Articles of Incorporation PREVAILS over Bylaws or CC&R

The board is attempting to collect another special assessment for our dues this year. The CC&R conflicts with the Articles of Incorporation, and the Articles shall be the prevailing document.

My issue is in regards to a "Special Assessment" the board is attempting to collect:

• The articles of incorporation protects home owners from the board members by not allowing special assessments, it only allows ONE assessment per year. Board members may call a special meeting which has the specific purpose of seeking a 2/3 vote of approval for a permanent or even a one year temporary increase on our yearly dues (called assessment) but may not charge special assessments.
• A meeting was not duly called for the purpose of voting on an assessment increase as our articles of incorporation. The meeting notice stated "Among the topics for this meeting will be the 2014 budget and financial standing" but there was no mention in our meeting notice regarding any special vote to increase the budget, or any vote at all.
• A vote was held without giving any residents the opportunity to send a proxy on their behalf.
• Even if a notice was sent and even if we were given the opportunity to have someone vote in proxy for us and even if 2/3 majority voted for the increase; this meeting was held after January 1. Section 6 of the Articles of Incorporation state that any budget increases must be done BEFORE January 1. After January 1, 2014 any legally authorized and valid votes for an increase could only be for 2015 dues.

Our board is not backing down even though I pointed out the obvious facts from our Articles of Incorporation. In March of 2011 I paid another special assessment under these same circumstances and it is just now I am aware what they are doing is not allowed. I would like to also get that back in addition to forcing the board to pay everyone back for that and not be able to charge this. I believe the board may not even be able to collect the regular dues this year because they did not vote on any budget until January 15 this year. Anyone know any good attorneys in the Columbus, OH market? Anyone have and feedback?

I am not nor do I play a lawyer.

My understanding is if a budget is delayed, the corporation continues to operate under the last budget.

You seem to believe and want a lot. Time to lawyer up and find out if you are right.

You and/or the trustees apparently are confused as to the hierarchy of your documents.

Each item is SUBSERVIANT to ALL items above them on the list

US Constitution

Federal Law

State Law (incl corporate law

Local / County Law

Covenants, Conditions, and Restricti attached to the deed and are the 'contract' between the homeowners

Articles of Incorporation = define the incorporation of the HOA as per applicable state law

By-Laws = govern how the CORPORATION is operated as per state law

Mark,

Is the Declarant (referred to as Wimpey in the document you provided) still in the picture?

If he is, then, per the document provided, only special assessments can be levied.

If he is not, then, from what you provided, the annual assessment would be a maximum of $60 per lot the first year. After the first year, the Board may raise it 5% per year. Increases greater than 5% must be approved by the membership.

As John pointed out, the order of precedence is has the CC&Rs above the Articles of Incorporation, Bylaws or Resolutions. If there is a conflict between two documents, the higher precedence document needs to be complied with unless there is language in the higher precedent document deferring control to a lower precedent document.

Is it possible for you to cite why you believe that the Articles of Incorporation would be the controlling document in this issue?

Mark, what is the SA for? If it is for something that should have been covered by the reserves then they are possibly in violation of Section 5312.06 of the O.R.C. Please note that this section ONLY refers to something that should be covered by reserves. (http://codes.ohio.gov/orc/5312)

5312.06 Powers of owner's association.

(A) Unless otherwise provided in the declaration or bylaws, the owners association, through its board of directors, shall do both of the following:

(1) Annually adopt and amend an estimated budget for revenues and expenditures. Any budget shall include reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, unless the owners, exercising not less than a majority of the voting power of the owners association, waive the reserve requirement annually.

---------------------------------------------------------------------------------
I'm not an attorney so if the cap for raising assessments is only in the AIC and not in the Declarations 5312.10 of the O.R.C. may allow them to raise the assessments w/o a homeowner vote.

I don't know what expenses your HOA has or what it must maintain but the base assessment of $60.00 in the document you posted x 44 homes is only $2640 a year and that's if everybody is current and paid up.

BTW Just for grins and giggles, how much was the SA for?

Mark,

Typically, when a development is started, it is planned and drawn up. This document is called the PLAT.

