Board Member misconduct re contract negotiation and due process

Started by EugeniaC • 16 replies • 1977 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

EugeniaC (Virginia)
Posts: 2

Posted:

Virginia:

Our HOA interviewed and decided upon a prospective new management firm. We had an agreed upon process in place for contract review and negotiations, and were on track to have a contract by September 16, 2014. However, a member of the Board, not an officer, decided she did not like the Board agreed upon process and decided she would take over the entire process, including all negotiations with the management firm. Without a single face-to-face meeting with the Board to discuss this and the issues involved, only 4 of 8 members (other than the Board member in question) gave their agreement(not vote) via email for her to proceed with her takeover. This member then took the Association attorney's memo and made decisions, alone, on all business and legal issues contained in that memo. Despite a written response from the President of the HOA, the individual wrote that no meeting was necessary and she was proceeding with her plan. Only 2 of the 4 who agreed to her plan had any involvement. This, despite that a real estate/HOA attorney I spoke with advised me that this was not legal in the absence of face-to-face meetings to discuss all aspects of the contract that needed to be decided by the full Board in face-to-face meetings.

Was this attorney correct? Was this a legal action on the part of the individual Board member and the 4 who emailed agreement? This is ongoing and urgent. Is there recourse or action the HOA President can take to correct this improper process?

FredS7 (Arizona)
Posts: 927

Posted:

Does the HOA president need to sign the contract?

KerryL1 (California)
Posts: 14,550

Posted:

If the directors did not vote at a meeting to permit Ms X to do all of this negotiation, etc., she has no right to do so. she, should in fact be censured by the board.

Troubling, is you make it sound, Eugenia, that including Ms. X, there was a quorum of the board who agreed with her. But, that quorum and vote should have been made at a meeting of all directors.

And Ms. X also used the attorney's memo as a guide. You mean that memo was actually revision to the contract that the attorney suggested??? Ms. certainly had no authority to do that.

(i'm not in the legal prof), but so far as I know, you & the MC have nothing. You do not have a contract that has been approved by the entire board by a vote at a meeting. The Attorney has not vetted the contract. The president has not signed the contract. I'd say you have no contract or if you do it's either invalid or voadable.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Eugenia,

An action without a meeting requires unanimous written agreement.

Therefore, it is highly likely that the individual you spoke of exceeded their authority. Unfortunately, if you can not convince the rest of the Board that the individual exceeded their authority and take the reins back, then the only other options are:

1) Live with it.
2) Initiate legal action to have the contract negotiations stopped until the issue is resolved.

Otherwise, you may find that the Association is tied into a contract they didn't want and can't break without paying a penalty to the contractor who acted in good faith.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Although slightly out of the ordinary, if she negotiated a good contract and the lawyer reviews it and the board votes for it, at the end of the day it doesn't really matter who negotiated it.

KerryL1 (California)
Posts: 14,550

Posted:

Something else troubling, Eugenia, is that apparently this MC is/was willing to deal with less than the entire board. The MC was willing to "go around" some directors. that does not sound good at all! Would you really wan to "live with it"?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By TimB4 on 09/11/2014 4:24 PM
Eugenia,

An action without a meeting requires unanimous written agreement.

Therefore, it is highly likely that the individual you spoke of exceeded their authority. Unfortunately, if you can not convince the rest of the Board that the individual exceeded their authority and take the reins back, then the only other options are:

1) Live with it.
2) Initiate legal action to have the contract negotiations stopped until the issue is resolved.

Otherwise, you may find that the Association is tied into a contract they didn't want and can't break without paying a penalty to the contractor who acted in good faith.

The flip side of the problem you face is that the prospective MC has no obligation to validate whether X has the authority to negotiate on behalf of the Board. If she strikes a deal with them, they may be able to hold your HOA to it.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KerryL1 on 09/11/2014 5:01 PM
Something else troubling, Eugenia, is that apparently this MC is/was willing to deal with less than the entire board.

It is often common practice for an Association to name one or two individuals to be the point of contact for contracts that are being negotiated. Those individuals would then summarize and bring all the proposals to the entire board for a vote.

Therefore, having a contractor that is willing to deal with less than the entire board certainly wouldn't be a mark against the contractor. After all, as I pointed out, it can be common practice for that to occur in many companies.

Quote:

Posted By KerryL1 on 09/11/2014 5:01 PM

Would you really wan to "live with it"?

