Power hungry Board

Need a few more details. Not sure why your HOA would consider this bill of the contractors as an insurance claim? What was the project the President have done? The people who aren't going to pay could be subject to a lien. That means paying the special assessment, attorney fees, and interest. The special assessment may have to rise to compensate for the legal costs to file those liens...

Contacting an attorney in your situation is very complicated. The owners would be responsible for their own attorney but still be paying dues to cover the HOA's attorney's bill. So would need more details on what the need of the attorney was about.

Give a few more details and we may be able to help you out.

Yep, I think Petunka hit the nail on the head. More than one board member (perhaps the Treasurer) knew of the contract and agreed to it. Perhaps by e-mail, phone calls or face to face discussions.

You would need to recall the board and have the new board make the claim (then refund all special assessment money). Otherwise, the only other option would be legal.

Personally, I would recommend that you pay the assessment. The committee made a recommendation not a decision. The Board made the decision. Even if the Board was unaware of the contract at the time, a majority must have approved it after the fact or the Board would have accepted the recommendation. Therefore, I'm not sure you have a good basis (based on what you posted) to refuse to pay. Of course, I don't know everything you do about the issue.

If you do choose to withhold payment, you need to be willing to accept the consequences as the issue is being worked out. Things like no longer being a member in good standing, possibly losing the right to vote, interest, late charges, costs of collection (if a court rules against you), are some of the consequences I can think of.

Tim

Shawn,


Is this a known fact? Or, is it someone's conjecture? Was there a meeting of the board during which the president was authorized to negotiate this contract or was there a meeting where the contract was approved by the board? Perhaps someone made this accusation without ever first checking the minutes of past board meetings to find out. Could the contract have been discussed among board members by telephone or email? Although the latter is not the proper way to do things (unless perhaps some emergency), it does stress the importance of authorizing contracts in a meeting and the action being recorded in the minutes. And by the way, there is no such thing as the "president of the board." Your president is the president of the association.


What committee? Who set up this committee? Was this an ad hoc committee of disgruntled homeowners who believe the president acted without authority? What proof is there? And, you haven't explained why and how you think the D&O insurance fits into this.


What is the attorney's advice based on? Is it merely the (possibly incorrect) information this "committee" gave the attorney? Or, is the advice based on an actual investigation by this attorney into the matter?


Has it occurred to anyone that pursuing legal action may wind up costing everyone more in legal fees for your own attorney and court costs and increased assessments to defend the action than the original $700 special assessment itself?

I know from experience that there are some people who, being upset over something, will let their emotions take over go around and spread rumors based on false perceptions and misconceptions rather than taking the time to check out the facts first. Your OP sounds incomplete. Make sure that is not what is happening here.

Bruce,
perhaps the treasurer decided to do that assessment in two phases, not unusual. In my post, I also question the committee is not acting in the best interest of the association. At least that was my first impression.

I tried to keep the information brief, but in doing so I left out several items...

First, there was a slide on a portion of the hillside that the HOA owns. The debris washed across the road below and also damaged our storm pond pipe. The president hired a company to clean up the debris after being prssured by by the city to do so. There was no meeting or discussion held between the board prior to the hiring. A $6500 deposit was made to the contractor. The total amount owed was kept from the homeowners for 2 months. A meeting was held to discuss current issues facing the HOA at which time the president admitted that he didn't follow the by-laws by having concurrence by another member of the board. The other two board members admitted that they knew nothing about the contract the president requested the $6500 to put a deposit down with the contractor. The check was signed by only one member of the board, even though the by-laws clearly state that both the treasurer and the president must sign all checks.

The original amount requested was an extra $1000 from each home. This was subsequently revised down to $700 per home. This amount doesn't cover the entire amount of the bill. The board intends to utilize our yearly assessment to potentially cover the remaining amount after they attempt to negotiate a reduction in payment. If that negotiation fails, they will be coming back to the homeowners asking for additional funds to cover this bill. The idea of pursuing a claim against the D&O policy came up at the meeting and a committee was formed to draft a claim to the insurance co. The claim was denied because it didn't meet the definition of a claim. Another committee was formed to consult with an attorney on the next steps. At this point the attorney stated that another claim should be filed, this time using a copy of the bill and stating that the HOA is not responsible since the president acted outside their authority. This recommendation was brought forth to the entire HOA at which point the Treasurer stated that he would not support filing another claim. There was a call to have the board removed, however once again, the treasurer demanded an immediate vote of confidence. The vote was upheld in favor of the board. It was at this meeting that the agenda included a vote on whether to follow the attorney's advice and file another claim. However during the course of the meeting the agenda was changed which revised what the vote would be taken on. There were two of us who couldn't make the meeting due to vacations and had submitted our proxy vote. Neither vote was counted since what was voted on had changed at the meeting. The board stated in the minutes that since we weren't there to hear the motion our votes were invalid. Another proxy vote was submitted after the meeting by another homeowner. They were also told that their vote didn't count since it was after the meeting.

Shawn,

Thanks for the additional information. From what you have stated, there seems to be a clearer picture.

First, it appears that the work had to be done anyway, and paid for by the association. Is the road owned by the city, or by the HOA? If it is the city's road, then I can understand the city demanding the HOA take care of cleaning it up since there could have been preventative measures (ie., a retaining wall) in place to prevent the slide from crossing the road. Apparently there were none. The association's storm pond pipe also would have needed to be repaired.

While the president may not have followed proper procedure by not consulting with the board first, the fact remains the work had to be done. Perhaps there were other mitigating circumstances that required the work be done without delay. Was the road safe and passable?

If there was only one signature on the check and two were required, then the bank should not have honored the check. Blame the bank for that one, unless the account was never set up to require two signatures. In that case, blame the board that set up the bank account originally.

It sounds to me that if any claim is to be made with the insurance company, the claim should be against the policy that covers liability and property damage for the association; similar to your private homeowner's insurance. D&O insurance normally covers errors and omissions committed by the board, and and the associations directors and officers individually, and pays for their legal defense and any judgement. (That's why it is called D&O, meaning "Directors and Officers" insurance.) So, it likely would not cover a claim resulting from a natural disaster, which is what this is. Does your association have property damage and liability insurance? The next thing to check is the coverage and the exclusions of the policy. Was the slide caused by a flood? Maybe the policy excludes damage caused by flooding.

In addition to paying for the cleanup and repairs, I think the association (and board) needs to make sure that have the right insurance coverage to pay for damage resulting from natural disasters.

Was this a special meeting of the homeowners? Are we talking about one, or more special meetings of the homeowners? What was listed as the item(s) on the agenda(s)? Was it to determine the need for and the amount of a special assessment? It is improper parliamentary procedure to add, change, or remove items from the agenda of a special meeting. Only the items on the agenda may be discussed and voted on. Assuming this was a special meeting to solve the issues relating to payment for the cleanup and repair:

1. A motion to recall the board should have been ruled out of order since the meeting was not called for that purpose and any such motion violated parliamentary procedure relating to special meetings.

2. A motion calling for a vote of confidence in the board should have been ruled out of order for the same reason.

3. A motion to change the agenda of a special meeting is out of order.

4. The proxies were useless because the special meeting didn't stick to the original agenda.

It sounds to me as though neither the board nor the association members are familiar with correct parliamentary procedure, and confusion was the result.

It also sounds to me like the lawyer's advice is based only on what he was told and not on his own investigation of the facts. That's advice based on heresay. He should have known better.