Illegal "sub" HOA? What can I do?

Started by LouiseC2 • 26 replies • 3154 views

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LouiseC2 (Idaho)
Posts: 12

Posted:

Hello,
I belong to a "sub" homeowners HOA. We have 14 townhomes on one street in a larger subdivision of single family homes. We have a master HOA also, and that HOA is currently run by a property management company since not enough homes have sold for it to be turned over to the homeowners. I pay dues to both HOAs. On this street all of the townhomes share the same sprinkler system. The builder set up the sub-HOA to provide lawn care, snow removal, and sprinkler system maintenance. Those services were what attracted me to this property. After all the units on our street were sold, the builder met with all the residents and turned over the management of the HOA. One of the residents was very eager to be president and took things over from the start. She seemed to have a lot of knowledge and experience and everyone was grateful to defer to her. I was secretary and another resident was treasurer; she convinced us that we didn't need a vice president, we didn't need insurance (even though the builder told us it was very important), and didn't need any bylaws or CC&Rs or anything else as we would just use those from the subdivision HOA. She immediately dissolved the builder's HOA and said that she filed for incorporation of our new HOA. She then began dropping services, including snow removel, weeding in front, and recently yard care for the whole month of November including fall leaf cleanup, saying homeowners should do the work themselves. I opposed all of those changes; I'm retired and have two bad shoulders. She also began spending our dues to replace plants she didn't like and replace mulch and add borders on peoples private property without their input. (During the year and a half I was secretary we had just one board meeting right after the change. After a couple of minor policy challenges from me she told me that she was going to be "in it for life" but she knew someone who would be happy to take over as secretary if I didn't object. I eventually acquiesced, because I was never included in or even informed of their decisions anyway; we never voted on anything and if we had the treasurer - who is a friend of hers - would have voted with her.) Last week she announced that the "Board" wants to spend a large portion of our reserve funds to replace the mulch in the front planting beds on the entire street with expensive crushed rock. I don't even have a front planting bed, so I would be paying to improve everyone else's property. I objected and asked if we could at least vote on it but she said no the board would decide. I've attempted to enlist other resident's support to try to put some brakes on her behavior, but nobody else seems to care. Does anyone have suggestions about what I can do? Thanks.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

two choices:

spend your life savings on attorneys, hoping you will prevail

OR

move on down the road

CAVEAT EMPTOR

GlenL (Ohio)
Posts: 5,491

Posted:

John with all due respect not everyone can afford to "move on down the road."

Louise, I doubt she had the power to dissolve the builder's HOA or form another one. Since Idaho doesn't have HOA statutes (that I could find) you will need to rely on and obey the non-profit statutes. You and your fellow homeowners are going to need to organize and take back your HOA. It will not be easy or cheap or fast as I imagine she will not want to go.

http://www.legislature.idaho.gov/idstat/Title30/T30CH3.htm

Studies show that 5 out of 4 people have problems with fractions

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Louise

With 14 of you and with as bad a dictator as you claim, it should be easy to gather enough support to recall anyone on/or the entire BOD.

Start with reading your docs on how to do a recall and talking to your other owners.

If you are unable to gain support then you might have to accept it is what it is and that you are in the minority.

Hope this helps.

LouiseC2 (Idaho)
Posts: 12

Posted:

Thanks to all for the comments. GlenL, I think she has done and continues to do many things that she doesn't have the power or authority to do, but she seems to know that she can get away with them. I couldn't find any Idaho statutes either, but I hoped I was just looking in the wrong places. I was told by someone at the state that I should start with the Attorney General, so maybe I'll call them tomorrow. But the reading I've done over the last few days is pretty discouraging; it all seems to indicate that these boards really are pretty much all powerful once they get in, while the individual members are all powerless. How did that happen?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Louise

The members are not powerless, unless they are in the minority.

Do your homework. Forget the government whatever offices. Read your own doucuments, Covenants and Bylaws. They will tell you how to recall (vote out) any BOD Member. While not easy to do such, the majority can do it.

Hope this helps.

