gains tax.

Ask your tax adviser for details why he thinks your tax loss from your separate rental property is not deductible against your ordinary income. I suspect the reason is not because you and your husband file separate tax returns.

The new Robert Bruss special report, "Seven Best Ways to Avoid Capital Gains Tax When Selling Your Home or Investment Property," 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 download at http://www.bobbruss.com/. Questions for this column are welcome at either address.