Suspicious transactions HELP ME!!!

Started by GregF4 • 53 replies • 2984 views

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GregF4 (Illinois)
Posts: 37

Posted:

My former HOA manager showed up at my door out of the blue and asked if I wanted to take over because he was moving (I DON'T KNOW WHY HE PICKED ME I DIDN'T EVEN KNOW WHAT HOA WAS UNTIL I MOVED IN ABOUT 3 YRS AGO.) I said yes and he had me send a notice to everyone saying that I am in charge now. (question 1- Am I really in charge just because the former president said so, there was no vote, but there never has been a vote. Nobody seemed to object though, there are only 12 members and they are mostly elderly women, nobody ever checks the books or comes to meetings so they stopped having them. Bottom line is nobody really cares what is going on and a lot of them don't even pay..the former manager/president started putting leans on lots and now people are a little more willing but 2 of the 12 pay less than everyone else..it's ridiculous really.)

step 2- he had me open a new bank account for funds and he closed the one he was in charge of..the left over money..get this- $25.00 THAT'S IT! this was a red flag to me so I decided to check the books.

As I was going through what records he handed over I noticed that there were no bank statements for the years that he was in charge, no records of deposits, and only a few check stubs and receipts for withdrawals... we were missing info for at least 12 checks, we had no reserve fund, there were no records or receipts of owner payments..just the non-payments that he jotted down on a piece of paper for me, and we didn't have the required Fidelity coverage on our insurance. Red flag number 2^

I sent the previous manager a list of what I still needed and his reply was "Everything is with the tax guy, you will have to wait three weeks or so to get them back." Red flag #3^ He could have gotten copies of bank statements from the bank down the street, he should have had copies of everything he gave to the tax guy, and there is no WAY I'm waiting 3 weeks!!!

I went to the bank to get statements and they said he had to do it because my name is not on the account...our condos LLC name is on the account shouldn't that get me access to the records????

anyway I found way to many receipts from the local grocery store where he had used our money to pay for his food and clothing, at the bottom of the receipts it said "labor payout" I don't think that's right!

How do I get access to that account or our taxes without him being involved..do i have to get the district attorney to do an audit before this is all pinned on me?

also, his name is under "registered agent" and "member" on our business renewal and I am listed as "Member"

PLEASE HELP!!!!!!

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

You might call your local district attorney office and make an appointment for a meeting. Take all information with you to the meeting and have it organized (including all receipts). He will be able to decide if criminal charges need to be brought or he may suggest the HOA hire an attorney. Either way it is someplace to start and if he finds criminal intent then they may prosecute. He also can possibly assist or inform you on how to get the bank information as the information is legally for the HOA, not the former President. Did you ask the bank about other options for obtaining as the HOA is the entity owning?

You need to get something proceeding before he moves and disappears.

This is a prime example of why it is important to have proper functioning HOA and for members to participate.

GregF4 (Illinois)
Posts: 37

Posted:

Thank you so much! In a way I hope he has been using funds for personal bills etc... It will certainly encourage owners to actively participate. We are going to try the bank one more time and show them the business license..maybe that will get us in????

JanetB2 (Colorado)
Posts: 4,219

Posted:

You might also check with the bank about in the future requiring two signatures on any checks for the HOA accounts. Also, you should not need to close and reopen the accounts, just update the signature cards so that there is a long trail that can be accessed for auditing purposes.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Janet gave excellent advice. Make sure you have a checks and balances when posting checks.

I am not sure if I see any issues... Here's why. You sound like your looking for issues instead of concentrating on CHANGING things. The past is the past. Let's begin again and NOT repeat history. Just put your foot down and say this is where we begin.

It's NOT that unusual for only $25 to be in a HOA funds. A HOA is ONLY funded by it's members FOR it's members. Depending on what bills you pay (insurance, lawncare, legal fees, or just maintain a sign) the amount in the bank is to cover all of this. Most HOA's don't have left over as the struggle between setting dues high enough to cover bills and to maintain a savings is nearly impossible. Especially in the smaller HOA's. Which means keep your expectations LOW when it comes to money in a HOA.

As for the personal grocery store receipts...I had PLENTY of those myself. That is because if I was at the store and the HOA needed light bulbs or cleaning supplies I'd buy them. I would then submit JUST the money I spent on these items but often times my OTHER personal items may have been listed on the receipt as well. When you have waited in line at Walmart long enough you run out of the ability to care to separate what you buy the HOA and what you buy for yourself...

Why can't you wait 3 weeks? How do you think business or HOA's work? Try taking 3 months to get approval to change a burned out light bulb... That is because the light bulb burns out. A request for repair to be presented. Approval by board members to replace. Buying the bulb. Submitting the receipt to the "Accountant" and then hope you don't need a contractor to change the bulb. It's usually a 3 bid rule with contractors and on their schedule...

Former HOA President

GregF4 (Illinois)
Posts: 37

Posted:

Turns out we got into the account and there is $5,333.00 worth of cash withdrawals and money orders/cashiers checks that the bank can't trace down for us. Oh and here is another interesting tidbit...OUR TAXES FOR 2010 HAVE NOT BEEN FILED AT THE PLACE THE PREVIOUS MANAGER TOLD US!!!!! I'm not looking for mistakes they kind of jumped out at me...the bank let me in on a little secret our previous owner gave us his tax I.D. number and said that it was needed to open our new account..the bank suggested we get our own so that we are not responsible for taxes filed under that number.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Greg,
What kind of association is this?

