Exclusive Internet Contract by old HOA

Started by JoeM8 • 5 replies • 2245 views

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JoeM8 (Virginia)
Posts: 3

Posted:

I live in Virginia in a Townhouse subdivision with an HOA, and right after it was established (2004) the president and developer signed an exclusive contract for cable/internet for over 30 years. It looks like the HOA president was also the manager of the cable company as he signed it in both places. It wouldn't be bad except the service is almost as bad as having dial-up. Seems to be a conflict if interest making the contract void, but I am not a lawyer. I have also heard that HOA board members cannot profit from their service on the board, but have not be able to find a Virginia law that backs that up.

Also, my understanding of the 2007 FCC order, is they banned cable operators from striking exclusive contracts with apartment buildings (specifically multiple dwelling units), but cannot find anything on whether that extends to townhouse subdivisions. The orders applies to new contracts and make old contracts unenforceable. I know it only applies to the cable portion of the contract, but I am hoping someone knows of something similar for bundled service or internet service. Any wisdom you guys can give would be great.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Joe,

Is your townhouse subdivision considered a condo Association or a property owners association?

Please note that a conflict of interest is not necessarily illegal. The important issues will be was his ownership in the company known at the time, were other bids solicited, were special favors given to some but not others (like free service) for approving the contract. I would suggest that you request the minutes of the board meeting surrounding this issue.

Directors may not be paid for performing their duties on the Board but this does not prevent them from being paid for services other then BOD duties. Additionally, most Board members are protected from bad decisions.

The Fairfax County Community Association Manual explains it a little bit better when they wrote:

Duty of Loyalty and The Business Judgment Rule – Board members are charged with a
duty of loyalty and fiduciary responsibility to use good business judgment in conducting
the governance of the association. Directors must make sure that their decisions work to
the benefit and protection of property values in general and without consideration of
personal interest or gain.8 Members of the Board are protected by the business judgment
rule. “So long as the board acts for the purposes of the cooperative, within the scope of
its authority and in good faith, courts will not substitute their judgment for the board’s.”9
It is not illegal to err or even cause financial loss or other harm provided that the board
can demonstrate reasonable investigation, consideration, thoroughness, and good
business judgment in reaching its decisions. “A complainant must establish that a board
acted negligently, willfully in bad faith, outside of its authority, or for discriminatory
purposes. The mere fact that a decision turned out to be unwise or incorrect does not
make Board members liable for any resulting harm or loss.”10 Board members must be
very familiar with the documents of their association, stay informed about association
issues, regularly attend meetings, and request that their perspective, opinion and/or
decision be recorded in the meeting minutes if and when they disagree with a board’s
action.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You have to factor in the technology your cable provider can provide. Our HOA couldn't get high-speed internet. That's because it required installing NEW cabling throughout the HOA. Which in turns means DIGGING UP everyone's yard. In a HOA you can NOT dig up anyone's common area without approval from 75% of the ownership. So until 75% of the owner agreed to have cable installed, we weren't getting it. Plus the cable provider hires an OUTSIDE contractor who in the years past, had left cables running down the street instead of putting them in the ground. It was impossible to get them to come out for months to finish the job.

Depending where you live if it rural or urban can effect cable availability and type. Another MAJOR factor is that the new technology that supported the high speed or upgraded cable/phone services cost the cable company OVER 100,000. Plus they had only 5 technician qualified to work on the new equipment. Which served about 5K customers EACH. A little overloaded for the techs and company. Plus about 1/2 of our community was older people who didn't use computers or cable subscribers. The cable company pretty much told us that IF they didn't have enough customers to cover the cost of the 100K for the equipment, they were NOT going to install.

Keep in mind that if your HOA has common property, people have to agree to have their yards dug up and want cable services provided. You may find these 2 hurtles MORE restrictive than the original contract signed.

Former HOA President

SusanW1 (Michigan)
Posts: 5,202

Posted:

Joe - all the big internet suppliers will do a free "survey" to see if they can provide service to your HOA.

2004 was a long time ago and I am sure you would be able to get out of that contract if you could show that the service is sub-par for today's needs.

But first, make sure you CAN get other service there.

PS Forget the conflict of interest thing - it's too late, anyway to bring that up.

JoeM8 (Virginia)
Posts: 3

Posted:

We have basic cable included in our HOA, it isn’t that bad. For HD we have to go with DirectTV or something similar. The internet on the other had costs $30, and my understanding is that no one in the community is happy with the internet service. I emailed the management company and was told the “board” has looked at the contract from every angle and can see no way out of it. The management company said some folks are using Cricket Wireless, and I can see a lot of folks have Hughes Satellite internet dishes.

The best I can tell it is a property owners association. In reviewing the signed pages of the “DEED OF EASEMENT AND EXCLUSIVE RIGHT OF ENTRY AGREEMENT” contract (that was a mouth full), it looks like the developer, HOA president, and Cable company manager signed it in March 2004. The cable manager and HOA president are the same person, and the 30 plus year exclusive contract is VERY one sided. My understanding is that the HOA president left the board soon after the contract was signed. According to the Articles of Incorporation, it was founded in October 2003.

I will request the minutes from the surrounding meetings to see what actually occurred.

JoeM8 (Virginia)
Posts: 3

Posted:

One additional updated, according to the management company, the 30 plus year contract was put in place at the start of the association by the developer. Again, the developer, HOA president, and Cable company manager signed it in March 2004. The cable manager and HOA president are the same person.

I am requesting the minutes from the surrounding meetings, or any documents to see what actually occurred.

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