Missing HOA records

Started by NameW • 12 replies • 1787 views

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NameW (Virginia)
Posts: 74

Posted:

You, a new owner in your community, have joined your HOA's Board of Directors. Most of the other members are also somewhat new. The HOA is well over 5 years old. Your President became President a few months ago when the prior President sold his home and moved away. The Secretary/Treasurer is also somewhat new and he too is replacing someone who died in a car accident.

Your Secretary/Treasurer (S/T) discloses that while those bank statements and financial records he has seen seem to show the accounts are up to date, the outgoing Secretary's daughter only gave him the financial records and books for 2009 and 2010. The daughter stated she has no other papers and she also stated she has no knowledge of records from before that and has no knowledge of any past meeting minutes, resolutions or other any other documents.

The last meeting minutes possessed only cover the last 3 months. No one in the Board has any idea where the Architectural Committee records, meeting minutes, prior financial records or any other Board documents are. What should you and the rest of the Board do?

GlenL (Ohio)
Posts: 5,491

Posted:

You go on with what you have and make sure that you have procedures in place to prevent it from recurring.

Studies show that 5 out of 4 people have problems with fractions

GlenL (Ohio)
Posts: 5,491

Posted:

You can also contact the bank; for a fee I'm sure they can reconstitute some of the bank records, canceled checks etc. Is there a management company who might have some of the records?

Studies show that 5 out of 4 people have problems with fractions

MaryA1 (Arizona)
Posts: 388

Posted:

Like Glen says, you just have to make do with what you have. But,from this day forward you can put controls in place to make certain the records are maintained. It may be a good idea to put everything on a CD.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Well, you have the 09 and 10 financials, that should be a huge help.
What about the bylaws? and other important documents? Up to date? any amendments that are not reflected in your copy of the bylaws? Annual Report filed? Current membership listing up to date?
CCRs filed? Minutes of the board meetings and the Annual Meeting Minutes/

The secretary would not have had any committee minutes.

TimB4 (Tennessee)
Posts: 21,059

Posted:

NameW,

Is this an actual issue or are you posting a theory for general discussion?

Either way, My Association went through a similar issue where a new board had limited records provided to them. Lots of reasons were given for why things were not available but it never changed the fact that the Board had what they had.

We attacked this the following way:

1. Solicited copies of any records from any and all past board members. This allowed us to rebuild 5 years of Board and General membership meeting minutes.

2. Created and adopted a records policy to require both physical and electronic copies of all Secretarial records and for most of the Financial records.

3. Posted electronic copies of all available minutes on our Association Website - which provided info to the members (available via password) and allowed one other avenue to recreate the records if it happens again.

Then we moved forward with what we had as there was nothing else that could be done.

Tim

TimB4 (Tennessee)
Posts: 21,059

Posted:

Forgot to add that we also posted all resolutions to the website as well.

NameW (Virginia)
Posts: 74

Posted:

Timb4,
It was a theoretical (although apparently containing elements commonly encountered in some HOAs). I met with some people regarding an HOA (the one in the news article I posted in another thread) and learned much of this theoretical happened to them. In my own HOA we have some stuff missing from the late 80s, but kind of did what you said. We stuck it in our newsletter and solicited any documents (including newsletters) from that period and recovered enough papers so that the holes are minimal and things can be figured out if a need to do so ever emerges.

In the real world one HOA property I know of had their Secretary/Treasurer's home go into foreclosure and he told no one of his problem before being evicted. He grabbed what he wanted of his belongings and left/vanished from the community and the trash people hauled everything else sitting on the curb to the dump. Several weeks went by before the next meeting of the Board. About 5 months later someone else bought the house and reported finding only 1 small box of old records sitting in the attic. Everything else was just gone. Glad that wasn't my HOA. OW!

There is a lot to be said for keeping electronic records and sharing thumbdrive backups with other officers periodically.

SharonG4 (Mississippi)
Posts: 54

Posted:

We went through something somewhat similar--only the Association was just being turned over to the homeowners from Developer control. The developer had hired a MC to run the HOA when he incorporated and started building the subdivision. The MC "managed" the HOA for 12 years until 90% of the lots had been sold and the development was turned over to an elected BOD. The BOD kept the MC on for 6 long agonizing months as they discovered that the MC did not keep any Architectural review records--they said they thought the developer had them--he said the MC should have kept them. The accounts were in such a mess, we didn't know what was going on--they posted dues to incorrect lot#'s or failed to post them at all. Collection of dues was horrible. We couldn't pay the bills and the MC said "Well the developer would just cover it when that happened" We terminated their services and hired a new MC who after 5 months is just now getting the account reconciled. The old MC failed to turnover any bank statements but we did obtain that last 2 years from the bank directly.

One issue that really is a sort point is that because we have no record of what was architecturally approved or denied, our lawyer tells us that we are going to have to "grandfather" in everything ( storage sheds, detached garages etc) that were built prior to the BOD taking control because we have no proof that approval wasn't given. ( The developer and two of his relatives were the original ARC committee. One member is deceased and the other two "don't recall what they approved or denied") We have developed a digital system and a hardcopy file of all our records with the board members and the MC maintaining the records. We also post the minutes online. We developed a stricter ARC policy, which is posted and have let the membership know that all future improvements must be to these standards for approval.

It's been tough getting the HOA started with no past records but we basically said we are starting from scratch and just moved forward.

StanH5 (Colorado)
Posts: 89

Posted:

I would say that you should simply go forward, unless, and this is important, you are aware of or suspect fraud, or if you Board is in financial distress and based on your knowledge of income and expenses shouldn't be, I would pursue an audit and search for records.

SharonG4 (Mississippi)
Posts: 54

Posted:

We did feel that some of the accounting just didn't add up so we requested an audit. The previous MC then submitted invoices for hundreds of dollars of printing costs which we can't prove was done or not. They also gave invoices for repairs to the irrigation system etc. however all of the services that they stated were paid for were completed by their own in-house personnel. Our auditor said that we can't really prove that the work was done or not done, only that they created invoices to total the amounts that we had questioned.

That was when we threw in the towel--raised the annual dues and started fresh. We seem to have rebounded pretty well this year--we were able to pay to bills and make some of the needed repairs to the community common properties. The developer continues to hinder us however. Our assessments are due each Jan. 1. He just informed us that he is taking an exemption from paying dues for 2011 and 2012--there is a vague clause in our covenants that stated that anyone owning 2 or more lots can take a waiver from dues for a two year period. We felt that this was written in to encourage builders to purchase lots when the subdivision was getting started in 1998 but the wording did not specify a timeframe. We were in the processing of amending the covenants to remove this clause when the developer notified us that he was taking his exemption for the next 2 years. Because of our lack of past records we don't know if he had previously taken this waiver. The developer still has 60 lots in our community.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Sharon,

If I may ask, what document is that clause in - the covenants or the bylaws?

If it's in the covenants, then all you can do is move on.

If it's in the bylaws and the covenants says something else (like assessments are to be made equally) you might have grounds to overturn that rules based on a conflict between the documents. However, it will require legal costs and the battle may or may not be worth it.

Does the exemption carry over if the lot is sold? i.e. is the exemption based on the owner or the lots? If it's based on the owner, what prevents lots currently under the exemption from being sold to a new owner who then claims the exemption?

Tim

TimB4 (Tennessee)
Posts: 21,059

Posted:

After I answered Sharons posting, i discovered that this topic is being discussed in a different thread. Here is a link for future discussions on the topic of developer having waived fees:

Subject: developer taking advantage

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