Single family homes or condo?
If its single family homes, is it voluntary?

If its a voluntary association and were talking about $5,000 in missing money, just let it go and resign as president. Its not worth fighting for a voluntary association. Just let it die.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Way to go Greg ... you are doing great so far.

They need someone like you to help fix this mess.

TimB4 (Tennessee)
Posts: 21,059

Posted:

1. If you haven't done so yet, follow Janet's advise and contact the District Attorney.
2. Inform the membership of your findings and request assistance in the form of a finance committee to help go over what you are finding.
3. contact the tax person for full copies of everything they have.
4. If the Association was incorporated, you should already have a tax id number. If you are not incorporated, get one now.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Greg - you have made some accusations without all the paperwork.

You will need to get an audit.

Like someone said, start with TODAY and get procedures in place, then look at the past.

Is your group incorporated? If so, use the EIN number to establish the bank accounts.

If not, get an EIN number on line. It costs very little and will help establish your group. THAT should have been the very FIRST thing your HOA did at the beginning.

GregF4 (Illinois)
Posts: 37

Posted:

Thank you for all the help guys, I think we have cause to call the district attorney...I was hoping it wouldn't come to that but with $5,333.00 of our total $16,918.00 that we can't trace because they were cash withdrawals..It would be silly not to get him involved, right? I don't know much about this stuff...

The bank set up a new tax I.D# for us and we removed his name and put my name under "registered agent" on the business license (totally justified since he is no longer in charge right? That was the only way we could get into the account he had, since he gave us the entity# and access code and said "here, take over" We are allowed to do that right??? The lady at the bank said it was fine but it felt sneaky to me. Should we probably remove his name completely?)

I can't remember if I mentioned this before but we called the place that he said our taxes were being done at and they didn't have any for 2010. Now I have to ask him where they are again, he is starting to get angry..but it's my job!

So, here is a hypothetical question- Say we signed up for a new account (under his direction) when we took over. We used the tax I.D. number that he told us to open the account with (which is actually the number that the manager who passed it to him applied for) (oh, and we have no record of him getting one with his name on it) Then he failed to file taxes for 2010..and we end up filing taxes this year(with the same tax I.D# he had been using)....the IRS notices year 2010 missing and they decide to audit us...........What could happen? Worst case scenario.

I would also appreciate possible reasons why he would tell us that we need to wait three weeks for the books. People that know the situation tell us DON'T WAIT!! Either he's not guilty and just doesn't want to go down the road to the tax guy and copy them..or doesn't know he can get copies, or he is hiding something, am I missing anything???

I think it is weird that he picks me to hand over the title of manager/president ...I am the youngest most inexperienced and dare I say unintelligent person in our condo association. Plus, we are newly-weds who just moved in!If he's guilty (I hope not!!!!) than that would be the best explanation as to the "why me?" question.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

Let’s take a few things at a time …

Don’t get in a rush … now that you have the bank information this is the time to be careful and methodical to make sure if there is any potential activities that should not have taken place. Your initial post threw up a red flag because of the insistence of closing the previous account and not providing the bank information. However, now you have that information so you need to thoroughly check some items first.

Compare some of the receipts you have that you earlier questioned against the bank information to see what is shown for the amounts. Do some of these receipts match, if so what was purchased for the matching amounts? This will potentially give you some initial ideas regarding any expenditure.

You really need to also have an audit completed. However, to do that you need to have the books, which have not been provided yet.

Respectfully ask him again about the books and let him know that you will be more than happy to go to the accountant or whomever and make a copy yourself as you are trying to get some items organized and wanted to make sure you follow the correct procedures. Let him know that reviewing the books will make you more comfortable regarding said proper procedures as you are new to the operating of an HOA. Depending on what he says or provides that would be the time to possibly be less or more concerned.

These are the most important items to start with first. If necessary you can always file for an extension regarding taxes, so let's get ducks in a row first.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

My overall biggest concern is your wanting to "throw the book" at this guy and potentially put him in jail. For what? You don't even know HOW a HOA works or what the money may have been spent on. This is STILL a PERSON who trusted you enough to give you this responsibility. Don't you think calling the law out on him is a bit disrespectful at this point?

Forget the past. This is a NEW start. There's NOTHING sneaky about setting up a new account with a bank and removing his name. We did that EVERY year when we changed board members/officers. We had a two signature policy and we had to change the signature card every time that happened. Unfornately, I had to take over from a con-artist President who was indeed ripping off the association. However, instead of taking him to the law I worked with him until I could formerly remove him from activity. He had entwined himself into the community so thick that removing him would made me look like the bad person. Instead I was just able to control what he was able to do and any expenditures he tried to get reimbursed. So yes I have been there with suspicious activity.

My best advice STILL is to just grab your bootstraps, pick up the pieces, and get to work. You have as much information as your going to get. If you have questions come here for advice. Read other people's posts. We are here to help and many of us have the experience that you need to help guide you. It is sink or swim when running a HOA. It's time to get your swimmies on...

Former HOA President

GaryL3 (Florida)
Posts: 32

Posted:

As an accountant, definitely get a CPA to review it. He might not charge you for an audit (more expensive) since you only have 12 members. But if he took cash out of the account, he must have backup for those withdrawals. He must be able to substantiate it.

Also, after all this is said and done, if he has embezzled money from the association, don't forget to notify the IRS. The money he allegedly embezzled is income!

