Legal Fees and Board Members

Started by ShayB • 20 replies • 1991 views

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ShayB (Ohio)
Posts: 8

Posted:

Good morning everyone -

The current President and former President of the Board decided to sign a retainer/contract with a lawyer with relation to current and ongoing Civil Rights Commission claims/lawsuits against our organization. Neither the Board nor the residents were presented with this retainer/contract, so therfore, this was not voted on by the Board nor the residents.

In our ByLaws, it states that the Association can pay for the legal fees it incurs out of our General (not Reserve) Fund, if the Board and community has voted, with 50% of owners, to retain a lawyer.

I need wording to start a Petition to require the two Board Presidents to pay for the legal fees, past and present, since these were not approved by anyone but the Board Presidents PERSONALLY. Anyone have any experience with this? (This is in Ohio.)

THANK YOU in advance!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Here's the deal with this. They may not have had a choice. HOA's are corporations. That means in a courtroom they must be represented by a lawyer. (Caveat: If the HOA has a competent board member who the members feel can represent them in court may be subsituted but NOT suggested). If these lawsuits are going to the court room then the HOA does indeed need a lawyer. Plus the money for the lawyer is going to come out of the money of the HOA's pocket.

A HOA is ONLY funded by it's owners for it's owners. This also means that when someone sues their HOA, they are suing themselves. Where else do you think the BOD is going to get them money to defend the HOA in a courtroom? They have to charge the owners/members.

Unless this lawsuit is against these board members PERSONALLY, then it's going to be the HOA paying for this lawyer. Plus your HOA should have an insurance policy protecting the board members and HOA from paying out a certain amount of money. This lawsuit eventually may work like an "insurance claim" in the long run.

Instead of focusing on getting mad at the BOD doing what they have to do. Find out more about what can be done about resolving this issue...

Former HOA President

ShayB (Ohio)
Posts: 8

Posted:

I understand that the Board needed a lawyer. However, it is in the ByLaws that in order to retain a lawyer for any purpose, it must be voted on and approved by all owners (wtih 50% in favor). Since the Board did not do this, they acted on their own free will and not on behalf of the community.

Additionally, the lawyer they retained is also one of the most expensive in our area...salt in the wound which could have been avoided if (a) the community was permitted to exercise their right to vote, and (b) possibility of less expensive lawyers could have been retained.

There is ZERO resolution with this Board; they listen to NOTHING that the owners voice, have severely mismanaged the money, and have their own personal agendas for which they are using HOA monies as well. For these reasons, among others, the owners are currently working on overthrowing three Board members (including the President who signed the legal retainer).

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds like you all need to concentrate on tossing out that board than the lawyer issue now. Once you get the board out, the new board can follow the procedure. May be able to continue using this lawyer or find a new one with the new board. I can say with experience, lawyers aren't cheap. A phone call or an email conversation can rack up some dough. So be very careful.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Shay...if the board presidents did not follow proper procedure you do have the right to seek a claim against them. There is a time and a place for everything, but you will have to weigh the worth based on how much the bills are and the potential costs associated with it.

In the meantime it sounds like the current boards needs to be recalled or voted out and your community needs to take ownership of it.

ShayB (Ohio)
Posts: 8

Posted:

The petition to remove the three Board members has already been processed, but what do you guys think about this Petition, for the payment and reimbursement for legal fees? I plan on running it by my attorney as well, but everyone knows how they charge for their time...I want to see if this needs any edits before I send it to him. THANKS!!

Petition to Order Current Board Member & President, and Former Board Member & President,
NAME and NAME,
of CONDO Condominium Association, located at NAME Ohio,
to Immediately Pay in Full and Reimburse

We, the undersigned homeowners in good standing, constituting 50% of the members entitled to cast ballots as required in the CONDO Condominium Association By-Laws version XV, Article VI, Section 11 of the By-Laws, request the following:

1) Immediate order of payment to the law firm that has been retained by Board Members NAME and/or NAME, for any past, present, or future Civil Rights Commission cases/claims, lawsuits, legal advice, including any and all communication and interaction with said law firm, which has not been voted on and approved by all owners. This immediate payment is due within 60 days and will not be paid by utilizing funds from the CONDO General Operating Account, nor the CONDO Reserve Account, nor the CONDO Elevator Fund, nor any other undisclosed CONDO Condominium Association monies. All invoices from this law firm, with relation to the two individuals named above, will be paid out of the individuals’ personal monies, and will not be invoiced to CONDO Condominium Association at any time, now or in the future. The retainer and agreement with said law firm was signed without a vote by the owners; therefore, all monies due the law firm are to be paid personally by the signers of the document retaining said law firm.