No I would not. However, that doesn't mean that the option doesn't exist. All I was providing were options that I saw being available to the OP. Which option they choose, or if they wish to utilize a different option that I failed to see, is their decision.

KerryL1 (California)
Posts: 14,550

Posted:

I've been following this forum for a long time and have not seen what you refer to Tim--a board choosing a point of contact to negotiate with a prospective vendor.

Our whole board meets with prospective vendors who've given us proposals based on the RFP (req. for proposals) that they've received from our PM. We all ask the vendor, who's often accompanied by 1 or two others, questions. In HOAs w/out a manager, I assume the board appoints someone--perhaps the Board secretary--to send out the RFPs.

Now if a Board, which as you say is often common practice, elects one or two directors to speak with and negotiate with the vendor, then fine. So long as the whole board has voted on this. That does not seem to be the case with Eugenia. Or so long as it's among an officer's written duties.

I cannot imagine allowing one or two directors to engage in all of the tasks involved with hiring an MC or, say HOA general counsel, without the entire board interviewing the candidates of usually 3 firms.

The recourse th president has is to not sign the contract till all have interviewed the MC and the HOA attorney has reviewed the contract.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KerryL1 on 09/11/2014 6:03 PM

I've been following this forum for a long time and have not seen what you refer to Tim--a board choosing a point of contact to negotiate with a prospective vendor.

Well, it is common practice. For example:

In my Association the Board instructed the Maintenance Officer to solicit bids, negotiate and summarize the proposals for the Board to view for our snow removal contract and common area landscape contract.

Just this last year, I have been the identified point of contact for the following contract negotiations: Trash Removal, Tree Maintenance, Common Area Turf rehab and painting of the curbs. Another individual was identified as the sole point of contact for sidewalk repair and road repair contract negotiations.

Mind you, being the point of contact doesn't mean that you have the approval authority. That authority is (or should be) kept with the Board as a whole. In some cases, like the common area landscape contract, the Board actually met with the top two contractors. This allowed the Board to ask various questions and for the contractor to make a pitch to the whole Board.

Quote:

Posted By KerryL1 on 09/11/2014 6:03 PM

Our whole board meets with prospective vendors who've given us proposals based on the RFP (req. for proposals) that they've received from our PM. We all ask the vendor, who's often accompanied by 1 or two others, questions.

If that works for you, great. For us, we prefer to utilize our time differently and have an appointed individual do the work you are having your PM and the entire Board do.

Our process is that the Board approves an RFP. The RFP will include what services the Board expects along with options the Board is considering. For example, in the trash contract we also asked for a bid using the option of twice a week recycling collection. The entire Board will meet with the contractors only if there isn't enough information obtained by the received proposals (which includes the designated individual checking references) and bid process to make a determination.

Quote:

Posted By KerryL1 on 09/11/2014 6:03 PM

I cannot imagine allowing one or two directors to engage in all of the tasks involved with hiring an MC or, say HOA general counsel, without the entire board interviewing the candidates of usually 3 firms.

And I would rather that you, and others who have the time to put into vetting the contractors do all of that work and bring me a summary so I can make an informed decision. I wouldn't have voted to place the individual in that position unless I trusted their ability to do the vetting process.
If I didn't trust them, I would volunteer to be the point of contact myself.

Quote:

Posted By KerryL1 on 09/11/2014 6:03 PM

The recourse the president has is to not sign the contract till all have interviewed the MC and the HOA attorney has reviewed the contract.

If the Board voted and instructed the President to sign the contract and the President refused, in my opinion, the next motion would be to remove the individual from the office of the President and appoint a new individual to that office.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

BINGO. Call the bluff.

KerryL1 (California)
Posts: 14,550

Posted:

Sorry, Eugenia, I typed the below in the wrong topic!

Your methods sound fine, Tim. But the points of contact are approved by the board. Sounds like Eugenia's were not. A director acted on her own and exceeded her authority as a director. But maybe Eugenia can clear up some murkiness in her tale--It' not clear to me what the HOA's attorney did or wrote, for example.

And it does not sound as if the entire board voted to approve this action by the director.

I'm not sure, Tim, why you think the president should sign this "contract" without practicing due diligence? In our HOA, our onsite management team is our biggest contract--I believe it takes all of us directors, who bring all kinds of different skills to the table, to be involved in hiring this vendor.

