Need Advice - We Have A Bad HOA

Hi everyone. I'm kind of stuck in what to do with out HOA. I've lived here for 8 years but only got involved with our HOA recently. It all started when my dues check was returned as having been sent to a bad PO box address. The address was correct but it still got returned. Now...we are a small subdivision with only 114 homes and for the past 10 years we have been paying an outside management company to do some of our work. The check I sent was to the management company. After it got returned, I called them but had to leave a message. A week later they got back to me but I then asked about their physical address as it was listed on their web site. They are not there. I pressed for more questions and really got a sense that this management company is really just a guy and his wife and I was bothered by their lack of communications. The more questions I asked, the more frustrated I became. Here's where things got odd.

I decided I wanted to get on the board and find out why we went from 8 members in 2012 down to 2. I also recruited 2 others. I quickly learned that our "president" is no inactive and non-communicative that he wanted the board to be just him and the treasurer. Our treasurer, who is my neighbor, is also friends with the guy running the management company. They did everything they could to keep me off the board but once on, I pushed for a vote to terminate the management company. We are paying him $3300 and as far as I can tell, he hasn't done anything. People are past due on their HOA dues, he's sent out no letters, etc. The vote passed and he was terminated. You'd think that was the easy past. But in the 2 weeks since we fired him, I keep being promised that our financials will be turned over and it isn't happening. I am not in charge of trying to reach out to the past due accounts but I have been told 4 times since last Friday that the info would be sent to me. Nothing! I then asked the treasurer (my neighbor and his friend) where the management guy's office was. He said he didn't know. I asked our postman and fond out and showed up at his office. It's a rented hole in the wall and he was taken off guard by me showing up. When I asked for the financials he said he told the treasurer it would be after Memorial Day. Then why was the treasurer telling me I'd have them last week. Why our treasurer has none of our financials is beyond me. And when I asked our president for the meeting minutes for the past 3 years he said he didn't have them...the management guy does.

So my problem is this. True or not, it really appears that our treasurer, president and the management guy are all trying to hide something. The president probably knows he's being voted out this year. I'd push for a petition to remove him now but that requires me getting 2/3 of the homes out here to sign it. The president has not respond to any emails I have sent him since Sunday. The treasurer is not responding to my text messages. The management guy said he'd email the financials to me today and nothing has come through.

We have 2 members on are board that should be gone and I feel I am the only one out here fighting to get the stuff but I'm running into a wall since I'm basically being ignored.

Your thoughts?

I've read the bylaws and can't find anything that would help remedy the management property now turning over the info. Also, I think I could get the 2/3 needed to have the president removed but I would really like to see him just resign.

? how many directors are required by your by-laws ?

? when was the last annual meeting of the members ?

? does anyone except you care ?

Wow...great questions. Ok...what I know is that it says we are to have no less than 2 board members and no more than 15 total. As far as the other residents, I am going to say they all stopped caring after 3 years on no newsletters, no one went to the meetings, no annual picnic, etc. It's as if these 2 board members just stopped doing anything so the rest of the subdivision stopped caring. However, I got them all re-energized with a simple newsletter letting them know they had a mostly new board and things were going to change. However, I didn't realize that the 2 existing board members would make it nearly impossible to get anything done. Our president knows nothing about what is going on so he referred me to the management company. Our treasurer has no info about the finances and referred me to the management company. And between the treasurer and the management company, both are telling different stories as to where are financial information is or when it will be made available.

As far as the management company itself, while we did voe to terminate them, the treasurer (the friend of the guy who runs the management company)said that we need to be patient as we make the transition from the management company having everything to us getting our hands on it. Apparently, the 2 board members had no control over our information. Hell...they didn't even know where the management company was located. As far as the banks, I was told only our treasurer has access to the accounts and only he has check writing privileges. One thing I know for sure. Once we get the records I am going to assume that "changes" we made and request copies from the bank of every check written. I don't want to flat out accuse anyone of wrong doing but everyone is certainly keeping their mouths quiet when it comes to turning over the financial information.