2) Immediate order of reimbursement to CONDO Condominium Association for all monies that have been paid out to the law firm that has been retained by Board Members NAME and/or NAME, encompassing all monies paid beginning January 1, 2000 and going forward. This document in no way waives the liability for any future reimbursements of monies paid to any organization that has not been voted on and approved by all owners of CONDO. This immediate reimbursement is due within 60 days and will not be paid by utilizing funds from the CONDO General Operating Account, nor the CONDO Reserve Account, nor the CONDO Elevator Fund, nor any other undisclosed CONDO Condominium Association monies. The retainer and agreement with said law firm was signed without a vote by the owners; therefore, all monies which CONDO Condominium Association has paid will be reimbursed personally by the signers of the document retaining the law firm.

As an owner of this property, I set my hand hereunto, in agreement with the items listed above:

JonD1
Posts: 2,350

Posted:

Shay:

While your demand letter sounds serious if you were to send it to me I would not regard it seriously.

But first I must comment on your issue with the members of the Board retaining an "expensive" lawyer. There is some truth about you get what you pay for even with lawyers.
So you would rather they had used a cut rate wooden nickel lawyer?

My guess is there is MUCH more to this entire story than what you have provided.

Just what is the nature of the legal action that has taken 11 years?

Who brought the action? Have you been provided the papers filed with the court?

Who filed suit? And what dmamages are they asking for?

What has ben the total cost in legal fees to date?

Was this submitted to insurance for coverage? Are they covering any or all of the costs?

Just what role do you play in all of this?

So before I jump on the "lets remove the Board bandwagon" I find it necessary to have ALL the facts not just some. One being why for 11 years the owners have sat by and IF the Board the current and former Presidents are all that BAD why was nothing ever done?

How long have you owned?

Do you have annual elections?

Now off to your demand letter. How many Board members serve on your Board. Where have they been for the past 11 years? And if they have been serving and allowed all of this why would you retain any of them? IF things are as bad as you represent?

Do you really think either named party will submit payment within 60 days? I wouldn't.

As you nor anyone else that does NOT serve on the Board are NOT clients nor does the attorney work directly for you why would you think they would or should turn over to YOU all correspondence? I wouldn't.

IMO to deliver such a written threat will acoomplish nothing other than guarantee further legal action. And despite YOUR demands to the contrary they would more than likely use the property's money and perhaps insurance coverage to cover their costs. I would.

So you can present any demand letter you wish. Will it accomplish what you are seeking IMO no. And of course most lawyers will be glad to review your draft make several legal changes and present you with a hefty bill and send it off.

Please let us know what happens.

EllieD (Vermont)
Posts: 446

Posted:

ShayB,

Approximately how many owners are in your Association?

Are you really talking about a vote that should have taken place 11 years ago? Or is January 1, 2000 a typo?

How do you know that 50% of the Owners would not have voted to retain the lawyer, had there been a vote?

ShayB (Ohio)
Posts: 8

Posted:

JonD1:
1) It's not even so much about the rate for the lawyer. Of course, everyone is watching costs in this economy. If the community had been allowed to have input or a vote, the Board would have been required to obtain three quotes from different law firms regarding how much the retainer would be and how much they charge per hour, etc. We could have at LEAST made an informed decision as a community...but the Board made the decision unilaterally for everyone.

2) The January date is to encompass all lawyer fees/etc that have been charged to the community, because the community has NEVER voted about anything to do with lawyers and claims, etc. The condos were starting to be built around that timeframe, and we wanted to include everything since the community has never been privy to voting for a lawyer.