GaryL3 (Florida)
Posts: 32

Posted:

Quote:

Posted By MelissaP1 on 03/10/2011 8:58 AM
My overall biggest concern is your wanting to "throw the book" at this guy and potentially put him in jail. For what? You don't even know HOW a HOA works or what the money may have been spent on. This is STILL a PERSON who trusted you enough to give you this responsibility. Don't you think calling the law out on him is a bit disrespectful at this point?

Forget the past. This is a NEW start. There's NOTHING sneaky about setting up a new account with a bank and removing his name. We did that EVERY year when we changed board members/officers. We had a two signature policy and we had to change the signature card every time that happened. Unfornately, I had to take over from a con-artist President who was indeed ripping off the association. However, instead of taking him to the law I worked with him until I could formerly remove him from activity. He had entwined himself into the community so thick that removing him would made me look like the bad person. Instead I was just able to control what he was able to do and any expenditures he tried to get reimbursed. So yes I have been there with suspicious activity.

My best advice STILL is to just grab your bootstraps, pick up the pieces, and get to work. You have as much information as your going to get. If you have questions come here for advice. Read other people's posts. We are here to help and many of us have the experience that you need to help guide you. It is sink or swim when running a HOA. It's time to get your swimmies on...

I respectfully disagree. If this guy stole money from the association, he needs to substantiate it, repay it or be prosecuted.

One thing associations can adopt which I recommend, as well as always having two signatures on a check, is to segregate the record-keeping with custody of the assets. Anyone that has access to the bank account should never have record keeping responsibilities. It's just a standard internal control. If there's money stolen, then it's gonna have to be by collusion. It's also not a bad idea to have an audit committee that reviews the backup to every transaction, i.e., no check written without an invoice and approval.

GregF4 (Illinois)
Posts: 37

Posted:

@ Janet-- I put every receipt in order then compared them with bank statements, I created some books and I'm 98% sure that there has never been books before (In the past when I had asked to see what my money was paying for..the manager would just say "oh fire insurance and stuff"..I never saw any proof or budgets so it's no wonder that people have a hard time forking over their money for services they are not sure of. I am determined to make books and give yearly budgets to each member so they can track every penny. I guess that is why I seem like I am in a rush because I would like to hold my first meeting but I have no information to go off from.)

I have a hard time determining how much we spend a year on anything...I think I can call all of the people we are contracted with and ask for check numbers and all the payments that we have made to them they should have that info. then the only thing else I can do is guess how much we spend on small repairs etc... He hasn't provided any receipts or info for the $5000.00+ in cash withdrawals/cashier checks if he doesn't I don't know where to go from there???

@Melissa-- I am not trying to be disrespectful to him, but as a former member I would like to know if my money has been going toward his new tile and hospital bills or to common area improvements etc... We all have a right to know, if he confessed I could work out a deal with him where he could pay us all back so we wouldn't have to make it pubic or anything but he is being uncooperative. I don't even know where to begin with all the district attorney stuff I have no idea what they do, I am just a newby taking advice from various board members and legal professionals. I am out to find my options, He is a friend and neighbor I love his family to death. I do not want to even bring it up to him because I am hoping to find out that he has been using funds correctly, but IF he has been steeling funds he needs to pay what he owes..are you suggesting that we just forget about it and move on so he can do this kind of thing in the future possibly to other people?

@Gary-- Thank you I will look in to that.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryL3 on 03/10/2011 9:53 AM

One thing associations can adopt which I recommend, as well as always having two signatures on a check, is to segregate the record-keeping with custody of the assets. Anyone that has access to the bank account should never have record keeping responsibilities. It's just a standard internal control. If there's money stolen, then it's gonna have to be by collusion. It's also not a bad idea to have an audit committee that reviews the backup to every transaction, i.e., no check written without an invoice and approval.

Thank you Gary … great advice!!!

Hi Greg:

When you compared receipts did you find anything?

Again, don’t get in a rush … because the next step, if you have not already before your first meeting be sure to thoroughly read your HOA governing documents. These will let you know how many board members / officers you need to have, election procedures, voting procedures, etc.

When your HOA elects the proper board members then you need to follow Gary’s advice and have two members who are not going to be keeping the records able to sign the checks. While nothing is 100% effective, as I have stated before and Gary referenced above it definitely can make people think twice about sticking their fingers in the pie. Also, if not done before then in the future when someone turns in any receipts for reimbursement have them sign and date the receipt and put the check number on the receipt. Any bills sent for payment also should have the check number and date written on these bill copies kept for your records.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Greg - with revenue under $25,000 a year, I would not worry about the IRS.

You have bigger issues right now - specifically an inactive board and no financial procedures in place.

In fact, as manager, you need not handle the finances, the treasurer should.

I would bring in another person or persons to help you get organized - and then backtrack the investigation in the books.

Sounds like this guy was paying himself to be the manager. If he was a one man show and kept things running all these years, doing everything - you may find some people might not even mind.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

My point is that you don't pee where you live...Yes this guy may have done a few things wrong. Everyone has. HOA's are NOT an exact science nor run by experts. It's a VOLUNTEER organization once it's turned over from the Developer/builder.

The best you can hope for is what YOU do with the HOA now that your in charge. You will find that since it sounds like you don't have any hired manager company and a possible part-time accountant that money isn't going to add up. This may be the FIRST issue you address with the other members. Hiring a management company or accounting firm.