Prior to any homes being sold, deed restrictions are recorded. These deed restrictions are called the Declaration of Covenants, Conditions and Restrictions (CC&Rs). The CC&Rs are the basis for creating and empowering the Association known as HOA.

Most (if not all) Associations become incorporated, as this gives the Association certain advantages and the membership certain protections. To become incorporated, the Articles of Incorporation are created and registered with the State which creates the entity HOA, Inc.

Regardless of corporation status, Bylaws are typically written and adopted as they specify how the Association is to conduct business.

Over the life of the Association, The Board of Directors will make decisions and adopt various policies. These are known as Resolutions.

What you are telling us regarding what documents came first in your Association is outside the norm. This is why many of us are a bit confused. It very well may be that in your Association an entity known as HOA, Inc. was first created and then the development was started. It's just something that we are not use to hearing.

When you purchased your home, what document (if any) was attached to your deed?

You may need to go to the County court house or property recorders office to find out.

We all need to save this "power" hierarchy and post it on our cork boards.

why?

we can't figure out that law overrides contracts?

I meant to say "You should concentrate your anger on what is creating the higher expenses, "instead of" how the HOA does things procedure wise.

Mark,

Let me understand this [emphasis added to the quotes as needed].


Your position is that since the meeting notice did not specify a vote on increasing assessments, no vote should have taken place.

I suspect that the Association would argue that by stating that a topic regarding the financial standing of the Association implies that the membership may need to vote to address the financial standing.

Honestly, I suspect that it's a 50/50 chance on who would win if taken through the courts.


In reality, per most governing documents, this is how it is supposed to work.

Members elect individuals to the Board of Directors to make the decisions that affect the Association as a whole. Unfortunately, too often members are not willing to step into this role themselves. Therefore, the only choices for Directors are those who are willing to serve.


Well, typically the work they are required to do is:

a) Adopt a budget and set the level of assessments (sounds like this is being done).

b) Hold meetings of the Board and of the members (sounds like this is being done.)

c) Provide proper notice for those meetings (the term proper is under disagreement)

d) Ensure assessments are collected, tracked and deposited. I know from personal experience that this is very, very time consuming (and we only have 130 lots). I likely spend about 2-3 hours per deposit (trip to post office to collect mail, open mail, endorse checks, enter into ledgers, fill out deposit slip, trip to the bank, scan deposit slip for electronic records, file deposit slip for paper records, write letters as needed based on payments, sign letters, file associations copy of letter, fold and stuff envelope for members letter, address and stamp envelope, place in mail). As there is no requirement that the Directors or Officers do this work themselves it is very common for associations to hire someone or some company to take care of this for them.

e) Ensure maintenance (preventative or corrective) is done on association amenities and common areas. Again, there is no requirement that the Directors or Officers do this work themselves. Typically even when they can do the work, there are potential liability issues, knowledge gaps or time requirements that prevent Directors or Officers from doing the work. Again, it is very common for associations to hire someone or some company to take care of this for them.

f) Provide specific services (trash/recycling, plowing of streets, etc.).

g) Establish or be the approval authority for exterior changes to the lots.

h) Depending on the wording in the governing documents, enforce the CC&Rs and rules/regs of the Association. Depending on the size of the Association, the number of volunteers from the membership and the number of complaints that are received, an Association may or may not hire someone to assist them with this.

i) Maintain association records (this can physically take a lot of space, therefore many Associations will rent a storage facility or have a hired contractor/company maintain them for the Association).

j) Obtain required insurance.

k) Pay taxes and file required paperwork to State and Federal government.

L) Other requirements imposed by the governing documents or applicable laws.

As you can see, it's not a lot but it's more than simply meeting for 60-90 minutes each month. Volunteers only have so much time that they are willing to give. If the time required exceeds the time they are willing to give, the individual simply won't volunteer or never volunteer for that position again. Therefore, it's not uncommon when individuals quit volunteering to hire a company or contractor to perform as many tasks as possible so the time requirement is minimized in the hope of attracting more volunteers to do the tasks that must be performed by the Association.

If I may ask, when was the last time you volunteered to serve on your Assocaitions Board or one of the committees?


Typically, the governing documents give the Board the authority to hire and fire contractors and companies to perform services. The most common hires are grounds maintenance and Trash/recycling services.

