Board Only Used 1 Opinion for $150,000 Building Repair Work -- Being Assessed to Home Owners!

Started by SamE1 • 14 replies • 1966 views

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SamE1 (California)
Posts: 32

Posted:

Our Board needs to address a roof/balcony water leak/potential mold issue in a bottom floor unit. They hired a forensic construction company to diagnosis and assess the problem. The company came back with a whole project that they will manage (bid out to other contractors) with a total estimated costs of $150,000!!!! They are not pursuing the roofing company that put on a new roof just two years ago, nor pursuing a claim through our insurance company. They are planning to impact an assessment on the 16 homeowners to pay in full for this expense! They are NOT planning on getting a second or even third bid to make sure the problem/scope of work and solution is correct.

Doesn't the Board have any due diligence responsibilities to at least get a second or third opinion to make sure the steps they are taking are correct? No one on the Board or HOA has ANY experience, knowledge or background in this area. They are all totally ignorant and seem to just trust this one company to move forward.

As the homeowner on the top floor, my unit will be greatly impacted (my entire balcony will be demolished and reconstructed) with a huge financial and inconvenience hit to me.

What rights do I have as a home owner to require them to do further investigative work (getting other opinions etc.) before proceeding?

TimB4 (Tennessee)
Posts: 21,062

Posted:

Boards should use due diligence but are also allowed to make bad business decisions.

It's possible that the leak/mold started more than 2 years ago (or can be argued to have started more than 2 years ago) which just means additional expense for legal bills to go after the roofing company on something you may not win.

Most insurance companies no longer cover mold issues. If this is the case with your Associations policy, it's likely that their is no claim to be made or paid out. You will have to read your policy to be sure. It's also possible that your deductible is more than the cost of the repairs which makes filing an insurance claim mute.

What is your Reserve Status?
Are they fully funded?

Even if the Reserves are fully funded, it's likely that nobody planned for this type of an issue. Therefore, there was no money set aside for it (unless you have a contingency fund).

To prevent this in the future, you may want to urge the board to establish a contingency fund for unexpected repairs. Perhaps up to a limit of 100K. Once this is funded, it can be used to offset future unplanned issues.

I understand the financial strain and the inconvenience. Unfortunately, things like this do happen and have to be delt with when it happens.

To determine why the decision was made (but likely won't undo the decision) you can read past minutes. Read the report. Attend meetings and ask questions. Perhaps volunteer to things the existing board members don't have the time to do.

If you don't like the decision of the Board you have the following options:

Do Nothing
Vote the bums out at the next election and get yourself elected so you are part of the decision process
Recall the board
Sell & Move

I know it's not what you wanted to hear but I hope it helps,

Tim

LawrenceC1 (Georgia)
Posts: 480

Posted:

Sam,

Most states have a statute that says that a director’s fiduciary duties in a nonprofit corporation such as a community association include acting in good faith, with the care an ordinary prudent person would exercise, and acting in a manner the director believes to be in the best interest of the corporation. You may want to search through the California Davis-Sterling law.

Fiduciary duties are always dicey to enforce, since terms like "good faith", "prudent", and "best interest" do not have concrete definitions.

But it might work to encourage the board to get some additional bids and check the insurance coverage if you point out these duties to them. It would carry an even stronger message for a lawyer to write the letter. It may be worth spending a couple of hundred dollars with an attorney when you are otherwise facing a bill of thousands.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Sam

Have you expressed your concern to members of the BOD and fellow owners about this sizable a contract (cost and complexity) going out without bids?

My suggestion is drop the issue of inconvience to you and concentrate on the no bid and complexity.

Hope this helps.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Law

One of the most aggravating BOD I ever served on had an attorney, homeowner on the BOD. He was afraid to sneeze without legal advice. He cost us time and money concerning the most mundane things.

Hope this is not taken the wrong way, but...aha the but.....you remind me of him. It seems to me that you advocate taking legal action, getting legal opinions, etc. as almost a first line of defense, versus a last stand defense.

Not meant as critical as it sounds....but..but....you semm to like billabe hours...LOL

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Sam,

If the issue is solved through the new installation of a roof, then a "forensics" construction company is probably overkill. However, if this problem has festered, requiring mold search or structural rot due to leaks, then a firm that concentrates on multiple tasks - assessment, demolition and reconstruction of more than a roof - is probably a smart move even if it's subcontracted. Flood and fire victims need these forensics construction firms.....your problem could mimic flood damage.

A multiple-prong, property problem needs a contractor over the volunteer board members, whose wisdom you do not trust.

No-bid is a problem UNLESS there are no other companies that can offer turn-key or comprehensive solutions to your community problems.

A roof failure after two years, if the roof's problem originates from the new installation and not the result of the board ordering the "cutting of corners" in roof installation, is a big problem. Do not rule this out.

Threatening legal action which could delay the relief you and your neighbors obviously need is a big problem.

Filing an insurance claim should be carefully weighed before allowing an adjustor to tour your property. Our HOA filed a "mold claim" for a damp basement in our clubhouse. The insurer, rightly so, blamed poor HOA maintenance and shifted our account to a higher-level official to consider a non-renewal of our policy. It was a $46,000 insurance claim.....in reverse; we had to correct our neglect and oversight.

