Another wacky HOA bill for Indiana?

I received an email from the central chapter of community associations institute (CAI) today (I have a membership to serve as our association’s representative in local meetings). Here’s a summary:

• The state legislature is considering House bill 1084, which would give the state Attorney general and homeowners the right to inspect the association’s financial records (ALL OF THEM, which would include invoices, contracts, receipts and bank records) . The Association would have to honor the request even if the person making it refused to say why he/she wanted them. The most the Association could charge for photocopying the records would be a dime per page.

• Furthermore, if there’s a dispute between the homeowner and HOA, board members would have to make all of their correspondence related to the dispute available to the homeowner (except for documents that are attorney-client privileged information between the association and association attorney and other communication considered work product in anticipation of a lawsuit)

This has already passed the state house of representatives and a committee hearing in the senate is scheduled for Monday, March 4, 10:30am in room 130 in the statehouse. If you feel strongly about it one way or the other, send an email or make a phone call to your state representatives. CAI would like people to show up at the hearing if they can so they can tell the members this bill is really whacky because:

1. It singles out homeowner associations in making available records other corporations want to keep private. In fact, current state law doesn’t require most non-profit corporations to comply with similar rules (most HOAs in this state are chartered as non-profits. The state’s Nonprofit corporation act of 1991cays a member can make a demand to inspect the records in good faith, for a stated purpose and he/she must describe what records are being requested, and those records must be related to the purpose.

2.This bill, if made into law, would open the association’s records to any member for any reason, which puts the association at risk for “fishing expeditions” by people who are only asking for them because they’re upset or disgruntled. The Nonprofit corporation law protects most records from being open to members because it’s important to keep those records private

3. If contracts are made available for inspection at any time, even during the bidding process, this bill might end the right of the association to conduct confidential bidding for contract services

4. The bill doesn’t allow the association to charge the homeowner additional charges, if warranted, for the time, management processing charges, professional fees, etc., that may be incurred in order to produce the records for the homeowner.

5. The bill doesn’t place any time limit on a member’s right to inspect all financial records, which means he or she may ask for records as far back as the association maintains them

6.Boards would no longer be able to conduct executive sessions to discuss issues involving a specific homeowner. The board members would have to provide all correspondence produced that is related to the issue except for those protected by attorney/client privilege or work product. That means, any conversation, emails minutes, etc., between board members that were exchanged prior to bringing the issue to the association attorney would have to be produced.

My comments on HB1084 (for what they’re worth)

First of all, I agree homeowners should know where the money’s going and why – after all we all pay for the services. Board members shouldn’t gain more benefit than others, so if there’s an actual or potential conflict of interest on any issue, he/she should disclose it immediately and if it can’t be resolved, excuse themselves from discussion the issue or voting on it. Homeowners should know if the Association has X number of people who haven’t paid assessments, how much is owed and what the Board is doing to collect (and it should be doing everything legally possible)

But bills like this demonstrate once again that the Indiana state legislature uses a sledgehammer to squash a fly. I’m well aware there are some rouge HOA boards that keep everything from everyone, and therefore harsh action such as recalls and perhaps lawsuits or the threat thereof, would be necessary for them. I wonder if this thing is the result of what’s happening in the Harbours Condominiums in Jeffersonville (this is the one the Attorney General is suing three former board members for a complete breakdown in honoring their fiduciary duty – you can probably Google the name to get the full story).

It may also be a response to the HOA in Evansville (I forget the name) where the board president has made everyone upset for one reason or another and basically cussed out a TV reporter who’d contacted him (unfortunately for him,, the phone call was played as part of the news story). I really wish the Legislature would slow down and do some research before coming up with this stuff.

Or maybe go back to proposing bills like mandating cursive writing be taught in school or that the Star Spangled Banner be sung a certain way (yes, these have been actual bills!)

My biggest concern about this bill is that people may be able to see everyone else’s account information on delinquencies (in my community, that would be A LOT of people!). I really don’t want to get into discussions about “why did so and so get a payment plan and I didn’t?” (because you reneged on the last two or three?) Homeowners should know what the board is doing about delinquencies and if it isn’t actively pursuing them, they should demand why, but knowing that Mr. Jones and Mr. Smith and the Wilkerson are behind by X amount of dollars doesn’t serve any purpose unless someone comes forward and offers to pay it.