I suspect that your governing documents is typical in regard on where the authority lies to hire contractors.

Granted, it would be nice for the issue to come up, wait, per one of your posts it did:


So perhaps, when your Board announced in the meeting notice that the financial situation for 2014 would be a topic of discussion at the membership meeting, they expected that members interested and concerned about the financial affairs of the Association (which is only funded by the members) would be in attendance at that meeting.

but, too be honest, based on your initial post [emphasis added}:

It sounds like you didn't attend the meeting anyway. It's at these annual meetings and at the Board meetings (that per OH law you are allowed to attend) that these discussions occur. If you don't attend any of the meetings or take the time to ask and review the minutes of meetings you don't attend, then you simply won't know what is happening until the decision has already been made.

As a member it's your responsibility to know what is happening within your own Association. Yes it's nice if the Association comes forward and tells you about it. However, if they don't you still have the responsibility to know. Therefore, you need to make the effort to find things out on your own (like by attending meetings and/or reading copies of minutes of the meetings you couldn't attend).


This of course goes back to the notice requirement and if the notice was proper and sufficient enough to be in compliance with your governing documents and applicable State laws. You believe it wasn't, the Association believes it was.


Again goes back to the notice requirement.

Please note that the requirement is 2/3 of the members in attendance (by person or proxy). Not 2/3 of the membership. Therefore, only those members who are interested enough in the affairs of the Association to attend the meeting would be making the decision. Those members who chose not to attend and also chose not to send a representative (proxy) in their place (which can be done for any meeting), simply has to live with the decision made by others who did choose to attend or send a proxy.


Well, as I posted earlier, the member may attend any of the annual meetings themselves or they have the right to send a representative (proxy) to the meeting on their behalf. Proxies are not only used for votes. Proxies are also used to show that the member had enough interest in what is happening within it's own Association that they sent a representative to find out what is happening. Additionally, by sending the proxy, if any vote is taken at all, the proxy may also vote on behalf of the member.


Again, this goes to the issue of was the notice proper. Additionally, does a board need to specify a vote will be taken or simply that the issue will be discussed (which may infer that a decision on the issue, which is typically voted on, will be done at the meeting)?

Based on your posts, you believe that notice of the actual vote needed to be given. You also specify that had you been aware of a vote regarding assessments you would have chosen differently and attended the meeting or send a representative in your place. You apparently also believe that had notice been given, the turnout would have been higher and the increase would have failed.

Your Board believe that proper notice was provided and the vote was valid.

When there are two differing interpretations between parties of a contract either one party chooses not to continue the argument, a compromise is reached or the issue is taken before a third party for a ruling (i.e. the courts).

Quote:

Posted By MarkC18 on 01/31/2014 6:28 PM

SEE WHY I AM PISSED?

Well, I do understand your frustration. You chose not to become involved in the process that was made available to you (attending the meeting) and the result of that decision cost you money.

I'm not saying that the Board's action was correct or incorrect. I'm tying to point out that members need to become involved in their Associations. At the very least, they should be attending all membership meetings or send someone in their place if they are unable to attend. You chose not to do this but it sounds like you don't want to take responsibility for that choice (as you blame the choice on the wording of the notice).


Perhaps. Perhaps not. I would recommend that since you do think that they are shady that you become more involved in your Association. Perhaps even volunteering to serve on your Board. This way, you can make sure that light is shined into the shady activities.


That is certainly your right. However, even if you take legal action against each Director individually, State statutes and governing documents typically protect the individual Director form personal financial loss and their expenses are paid for by the Association. As a member of the Association you would be responsible for your share of those expenses. Insurance may or may not come into play. If it is determined that the Board knowingly violated the governing documents or applicable laws, the insurance will typically not pay anything. This would result in the financial expense of the legal defense and any judgement to be paid by the Association. Again, as a member, you would be responsible for your share of those expenses. Additionally, I would suspect the rates for all insurance coverage for the Association to be increased.