You have to live with this person and his family. Do you really want to raise unnecessary flags until you get ALL the facts in? There are instances where you do have "Cash" as a payout in a HOA that has really limited accountability for. Those may cover supplies or other "under the table transactions" to contractors over time. It doesn't sound like your HOA has a policy of 3 bids for licensed/insured contractors. Many contractors out there work on a cash only basis. Has your HOA had some maintenance items completed? This could include lawncare, planting or emergency repairs.

I hesitate to bring someone under the legal gavel without understanding all that is involved. I had dated the con-artist guy that was our President. It's partly how I got involved becoming president. Realized very early his "game" but he was soo part of the community that any actions I did against him came across as "scorned woman". It wasn't the case at all. So there is a fine line of acknowledging something wrong and exposing it. Sometimes you do have to just accept it and move on. Just don't let it happen again.

Former HOA President

GregF4 (Illinois)
Posts: 37

Posted:

Janet- I read through every word in our documents, Made a list of the things I understand, and got help for the things I didn't. I sent a copy of all of our transactions to a friend that is in accounting and she is helping me create our first ledger ever and label all of the transactions with the correct terms. If the association decides to pay us for managing we need to report that on our taxes right? The pay in the past has been "skip out on your monthly dues" but I think there should be a paper trail..so what if I paid my dues for the year, then got it all back in the form of a written check from our funds..do you think that needs to be reported on our taxes?

right now we are working on holding a meeting so we can discuss setting up a reserve fund, saving money by switching to a different insurance company, doing our own lawn care and electing me to be president in accordance with the bylaws (votes) so there is no question, and during the meeting we will be providing everybody with an estimated budget for the year. We also have templates to take minutes of our meeting and we have gotten info about proxy votes for the people who just don't care. We have family members on town councils who are helping us with this stuff. We also need to change the old tax I.D. # at our bank to our new one...and the people we have contracts with are sending us the check #'s and amounts they got from us..after we get those maybe we can get close to the bottom of those cash withdrawals and missing check info..... am I missing anything?

p.s. Janet you are a life saver!!!!!! Thank you so much!

GregF4 (Illinois)
Posts: 37

Posted:

That is what I am out for is to get ALL the facts before I get legal. we only have contracts with 2 people who provide lawn care and snow removal..plus we have a water bill for the lawn, and condo ins. He certainly didn't pay them that much in cash on top of the checks we have stubs for....the rest could have gone to bee traps, small shrubs, a few shingles, dryer vent covers,pay for his family members weeding, and some sprinkler repairs (these are the things he reported that he did, I'm going by memory though) He has only been in charge for 22 months. I find it a little hard to believe that he spent $5,000.00 on bee traps in 22 months, I'll ask him though, if he can provide receipts for every one... why I think I owe him an apology for even considering suspecting him of stealing funds.

We are not taking any legal action until he provides us with the taxes that he said will be here in three weeks. I'm afraid we can't wait any longer than that because he is trying to move, then the association will get stuck cleaning up his mess.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

Wow … you are going great so far … give yourself a big pat on the back!!! Sounds like you have some great help to get everything back on track with friends and family.

You are a non-profit; therefore, you want to keep a very good paper trail. As far as the tax issue, my HOA does not pay a manager so I would recommend asking your tax person. Not sure how that would work as potential income for yourself even though may just be for dues amount. I also would recommend two accounts (1) for reserve fund (2) for everyday HOA expenses. You can open reserve one down the road after you get some money built to start the reserve.

What do your documents state with regards to board / officers? You beat me to it as I was going to recommend you make your vote official and on record. I can’t think of anything at the moment, if I do I will let you know. Sounds like you are getting everything under control and doing great.

GregF4 (Illinois)
Posts: 37

Posted:

Janet- It says that the association (which is every owner) acts through "The Board of Trustees" to provide maintenance etc... I can't find any mention of how you get on the board or what the board consists of, I was thinking of just having an election for President, Vice President, Secretary, and bookkeeper...then see how that works out

I am also going to have them vote on a monthly fee..because everybody is paying different amounts. when I establish this new amount do I need to have it recorded with the county recorder for it to be valid?

EllieD (Vermont)
Posts: 446

Posted:

GregF,

Did you tell us which you are – a Condo Association or a HOA?

I looked back over the posts, and apologize if I missed your answer.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Greg - there MUST be some history about this HOA. Can you find the minutes of the previous meetings, even from way back when?

Your group can't just "set" the dues. They were set before and need to be verified or amended.

Once the board is established, then you can be appointed or hired as manager again.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

Generally an HOA will have Articles of Incorporation, By-Laws, and Declaration of CCR's. With what you stated I have a few questions:

1. What are the titles on the sets of documents you have?
2. How old is your HOA?
2. Are you a Condominium or single family homes?
3. At beginning of your documents does it reference any State Statutes, Non-Profit Corporate Law, or Trust Law that the documents are supported by?

Also, do me a favor and go to the website for your County Records. Here you should be able to do a search for your HOA and it will pull up any documents filed. This way you can see if you actually have copies of all current documents.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Greg ... do not do anything on the dues yet, it could be that somewhere there are governing documents which state units pay dues maybe based on square footage or some other constraints if you are a condominium.