I'm also concerned that this type of thing might discourage people from volunteering for the board and many HOAs like mine already have trouble getting people. I agree people should act in a professional manner and recognize they should pay attention to what they write and say because it can bite them in the behind if they don't. But there also needs to be room for open debate and as some of you konw, there are a few times where the Board does have to go into executive session to discuss certain issues without having to worry about disruptions. Executive sessions should be extremely rare and I believe most of them are (our Board has only had one in the last three or four years)

I have a little more to say about this, but am trying to pull my thoughts together for an email to my local representatives since I can't make the hearing. In the meantime, anyone else from Indiana and elsewhere are welcome to weigh in, as I know there are some variations of this bill that have been considered and perhaps made into law in other states - your experiences, good and bad, will be very useful!

Shelia,

Access to the financial records is standard in VA (and in my opinion should be in all States).

Access to records related to a violation is part of our hearing process.

VA open meeting law also discourages having communications about issues outside of a meeting.

Since I'm already use to what your State is proposing, I have no problem with it.

As for your issue about the contract, it's not a contract until signed by both parties. Until then it's a bid on a contract. Our board uses the blind process (names are blacked out and companies are referred to as A,B,C) when awarding contracts. Once signed, we actually include the contract as an attachment to the minutes (and minutes are available to all members).

Here is a link to the bill and all variations.

Sheila-

Please take advantage of the link in TimB's post to read the bill for yourself. Do not rely on the CAI interpretation. Do you suppose that the CAI is a homeowner's advocate?
I can see how one might make that mistake, but alas, it is not true.

Please do not rely on a trade association to tell you how to think. The CAI considers your assesment (and all HOA dues) as theirs to earn. (and I use the term earn very lightly)

Laws are usually proposed to protect homeowners. But don't worry, the CAI will have plenty of well-dressed lobbyists at the hearing to fight against the parts of the proposed legislation they find onerous to their agenda. What a shame that they will also mislead some homeowners like you into testifying against their own interests as well.

I hope you never personally need the protection the legislature is trying to codify; but most homeowners will, sooner or later. Some won't get it in time.

Please do some research before you make up your mind.

Elaine

The goal for HOA Boards should be like that of public institutions - Transparency to their memders.

My city, my county, my state, and my local school board are required by law to make those documents available for inspection and to provide copies if requested. Ditto for police and court records.

This issue got its share of responses – thanks everyone! I probably didn’t clarify a few things as I wrote my original post, so here goes.

First, I have no problem whatsoever with transparency – as I said before, this is everyone’s money and so we all have a right to know where it’s going. I’m treasurer of my association and shortly after posting I continued work on our annual report, which includes an itemized recap of last year’s budget. We’ve always made the minutes and income/expense statement available to anyone who wants to take a look at it, and if people wanted to see the contracts we sign, they could do that too (although no one’s ever asked).

And boards have a responsibility to follow the Association’s bylaws and CCRs, and if there’s a major issue with what they’re supposed to say and this happens all the time, it may be time for the association to consider taking a hard look at the regulation and how it’s enforced to make sure everyone understands it and that it’s applied consistently and fairly. If nothing else, maybe there could be more effort in writing this stuff in plain English as opposed to legalese – no wonder people get confused.

I know some of you have negative experiences with CAI and I know my job is hard enough without people trying to manipulate our board or our homeowners for a buck, so I do try to watch out for that. I can only speak for the chapter here in Central Indiana and thus far, and I’ve never found them to be so pro-HOA they ignore legitimate concerns about rouge boards (and property managers, for that matter). I’m also well acquainted with folks in the AG’s Office and I know they’ve received a number of complaints over the years about this stuff.

Part of the problem is that Indiana law is way, way behind other states that have more refined legislation on HOA operations. I wish these folks would attend someone’s board meeting to see and hear for themselves what’s going on. Instead, people run to a TV news reporter yelling about so much unfairness of things because they didn’t read the rules or just decided a particular rule doesn’t apply to them, and instead of using common sense, we get all this hooey about one’s constitutional rights being violated.
Of course, there could be a bright side to this – maybe if homeowners really saw how hard up our association is, thanks to banks and deadbeat homeowners, maybe they’d shaddup about “my fees are too high” – of course they’re high when people don’t pay their fair share!)

The main driver for my reservations about this bill is delinquency information – some people could use this to get hold of information about their neighbors that really isn’t any of their business, dash over to that neighbor’s home to confront them and then all hell breaks loose. Our HOA tries hard to look at everyone on a case by case basis and when we make counteroffers to people who request a payment plan, we have our attorney or property manager explain what our reservations are and we’ve also told people what sorts of things we consider via our collection policy that we distribute every year.