We do not interview our smaller contract vendors, pest control, pool service, gym service, elevator service, copier machine service, etc., etc. In these cases, management sometimes bring the board proposals at a meeting if she thinks it might be time for a change.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TimB4 on 09/11/2014 6:33 PM

Posted By KerryL1 on 09/11/2014 6:03 PM
The recourse the president has is to not sign the contract till all have interviewed the MC and the HOA attorney has reviewed the contract.

Quote:

Posted By KerryL1 on 09/13/2014 8:54 AM

I'm not sure, Tim, why you think the president should sign this "contract" without practicing due diligence?

I expect that the President of an Association is also a Board member. I also specified the condition that the Board would have voted on the contract (indicating that the Board discussed the options and, I would expect, had practiced due diligence).

Once the vote is taken and the President is instructed to sign the contract, I would not consider refusing to sign as the President practicing due diligence. Instead, expecting that they voted against the contract, I would see it as someone who is simply upset because the vote didn't go the way they wanted it to.

Having served as President in my Association, I've had to sign a few contracts that I thought were not in the best interest of the Association. However, I lost the argument when it was discussed at the Board meeting and was outvoted. Therefore, the Board chose to go with a contractor who could still do the job but would nickle and dime the Association on everything they did. As President, my options were to sign the contract or resign. I had presented my reasons and either my reasons were not good enough or I presented them poorly. Therefore, the vote didn't go the way I would have hoped. I signed the contract as resigning would have prevented me from addressing the other issues I saw and was able to convince the Board to vote the way I thought would be best.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By TimB4 on 09/13/2014 10:32 AM
I expect that the President of an Association is also a Board member. I also specified the condition that the Board would have voted on the contract (indicating that the Board discussed the options and, I would expect, had practiced due diligence).

Once the vote is taken and the President is instructed to sign the contract, I would not consider refusing to sign as the President practicing due diligence. Instead, expecting that they voted against the contract, I would see it as someone who is simply upset because the vote didn't go the way they wanted it to.

Having served as President in my Association, I've had to sign a few contracts that I thought were not in the best interest of the Association. However, I lost the argument when it was discussed at the Board meeting and was outvoted. Therefore, the Board chose to go with a contractor who could still do the job but would nickle and dime the Association on everything they did. As President, my options were to sign the contract or resign. I had presented my reasons and either my reasons were not good enough or I presented them poorly. Therefore, the vote didn't go the way I would have hoped. I signed the contract as resigning would have prevented me from addressing the other issues I saw and was able to convince the Board to vote the way I thought would be best.

The Pres cannot hold the rest of the Board hostage by refusing to sign. The Pres has 2 choices: sign or step down from the office of President.

If he steps down, he is still a Board member whose voice will continue to be heard when he votes.

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

Based on what Eugenia has told us, Tim & NpS, the whole board did not authorize Ms. X to do what she did at a meeting. If it was action taken without a meeting, there was not complete consensus.

And the board did not vote, so far as I can tell, to actually hire this vendor. I don't see how or why the president should sign the contract. Without a board vote, I don't see how th contract can be valid. Or, am I missing something???

I still am certain that no director here would accept the advice of any other director about a property mgr. But that's because we have a full-time onsite PM. I can see less care needed if the PM were a portfolio PM with several accounts, or perhaps one who's on the premises, say, 12 hours a week.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By KerryL1 on 09/13/2014 4:54 PM
Based on what Eugenia has told us, Tim & NpS, the whole board did not authorize Ms. X to do what she did at a meeting. If it was action taken without a meeting, there was not complete consensus.

And the board did not vote, so far as I can tell, to actually hire this vendor. I don't see how or why the president should sign the contract. Without a board vote, I don't see how th contract can be valid. Or, am I missing something???

I still am certain that no director here would accept the advice of any other director about a property mgr. But that's because we have a full-time onsite PM. I can see less care needed if the PM were a portfolio PM with several accounts, or perhaps one who's on the premises, say, 12 hours a week.

Yes. As I read the OP description, there was a defective selection process with a final vote of 5-4 to hire the MC. The defects were (1) independent acts by one board member without authorization, and (2) non-unanimous selection without a meeting.

My last post was responding to Tim's comments, not to the OP's original facts.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I also read the OP's position and understand it.

My response about the President was in response to Kerry's earlier statements.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here