GregF4 (Illinois)
Posts: 37

Posted:

o.k. I guess I need to do some explaining to the best of my abilities...we start when the condos were built by president 1 1996, he was in charge when I moved in 3 yrs. ago, He was the one that made the declaration of covenants. Hardly anybody paid their dues ($50.00/month) and there were no consequences for not paying...I guess president 1 just paid for us out of his own pocket??? I didn't even pay because I was never contacted on where to send it other than from my realtor and she wasn't even sure. Anyway, I was told that he kept track of our books in his head.

My neighbor was a good friend of pres. 1 and when pres 1 didn't want anything to do with the corporation anymore he handed it over to him (pres 2). Pres. 2 (2008) got a tax I.d.#, a business license and raised the dues to ($65.00/ month) because nobody was paying (so in a sense, the ones who were paying monthly had to pay more because of the non-payers and they were mad) There was no meeting to speak of and no voting so some of the payers refused to fork over the extra money and they still do. Pres.2 was only in charge for 3 months then his house sold and he moved away and handed everything to pres. 3 (pres.2 kept track of things by keeping check stubs, receipts, and bank statements...so we have all those...for 3 months)

Pres. 3 (2009-2010) put liens on peoples houses and took them to court etc.. and got most people paying..but they were paying whenever they felt like it and late charges were not enforced...pres 3 said he was moving and handed everything over to me...then it turns out he's not moving, and then he is, and then he's not etc.... (pres. 3 kept 0 bank statements, a few receipts, and a few check stubs up until 2010 when he kept nothing.) I tallied up all the missing info and asked him to get it for me and he said that we have to wait until we get taxes back because they have everything (odd because he could have gotten me bank statements or at least the stuff from 2009..also I called the place that he said taxes were being done at and they said that they did not have 2010 taxes from us.)

As far as I can see there are no books (they managed to get taxes done for 2008 and 2009 so there must be something out there??), there has never been any "Board of Trustees" only a manager/president in charge of everything. now that manager is me I am trying to form a board according to the bylaws and follow them the best I can with the little experience and info I have.

@ Ellie- Everybody has always called it an H.O.A we live in a condo and there are 12 lots...each owner was named in the declaration a "Member" sorry if I'm not much help.

@ Susan- I can recall 2 meetings that no one attended and I don't believe they kept minutes.
The dues in the declaration started at $50 and they could only be increased higher than 5% with a vote, there was no vote but they increased them anyway...If it was less than 5% they could be raised yearly without a vote... members who know the bylaws only pay $50 the rest pay $65

@ Janet I'm not sure exactly what you are asking for but I will do my best.....
1. What are the titles on the sets of documents you have? Conditions and restrictions and reservation of easements, voting rights,duties and powers of the association, covenants for maintenance assessments, Effect of non-payment of assessments,..etc Are these what you wanted????

2. How old is your HOA? The declarations were recorded in 1996

2. Are you a Condominium or single family homes? condos..we are attached side by side in 3 groups of 4

3. At beginning of your documents does it reference any State Statutes, Non-Profit Corporate Law, or Trust Law that the documents are supported by? They were recorded by the county recorder and we are a L.L.C that is all I see???

TimB4 (Tennessee)
Posts: 21,059

Posted:

Greg,

Have all the units been sold (at least once) or does the developer still own some of the units?

If the developer is still in control (president 1), i.e. has the majority votes within the association, then the Association has not been transferred to the owners.

If the developer is not in control, then the transfer of the Association to the members was done improperly. Not necessarily illegal, just improper.

It sounds like president #2 started doing things properly.

IF the members are responsible for the running of the Association, then start from there. Get what paperwork you have in order, call a meeting of the membership, give a financial report and hold elections to have a proper board of directors. Then move forward from there.

IF the developer is still in control, you can still do everything as if the members were in control (which would be my recommendation) unless he objects.

Check with the State and see if your Association has been incorporated. On behalf of the association, seek legal advise (most will give you the courtesy of an interview without charging you). At this meeting explain the financial issues and ask if they would be willing to assist you on credit (check out the terms of this credit).

My guess would be that in about a year, you should have working Association.

Tim

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I think your off to a good start and great your getting advice. Most of your questions will be answered as soon as you read your Convenants and Restrictions and/or Article of Incorporation. By-laws are pretty much icing on the cake but not required to be filed. They are just the rules but the CC&R's are what every owner is legally obligated to be held to. You will see some repetition between the two documents but one just fills out the details.

My concern is your thinking of being "excused" from paying HOA dues isn't going to work. President or other BOD positions are ALL non-paid volunteer positions. It's best from a financial standpoint that if it is agreed you get paid, then pay your dues and then have the money reimbursed to you. This way it is tracked and part of the HOA's expenses. This is because a HOA is ONLY funded by it's owner's for it's owners. It is also a non-profit corporation which means whatever money it brings in has to be spent out. There can be a bit extra for savings/reserve but that could be taxable.

Basically, if you don't show you paid dues this can put you in hot water in the future. How would that be tracked? Whoever takes over from your may notice this suspicious you didn't pay dues... Similar to what you think you see now.

It took me about 2 years to straighten out our HOA. This included ammending and changing our documentation, foreclosing on a property, and doing some over-due expensive maintenance/repair items. The good news is by the time I straightened everything out, the formerly inactive barely involved homeowners became overzealous participators. Always create a "Bigger fish" to swallow you up...