So that’s my take. Personally, ‘m hoping there will be a lot more wrangling on this bill before it gets resolved. Especially since we'll free falling over the fiscal cliff that will have EVERYONE's attention for a good long while.

I have to disagree. If I am a paying member of an association and another member is not paying, it is my business. I am in a contract with every other member. I know of no other contracts where one party is not permitted to verify that the other parties are performing as agreed.

That being said, I have no personal knowledge of anyone confronting another owner and causing all hell to break loose.

By the way, I had some bitter online arguments with a fellow board member over disclosure of payments. He insisted he had signed no contract when he joined the association although the courts say otherwise. The other board member actually filed a report with the sheriff claiming that my online comments were a threat to him. When the sheriff rebuffed him, he filed a complaint with the State Bar alleging that I was engaged in the unauthorized practice of law because I had cited some statutes to support my arguments. The Bar also dismissed his complaint. My point is that this is a hotly contentious issue that will not be resolved easily or anytime soon.

Well Larry this has to be a joke right???? You have put your faith in the SEC??
The SEC will oversee corporations to YOUR satisfaction? The SEC you know was overseeing Bernie Madoff how did that work out? And not sure what makers you think the filings provided to the SEC (one copy) equates to every shareholder being abler to demand copies of all financial records. Again, under current law this is not required.

The part about you concern over garbage fines really is no way connected to this discussion.

Jon,

Your question was:

"Just what public institutions would you compare HOAs to??

"And if so where can you go and demand copies of every financial document?"

You asked about "public institutions" and my response was a list of "public institutions."

Are you now saying that you do not know the difference between a public institution and a corporation?

Larry my quesion to Duane was what public institutions HE was attempting to compare HOAs to??? Attempting to have him consider that perhaps his desire for transparency within HOAs has nothing to do with what is required of public institutions.

And as a result your list provided entities not equal under most current law. You local, state, or federal government are not corporations.

So yes Larry I do know the differecne between my local government and a private corporation and I understand they operate under different laws and requirements. And comparing the two is like comparing apples to helium ballons. So because the government is required to do so HOAs should be too. Is that your viewpoint???

I shutter when people look to government and politicians for solutions.
More rules, more regulations, more legal issues and in the end is any of this beneficial to the property? IMO NO. Just look to Washingotn now and see just who you would like to direct your life. Just look to the legal system and tell me this is the system you would rather depend on for deciding what is right for youe property, home and investment. Just look at the states where governement has involved themselves most in the operation of HOAs and property ownership. California and Florida and just might be me but in no way are they doing it better because they follow Davis-Stirling or Roberts Rules of Order as required by more rules written by a college law professor. Seems to me California should not be held in some high regard for the accomplishments made in their political system. Hell, recently someone posted here about having an agenda item to discuss the mistreatment of one Board member by another and how is was then put on the agenda and then removed, now all the experts in DS and RRs run around to read their codes, documents and state laws to determine how to deal with out of line behavior. And no one can find a clear cut answer in all the laws, rules, and guidelines. Here's a news flash the system of government in this country does not work for the benefit of the people. The legal system has long ago been bought and paid for and no longer serves the people but rather those that can buy their own justice. And when people look to these entities to provide justice, protect rights, act in YOUR best interest you are acting the fool.

Dear JonD-

Allow me to buy you a drink so I can continue to nod my head in agreement with your mini-rant in person.

While I enjoyed it and agree wholeheartedly, I hasten to point out that those of us in CA who have had to become "experts" on Davis Sterling were forced to, because we're stuck with it.

We're also stuck with being expected to voluntarily govern and maintain the ever-growing inventory of CIDs and PUDs here in the land of the $2million "tear down".

So the housing which is affordable to seniors and the working poor (formerly known as the middle class) comes with a huge hidden cost- unknowable until one actually moves in.

I've been around Sacramento enough to realize that the pols are not lining up to help us; in the end it all comes down to we the people - which is why I still dream of finding a way to motivate and educate enough homeowners to BECOME the government we all wish we had. Common sense and civility are never a product of government. They can only be a factor introduced from inside the governors themselves.

Unfortunately, that lesson is impossible to fit into a text-message.

Elaine

Jon-

CAI is a trade org. and collects from the property managers and lawyers who belong to it. Not everyone belongs. It's like the AMA that way. But the AMA still has plenty of political clout. So does CAI- in California at least. They also provide seminars here in California, but not for free. In addition they sell ongoing training to most of the property managers and have seen to it that their type of training is required for certification of property managers in CA. They are not all bad, and do share information, but they are self-serving.