Property managers answer to the board of directors but it's the board who is responsible for the actions. A board can delegate a lot of authority to a management company, but it can't delegate ultimate responsibility. I found this for Kansas, section 58-4616 looks like it might be of interest to you as far as association records, what you have a right to see, how to request it, and how long they have to respond. Enforcement of a non-response may be a horse of a different color, though, I didn't read everything linked on the page. In Florida there's an automatic $50 a day penalty for every day over ten that the association doesn't respond to a records request. Kansas is 99.9999999% sure to be different in that respect.

http://www.kslegislature.org/li_2012/b2011_12/statute/058_000_0000_chapter/058_046_0000_article/

If I understand this, you now have a board of five consisting of the president, the treasurer, you, and two friends that you recruited. If so, call a board meeting (or at the next scheduled board meeting) and vote in a new president and Treasurer. You don't have to wait for the next annual meeting. Check your bylaws and do it by the book so they can't challenge it.

Florida Statutes 720.303(5)(a) says, "The failure of an association to provide access to the records within 10 business days after receipt of a written request submitted by certified mail, return receipt requested, creates a rebuttable presumption that the association willfully failed to comply with this subsection."

720.303(5)(b) right after that says, "A member who is denied access to official records is entitled to the actual damages or minimum damages for the association’s willful failure to comply with this subsection. The minimum damages are to be $50 per calendar day up to 10 days, the calculation to begin on the 11th business day after receipt of the written request."

Note it says a member is entitled to "damages", so it's not a fine per se. Since the maximum amount seems to be $500, I would assume Small Claims Court would be the venue. Any other approach would make it not worth collecting. I'm sure a lawyer's fees would eat that $500 without even blinking, so yeah... probably Small Claims Court. But I'm not 100% sure.

Thanks Geno. I think you're right about the lawyer fees. I wonder what would happen if ten HOs sent identical demands for access to the records at the same time. Do you think that would create a potential liability of $5,000 for the HOA?

Providing that they are willing to take the job.

An Association has the following:

Director - Typically elected but may also be appointed. Directors each have one vote and make the decisions by majority rule for the Association.

Officers - Appointed by the Board (typically from amongst the directors). Officers have zero vote. Officers implement the decisions of the Board and perform the day to day tasks of the Association (collect assessments, pay bills, maintain the common area, etc.).

When Directors also serve as Officers (which is common), it's like having two jobs. As a Director, they cast votes in making the decisions of the Association. As an Officer, they would then implement those decisions.

Officers serve at the pleasure of the Board - that is to say, that the Board (Directors) may remove someone from office at will and replace them with another individual.

Directors serve at the pleasure of the membership - that is to say that the members elect and may recall (remove) an individual Director or the entire Board. However, depending on applicable laws or your governing documents, it's possible that Board may also remove a Director. This may occur if the individual misses too many meetings or if they were appointed to the position. Check your governing documents and applicable State Statutes to see if these specifics apply to your Association.

I see my & tim's posts crossed. We say the sam thing, Gregg, but with slightly different language.

Gregg

Typically the Officers of the Association (Pres., VP, Sec., Treasurer) are fellow BOD Members that were elected as an Officer by their fellow BOD Members. Some Covenants allow Officers not to be Members of the BOD but they are few. In the vast majority of associations an Officer must be a Member of the BOD.

Typically Covenants will say that after a General BOD Election, the BOD will meet and have an Election of Officers. Some Covenants will allow to BOD to call for an Election of Officers whenever they want to. Generally if Members of the BOD are unhappy with a Officer, the Members will call for an Election of Officers. This means a majority of the BOD would have to agree say 2 of 3, 3 of 5, 4 of 7, etc. to an Election of Officers. I know nothing of a BOD being able to recall any Officer with a 2/3rds vote. Not that is does not exist, but I have never heard of such.

If an Election of Officers is called for and any existing Officer loses, they are still a Member of the BOD but they are no longer an Officer of the Association.

If a Member of the BOD can be recalled by the owners, it is to remove them from the BOD entirely be they an Officer or not.

Hope this helps.

I took the time to scan the link. As NPS says, very unusual.