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

Sorry ... in my first question I essentially meant do you have the following documents:
a) Article of Incorporation
b) By-Laws
c) Declaration of CCR’s

Per your statement: Condos. we are attached side by side in 3 groups of 4
1. Does anything in your documents state “Condo” or could you potentially be considered “Townhomes”?
2. Does the voting in your documents give one vote per property owner or is it by percentage or fraction?

With your statement: They were recorded by the county recorder and we are a L.L.C
Apparently you may be registered as a “Limited Liability Corporation” instead of “Non-Profit Corporation”, so you need to verify the registration status. As Tim said above this information is available usually through Secretary of State office or website.

I was also going to post the State Statutes for you; however, I am still not 100% sure at this time what you are legally considered. So we will wait on that until maybe tomorrow.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Greg:

BTW – I ran across some info while searching and wanted to let you know down the road do not hire out or get paid to manage any of your neighboring HOA’s without getting a license. You are allowed to only act as a Property Manager for one HOA in Utah unlicensed. Just a heads up for future reference.

Utah Code
Title 61 Securities Division - Real Estate Division
Chapter 2f Real Estate Licensing and Practices Act
Section 202 Exempt persons and transactions.

(iii) a regular salaried employee of the owner of real estate who performs property management services with reference to real estate owned by the employer, except that the employee may only manage real estate for one employer;

(v) a regular salaried employee of a condominium homeowners' association who manages real estate subject to the declaration of condominium that established the condominium homeowners' association, except that the employee may only manage real estate for one condominium homeowners' association;

GregF4 (Illinois)
Posts: 37

Posted:

@ Tim "Have all the units been sold (at least once) or does the developer still own some of the units?"

YES, THE DEVELOPER DOESN'T OWN ANY OF OUR LOTS.

"Check with the State and see if your Association has been incorporated. On behalf of the association, seek legal advise (most will give you the courtesy of an interview without charging you). At this meeting explain the financial issues and ask if they would be willing to assist you on credit (check out the terms of this credit)"

THIS SEEMS TO BE A REOCCURRING STATEMENT, I DEFINITELY PLAN TO TALK TO A LEGAL DUDE OF SOME SORT. A CPA IS THAT RIGHT?

@ MELISSA "My concern is your thinking of being "excused" from paying HOA dues isn't going to work. President or other BOD positions are ALL non-paid volunteer positions. It's best from a financial standpoint that if it is agreed you get paid, then pay your dues and then have the money reimbursed to you. This way it is tracked and part of the HOA's expenses."

THE GUY THAT WAS IN CHARGE BEFORE ME RECOMMENDED THAT WE DO THAT BECAUSE THAT IS WHAT HE DID, I DIDN'T LIKE THE FACT THAT THERE WASN'T A PAPER TRAIL AND I AM LEANING TOWARD DOING IT ALL FOR NO PAY. MY REWARD WILL BE TO GET THINGS ON THE RIGHT TRACK AND MAKING SURE THE FUNDS ARE SPENT PROPERLY. I ALSO HOPE TO GET OWNERS INVOLVED, CHECKING THE BOOKS REGULARLY SO THEY DON'T GET SCREWED...IF THE LAST OWNER DID SPEND OUR FUNDS ON PERSONAL STUFF..WE KIND OF DESERVE IT FOR NOT KEEPING TRACK OF THE BOOKS.

2 JANET "Sorry ... in my first question I essentially meant do you have the following documents:"
a) Article of Incorporation - WE HAVE "DECLARATION OF COVENANTS" "RECITALS" THEN IT LISTS "ARTICLE I- ARTICLE XVII" I DON'T SEE THE WORDS "INCORPORATION" "BYLAWS" OR "CCR'S" ANYWHERE...WELL NOW I'M REALLY CONFUSED! HA HA....

BY THE WAY JANET, I DID A SEARCH FOR OUR HOA BUSINESS NAME AND FOUND 2 ENTITIES ONE EXPIRED 1-05-2009 AND WAS REGISTERED 8-30-2008 PRESIDENT 2 (GUY BEFORE ME) WAS THE REGISTERED AGENT AND THERE WERE NO DOCUMENTS FILED UNDER THAT ONE...... THE OTHER WAS ACTIVE 9-02-2008 LAST RENEWED 8-31-2010 (AGAIN THE GUY BEFORE ME WAS UNDER REGISTERED AGENT-I GUESS THE LADY HELPING ME AT THE BANK DIDN'T ACTUALLY RENEW IT WITH JUST MY NAME ON IT LIKE I THOUGHT SHE DID)
THERE WERE 4 DOCUMENTS FILED UNDER THIS ONE- 1-16-2009 ANNUAL REPORT, 2-2-2009 ANNUAL REPORT, 12-7-2010 ANNUAL REPORT, 9-2-2008 APPLICATION.....NOW BEFORE I PAY TWO DOLLARS EACH TO VIEW THEM ARE THESE WHAT YOU WERE TALKING ABOUT THAT I NEEDED...THE UPDATED DOCUMENTS?