LouiseC2 (Idaho)
Posts: 12

Posted:

I've tried a couple of times sending out an HOA-wide email explaining out my concerns. The first was when she discontinued the November lawn care/leaf cleanup; that time not a single person even acknolwdeged my email. The second time was when she announced the huge planned expenditure for crushed rock replacing the bark mulch. (These are not common areas - these are individual planting beds on private property next to the sidewalk on most of the homes. I don't have one on my property.) That time just one person responded and she said that she liked the idea. As far as CC&Rs, we don't have any. We also have no bylaws. All we ever did was informally agree to collect and disburse money for yard care and sprinkler system maintenance. I could never even get her to codify which services were included in that (believe me, I tried when I was secretary).

So, since the rest of the HOA members seem apathetic, I was hoping to find some law or laws she has broken, like operating an HOA without proper authority because it wasn't legally set up, or misappropriating HOA funds, or something - something I could show her that might make her reconsider her tactics a bit. I just want her to be a tiny bit reasonable. I want my dues to be spent first on the services I was promised when I bought the property and and not on landscaping projects that she and her cronies want done to "improve their property values". I don't believe that's the purpose of an HOA that was set up to provide convenient yard care. It just burns me that the money I pay to them to have my leaves removed will go for their landscaping upgrades while I have to pay someone again to actually do the work.

GlenL (Ohio)
Posts: 5,491

Posted:

I posted what laws she needs to follow, I even posted the url to them. It is up to you to read them and decide which ones she is not following, like by-laws being a requirement. The Covenants run with the property so she couldn't do away with them nor IMO did she have the power to dissolve the HOA and start a new one. I'm not an attorney and you should check with one but with no insurance if anyone were to be injured or killed on any common area then EACH and EVERY homeowner could be sued for it. What about reserves? Are they being set aside or will you all wake up in a few years to a special assessment to pay for something you should be putting money aside for now?

I realize your biggest complaint is that everyone else is getting something you're not but you need to have a Come to Jesus meeting with your neighbors (not an email) and explain the facts of life to them. In the mean time if you know how much the HOA is paying for the gravel, you can sue in small claims court. It won't be easy, petty dictators usually don't go quietly.

You can either do the work and rally your neighbors to oust her, sell & move if you can afford to or pray you can get out before it all comes tumbling down.

Studies show that 5 out of 4 people have problems with fractions

GlenL (Ohio)
Posts: 5,491

Posted:

Oh yea, I almost forgot the mortgage holders, you know the bank or finance company everyone sends their monthly payment to. Again not an attorney but that is a legal document, they lend you money providing X conditions apply. When you go changing the conditions, like changing the HOA without their written approval, everyone could find their mortgages void and the bank demanding their money and everyone scrambling to get new financing.

Studies show that 5 out of 4 people have problems with fractions

LouiseC2 (Idaho)
Posts: 12

Posted:

GlenL, actually my major concern is not that others are getting something I'm not, although apparently I made it sound that way. I was having issues and voicing them long before this latest project of hers was announced. We have one yearly meeting; I went there last October intending to discuss my concerns. I won't go into the details, but I was not able to present my ideas.

I didn't notice the URL you had at the bottom of your post, all I read was that you couldn't find any Idaho Statutes. I'll check out the link. Thanks for your input.

LouiseC2 (Idaho)
Posts: 12

Posted:

Hey, that's one of the pages I already had bookmarked from my research, but I confess I haven't dug into it yet. I will do so.

LouiseC2 (Idaho)
Posts: 12

Posted:

Update for anyone who might be interested:

Apparently this woman knew exactly what she was doing. I'm guessing she has done it before. I called the secretary of state about non-profits and they directed me to the page where I could view all the documents. She did legally dissolve the old, incorporated HOA; all it required was 3 director/members of the old HOA. As secretary I was listed as one of them and I actually signed the dissolution document! Of course, I had no idea what the implications were, I thought we were just taking ownership and setting up a bank account. She then formed our new organization as unincorporated. This she was able to do as president with only her signature and a statement that the members approved. Under that designation, she wasn't required to have bylaws or CC&Rs. The only way to change things now would be to designate three other "directors", get a majority vote, then disolve the current HOA and start a new, incorporated (subject to rules) one. And Idaho doesn't get involved in any disputes, I would have to hire an attorney to challenge her as things stand now.

So I guess she really can do whatever she wants, including being president for life and spending the money however she chooses.

