Board's Disregard for laws that govern our HOA - Recourse? Help!

I attended my HOA meeting last night and am deeply concerned. I own a condo in a Community in N. Phoenix Moon Valley. I do not believe our Board understands nor has regard for the rules governing our HOA. Our former President is now our property manager. Our president fired a reputable property management company, resigned as the president of the Board, and then became our property manager. The two gentlemen who served on the Board under the former president are still on the Board. As we entered the clubhouse for the meeting, the property manager (former president of the Board), required everyone to sign in. She blocked the entryway and denied entrance to anyone who wasn’t a homeowner, specifically anyone who wasn’t on the deed. Spouses, significant others, Realtors representing clients and renters who had a letter of proxy, were all turned away from attending the meeting. She told a woman, married to her husband of 40 years she could not attend the meeting because she was not on the title of the condo. One item addressed in the meeting concerns me deeply. AZ Statute ARS 33-1243. I believe the Board’s decision to terminate a reputable property management company and to hire our former president of the board as our property manager constitutes a conflict of interest. The president resigned from the Board and then assumed the position of property manager. I believe the conflict of interest exists because the president discussed a contract for employment and compensation and then resigned with the understanding that she could not serve on the board and be employed as property manager at the same time. An owner challenged the Board’s decision. The current Board President said that there was one bid for consideration, whereas the former board president (and current property manager) said the Board received three bids for consideration. This concerns me and leads me to believe that the Board only received, considered and approved ONE BID – our President’s bid to become the property manager. I don’t believe the Board even seriously considered the bids they received and they never discussed the change with the homeowners. This means the Board also amended our budget mid-year to account for her new management fee. Our by-laws do not give the Board the discretion to amend the budget without consent from the majority of the homeowners. The Board never consulted nor obtained the homeowners approval to change the property management company or amend the budget.

What’s worse, our property has never looked worse. We’ve had problems with our pools and spas all summer long and the Health Department just closed our pool spa this week. We have pet and pigeon feces everywhere. We were once a beautiful Community. Our property values have deteriorated along with the upkeep. I am embarrassed and discouraged by living here. I want to walk away from my home. The property manager is a controlling, negative, combative and abusive woman. It looks like she has several civil suits against her and was even charged with harassment. She was unemployed, and by firing the reputable property management company, she was able to create an income for herself. There are even rumors that she receives disability from the government, which would mean she can’t be employed? She requires our off duty security to come 4 hours a week to protect her when she is working on site at the property. If you need an officer to protect you, you probably don’t belong in the Community. Our Community suffers from extreme apathy and I don’t blame them. The Board is a runaway governing body, obsessed with controlling the money and decisions that affect the Community. The senior citizens come to the aid and support the Board and Property Manager – but they are ignorant and afraid of change. We have a lot of empty homes and believe a lot of homes are in foreclosure. I am not sure if we have enough eligible votes to recall the Board and get new leadership. If we get a new Board, we can get a new property manager. Do you believe that our Board acted in the best interest of the HOA when they hired our former President of the Board to become our property manager? Do you believe our Board’s decision to hire her was a conflict of interest? The appearance of a conflict of interest is there. Do you believe we have a case for a class action suit? The Arizona statutes govern our HOA, and trump our by-laws. My interpretation of the State Statutes says the Board is in violation. HELP!!!!

I would add a forth option: Rally your neighbors, vote in a new Board, replace the property manager.

While it might be easy to blame the deteriorating conditions on the PM, chances are there just might not be money there to maintain the property. It depends on the budget and how many delinquencies there are. And yes a person on SS disability can work and earn however there is a limit to how much they can earn before they start loosing their SS benefits.

Earnings limit to receive Social Security disability benefits.
Updated 11/08/2010 12:52 PM | Answer ID 317

I am receiving Social Security disability benefits. Will I lose my benefits if I work and earn money?

Not right away. We have special rules called work incentives that help you keep your disability and Medicare benefits while you test your ability to work. For example, there is a trial work period. During the trial work period, you can receive full benefits regardless of how much you earn. You just have to report your work activity and continue to have a disabling impairment.

The trial work period continues until you accumulate nine months (not necessarily consecutive) in which you perform what we call services within a rolling 60-month period. We consider your work to be services if you earn more than $720 a month in 2010 and 2011.

After the trial work period ends, your benefits will stop during months your earnings are at a level we consider substantial, currently $1,000 in 2010 and 2011. Different amounts apply to people disabled because of blindness. The monthly substantial amount for statutorily blind individuals for 2010 and 2011 is $1,640.

For an additional 36 months after completing the trial work period, we can start your benefits again if your earnings fall below the substantial level and you continue to have a disabling impairment.

For more information about work incentives, we recommend that you read the leaflet, Working While Disabled-How We Can Help (Publication Number 05-10095).