GregF4 (Illinois)
Posts: 37

Posted:

JANET I FORGOT TO MENTION THAT I HAVE HEARD US CALLED TOWNHOUSES AND CONDOS I THOUGHT THEY WERE THE SAME THING. THE DECLARATION HAS OUR LLC NAMED AS XXXTOWNHOUSES LLC BUT LATER THE 2 PRESIDENT GOT THE BUSINESS LICENSE UNDER THE NAME XXXCONDOS LLC OUR REALTOR CALLED IT A TOWNHOUSE WHEN WE BOUGHT THE PLACE.
I HOPE THAT HELPS??????????? I DON'T KNOW WHAT I'M DOING! ITS FRUSTRATING BEING YOUNG, INEXPERIENCED AND STUPID..HA HA

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Okay, you REALLY need to read your documentation in regards to being paid. I am sorry but it most likely states that ALL board member positions including officers are UNPAID VOLUNTEER positions. It would be up to the board and members to VOTE if they would concede that your position gets out of paying dues. However, I suspect that the other board members would want this as well. Then what? No INCOME coming in from atleast 3 sources?

You will find out there are financial reprecussions for being excused from paying your dues. It stinks to do all this work for "free" but in reality that is what being an Officer in a HOA is about. It's honesty and integrity. Why do you think we hate our politicians soo much? It's because we have to pay them for their honesty and integrity. Which usually makes even the best intentioned politician look crooked...

Former HOA President

GregF4 (Illinois)
Posts: 37

Posted:

Quote:

Posted By MelissaP1 on 03/11/2011 8:09 AM
Okay, you REALLY need to read your documentation in regards to being paid. I am sorry but it most likely states that ALL board member positions including officers are UNPAID VOLUNTEER positions. It would be up to the board and members to VOTE if they would concede that your position gets out of paying dues. However, I suspect that the other board members would want this as well. Then what? No INCOME coming in from atleast 3 sources?

You will find out there are financial reprecussions for being excused from paying your dues. It stinks to do all this work for "free" but in reality that is what being an Officer in a HOA is about. It's honesty and integrity. Why do you think we hate our politicians soo much? It's because we have to pay them for their honesty and integrity. Which usually makes even the best intentioned politician look crooked...

Melissa that's the problem there is no documentation about it and there has never been any board members..just the contractor who said hey you be in charge now..then the next guy said you be in charge now down to me no voting nothing... I figured I will just pay my dues like everyone else and do the job for free...as for the rest of the presidents ignore it as an honest mistake I guess????

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:
It appears you just have in hand a copy of the Declaration of CCR’s.

The search you just mentioned was through the State correct? Also, you do not want it renewed with “just your name” … you are just the “registered agent” or in essence contact person for your Townhomes. BTW you are Townhomes as per your Declaration, unless anything different is filed such as amended CCR's.

Did you also do a search via County Records to see if you have By-Laws, Amended CCR’s, or LLC documents filed? You should be able to call, go by physically, or use County website to check. You may try HOA name as both Townhomes and Condos in case.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Just noticed above CCR's confused you ... when we make this reference is is regarding "Covenants".

CCR = Covenants, Conditions and Restrictions

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

Another question:

In your Covenants does it reference something to the effect “Utah Code Annotated … Section 57-8-1, or other similar language? This will let us know what sections of the state code your townhomes fall under.

GregF4 (Illinois)
Posts: 37

Posted:

JANET- "The search you just mentioned was through the State correct? Also, you do not want it renewed with “just your name” … you are just the “registered agent” or in essence contact person for your Townhomes."

YES IT WAS JUST STATE... WHEN THE FORMER MANAGER HANDED EVERYTHING OVER TO ME HE SAID THAT HE ALREADY TOOK CARE OF THE REGISTERING...I WAS LISTED AS A MEMBER AND HE WAS LISTED AS THE REGISTERED AGENT OURS ARE THE ONLY NAMES ON IT. DO I NEED TO SWITCH THE NAMES? DOES THAT SOUND LIKE IT WAS DONE INCORRECTLY?

"Just noticed above CCR's confused you ... when we make this reference is is regarding "Covenants".
CCR = Covenants, Conditions and Restrictions"

YEAH IT JUST CLICKED AS I READ YOUR COMMENT..

"Did you also do a search via County Records to see if you have By-Laws, Amended CCR’s, or LLC documents filed? You should be able to call, go by physically, or use County website to check. You may try HOA name as both Townhomes and Condos in case."

THE WEBSITE IS HAVING SOME ISSUES I WILL HAVE TO GET BACK WITH YOU ON THAT ONE.

GregF4 (Illinois)
Posts: 37

Posted:

In your Covenants does it reference something to the effect “Utah Code Annotated … Section 57-8-1, or other similar language? This will let us know what sections of the state code your townhomes fall under.

I SEE NO MENTION OF "UTAH CODE ANNOTATED" BUT THERE ARE SOME NUMBERS BY THE COUNTY RECORDER STAMP AND "08826 PLUS THE BK# AND PG#" THEN ON SOME AMENDMENT PAPERS I HAVE "H-50499 AND 05-228-2001-2012" "H-48940" I HAVE NO CLUE WHAT THEY ARE???? IS THAT ANY HELP?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Hm-m-m
Annual Reports require a reporting of the officers of the corporation and then the Registered Agent.

Whose name are in those blanks?? Where did all the other people go??

Sorry, friend, but you are assuming the Manager's position and must report to the board. If there is no board, then you need to let your fellow homeowners know that and let them know they are in real danger of being taken over by a judge, if anyone catches on.

You can either be the manager OR on the board, but not both. Make a decision.

You need - to protect yourself - a fully funtional board.

P.S. The lady at the bank is NOT qualified to guide you in HOA matters. She is just keeping her accounts straight.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

No … those number do not help … they must be internal for your county records.