I think my only other option, aside from moving, would be to have my own sprinkler system installed and simply withdraw from the HOA. Sigh.

Thank you all for weighing in.

GlenL (Ohio)
Posts: 5,491

Posted:

Louise again I direct you to your ORIGINAL COVENANTS[/U][/I][/B]. They set out the conditions that your HOA operates. Unless the HOA, not the corporation, but the HOA itself was properly dissolved and the covenants removed, they still apply. Also since she changed the status from non-profit, you might inquire if the proper tax forms were filed.

I'm sorry but you have a mess on your hands and it's probably going to take a lawyer and money to straighten it out.

Studies show that 5 out of 4 people have problems with fractions

EllieD (Vermont)
Posts: 446

Posted:

LouiseC2,

You wrote “She did legally dissolve the old, incorporated HOA; all it required was 3 director/members of the old HOA.”

I believe that those of us reading your posts would be interested in the exact wording in your Original CC&Rs that allowed this to happen. One would expect that there was a detailed specified procedure that needed to be followed.

I assume you have a copy of the Original CC&Rs and other Documents that apply to your “sub association” and also those that apply to the Master.

Have you carefully searched those documents, in particular your Original CC&Rs, those that apply to your “sub”, to find the applicable Sections, paragraphs?

LouiseC2 (Idaho)
Posts: 12

Posted:

I do have the CC&Rs for the master association. I never received CC&R's from the original association run by the builder of our subdivision within a subdivision, but maybe I can get a copy from him now. He's a big builder with many subdivisions large and small and is still in business. His original association was incorporated and did carry insurance. The Secretary of State's office told me that all that was required for dissolution was the procedure I described that we went through when it changed hands, but I'll do some more investigating and if I get any relevant information I'll post an update. Thanks.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Louise

Not to jump on, but you did sign to dissolve.

You are beyond casual chat advice. Either accept your mistake and live with it or hire an attorney. I see no other alternatives.

Sorry to sound so harsh.

LouiseC2 (Idaho)
Posts: 12

Posted:

JohnC46 - Wow, what a guy you are. I'm only continuing because EllieD asked me for clarification and GlenL has been helpful and seems interested. If you aren't, then don't follow.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Louise

This is a public chat forum. You came out here and opened the door asking for help. Blaming someone for everything.

I posted several times trying to help/advise you on how to get control of your HOA, as did others.

Then you lay the bomb on us that as a member of the BOD you agreed to dissolve it and you did not even know you had done such.

Sometimes the truth hurts. Often one has to step up and take responsibility for their actions. Often this might require time and money to correct.

LouiseC2 (Idaho)
Posts: 12

Posted:

Thanks to all who made positive comments and suggestions; through your input and my subsequent research I learned some things I didn't know that have helped me.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

I'm sorry but you have a mess on your hands and it's probably going to take a lawyer and money to straighten it out.

DOH

Attorney OR live with situation OR move on down the road was my advice, anyone see other options (since the other owners don't care)?

caveat emptor

CH4 (Texas)
Posts: 1

Posted:

Quote:

Posted By LouiseC2 on 05/02/2012 9:15 AM

I think my only other option, aside from moving, would be to have my own sprinkler system installed and simply withdraw from the HOA.

Louise, I'm so sorry this has happened to you. Thank goodness you can withdraw from this sub-HOA, though. I hope the amount of money you have paid as dues (for services you never received!) was not too great. Better to say goodbye to money already spent, than spend more money to fight it. What will you gain anyway? Your neighbors are more interested in landscape than services, so the ultimate decision will not change. Even if she has not done everything properly, I can see her getting the neighbors to sign-off on any documents to make things right. As I said, thank goodness you can choose not to participate.

Seems the best thing you can do is to not give any more money to this an endeavor for which you receive no benefit. The president and your neighbors are all happy, so let them pay for their own landscaping.

Perhaps, as others become disillusioned, they will leave the sub-HOA too.

claire

LouiseC2 (Idaho)
Posts: 12

Posted:

Thanks Claire. I agree with you completely, and I've decided that there's no point in continuing to struggle with them. Which is actually a big relief!

EllieD (Vermont)
Posts: 446

Posted:

LouiseC2,

I encourage you to not “just give up”. By coming to this site you have gotten some very good information – in particular from GlenL (Ohio) and a few others.