MaryA1,

This was not our Annual meeting but a monthly meeting. The individuals the manager turned have attended monthly meetings before. There was selective enforcement on her part. Why was the manager locking people out? Why wasn’t a member of the Board at the door, greeting the individuals, asking them to sign in? The manager controls the Board like little puppets. When the individuals questioned the Board President about why they couldn’t attend, and asked to see the law that applied from banning spouses (not on the title), Realtors representing their clients and other individuals who had been welcomed in the past, the Board President turned to the manager and said “well, I don’t know, is there are law that prohibits these people from attending.” The entire room witnessed this. The Board President clearly does not understand the laws governing the HOA.

MaryA1, may I ask what your credentials are? Are you an attorney? How does full disclosure make this action acceptable? There is no disclaimer in the Statute that says full disclosure makes Board decisions acceptable. It appears the PM former Board President acted with intent and retribution when she fired the reputable PM Company at our Community. She served as the Board President at two Communities simultaneously. She served as Board President at my Community (where she owned 2 units and foreclosed on 1) and the Community where she jointly owns a home with her mother. The same PM Company managed both the Communities. When the other Community asked her to provide accounting of the petty cash funds, baked sales funds, garage sale funds and financial records, she refused. The Community asked the PM Company to provide those records, which they did. The PM Company pursued her for petty cash receipts and financial records. The information that the Community learned from the financial records and lack of receipts led to a recall vote of the Board. She had misappropriated funds, and had breached her fiduciary responsibility in several areas. She resigned from the Board before she could be recalled, but before doing so, appointed her two best friends who then appointed her mother to serve as Board President. Months later after the Community recalled her actions, with legal assistance, and established new leadership, the Community learned that she had spent $16,000 of HOA funds in legal fees, in an effort to remain in power. The Community attorneys even counseled her that remaining as Board President was not in the best interest of the Community and that she was egregiously spending the HOA money to remain in power. The Community decided against bringing legal action against her because she had just foreclosed on two homes, was unemployed (fired by her employer), collecting disability (knowledge to many in her Community), drove a beat up car, and really had no assets to go after. The Community had spent $20k of their own money in removing her from power and they didn’t want to spend any additional money to bring legal action against her, when they knew she had no money to go after. She had cause to fire the reputable PM Company at our Community because the PM Company acted in accordance with the law and this led to her removal from the Board at the other Community. The Community where she lives with her mother knew of her intent to fire the PM Company and start her own PM Company. She was removed from the Board at that Community before she could make this happen. She was successful however making this happen in my Community. She convinced the two Board members (the two men she controls like puppets) that it was in the best interest of the HOA to fire the reputable PM Company and hire her to manage the property. She had NO prior PM experience other than serving as Board President and overseeing the HOA affairs. She sent a newsletter to the entire Community listing grievances against the reputable PM Company as reasons for firing them. Every grievance she list reflected poorly on her and the Board as she was responsible for the oversight of the PM Company. The Board failed to follow up with the PM Company which makes them just as accountable for the grievances. The Board is responsible for oversight of HOA employees. Is this correct? The Board cannot blame incompetence on the employee, entirely, as the Board is just as accountable to the homeowners for caring for the Community. It appears she fired the PM Company in an effort to create an income stream for herself. It also appears that she had an ax to grind with the reputable PM Company as she was exposed for her wrong doing at the other Community and the PM Company had a hand in it. It is all so convoluted here. The same property management company, the same landscaping company, the same community manager, and the same Board President served two different Communities at the same time. One Community managed to stop the wrong doing, while another Community, MINE, suffers at the hand of her incompetence, control, and manipulation. The Board is clearly being controlled by her, and I can’t figure out why they would choose to align themselves with someone like her? She is a liability to this Community. She is in a position to siphon funds from our accounts, as she is very skilled in finance and accounting and she can manipulate the books. She is also in a position to sue our Community should something go wrong. The line between property management and board leadership now is so blurred that our Community is very vulnerable. She controls everything.

I do not see how she could have remained on the Board and serve as the PM at the same time. I do not see how she could have even approached the Board with a bid for employment while serving as Board President. How do we know she didn't abuse her power as President and place undue influence or pressure upon the other two Board members to agree with her suggestion and play along with it? How do we know that everything agreed upon and done behind closed doors and secrecy among those three Board members was in our Community's best interest? How do we know that hiring her as the PM was in our best interest, as other reputable companies were NOT considered and she had no previous experience as a PM? This woman foreclosed on her home in our Community. She foreclosed due to financial hardship. Embezzlement of HOA funds is very common. How could the Board in good conscience hire an employee and give them carte blanche of HOA funds when that employee had personal financial hardships, needed a job, and in essence created an income for herself? We have no understanding of her employment agreement as we were not consulted or informed until after the decision was made and changes were put in place. As PM she is an employee of the HOA and receives compensation. Board members cannot receive compensation for their service. Are you inferring that she could have served on the Board and also be employed at the same time? How does that not present a conflict of interest?

