Violating Bylaws

What are the consequences, if any, of an HOA violating its own bylaws, i.e., annual audits, audits when the Treasury changes hands, board member being bonded?

Can legal action be brought against them?

Thank you, Tim, I appreciate the response. It does help, but I see I have a lot of research to do!

Our HOA is well established and they have been doing whatever they wanted for years.Homeowners have been yelled at, told they have no say-so in anything and no reason to even speak. Thankfully, new laws have just passed in Texas giving homeowners more rights and requiring HOAs to do more things legally, i.e. filing bylaws, restrictions and other documents with the county in order for them to be valid. Most of the 'scum' is now gone, but there's a few bums left who are obviously not happy that they can't just do what they want and butt heads at everything.

We know they haven't had an audit in years, and according to bylaws they are supposed to do one annually as well as whenever the position of Treasurer changes hands, which has happened twice just since August of last year. One of the excuses for not doing it has been they just can't afford it. My response to that is 'not my problem.' A lot of people have stopped paying and haven't paid in years. From the new laws, it will cost the HOA money legally to even try to force payment, get liens and eventually foreclose. They have to have a court order. They lost the support of the neighborhood because they never supported the community, it was always their own agenda. We have a LOT of people who would just like to see them gone altogether, but a lot of people are still afraid of them and not willing to step up for fear of retaliation. We've told them many times that unless people start seeing changes FIRST, they will never get support. Even though the new laws are for the homeowners, many are tired of wasting their time with the board and want nothing to do with them.

We are looking at other options and possibilities, possibly just bankrupting them to disband them altogether, just not sure how to go about doing that. I appreciate this forum and all who help others. It mean a lot to know there are people out there who DO care!

"annual audits, audits when the Treasury changes hands, board member being bonded"

Why would board members need to be bonded? Audits are very expensive. Perhaps the board got an audit review or compliation.

What's your size and annual budget/

Robert:

Seems from what you have posted you have quite a bit to learn.

Your response when told the audits were not performed because they don't have the funds "not MY problem" well that IS a problem and it is your problem and that of every other owner. If they don't have the money just because YOU say so doesn't make it so. If the owners don't fund the HOA just hwere should the money come from? Our audit runs about $2,000 each year. Does your property have the funds to perform the audit?

Do you have ANY actual knowledge of the property's finances? Yearly income, expenses how many units have failed to pay their fair share? Tough to find the problems when you don't have the necessary information.

IF money is a problem what services the HOA provides would you be willing to do without to have YOUR audit?

IF many of the owners are NOT paying where should the HOA find the funding to do what you demand?

IMO at least some of the blame lies with the owners to what extent tough to tell from what you have provided.

And can you take legal action why sure you can. Just what would you hope to accomplish though? Just to get even for what you feel was misbehavior?

And your plan to simply bankrupt THEM. Just what do you think would happen then? The property would automatically revert back to its former splendor? Guess again. The HOA would go away? Guess again? Your property would become worthless? Getting warmer.

The reality is YOU are THEM. Bankrupting them would harm your own property. The Board members like YOU are owners. It is not them against us, that mentality will accomplsih little.

Robert,

An actual Audit is very expensive, We only have a 100K budget and were quoted 10K for an audit. To minimize costs we asked the membership for permission to do a "financial review" vs. an audit. Here is a link to a thread within this forum that has additional links and discusses the different services a CPA could provide and the costs involved:

Subject: Financial Audits, Reviews or Compilation Which do you use?



True, it's not your problem. However, it is your money being spent to have one done.

You stated that "a lot of people have stopped paying and haven't paid in years." When this happens, it typically falls on those who are able or willing to pay the assessements to pay more (in the form of higher assessments) so the bills are covered and services continue.

Some of these services are contractually mandated by the CC&Rs and some may be optional. Example: CC&Rs may say common area is to be maintained but does not specify how often the grass is to be mowed. Hence mowing could be cut back from once a week to once a month. Another example would be the hours a pool is opened could be adjusted. etc.


Yep. Everything costs money. Even if the costs of collection are part of the lien, they Association must still pay those costs initially and "hope" they can recoup the money.

Often it's cheaper to just cut losses and write it off - as the Association lien is secondary to the banks lien.


Sometimes it's just plain apathy or lack of information.
It took me three years of informing the membership before positive changes occurred.


Bankrupting them is bankrupting the members (aka you and your neighbors).

The only money an Association receives is from it's membership. Typically any legal actions brought against a Board member is paid through the D&O Insurance (which will lead to higher insurance premiums) and/or directly from the coffers of the Association. When this happens, the Board may need to pass Special Assessments in order to pay those legal bills. If you are a party to the legal action you will be required to pay your share of those legal expenses in addition to your own.

The Board is made up of volunteers. If they are unpaid volunteers, laws typically indemnify them from making bad business decisions. Therefore, there is rarely any punitive damages associated with legal challenges.

I've discovered that the best way to make changes is to become involved. Even if the involvement is just attending the meetings to observe what is happening - as few are willing to do the wrong thing when they know they are being observed. A side benefit is that attendees will learn why certain decisions are made.

As your doing your research, you might want to check out the following links:

Community Associations Network - Texas page. They are a sponsor of this site and provide links to the HOA laws of each state (scroll down the page and look in the left column) in addition to other resources.

Texas nonprofit corporation laws. If your Association is incorporated as a nonprofit (most are) they must comply with these laws in addition to HOA laws and other laws.

HOA-USA Texas Resource page. This organization requires money to join (no, I am not a member of it) and see everything that's available. However they do provide a lot of resources for free. For example, check out the explanation of laws the Association must comply with.

CAI Best Practices Reports. CAI stands for Community Association Institute and also costs money to join. However, they do publish reports called "best practices" that may provide some guidance and insight. The link above is to the CAI website page for their reports. However, I prefer how this Associations web site offers them with short descriptions of the contents.
Side note: Many consider CAI to be the "bad guys" as they do lobby for HOA laws. Irregardless of how you view the organization, they do offer some good resources (and no, I'm not a member of this organization either).

Of course, continue to visit this site as another good resource.

Hope this helps,

Tim

I truly appreciate the advice and information.

This is an invaluable forum.