1. CC&Rs and Bylaws: IMO there is no reason not to use the Master HOA ones – probably all that would be different for your “sub” would be the “land descriptions”. I did some “googling” and “Master” and “sub” Associations seem quite common in Idaho.

2. You wrote that you never received CC&R's for the original association run by the builder of our subdivision ... but that maybe I can get a copy from him now.

While you might not have been given a copy, you apparently bought into a HOA so your Deed should reflect that. Someplace in the “packet” of papers you received at closing there should be a reference to “a Filed Declaration, and/or CC&Rs etc” by Book and page Number.

3. Unless you know where such documents(land records) are filed for where you live, you should be able to get this info from your copy of the Master CC&Rs. Look thru the first couple of pages and/or the last couple of pages. You are looking for something that reads like:

"All of the land within the boundaries of Pxxxxxx Hxxx Subdivision No 4, according to the plat thereof recorded in Book 00 of Plats at pages 0000 and 0000, records of Ada County, State of Idaho".

Apparently land records and Documents are kept (recorded) at your County Office – so phone and ask if any documents have been recorded for your “sub Association” by name. It also might be possible to do an “on line” search.

4. You wrote: She did legally dissolve the old, incorporated HOA; all it required was 3 director/members of the old HOA.

IMO, and I am not an Attorney nor do I work in the legal profession, you should not be too worried or concerned (except perhaps as it affects Taxes) with the fact that “your President” changed the Association status from Incorporated to unincorporated.

Apparently in Idaho, HOA Associations can be either. With a Google search I found: In Idaho there are nearly 2,500 homeowners' associations (HOAs). They are typically organized as membership non-profit corporations, or unincorporated associations. And:

"Sub-Association: An Idaho non-profit corporation or unincorporated association organized by the Declarant or by one or more Owner pursuant to a Supplemental Declaration recorded by the Declarant or said Owner(s) for any specific tract or parcel within Pxxxxx Hxxx Subdivision".

5. I also doubt that anything was legally dissolved. I agree with GlenL who wrote “I doubt she had the power to dissolve the builder's HOA or form another one.”

To "dissolve a HOA” as I understand is something completely different. IMO all that happened is that your status as Incorporated was changed to unincorporated.

As GlenL pointed out “The Covenants run with the property”. If you do not understand this concept and/or what it takes to dissolve a HOA, please post again and ask.

6. INSURANCE: If I were you, the one thing I would be worried about is “no insurance” - referring to your statement: The President convinced us that we didn't need insurance (even though the builder told us it was very important)

Your Builder told you, insurance was very important – because it is.

For starters you should have Comprehensive public liability insurance. As GlenL wrote “I'm not an attorney . . . . but with no insurance if anyone were to be injured or killed on any common area then EACH and EVERY homeowner could be sued for it.

Also you need D&O coverage (Directors and Officers liability insurance). IMO, no one should ever agree to serve as a Director, Board Member, or Officer unless there is high limit D&O coverage in effect.

And you probably want a Fidelity Bond and Fidelity Insurance to protect your(the Association’s) money.

To find what other Insurance you should have check the Master CC&Rs. There should be a section titled “Insurance”.

Also, if possible try to get a copy of the Insurance Coverages that had been in effect. Then contact that Insurance Company and/or Agent and discuss.

7. Also troubling is that you wrote: “the "Board" wants to spend a large portion of our reserve funds to replace the mulch in the front planting beds on the entire street with expensive crushed rock”. If you actually have a proper “reserve fund” then generally reserve funds are to be used only for what they have been put aside(reserved)for–and for nothing else.

8. As JohnC46 posted there are ways to “fix things” such as by calling a Special Meeting of Members “to recall anyone on/or the entire BOD. FYI, the procedure for doing that should be in the Bylaws.

However, as already suggested, you will probably need the help of an Attorney who specializes in Home owner Association law. IMO, if nothing else, you should inquire, and/or ask about, and arrange for a free consultation, with a couple of different attorneys.

You apparently are concerned about the present “state of things” and want “your” Association to function as it should. I hope you do not really mean that “there's no point in continuing to struggle with them.” Also, there is no easy solution such as “to simply withdraw from the HOA”. That has been discussed here, on this site, many times.