For fun, lets take a look at what might happen if you did bring legal action:

Lets say you win:

a) The Association may need to impose a special assessment to return the increase in funds. End result - you, as a member, are paying the association to pay you back the amount of money you just paid them.

b) The Association may need to close down amenities or reduce services (like trash collection from twice a week to once a week) or defer needed maintenance to make the budget work in the confines of the assessment.

c) If the budge can't pay for legal expenses, the Association may need to impose a special assessment to pay for the legal case it lost. You, as a member, would be responsible for your share of those expenses.

d) The following year, proper notice is given and it's possible that the assessments will be set higher (due to potential increase in insurance rates based on the legal action you took).

Lets say you lose:

a) No change occurs to the annual assessment.

b) You may need to pay for the Association legal expenses completely on your own or, at least, pay your share of the Association legal expenses via special assessment.

c) Next years annual assessments may increase more than they needed due to potential higher insurance rates based on the legal action you took.

In reality, it may be better to simply become involved in your Association, gather support and either recall the current Board or simply vote them out of office at the next election. If you have enough support, you can put individuals on the Board that will fire the MC and do as much of the work as they can themselves. They could even take assessments back to the level they were.

By the way: I don't recall seeing it. How many lots are in your Association and what was the vote count?

If you determine that even if those who didn't attend all voted against the increase, the increase would have passed, this could be an indication that you don't have the support within the Association.

Mark,

I know that this isn't what you wanted to hear. I hope it helps,

Tim

The board adopted "code of regulation" in a community meeting where they did not tell anyone there would be any voting happening (and only 2 non board people were there) and that does state the board can charge a special assessment, HOWEVER, it states that it must be within the guidelines of the articles of incorporation.
The articles DO NOT provide any special assessments. It is very specific that the annual assessment must be voted on prior to January 1 each year, and the board cannot raise it above 5% without a vote of approve by 2/3 at a meeting DULY called for this purpose. If the board really had the power to charge special assessments they could charge as much and as often as they like, correct? I do not believe that is the intent found in the articles of incorporation. No meeting is ever DULY called for the purpose of voting in our community, therefore, no vote by the community is ever a valid vote.

For the record, i did run for board after the board said they were sick of doing the work. The board did not step down and i did not win because there were more board votes there than residents. The articles are very clear that voting can only be done when a meeting is duly called for that purpose. Who wants to sit through bull shit sessions if we voting on anything? Not me, and that is my right, but that does not take away from my right to know a vote is happening.

Then you will suffer the consequences.

If you want a professional, you hire a mgmt company. But be prepared to pay out the nose. If you want amateur volunteers who do their best, but sometimes make mistakes you self manage. If someone isn't doing things up to your standards, you volunteer yourself. Suck it up and volunteer.

Who is the lazy one? Does not sound like the ones attending the meetings and addressing the issues. Hiring a Management company does NOT equal being "lazy". A MC can NOT make decisions without the board's input and approvals. The MC acts on the behalf of the HOA. That costs money while lessening the burden of some chores best left up to professionals to handle. I would sooner trust an MC to pay the monthly bills and collect than volunteer from my neigh orhood.

A HOA is ONLY funded by its members for its members. If you need the yard mowed you ALL pay for it equally. don not have enough money? Then you raise dues 5% annually per board vote or have a special assessment through member vote. If your HOA can not afford to operate or have a reserve fund, it is ALL of your fault as HOa members.

If your constantly having assessments, that speaks volumes of laziness on the HOa members of contributing enough interest and money to it's needs.

I am the ignorant one? Mmm... From your lack of participation and judgement statements of HOA's I do not conclude so. FYI one goes by the CC&R's and NOT by laws, They trump by laws. Special meetings can also not have to be held to get certain votes. There is a way around this requirement. If you just took some time to open your eyes and ears instead of your mouth.

Mark,

Thank you for being willing to keep us up to date on the issue.

I wish we could have helped more than we did. Unfortunately, sometimes you do need a legal opinion.

I do wish you luck.

Tim

JohnC, The board cannot hold any elections or votes without A MEETING DULY CALLED FOR THIS PURPOSE. PERIOD.

MarkC18,

Some questions, and comments:

1. You posted: “the board said there would be a meeting to review the budget but never indicated to anyone there would be a vote about anything”. Was a vote required or not? That is, did the Budget that was presented show an increase of more than 5% over the previous year’s Budget?

Per ARTICLE VI that you included - so long as the assessment based on the budget was not increased by more than 5% - then a vote is not required, and the Meeting would be only to review.