3) There are now a few different lawsuits ongoing, mainly with the Civil Rights Commission about harassment. The Board refuses to provide ANYONE with the documents from ANY of the cases, since "the lawyer has advised them not to". This is yet ANOTHER problem with the Board...the owners figure, "We're the ones being sued; we should at least have SOME idea of what we're being sued FOR." The Board doesn't think we have the right to know, so they simply don't supply us with the documents. I have asked them in writing at monthly Board meetings, every month since last October, for copies of all documents pertaining to all lawsuits.

4) We don't know anything about the lawsuits...don't know who filed them, don't know what they're suing for, etc. We have searched the public records repeatedly (I and multiple owners), and come up empty. So either the lawsuits aren't happening at all (which they are, if we're paying a lawyer), or the records aren't public.

5) Total cost in legal fees to date is upwards of $10,000. The Treasurer on the Board has refused to pay any more to the lawyer until the other community bills are caught up, because the President of the Board wants the Treasurer to pay the lawyer FIRST and everything else after. However, we currently have an outstanding balance with the lawyer of almost $7k, and since we are a tiny community (total of 48 units in 2 buildings), paying the $7k first would have us bankrupt. On top of the remainder of the legal fees until this mess is over.

6) Don't know if this has been submitted to insurance for coverage...the Board refuses to give ANY information whatsoever.

7) I am one of many owners who is tired of the Board and their illegal and heinous manner of business, trying to set things right and get rid of the "cancers" on the Board while the community is still salvagable and before it goes into complete financial ruin.

8) The owners have been trying to get things done for years with this Board. The Board is so corrupt; I can't even begin to tell you. We've had members appoint themselves to be on the Board without a vote. We've had Presidents who have personally mismanaged their own personal funds so badly that they've filed bankruptcy...and THEN come to live at our community and run for President. We've had promises promises promises from every Board member how they will make the community "GREAT" and then have their own agendas once they get in office. So the owners are now learning that we don't have to wait until the next election period to get rid of a Board Member, and we're trying to make things right as soon as we can.

9) I have owned for 5 years.

10) We do have elections; see #8.

11) We have five Board Members. They have been rotating 2-3 seats every 2-3 years, depending on position. The Board that we currently have consists of two people who care about the community and the owners, one person who was moved up to President from VP after the Prez was removed, and two people who are still on the board from prior elections because no one else wanted to be on the Board with the Prez who later was removed.

12) No I don't think anyone will be submitting a payment within 60 days...but if they don't, at least this time frame will give us a jumping-off point if the owners decide to sue. (Sigh.)

13) The Board or the lawyer should be turning over SOMETHING of the case(s) to all owners, because WE'RE PAYING FOR IT. Period. You wouldn't write a check for a car you've never seen, never driven, and never been in the same room with.

EllieD (Vermont)
Posts: 446

Posted:

ShayB

Would you be willing to post the exact wording of the paragraphs or sections from your documents where it states that a 50% vote of owners is required re legal fees.

CynthiaF (Texas)
Posts: 5

Posted:

I was a court clerk for many years, and I can tell you - anyone can sue, but they can't always collect.

The attorney retained by the Board's President should have asked if that person had the authority to sign for and retain him on behalf of the HOA - and ask for a copy of the Declaration and Covenants if they seemed uncertain. Too bad the Treasurer paid anything at all. If I got another invoice, I would send a letter explaining that I (as Treasurer) do not have the authority to pay because (then cite the Article and Section outlining the 50% vote stipulation). He 'might' sue the President, he 'might' sue the HOA - but it really seems like he just did a little pro bono work without intending to - but it's his own fault.

Consider this - the attorney can sue you and clean-out your bank account OR you pay him and clean-out your bank account on your own. Either way, now you have no money. Rather than voluntarily handing over money you don't even owe, wait for him to sue you - he needs a contract in order to collect - what's he going to show the judge? All he can show the judge is a piece of paper signed by someone who did not have the authority to pay the debt.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By CynthiaF on 09/01/2011 6:40 PM

The attorney retained by the Board's President should have asked if that person had the authority to sign for and retain him on behalf of the HOA - and ask for a copy of the Declaration and Covenants if they seemed uncertain.

