Suing My Association

Karen,

Welcome to the Forum. Boy it sounds like there is certainly some issues within your Association.

Although you mentioned several serious issues, you did not specify what your actual complaint to the courts were. Therefore it's difficult to comment on that.

I do have a few questions:

Are you filings a complaint as a single member of the Association, as part of a group of members or as a member of the Board?

Does your Associations membership elect Directors and they then appoint the Officers or does the membership elect Directors into specific positions?

Is your Association under developer control or homeowners control?

I do have the following comments on what you posted:

Taxes not filed
Get with an accountant and/or do the paperwork and file the taxes. The penalties for not filing are much more than the penalties for filing incorrectly or owing money. Note: I see a potential for legal action here (against the Association), as the Board should have known to file taxes. However, the D&O insurance would probably not cover the legal fees. Therefore, it's probably much more cost effective to bring this attention to the membership and just pay the penalties for filing late.

Checks

If you don't have it yet, get the documents changed to require two signatures on all checks issued by the Association. This may prevent this issue from happening again in the future.

Fences

If the Board concurs that fences are to be a shared expense (I don't think they should be) they have to do it for every lot. This may require amendment to the Governing Documents. I expect that your documents specify that Directors are not paid. If this is and they Board does pay for the fences the next board can actually go after them to have them re-pay the amount. As having part of the fence replaced is a form of payment they only got because they served as director.

recovering money

Get an audit done. Your Associations Crime insurance should cover any missing funds (less a deductible) and the insurance company will probably go after the individuals involved to recover their money. Of course, this may require that charges are actually filed with the police.

hostility

Yep Directors are human and generally do knee jerk reactions when threatened. Are you attending any of the Board meetings? It's possible that the new board doesn't understand the severity of the situation and are being told you are personally responsible for all of these issues (vs. you just discovering them and bringing them out into the light).

Unfortunately, if you are filing (or have threatened) legal action against the Association (as it typically wouldn't be against an individual board member) it places you in the limelight. Document what is happening and contact the police if you feel threatened. Perhaps a letter from your attorney to the Board would rein them in. They may still have hostility toward you but might not show it as much.

Best advise, get the facts to the membership. Don't add opinions or speculation. Let the facts speak for themselves. The issue is going to divide the membership and you might not be the most liked person in the association. However, you should have company by disclosing the facts (again just the facts).

bank accounts

It typically takes a court order to freeze accounts. Therefore, something is happening. It will probably take a court order to unfreeze the account.

General Advise

Honestly, it might be better to petition the court to place the Association into receivership so the issues can be resolved. THIS WILL COST THE MEMBERSHIP A LOT OF MONEY. The receiver will be paid by the Association for the work done - so expect assessments to be increased to cover that expense. However, they will have full authority and will probably do an audit and request criminal charges be done if warranted. They will then hold a proper election and turn the association back over to the membership.

You will probably lose any and all friendship with Association members, as tempers tend to flair when the pocketbooks and wallets are forced open. I suspect that you would be blamed for the additional expense. However, it will protect your the value of your home over time.

Probably not everything you wanted to hear. Hope it helps.

Tim

Hi Karen:

Along with Tim … welcome to HOAtalk. I also agree with Tim in that you have many issues.

Per your statement:


The issue could be similar to my area in which the local City Ordinances state that any lot which is touching HOA common area must be fenced and the fencing is responsibility of the HOA. Therefore, please check your local ordinances or potentially check with your local Planning Department regarding responsibility. They should be able to let you know definite responsibility.

I agree with Tim if your accounts have been frozen, then there is potential serious issues that need to be addressed. If you cannot get a proper audit completed and everything back on track within the next 6 months, I would have to agree with Tim in that you potentially should go into receivership. This is one of the last items I would ever recommend; however, due to the bank account issues I have some great concerns. As Tim stated this option would cost everyone more fees; however, in some circumstances the fees can outweigh the long term detrimental impact.

Susan also offered an option if you can get everyone involved and remove the current board to essentially start over and have individuals who are willing to fix the current issues.

Karen,

I expect that you've contacted an attorney. Remember to ask the attorney for options other than court and what the probable result might be if you won.

BTW, What do you want out of the suit? If no one is willing to step forward and do the work (other then those already on the board)the same people will still be there. I don't think a legal action of the kind you are describing will actually end with the Board being removed.

I wish to also point out that if you are bringing legal charges against the Association, they will use Association funds to pay for the defense. Typically, this will require a special assessment, which you will be required to pay, as you are a member of the Association. If you prove that the board did what they did knowing they shouldn't be, the Associations D&O insurance will not cover the legal fight and the full cost of the legal bills will be on the membership.

This is partially why Susan said to replace the Board and have the new board fix the issues.

With that small of an association with almost 1/2 remaining silent, it's going to cost you a fair amount of time, energy and money to correct on your own. You might want to start by calling a meeting to explaining what is happening and the options available. Don't call it a membership meeting, just call it a community meeting - so you or your group is running the show. Perhaps bring your own attorney to address the group on the facts and options:

Toss the bums out and clean up the mess as a group

or

Legal action which will require money (irregardless if they stay neutral) and probable receivership causing assessments to be raised.

No matter which course of action is decided upon, I suspect property values to fall and sales to be non-existent (as who would want to purchase into an association like yours).

Keep us posted and Good luck!

Tim