I should have thought of this before … do me a favor and check your Title Insurance policy sent to you after you purchased. This document should reference your covenants and possibly the other documents affecting the property. See if any By-Laws, LLC, Article of Incorporation, etc. are listed on this document. If they are listed make notes regarding name of document, date filed, book#/page#.

TomE4 (South Carolina)
Posts: 26

Posted:

Greg,

I would strongly recommend you check your Bylaws. In ours, it states

"Vacancies in the board caused by any reason, excluding the removal of a director by vote of the Association, shall be filled by a vote of the majority of the remaining directors, even though less than a quorum, at any meeting of the board. Each person so selected shall serve the unexpired portion of the term".

I think you are putting yourself at risk by just "taking over" without having been given the legal authority to do so by your Associations Bylaws.

Tom

GregF4 (Illinois)
Posts: 37

Posted:

Susan-
"The lady at the bank is NOT qualified to guide you in HOA matters. She is just keeping her accounts straight."

I was the one who changed it at the bank while we were trying to get into an old account for records. she let me use her computer and didn't mention that it needed a signature so it didn't go through before she logged off. I didn't make that very clear...

Janet
I should have thought of this before … do me a favor and check your Title Insurance policy sent to you after you purchased. This document should reference your covenants and possibly the other documents affecting the property. See if any By-Laws, LLC, Article of Incorporation, etc. are listed on this document. If they are listed make notes regarding name of document, date filed, book#/page#.

The copy I got looks exactly like the one I was looking at before there are articles of organization is that the same as incorporation? Are you wanting me to find out if there are updates to the covenants so you can tell me if there is a specific reason why we are all paying different amounts? what exactly are we trying to figure out?

This sounds like a big confusing mess do I need to just take all the info I have to a professional and explain the situation? if so what would that professional be called? District attorney...cpa..pc ???? Do I just turn everything over to some sort of HOA management company before I get in trouble?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

You are not going to get into trouble … what everyone needs to realize is every State is different regarding their laws and documents. Your state has the following:

57-8-16.5. Appointment and removal of committee members and association officers –

Renewal or ratification of contracts -- Failure to establish association or committee.

(1) The declaration may authorize the declarant, or a managing agent or some other person or persons selected or to be selected by the declarant, to appoint and remove some or all of the members of the management committee or some or all of the officers of the unit owners' association, or to exercise powers and responsibilities otherwise assigned by the declaration and by this act to the unit owners' association, its officers, or the management committee.

You stated the previous managing agent appointed you … do not worry. Just worry about getting everything on the right track. If you need to potentially consult someone, then you want to make sure you have as much information ahead of time. This will help you either fix yourself or will hopefully cost less because they will not have to search for certain information.

Everyone when they purchase property after closing is mailed a copy of their “Title Insurance Policy”, if you cannot find your copy then ask your neighbors to review their copy and see what it states.

GregF4 (Illinois)
Posts: 37

Posted:

Tim- "I would strongly recommend you check your Bylaws. In ours, it states
"Vacancies in the board caused by any reason, excluding the removal of a director by vote of the Association, shall be filled by a vote of the majority of the remaining directors, even though less than a quorum, at any meeting of the board. Each person so selected shall serve the unexpired portion of the term".
I think you are putting yourself at risk by just "taking over" without having been given the legal authority to do so by your Associations Bylaws.

The bylaws say that each owner of the 12 lots is the "association" and it is their duty, through "the board of trustees" to maintain the place but there is no mention of how you get on the board...In all the years I have lived here we never voted for anything (even though there are voting instructions in the covenants)..they just volunteered themselves and took over...All I wanted to do was mow the lawn and plow so I could save everybody money, then the previous manager showed up out of the blue and asked me if I wanted to take over because he was moving.. I reluctantly said yes and from there I was instructed by him to send a notice to everyone saying that I was in charge from now on..now they send their checks to me and I handle the money and send notices..etc..

Are we totally screwed up?

GregF4 (Illinois)
Posts: 37

Posted:

JANET- Everyone when they purchase property after closing is mailed a copy of their “Title Insurance Policy”, if you cannot find your copy then ask your neighbors to review their copy and see what it states.

I have in hand a copy of my Title Insurance Policy it was in a packet organized like this: warranty deed--- Owners policy of title insurance issued by xxxx title guaranty company--- Schedule A---Schedule B Exceptions--then a copy of the Declaration of Covenants and restrictions and reservation of easements--- then at the back there is a paper that says
Amendment to:decl of cvnts etc.. RECITALS Declarant is the owner of certain property in Utah particularly described as follows:Lots 1,2,3,4,5,6,7,8,9,10,11,12 entry #97841then an ammendment for location of permanent easmentsand no tabacco use
then another paper saying that the paragraph for nuisances had been removed.
That is the end of the packet

Instruct me on what to look at here... By the way thank you so much for your help! I obviously need it.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Greg:

OK … your “Title Insurance Policy” will list items generally on a schedule page such as:

* Terms, agreements, provisions, conditions … as set forth in Declaration for XXX Townhomes, LLC, recorded X Date in Book / Page

* … as set forth in Articles of Organization ….

Or, possibly some other documentation referencing potentially the LLC, etc.

What you are looking for are potentially any documents other than the Covenants you currently have regarding your HOA and which could help. If they are listed then for sure they should be available through the County Reccords.

GregF4 (Illinois)
Posts: 37

Posted:

Janet- I just looked in the county records and they are identical to mine, there are no other rules other than what I have...now what?

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