In practical terms, the documents which are (rarely) requested are just emailed from the property manager to the owner who requests them. Part of the pm's monthly fee, no extra charge. I can see that this would be a bit of a bother for a self-run CID, but since we all must keep the records, coming up with a reasonable way to share them if asked is not that tough. Most records are part of the annual budget disclosure packet, and everyone should already get that. It's a rare owner with the curiosity to look more deeply, and usually someone so inclined will already be on the board.

I agree that more and more is expected of us each year, but actually, many laws restate previous mandates, things which a good board is already doing, so it needn't prove that burdensome, except of course when an insecure director feels the need to try to think like a lawyer or worse yet, run each decision by one.

In CA. there are more and more politicians who rose through the ranks of their own HOAs or neighborhood associations, so there's hope, but of course untill we get $ out of politics, don't expect anything approaching democracy on any issue.

Elaine

My problem is the proposed legislation is so open ended that the HOA Chief Complaining Officer (CCO) could go on a witch hunt and demand so much documentation from the Association, especially at at ten cents a page, that the association could lose money providing "all" the CCO requested.

If the legislation said provide at a "reasonable" cost then I might not be so nervous but still, I think it opens the door to witch hunting from a disgruntled owner and we all have at least one, if not more of them.

"Of course I'll respect you in the morning."

And yes dear..I will not....guess....quite a common one....

Derek,

Your HOA sounds exactly like the problem child that this legislation is intended to address.

Well, I promised to give everyone an update on this bill – I don’t have the details on how specific negotiations went, but the bill passed the House and Senate and now it’s up to the Governor to sign it. If he does, the law goes into effect on July 1, 2013 and here’s how it’ll read:

(g) Subject to subsection (k), the financial records, including all contracts, invoices, bills, receipts, and bank records, of a homeowners association must be available for inspection by each member of the homeowners association upon written request. A written request for inspection must identify with reasonable particularity the information being requested. A member's ability to inspect records under this section shall not be unreasonably denied or conditioned upon provision of an appropriate purpose for the request.
(h) If there is a dispute between a homeowner and a homeowners association, the officers of the homeowners association must make all communications concerning the dispute available to the homeowner.
(i) A homeowners association shall make all communications and information concerning a lot available to the owner of the lot or a home on the lot.
(j) Notwithstanding subsections (h) and (i), a homeowners association is not required to make:
(1) communications between the homeowners association and the legal counsel of the homeowners association; and
(2) other communications or attorney work product prepared in anticipation of litigation;
available to the owner of a lot or home.
(k) A homeowners association is not required to make available to a member for inspection:
(1) unexecuted contracts;
(2) records regarding contract negotiations;
(3) information regarding an individual member's association account to a person who is not a named party on the account;
(4) any other information that is prohibited from release under state or federal law; or
(5) any records that were created more than two (2) years before the request.
(l) Nothing in this chapter:
(1) abrogates or eliminates provisions in homeowners association agreements that permit or require additional disclosure or inspection rights not required by this chapter; or
(2) prevents a homeowners association from agreeing to make disclosures or to provide inspection rights not required by this chapter.
(m) A homeowners association may not charge a fee for the first hour required to search for a record in response to a written request submitted under this chapter. A homeowners association may charge a search fee for any time that exceeds one (1) hour. The following provisions apply if a homeowners association charges a search fee:
(1) The homeowners association shall charge an hourly fee that does not exceed thirty-five dollars ($35) per hour.
(2) The homeowners association may charge the fee only for time that the person making the search actually spends in searching for the record.
(3) The homeowners association shall prorate the fee to reflect any search time of less than one (1) hour.
(4) The total amount of the fee charged by the homeowners association for a search may not exceed two hundred dollars ($200).

So, I guess that’s that. My issues were addressed, so we’ll see how it goes if this is made into law. This section of the law will apply to all HOAs – go to the state government website’s legislature section and take a look at IC 32-25.5-3-8 and IC 32-25.5-3-3(g) through 32-25.5-3-3(m)

Dear Indiana HOA Member

I apologize for an error in recent communication concerning the HOA records. The records are located in Nome AK as in Alaska not in Nome AL (Alabama).

Again, sorry for my error and to compensate you for it, we will not charge you anything for using our copier machine also located in Nome, Alaska.

LOL.......LOL.....LOL