Board not ratifying budget

Nancy,

I'm going to be realistic about your questions.

What could possibly happen to homeowners? Worst case: the homeowner could lose their home or life savings fighting legal actions brought against them by the Board. Best case: nothing. Most likely, what happens will depend on how the homeowner reacts to what the Board does or does not do and how the Board reacts to those actions.

Does not complying with applicable laws fall under fiduciary responsibility? Based on the definition that fiduciary duty is to act solely in another party's interests, yes it would fall under that category. Of course, none of this matters unless the issue is taken before the courts. This of course will cost both sides time, energy and money.

Do I have any suggestions as to how to get the Board to ratify the budget? Yes.

Recall the Board and replace them with individuals who will comply with applicable laws. However, if there is apathy within the membership and a lack of volunteers to step forward and serve on the Board, the recall action can fail. This leaves few options:

1) Consult a local attorney to see what legal avenues are available to you.
2) Live with it.
3) Sell.

As we know there are civil laws and criminal laws. Criminal laws are enforced by the State. Civil laws are enforced by the individuals involved and they do this through the court system. Since contracts, hoa/coa laws and corporate laws are considered civil laws, there is typically limited governmental authorities to "oversee" or enforce those laws.

Typically, there is no Federal or State agency that oversees Associations. OK there are some States, like VA, that have ombudsman offices. However, that office has little authority over the Association because they are not part of the judicial branch.

Sure the State corporation commission may fine for not filing the annual report on time. The IRS will certainly go after the Association for failing to file taxes. The District Attorney will prosecute if criminal laws are broken (example embezzlement). However if the Association doesn't comply with the Bylaws or a civil law, it's up to the membership to hold the Board accountable. The easiest way would be to recall the board or not reelect those same individuals. The more expensive option is to go through the court system.

This is why it's imperative that the members remain active in the development and actually take an interest in how the Association is governed. If apathy sets in (and, unfortunately it does), it becomes that much more difficult to change things when issues are discovered.

Thank you Tim. I have found your knowledge very helpful in the past. Unfortunately apathy has sets in. As some of the homeowners have said to me they don't care. There is only 1 or 2 homeowners that want to become a Board member. What bothers me the most is this Board doesn't follow the laws and has no intention of listening to anyone. When someone does advise them about the laws, they are called a trouble maker when in fact they are only trying to help. I was a Board member for many years and tried to uphold our Covenants and the laws and there were some men in the community and on the Board that harassed me really bad. Since not being on the Board I find it very difficult to just ignore what the present Board is doing. These are a few things. No proper notification of new officers. Will not give homeowners copies of audit. Will not give homeowners list of names and address of homeowners. Our By-Laws say copies of the audits may be purchased at reasonable costs. They will let us inspect them, but, the homeowner has to go to the Treasurers house to look at them. Not a comfortable situation. We do not have an office, out meetings are held in the Boards homes. At the annual meeting there usually isn't a majority of the homeowners present. The vote is done by proxies and the majority of the proxies are sent back giving the present Board the right to vote for them. And of course the Board votes themselves back in. Again thank you suggestions and information.

Nancy

In your OP you accuse the BOD of operating illegally as you say the owners must ratify the budget. Later Tim posted NC law that said the budget is ratified unless a majority of owners reject it.

Later you say the BOD stays in power by collecting collects proxies, which is legal.

You say you cannot see the budget then you say you can if you go see the treasurer and see the budget.

You accuse your BOD of operating against the laws but then it is shown they do not.

Tough love but I think your dislike of the BOD is clouding your vision and it seems your accusations against them operating legally are improper.

My advice is work to change the BOD. If unable to do so them maybe you are being told you are part of the problem rather then part of the solution.

Nancy,

I'd like to comment on a few things.


Actually, it's more of an issue of the membership being given a chance to reject the budget than approve it. However, you are correct, the meeting must still be held.

I'd suggest holding the meeting at the same time as a Board meeting. It's likely that only the members who are against the budget would be the ones to show.


Knock on doors. Explain the situation and ask that they assign you their proxy if they are not attending the meeting. Then hand them a proxy form to fill out.

There are exceptions but typically the resident members outnumber the nonresident members. Therefore, if you gather proxies from the resident members, you may have enough to control the vote.


Well, if you don't have an office, I don't know where else you would meet to inspect the records. Unless the audit was provided via digital means, or if the keeper of the audits has a scanner, to provide a copy will require a trip to the store to make copies. If you have a scanner, perhaps you could offer your time to digitize the records of the association.

I actually took the time, as I cycled through the officer positions, to digitize all the Association records. Once that was done, and with the boards approval, the records were then made available on the Associations website. I used the argument that it helps sales (which it may or may not do but we do get positive feedback from Realtors and new owners) and will save time and energy of the Directors by not having to copy and mail things upon request. Mind you, I was the one who took the time to digitize the records (and it did take a lot of time). I didn't ask others to do the job as I didn't expect them to make the time to do it. This is why I suggested that you could offer to digitize the files.


It's great to believe in the Law.

You need to remember that laws only work when everyone agrees to comply with them. If someone, or a group of individuals, do not want to comply with the laws then there needs to be a way to enforce them. With so many laws, Our nation has divided them into criminal and civil laws. As posted earlier, the State will enforce criminal laws but its the responsibility of the individuals involved to enforce civil laws (which is typically done by negotiation or through the courts).


Yes it is.

The BOD is made up of individuals and some individuals believe that specific laws don't apply to them. If enough of those individuals get on the Board together, they can usually do as they please unless the membership exercises their watchdog duties and vote the bums out of office.

This is because it is also the duty of the members to be the checks and balances of the Board.

The membership is also made up of individuals and some individuals simply don't want to become involved. They want someone else to do the work for them. If enough of those individuals are members, then the Board can usually do as they please because the members failed to perform their duty.

With all that said, Nancy I applaud you for being involved. I would also ask you to ask yourself, what is it you want to change? You are not going to win all the battles but you can win the war. Therefore, it's important to chose what battles you are going to fight.

Personally, to me, the battle of calling a meeting to ratify the budget isn't that important. This is because the budget is ratified unless a majority of the members disapprove it. Since it's unlikely that you will get involvement from a majority of the members, I would pick a different battle. Perhaps just working on educating the members and gathering proxies to vote the bums out at the next election.

As for the audit. If I wanted a copy, I would arrange a time to inspect the audit and then bring a camera or computer and scanner and make my own copy. Perhaps, the next time you ask for a copy, the Board would be more willing to comply.