2. RE Special Assessments, you posted: The Codes of Regulation has a section that states the board has authority to charge special assessments, and the guidelines for these assessments can be found in the Articles of Incorporation and/or the Covenants and Restrictions. (they just copied someone else's codes of regulation, this was not designed simply for our 44 unit HOA).

OK, so your Documents do provide the authority to charge special assessments, and there are guidelines.

Copying someone else’s Codes of Regulation is, often (typically) done, and is perfectly OK.

What do you mean when you write that “this was not designed simply for our 44 unit HOA"?

3. You apparently understand the difference between a regular assessment maintenance fee based on the estimated Budget, and a Special Assessment needed for a particular purpose, not part of the yearly Budget.

I ask because you wrote: “The board is trying to make this a special assessment rather than the regular annual assessment”. Would you further explain?

4. You wrote “There was no vote on spending all the reserves last year and no vote on allowing the board to hire a third party management company. - and “The lazy board simply does not want to do the work.”

It seems to me that the Board had "the right” to hire a Manager. Somewhere in your Documents there should be something like:

“The Board of Trustees may employ the services of a manager in order to perform the duties imposed upon it, and may pay such compensation as it determines. The Board may delegate such administrative and ministerial duties as it determines".

5. You wrote that the board members last June announced they were spending every penny in our reserves to pay for a third party management company and would figure out how to pay for it at a later date.

Apparently hiring the Management Company was done mid-year. And in order to find the money – they borrowed from Reserves. Not the best – but Reserves can typically be borrowed for a short period of time, and then replaced. And, in order to pay back the borrowed Reserve Funds, a Special Assessment was necessary.

OK, what was done was done. And since the Special Assessment was needed to pay back what was borrowed, a Member/Owner Vote, may or may not have been required.

In any case, as I see it, there was only one possible outcome – a “yes” vote for the Special Assessment to replace the funds borrowed.

6. Obviously going forward, the cost of the Management Company needs to be included in the Annual Budget. If this required raising the Regular Assessment Fee by more than 5% - then again, as I see it, there could only be a “yes” vote to approve the Budget.

7. Is everything now running smoothly?

If it is, why not just suggest to the Board, that in the future they adhere to the Documents re “providing written notice” of upcoming Meetings, including listing any specific items that require a Member/Owner vote?

8. Is it possible that providing written “Notice of Member/Owner Meetings and the Agenda”, and preparing Proxies, properly worded, is one of the tasks that the Board will be asking, and paying, the Management Company to do, help with?

Ellie, to clarify my first answers the assessment this year AND last year were $130. There was no special assessment last year but this year the special assessment is $100

Be pissed. They are liars. You have an absolute right to be pissed. They are breaching a contract! Stay on them. Keep fighting. Don't let anyone even attempt to discourage you from protecting your rights and your property. And believe me, they will try. But if you don't, you can awake one day to find you have been "Madoffed." Don't wait that long!

And yes..it's challenging at first, but I would learn how to file a complaint in your state's court and take the case to the Chancery Division (if you have one in your state) to seek relief from these actions. You seem to have a grasp of the contract, the contract is binding, the terms are written. You can seek injunctions against these parties to stop acting/act in a certain way. And if you seek financial compensation, you would have to file a derivative claim on behalf of everyone and what you won would be a share of that. But if you are just looking to get control back, start there and see if your judges will find in your favor.

I'm from NJ. This state is way too corrupt and the judges are in bed with the lawyers. I have no chance, but I have to go through the process until I reach the federal level -- which will be eventually.

But nonetheless, take it the courts. Get it on record. Maybe your COA/HOA's lawyer has ethics (hahaha!) and will advise the board to start acting in accordance to the rules as required.

Again, never let fools discourage you from fighting for your property. The same people guiding you to "let it go" are the first ones that would scream if a dime was taken out of their pocket. Hypocrites are not worth your time. You have rights, fight for them.