If there are other options, bring them to your board. The price will likely be in the ballpark for all the companies but you'll have options AND the board may get assistance it needs. Ignorance of possible vendor options and not negligence may be to blame.

Bite the tongue and extend a hand.

SamE1 (California)
Posts: 32

Posted:

Thanks. Great advice. I've contacted an attorney and agree 100% -- a letter from an attorney that costs a couple hundred dollars is well worth it if it can save thousands. I can't imagine any lay person would consider a $150,000 repair job and not get at least a second or third opinion. That would -- to me -- be in the "best interest", "prudent" and in "good faith".

SamE1 (California)
Posts: 32

Posted:

Thanks. Yes -- I expressed my strong opinion (concern) to the BOD last night at our annual HOA meeting. Much to my surprise -- the Board and other home owners were fine to move forward with the one single forensic construction guy in charge. Their words -- "he seems like a good guy and we feel comfortable moving forward...". It is amazing to me that they can be ok to impose a $150,000 assessment without a second opinion. Our reserves are low. We would not be able to pay for it out of reserves -- they want it all through assessments to the 16 home owners.

SamE1 (California)
Posts: 32

Posted:

You obviously don't understand the issue or concern. I am a home owner and business person and I like to make good business decisions. I don't want to be assessed $150,000 without doing some due diligence. If you would like to cover my portion of the expense I'd be happy to allow that and not pursue any legal action. If you read what I wrote, I asked for a second opinion from a construction forensics specialist...not an attorney. If the Board is only intent on getting one single opinion to reconstruct a major portion of our building -- including my unit - then yes... I'm going to get legal advice on my rights. Thanks for the advise...but no thanks!

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Sam,

Why bring your concern to this forum if you'd predetermined you were going to hire attorneys and probably sue your HOA board? Keep in mind that you're suing yourself and delaying your own repairs being conducted, no-bid contract or not.

If you're not a board director, it's time to step up and serve to improve your operations. It appears your board hired a bad company two years ago and wants to blindly hire another company because the man "seems nice." What more do you need to consider lending your talents to this group from the inside?

You're not going to spend thousands of dollars of your own money for an attorney to haggle, in court, over the definitions of words. If you do, you'll pay that plus your assessment. I'd rather see someone help the board assess the new and bad roof and consider directing lawyers towards the company who installed a 20-year roof that lasted 20 months.

The cure for HOA drama is competence. It works like water on a fire.

LawrenceC1 (Georgia)
Posts: 480

Posted:

Quote:

Posted By KellyM3 on 07/19/2012 3:54 AM
...The cure for HOA drama is competence. It works like water on a fire.

Kelly,

It's not often that easy.

It's hard for new members to get elected and vote out an entrenched group of long-standing directors. The incumbents have their friends and supporters, who are likely to be active voters. There is probably a large group of apathetic homeowners who don't vote at all. The rest of the homeowners, who haven't made up their minds, are likely to see only bickering and mud-slinging without a clear picture of who represents the problem and who represents the solution. So the incumbents survive and are voted in for another term.

Even if new board members are somehow elected, seldom will an incompetent board welcome new more competent members who can do things better. More likely, the incumbent directors will do everything that they can do to avoid looking bad in comparison, by putting obstacles in the way of new members looking to improve things. The new members will often get disillusioned and disgusted and walk away, and the problems continue.

Sometimes, you just have to deal with the existing board and bring in a third party to hold them accountable. This doesn't have to be an attorney, although that can be a good option. It could be a mediator, or an ombudsman in states that have one. And if you use a lawyer, it doesn't have to go all the way to a lawsuit and court hearing. Sometimes, just a letter from an authoritative outsider is enough to break up the "groupthink" that dominates some boards.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Having apathetic homeowners chronically whining, not stepping forward except to hire a lawyer and acting helpless is a sure fire strategy for success. The community gets what it asks for. Victimization is a losing hand, Lawrence.

Sam - Sue them blind!

SamE1 (California)
Posts: 32

Posted:

Thanks - appreciate the response. To be clear - I'm not predetermined to sue the HOA (which is obviously me as well). I'm willing to engage an attorney to write a simple letter (that may cost me a couple hundred dollars) to force the Board to simply do the due diligence and act as fiduciaries to get a second opinion from another forensic construction expert. One single letter from an attorney reminding the Board of their duties/obligations can go a long way. I've been a Board member for several years (and "stepped up to improve the operations") and know the process and have worked very hard to keep my building running well. This is the first year I have lived in the building (7 years now), I am not on the Board. When I was on the Board, we absolutely received at least 2 bids before work was undertaken.

SamE1 (California)
Posts: 32

Posted:

THANK YOU LAWRENCE. YOU HAD VERY GOOD INSIGHTS AND SEEM TO UNDERSTAND MUCH OF OUR SITUATION.

JeanneK3 (Maryland)
Posts: 562

Posted:

SamE1:
It's unfortunate that you only got one bid but it sounds to me that the work must be done. If the one-time assessment route is too hard for your neighbors, consider getting a loan to do the work. There are reasonable loans available to HOAs.
Jeanne

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