FL HOA loaning money to CAM's 2nd business LLC

Our CAM manager operates like she's a board member. The current HOA has over 2,100 homes. The BOD president is also the president of another HOA in our same area. (There are several sub-associations with their own CCR's, HOA fees, etc.) This CAM is also contracted by the other HOA to be their CAM, too. This president consults her opinions and acts on them at Board Meetings. The CAM for the association is also the owner of the management company along with her husband. They own another LLC business they call a "rental company". This CAM is extremely aggressive with foreclosing on homes if they are late on $60 annual HOA dues. When the HOA forecloses on homes, sometimes they sell the houses. At the last HOA meeting, the CAM said they had been deeded over 3 or 4 houses from the Board that "no one wanted". I found in the HOA minutes that the Board of Directors Unanimously voted to all the CAM management company to take loans from the account for "up to $20,000 PER HOUSE! No oversight committee on them taking this money. Furthermore, the management company's second business, the "rental company" supposedly fixes up these houses and keeps the rent money. If the home is foreclosed upon by the bank, the CAM said at the HOA meeting that they "will make the Bank prove they really own the house by demanding they come up with original documentation." Only when the house sells back to the bank does this "rental business pay back the association!

I am outraged. I am on the Board of another HOA and cannot believe this has happened. Furthermore, I looked up these "3 or 4 houses" that was deeded to the "rental business" and these are homes currently in the 2nd HOA that our President is also President!

So, our HOA is loaning money to a business that was deeded homes from another HOA where both the President and management company work for both HOA's.

What would you do? Where do we start? The management company said this is perfectly legal. I say it's not on many levels. I just want to hear what ya'll have to say. Thank you.

Sheri,

What is legal is not always ethical, proper or good judgement.

I suspect that your governing documents authorizes the Association (i.e. Board) to exercise all authority not held by the membership. This authority would include investment of money (stocks, bonds, loans, certificate of deposits, etc.).

Providing normal interest rates are being charged, there is some sort of loan paperwork signed and payments are being made on time, since the decision was made by a vote of the Board, it probably is legal. Granted, I wouldn't do it and I think it's a bad business decision, but that doesn't make it illegal.

If it were me, and I was on the board, I would inform the membership of the issue through the financial statements (i.e. a separate line item for loans made/notes held) and the minutes.

If it were me, and I wasn't on the board, I would question the business decision and, if there was enough support by the membership, recall the board or not reelect them. The Association would still be bound to the agreement but by removing the board that made that agreement, perhaps it will prevent it from happening in the future.

No loan paperwork is filed. Furthermore, keep this in mind: one HOA is loaning money to repair a house in another HOA. This was not brought before the community. And our association is not getting the rent. This is highly improper in my book.

Thank you, Tim. Yes, we did a written recall of three on that Board, of which I am presently a director / Treasurer. I own a handful of properties in areas with HOA's.

Right. This is a different HOA.