Well, I finally won my court case! The bottom line is the board is required to send a notice for a duly called meeting of a vote and they are not allowed to not tell anyone their will be a vote and then hold a vote. People have the right to know there will be a vote. The boards second plan of action of claiming because the code of regulation was added with wording that states the board has a right to demand special assessments also failed. There was a clear conflict between the articles of incorporation and the code of regulation and the code of regulation SHALL PREVEIL! Not the board trustees is attempting to propose a new articles of incorporation and code of regulation. I have sent the board a notice of a demand to hold a revote for two trustee positions. I had refused to pay the special assessment they were not entitled to collect and in turn they had refused to let me and other homeowners vote or run for the office of trustee because of this. Now 2 of the 3 board members are not legally considered board members because of the fraudulent way in which the election was held. I have sent my notice to let them know that they also cannot simply hold a vote for the two trustees at the same meeting when they want to vote for the new articles and code of regulation. The reason for this demand is the fact that only the trustees may call a meeting for the purpose of voting for the proposed change. If the same trustees are re-elected they would then have the option to call for a meeting to vote on the proposed changes, but they would be require to give a minimum of a 7 day notice and maximum of a 60 day notice. I will update you guys once this next battle is done. The bottom line is people are becoming more aware of the evils of homeowner's associations. Being part of an HOA reduces the value in our homes because less people are interested in buying a home that belongs to a homeowner's association. Another property me and my spouse purchased recently had the HOA dissolved. I had told the realtor that we would not be interested in purchasing any home that belonged to an HOA. In 1 year our home value increased from $186,000 to $366,000 according to Zillow estimates. I can't say enough how much I hate homeowner associations!

By all means do look up the recorded deed restriction on your lot go to Franklin county recorders office and look up your deed, write that down and review the deed restriction usually on first or second page. If the developer placed the wrong deed restriction on your property, they'll just claim well that was a technical error someone just placed a wrong deed restriction and carry on.

Now if that happened now look at your neighbors deed restrictions, if they all wrong or even just 1 section of the community you might be in a HOA community but not in it.

Just don't go by some company or person saying your in a HOA, so many things that could go wrong can go wrong making and enacting a HOA.

Some times deed restrictions states one deed restriction but you have to check the one listed on your deed and follow the path of ownership of the land.

Hard to enforce a HOA deed restriction that just list's the sellers of the land to the developer. One error might be something a judge will cite, but an entire section hardly. Deed restrictions follows the previous one, HOA can't cite a existing HOA deed restriction placed after the one on your House Deed.

Unless they can produce a document you signed up and acknowledged your in their HOA. If they can't they'll send nasty letters citing a ORC article and ask you by voluntary joining our society our community will be better. OBTW sign here to acknowledge your in our HOA.

HOA's can get dissolved, unless the city agrees to pay for the street repairs and lighting repairs, sewage repair and take over all the HOA common grounds and structures.

City's can come back on all the lot owners in the HOA community for tax's on the common grounds and cost for repairs.

Developers made a contract with the city for the HOA to assume all liability of the roads and common grounds. that is also unless the HOA covenants was at it's expiration date and the HOA was dissolved during that time, then the city has no choice but to declare your community HOA free and now public.

Crystal,

Mark apparently isn't that ignorant nor, from my reading, is he defending his Association.

He attempted to resolve the issue internally but that attempt failed. Therefore, he exercised his option to bring the issue before the courts for a ruling. Per Marks, update, he won the legal challenge he brought against the Association. Therefore, he apparently has a better understanding of his governing documents than those serving on his Board does.

Mark,

Will you now be willing to serve on the Board to make sure this doesn't happen again in the future?

I attempted to run for trustee the week before the court hearing so we could hopefully resolve their illegal actions without legal action. Unfortunately the board blocked me from running or even voting because I was past due. Of course now the issue, which I brought up to the board as they refused to let me and other people vote or run for office, is the money they were calling past due was not even legally due so the 2 of 3 trustee positions were not voted in through a legal method. I am now demanding a re-vote for these two trustee positions because of the voting fraud. Any decision they make or any vote they introduce other than a re-vote will be up for challenge because they are not legally board members. If they hold this re-vote I have already told them I will run against them. If they do not hold this re-vote, I will challenge the vote they hold for a new articles of incorporation and code of regulation they are going to introduce for a vote in December. Additionally, if they do not hold a re-vote I am considering personal legal action against the board members past and present for fraud. Hopefully they do the right thing because I don't want to go to court any more than they do; but I will not allow them to violate my rights.