President Bought Property at Auction

Our president was notified by the county that property next door to her was going up for auction. None of the board was notified. She purchased the property, and we believe she didn't show up at court to make sure the community received the back dues and they were wiped clean. We will be verifying this information this week by researching the court records.

While this is not illegal for her to purchase this property, what is your take on her doing it without notifying anyone that she had the intentions of doing this?

When buying a property at auction do you....... (A) tell everyone and bid against them? (B) Shut your mouth, tell no one and try to get it for the lowest price possible.

If I'm on a mailing list for auctions, many of which you have to pay for, I dont have to tell anyone. Want to be notified? Sign up yourself. As for back dues... lets say the property had a mortgage of $100,000 and hoa dues outstanding $5,000. And the property sells at auction for $50,000. The mortgage company gets $50,000 and takes another loss of $50,000. The HOA gets nothing.

I think the question is was the Association notified of the auction or the individual who happens to be President notified of the auction?

If it was the Association, then there was a responsibility to pass that info onto the Board.
If it was the individual, then there is no further responsibility.


That individual might want that but they are only one vote (well, two now since they own the other property). The answer to this is likely within your governing documents. Typically the Declaration requires that Assessments are done uniformly (usually for lots) or as a percentage of ownership (usually in condos). To change how assessments are levied, it usually requires an amendment to the Declaration. You should check yours to see what they say and, if it requires changing, make sure that the whole board is aware of it.


Well, it is typically a public record that shows who purchased property. They should have expected the word to get around.


I do believe that the Board should have been informed of the auction, as this would have allowed them to make sure all their documents were together. I think this should have been done regardless if the notice was sent to the individual or to the Association.

I do not believe that the auction should have been announced to the entire membership, as it serves no purpose.

What is legal is not always what is ethical. Members of the Board should do what is ethical but must do what is legal.

Unfortunately, in today's society, ethical behavior appears to be optional.

Katie,

Are you on the board?

I ask because there are different courses of action that may be possible to try and prevent things like this in the future.

Katie,

I’m inclined to agree with you. The court sent notice to the association and not the president personally. The president used insider information to profit and maybe did so at the expense of the association. She had a duty to inform at least the board. If the notice was sent to the association then it should be filed in the association’s records.

The president has a fiduciary duty to the association and its members. She has already breached that duty by withholding information from the association so that she may profit.

I am curious why the president and not the association’s attorney would appear in court. In most states, a mortgage lien is superior to an HOA lien, so a mortgage foreclosure usually wipes out the HOA’s lien. That said, there is still the appearance of a conflict of interest when an officer of the association purchases property under conditions that will result in the association being short-changed.

Katie,

My question about the court appearance came up because in most states an attorney must represent an incorporated association in most courts. For example, in AZ an officer of the corporation may represent it in Justice Courts but not in the Superior Court, which is where foreclosures proceedings take place.

I readily admit this isn't the first issue with the president of this board. This is just yet another bullet on the long list of issues. There have been blatant illegal issues that are being dealt with legally. And as I said, this, perhaps, is not illegal, it's just unethical and speaks of her character.

Thank you Tim - we already are in the process of fighting this. She was asked to resign and refused. We are now getting signatures for a special meeting and will deal with it there. We have also hired our own attorney to take care of the illegal activities.

Just wanted input. Thank you all.

Happy Thanksgiving to you all.

Who is the we?

Thanks

The 'we' is my husband and I and several property owners here. We have a petition with the 40 signatures needed to call a special meeting and vote them off the board.

The truth of the matter is that this association is so far beyond recovery financially. The IRS has already contacted them within the past few weeks regarding the past 3 years of filing their tax returns and being on the wrong form. This is something that was brought to their attention a year and a half ago, but they did nothing. It has now caught up with them. On previous tax forms we have come across, they also blatantly lied on them saying they were not receiving any other monies other than the dues, but for years they opened our golf course to the public, sold passes to the public and deposited that money into the general fund, not reporting it as income.

There are NO amenities left in working order. The parks are non-existent, the tennis court is in shambles, the golf course has been closed, the pool pumps went down mid summer and it has been green ever since. But they managed to spend over $1100 over the course of 2 months to hold a May BBQ and a 4th of July BBQ. They haven't had an audit done in years. They are now spending money on a high-dollar website that is not mandatory, although the Treasurer is telling everyone it is, instead of spending what little money they have left fixing our neighborhood. I honestly think they are beyond recovery at this point. And yes, before anyone starts to attack me about doing things to help fix things, PEOPLE HAVE....WE HAVE. As I mentioned, my husband got on the board, but he was up against a brick wall when it came to try to get the board to ACT on anything. Most of the owners have lost interest and simply do not care anymore. We have offered options that are fairly inexpensive to getting things back on track, but they sit on those suggestions.

We are now going to to try to sell and get out before they end up all the way in the toilet.

That's what I'm thinking, too Brad. We will be taking all of the information regarding that incident and other documents to our attorney next week and going from there.

Have a wonderful and blessed Thanksgiving!

Am I the only one who doesn't see anything done wrong here? Just what one wants to see as wrong? Auctions of foreclosed property are PUBLIC information. It's IN the newspaper!!! Anyone could have this knowledge and it is NOT inside at all. Yeah maybe the bank did call up the HOA to get details and that tipped off the President it was a bank foreclosure. However, I could very well walk by a house that's abandoned in my neighborhood and inquire the same information. Matter of fact I know of one now. Would it be unfair because I live in the neighborhood and know a neighbor who confirmed to me it was a foreclosure? Where is that line?

People often look for crooked things when they are displeased. The trees for the forrest. The real issue here is that the HOA memberhip is Apathetic. Which means the people who do participate and get things done get their things done. It will be the SAME way when and if you get on the board after kicking these people out. It will be YOUR agenda and people criticizing it. Always a "bigger fish". The membership will still be apathetic just a different crowd who is not. So don't fool yourself into heroship.

I say this from experience. Our HOA was completey apathetic and had a con-man as president when I took over. It was a mess. Took me a year just to straighten things out. Mainly because I had to deal with the con-man President as my Vice-President for a year before getting rid of him. After that I made my goal to have people want to kick me out of office and take over. That cured our apathy and increased participation. Once I got things straightened out there was not much shortage on who wanted to participate then. That is how you change a HOA. Changing the apathy.

If she was notified personally, it would be a different story

Melissa, I am not fooling myself into 'heroship' or anything else for that matter. You don't think there's anything wrong with this, and that is fine. You're entitled to your opinion.

John, you, also are entitled to your opinion that the president didn't 'hoard' information. After all, I asked for your OPINIONS, not an attack.

There's is a LOT more that's going on than just the property issue and I've already acknowledged it is NOT ILLEGAL. Try tax forms that haven't been filed correctly for the past 3 years (and they were told this 18 months ago, but still did nothing), audits that haven't been done in years, money missing. And this is not just my opinion, or suspicion, it's FACT. I have paperwork to back it up. And yes, the IRS is bearing down on them now, and not just for that, but for selling amenity passes to the public and not reporting the income. They don't have meeting minutes that are correct, some are missing altogether; elections where the president held the ballot box for two days and then personally took it to the CPA for counting, when she herself was on the ballot. I don't know about your state, nor do I claim to know, but in Texas, that's a no-no. We have had a green pool since July, so it wasn't usable all summer by anyone, they've padlocked the golf course, the tennis court is a dump.....it goes on and on. So my "issues" with the president aren't mere unhappiness with her, they are facts and will dealt with legally.

Wrong is wrong and if some of you don't think any of this is wrong, then as I said, you're entitled to your opinion.