Cynthia,

I agree that the attorney should have checked. However, it is typical that the President of a Corporation is the signature authority for Associations on contracts. Therefore, I don't think the attorney failed to do anything any other business would have done.

JonD1
Posts: 2,350

Posted:

I have served on my property's board for 25 years.
Not once in that time has any service provider or contractor EVER asked or inquired as to whether the board or any member of the board or MC had the authority to enter into the contract or agreement.

The President of the board agrees to hire you and you question their authority not reall good business practice IMO.

If I am correct this lawyer was hired 11 years ago and during that time paid. So how can you now suggest payment can and will no longer be made?

Not having ANY details as to the details of the supposed lawsuit filed hard to balance the actions of the President and ex-President versus what is in the best interest of the board.

ShayB (Ohio)
Posts: 8

Posted:

Thanks, CynthiaF and BradP, for your well-thought-out responses, and for the time you took to help me out. I do appreciate it.

I guess I thought when I signed up with this site, it would actually be more beneficial...and with the exception of the two people I just mentioned, the rest of the responses have not assisted me in any way whatsoever. I didn't post here because I needed more stress in my life; I posted here in hopes I could get some help and REAL answers to my questions. I'm not trying to stir up drama (I get plenty of that from the ignorant Board).

Jon, NO...if you read MY thorough answers, the lawsuit was NOT started 11 years ago, and the lawyer was NOT hired 11 years ago. So that pretty much throws out any issue that you apparently have, because that's what you're clearly hung up on. If no one in your time of seating on the Board has ever requested the authority of the signer for an agreement...apparently you've hired some questionable characters to do your bidding.

The point here is not what's in the best interest of the BOARD. The point is, as it ALWAYS should be, is to do what's in the best interest of the OWNERS and the COMMUNITY. That's the reason for any Board to exist in the first place.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Shay - as a Member, you do have the right to know what legal fees have been paid and what for. Looking at the monthly financial report should have given you that info.

Attend your next board meeting and insist on this information. It might be general info, i.e. a resident is suing the HOA claiming violation of his civil rights because XYZ happened. We have retained a lawyer who charges X per hour and he is doing the following . . . .

A FEDERAL Civil Rights charge against the HOA?? You better have a really good lawyer. The settlement could be huge! Sometimes these things are settled out of court for a large chunk, too.

As for the "permission" of the board to enter into legal protection, that is unusual. As a corporation, this board has the right to enter into contracts.

EllieD (Vermont)
Posts: 446

Posted:

ShayB

In your very first post you wrote:

In our ByLaws, it states that the Association can pay for the legal fees it incurs out of our General (not Reserve) Fund, if the Board and community has voted, with 50% of owners, to retain a lawyer.

Sometimes in order to receive meaningful answers it is helpful to know the exact words in your Documents, which is why I asked if you would be willing to post them.

Trying to interpret what you posted - it seems that the 50% vote might be ONLY TO DETERMINE from which fund the legal fees should be taken – the General Fund or the Reserve Fund.

SusanW1 (Michigan)
Posts: 5,202

Posted:

I SAID: As for the "permission" of the board to enter into legal protection, that is unusual.

I MEANT As for the "permission" of the board to enter into legal protection, that is usual and a part of their powers for any corporation.

Perhaps from what fund the legal fees come from is the issue, as suggested before.

But again . . . don't mess around with a Civil Rights lawsuit!

ShayB (Ohio)
Posts: 8

Posted:

EllieD, I understand the need for the exact wording of the By-Laws. However, I don't have them with me and have read them enough to know what they say (unfortunately not verbatim). The ByLaws say that NO legal fees are permitted to be paid out of the Reserve Fund whatsoever. This leaves the 50% vote to pertain only to the General Fund.