We will recall the Board, and then fire the property manager. It will take time and resources. I will not allow my Community to deteriorate further under her management and current Board leadership. One homeowner put is best when he requested a refund of his HOA assessment fees from the past 4 months because our money certainly didn’t go to property management. Our pools and spas were unusable, the property is unkempt, and the PM is full of excuses stating that just because it looks like things aren't getting done, doesn’t mean those things aren’t being addressed. When things don’t look like they are being taken care of, one can only assume that things are in fact, NOT being taken care of.

Am I being ridiculous here? Am I out of line? Things dont seem or feel right to me. Does anyone else agree with me? I am so underwater on my condo. If we cannot remove the Board and the Property Manager I feel desperate enough to walk from my home, just like the PM did. The deterioration of my Community is heartbreaking.

What credentials do you have to substantiate your response to me? Thank you kindly for your time and response. I appreciate all insight and direction.

The decision did not take place in an HOA meeting. It was behind doors in the Board’s private meeting. We requested the background information but the Board refused to comply. Is the Board required to keep the minutes of their private weekly meetings and provide that to the Community?

I understand a lot of the points I make may be supposition but cases in court are won even on the “appearance of.” The appearance of the Board’s wrong doing can by sniffed out from a mile away. If you look at the intent behind the action, you question if the action was in the best interest of the HOA and if the Board failed in their fiduciary responsibility to the homeowners.

Equally concerning is that the AZ Division of Corporations shows this woman as the Statutory Agent for our Community and the President Director of the Corporation. We were told that she resigned from the Board but our incorporated documents with the State do not reflect that. How can she be the Statutory Agent and the President Director? That gives her too much power over a Community she no longer lives in and can single handedly take down.

What is equally disconcerting is the fact that if we vote to recall the Board, she will be involved in the process. The PM Company assists with validating the signatures on the petition to call the special meeting to recall the Board. She is the only one with knowledge of whether homeowners are in arrears or not, and she knows who is on the title of the property. I am sure a Realtor can provide us with the homeowner title info. As for the billing statements, she has demonstrated her incompetence in this area. She shows certain homeowners grossly in arrears (since the transition of PM Company’s) when they are in fact not. I assume it would be up to the PM to provide the burden of proof because numerous homeowners have produced their records to show payment of HOA dues but she still shows their accounts in arrears. I would not put it past our PM to selectively manipulate certain accounts out of retribution. She assessed 40 or so homeowners last month with a late fee when in fact they were not late in making their payment and she chalked it up to a “mistake.”

The PM validated the signatures of our petition. And she validates the votes. How can we make this a democratic process and bring on a new Board when she is a former Board member, has a lot at stake (including her livelihood and need for control of power), and is in the position as PM? She will not allow the process to take place fairly because if we do prevail in recalling the Board, she will be fired. Just look at her behavior at the other Community. She charged the HOA $16k in legal fees fighting the Community to stay in power. We will pay handsomely as a Community either way - to remove her, or fail to remove her. This has touched a nerve with enough owners that we can bring about change - its just a matter of how much it will cost us and the time invested to do so.

MaryA1,

Thank you very much for your response. I appreciate your insight.

We have 276 units in our association. We have a large number of foreclosures, and short sales. We also have several bank owned properties. I understand that any owner in arrears is automatically disqualified from voting. How do we determine the percentage we need for our petition to recall at a special meeting, and the percentage required at the special meeting? Is the percentage based on the 276 units, regardless of the number of bank owned, foreclosures, and or empty units? The MLS shows 18 foreclosures but I believe the records to be grossly in error and believe we have 60 or so foreclosures on property. We have some work ahead of us to get the number of votes, and to counter all the senior citizens who support the Board and PM.

How do we address a Board and PM that don’t understand the State Statutes and their disregard for them? Obviously we can remove them. How do we prevent law suits against the HOA, due to State and HOA violations?

Cliff are you still checking in for insight?
I just came across your post in a research effort of my own. Your words are like echos of my own. I have been involved with a recall effort of our BOD for the last two months. We have in the newborhood of 3400 homes/lots and submitted 477 signatures of petition to recall 6 of the 7 board members who were in secret illegal meetings planning much the same as you have spelled out. The difference is that they were unsuccessful because it was found out in time. The resulting aftermath however is another story. We as a "Planned Community" of over 1000 and not a "Condo Community" were required to get 10% of our membership on the petitions to allow for a Recall Meeting and the subsequent ballot vote.

This is an issue that has been responsible for many a sleepless night for me, if you are still out there fighting the good fight, drop a line, I would love to help.