9. I would encourage you to “learn more” about Home Owners Associations and how they are supposed to operate. Then you will have the knowledge to “discuss issues” with your President and also to persuade your neighbors, so as to get them on your side. I wish you success.

EllieD (Vermont)
Posts: 446

Posted:

LouiseC2,

While doing some Google searching on HOAs in IDAHO I found a resource, that you might want to check out,if you have not already:

http://www.vf-law.com/

Disclaimer, I have absolutely no connection with this Attorney’s Office. But I did find the web site to have many good articles re Home Owners Associations, and the site indicates that they practice in IDAHO.

And, the best part, maybe - they have a recently published a Book for Idaho HOA Boards.

Paraphrasing from the site: May 1, 2011, The Boise office is proud to announce the arrival of its new publication for Idaho association boards.

"The Official Board Guide: Records and Resources" is a collection of legal advice on topics like governing documents ... . There has not been any single legal resource for associations and board members in Idaho up until now.

Based on Idaho law and association practices ... straight-forward, easy-to-read legal advice to help board members ... . To receive one of these complimentary Official Board Guides (also known as the big orange binder!), Xxxxxxxxx is happy to offer one free copy to each association board. Please give us a call or email to see if you qualify.

GlenL (Ohio)
Posts: 5,491

Posted:

Louise, I would start at your County Recorder's Office, if Idaho is anything like the rest of the country the Declarant would have had to file at the very least the Covenants there. Now in my county all I have to do is enter my HOA's name and every filing recorded for it is at my disposal on their website. FYI while it is simple to abolish a corporation with a few signatures, typically it requires 100% of every owner signing to abolish an HOA and the mortgage holders if any. That plus you have to find someone willing to take responsibility for any common areas.

I wouldn't give up or stick my head in the sand and hope it never rains because when the Piper finally needs to be paid if I were one of your fellow homeowners I would be looking specifically at the three people who signed away the original corporation and allowed this to happen.

Studies show that 5 out of 4 people have problems with fractions

LouiseC2 (Idaho)
Posts: 12

Posted:

EllieD and GlenL,

Thanks so much for all the research you have done and advice you've given. I found that I had the CC&Rs for the builder in a PDF file on my computer! They say that all the rules of the master subdivision apply and add some additional stuff about party walls; they also say very specifically that insurance is required and spell out what kind. There is also some information about voting and most importantly they state that unless all "First Mortgage Holders" have given their written permission, basically NOTHING can be changed. So, even though she filed an articles of dissolution document, I believe you're correct that the dissolution would be found invalid if challenged.

But, there's more.

I was organizing all the copies of all documents I'd downloaded from the secretary of state website to put in a folder for future reference, and I kept getting confused by the dates; I thought I must have saved something incorrectly or saved some things twice. So I went back to the website and looked carefully and here is what I found:

The original, builder's HOA was XXX LLC. She filed articles of dissolution for that one in January of 2010. We didn't vote or give written permission, but most of the owners were at the turnover meeting and said it would be OK. She then filed articles of incorporation as XXX Homeowners' Association, Inc. So we were still incorporated at that time. Then, in November of 2011, she filed articles of dissolution for XXX Homeowners' Association, Inc. The form says 12 of 14 members agreed, just like the first dissolution form. But that one was a total fabrication. She never even mentioned dissolving and recreating our HOA at the yearly meeting we had right before she did the second dissolution. Then she turned around and filed an "Unincorporated Nonprofit Association Appointment of Agent for Service of Process" as XXX Homeowners' Association (which required only her signature and that of the treasurer).

She may have shot herself in the foot on that one. I've done some research on unincorporated non profits, and in Idaho "members come and go at will". So, unless somebody challenged both dissolutions, I believe that I could withdraw.

I don't know what I'll do. I've been going round and round with this woman for 2 1/2 years and I'm frankly tired. (Everything is a battle with her; even getting a sprinkler head adjusted required a two day ordeal and my submission of a picture of my wet fence.)

None of the other homeowners seem to care at all and I've begun to feel like a pariah for being the one not to go along.

LouiseC2 (Idaho)
Posts: 12

Posted:

Just FYI, we don't have any common areas on our street - the master subdivision has some but I think those would be covered by their insurance.

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