SusanW1, Thanks for your input. I completely understand and agree with the fact that the Board is permitted to enter into contracts, AFTER the Board has obtained permission to do so by 50% of the community via voting. And as far as the CRC lawsuit...if the issue is harassment by the Board of an individual owner, I'd have to say I'm probably on the side of the owner...this Board has stopped at NOTHING to get what they want. If that means bulldozing over the needs of a handicapped owner (or whatever the case may be), then the Board would have no qualms about that. It wouldn't suprise me in the slightest if the Board is harassing anyone. The only downfall to the CRC lawsuits is that the community will have to pay for it, either in legal fees or in settlement monies...which sucks either way, but maybe if the Board loses the suit, it might teach them a lesson about how NOT to govern a community.

ShayB (Ohio)
Posts: 8

Posted:

Also, the monthly financial report only states "Lawyer fees........$xx.xx paid".

I have asked the Board in person (repeatedly) about the reason for the legal fees, etc etc etc. The President simply states, "Our lawyer advised us not to discuss it." So the owners have ZERO answers other than what we are able to scrounge up on our own.

The Treasurer whom we now have on Board is one of the two GOOD Board Members...but she is actively trying to fix the HUGE mess from the prior Treasurer. And the current Assistant Treasurer is from the old Board and wants the new Treasurer to do things the old way. Sigh.

ShayB (Ohio)
Posts: 8

Posted:

Oh, and the locale of the CRC lawsuits, as I have heard from other owners, is that it is a STATE lawsuit with the CRC (not Federal...yet).

JonD1
Posts: 2,350

Posted:

Jon, NO...if you read MY thorough answers, the lawsuit was NOT started 11 years ago, and the lawyer was NOT hired 11 years ago. So that pretty much throws out any issue that you apparently have, because that's what you're clearly hung up on. If no one in your time of seating on the Board has ever requested the authority of the signer for an agreement...apparently you've hired some questionable characters to do your bidding.

The point here is not what's in the best interest of the BOARD. The point is, as it ALWAYS should be, is to do what's in the best interest of the OWNERS and the COMMUNITY. That's the reason for any Board to exist in the first place.

So Shay your demand letter only seeks repayment of any and all legal fees since the hiring of this lawyer in 2000. No matter what the issue you think the former President and current President should pay for it all. 11 years of legal bills with your not knowing who, what, when, where or why but someone else should pay them. Good luck with that.

You have several legal issues now occuring. The lawyer has advised the Board NOT to discuss or provide details to the owners. But of course you see it differently. Afterall why follow the advice of the lawyer? Right?

To be honest seems you have no real understanding of the details your property faces and like many you have decided the fault lies ALL with the President and former President.

And IF the Board ceases to pay the attorney are you willing to forfeit the case? Understanding of course you know nothing about what is at risk or if the legal fees have been submitted for insruance coverage. IMO would be better if you had some idea what you were talking about. How about those "good" Board members sharing the details with you? Or are they not willing to do so?

Your suggestion that a policy by which all owners would take part in the hiring of an attorney with bids and comparisions is naive at best. Basing the hiring of an attorney on hourly rates proves zero. And of course in my expierence no attorney can predict or estimate the final cost of any legal action or defense. But for you if all the owners had a say about something they knew nothing about then it would all be fine.

"If no one in your time of seating on the Board has ever requested the authority of the signer for an agreement...apparently you've hired some questionable characters to do your bidding."

I especially enjoyed this comment suggesting any reputable characters would ask for proof the Board or its representatives had the authority to hire, and enter into agreements because it clearly shows you have zero understanding of the operations of YOUR Board or any Board for that matter.

Sorry I was unable to solve your problems. Perhaps if you bothered to consider the fact you lack a clear understaning and what has taken place, what is ongoing, the legal requirements on a Board, or the role of the legal system in resolving these issues it MIGHT explain the difficult position you have left us in.

But keep placing blame, dwelling on decisions made 11 years ago, and attacking the members of the Board all quite helpful in resolving your issues.

As an owner for 5 years just what was YOUR role in all of this? Any?

Or were you like the other owners asleep at the wheel???

Were the President and former President voted in? Or did they appoint themselves? Or maybe no one else bothered to get involved. Same result.

Easier to blame someone else.............

I don't require a response you seem to understand it all already.

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