Where I the OP, I would pay attention to recalling Member(s) of the BOD. In lieu of being elected, a recall might be the way to go.

Some of those Bylaws would seem easy to change in that people would support change. People would support must be an owner. A BOD from say 3 to 7 Members. BOD Members cannot be compensated. Get rid of Chairman of the BOD. They all seem like things people would be more then willing to go along with.

I've been making a log of all of the suggestions made here so I can ask that the board addresses them. I think I've narrowed my concerns down to this final question.

Our board consisted of 2 guys...one was acting as president and the other was acting as treasurer. I was able to recruit 3 more people so, including myself, they board now has 6 members. The 4 of us that a new want to remove the president and also request that the treasurer step down or we will vote to remove him as well so we can access the bank accounts. My question is this. Do I have the right to call for a special meeting, informing everyone of the date and time, to call for a vote to remove?

NpS quoted your bylaws Article III, Section 8, which tells how to call a special meeting of the board of directors. (This is not a special meeting of the members, which would be a meeting for all owners, just a board meeting.) It takes 12 days after giving notice of the meeting, so you might want to skip the special meeting and just wait until your June 8 scheduled meeting.

I am concerned that this is happening too fast and you don't really have the experience to run an association. You are going to remove the President, Treasurer and the management company, all at once. Do you have good replacements? You might want to retain the manager or hire a new management company to get you through this.

DITTO

When was the vote to terminate your previous management company? I would not automatically assume there was funny business going on. You could be right but delays in transitioning between outside service providers are not in and of themselves evidence of wrongdoing. We are self-managed but we do have an outside bookkeeping firm. Last year we decided to switch companies. The switchover date was January 1 and, even with 60 days prior notice, it took until almost the end of March before all the records had been transferred, bank accounts squared away, and everything entered into the new firm's system. You shouldn't have to wait forever, but the transition can take some time and just because it drags on for a month or even two doesn't necessarily mean something shady is going on.

I agree with posters above who say you should wait for your June 9 meeting. That's 4 weeks away and your procedure to call a special board meeting requires 12-day written notice via US mail. Your president first has to refuse to call a special meeting before another director can do so. How do you document that? How long will it take to get him on record refusing to call a special meeting? Until this coming Wednesday? All week? At best a special meeting is probably still 2 full weeks away. If you think it's that important then, by all means, procede. I'd rather use that extra time to get all my ducks in a row. Map out the order of events you want to happen at the next meeting: quorum, election of new officers, termination of the position of "Chairman of the Board" (as per your bylaws) if you so wish, termination of all existing board compensation, examination of any employment contracts that may be in effect (again, as provided in your bylaws which are, as others have pointed out, unusual).

If this is going to be contentious or controversial at all, you probably want to make sure you dot all the Is and cross all the Ts. If there's a requirement that an updated list of officers be submitted to your Secretary of State, you probably want your Secretary to mail that out as soon as possible after the change. Have the secretary impress the corporate seal on it first. Be ready to take a copy, and maybe a copy of the meeting minutes, to your bank(s) in order to authorize/de-authorize signature authority on the accounts.

This is all pretty basic stuff IMO. You don't need a lawyer for any of it, but given your confusion about the basic difference between directors and officers, I think you should familiarize yourself as much as possible with the nuts and bolts of the matter. If you intend to have the board select another member, do that at the same meeting. Make sure that person also familiarizes him or her self with your documents.

We have a new development. The HOA president has called for a meeting this Thursday night. He already knows there is growing support for his removal. So I have these questions on my mind:

1) We've been asking for Meeting Minutes for the past 3 years but no one seems to have them. If they are not produced, or were not kept, what conclusion would you come to as board member? Without them we have no idea what action the board has taken over the past 3 years.

2) We have already made a list of financial documents we would like to inspect. What action, or conclusion, would you make if he failed to provide them? Our bylaws do say that we are allowed to review them upon request but we've been asking for them for weeks and nothing has been done.

3) Is it wrong to require that the treasurer much have at least 2 other board members approval before writing HOA checks? I'm not saying 2 signatures on the checks but just approval so more than 1 person knows where the money is going to before the check is written.

It doesn't appear that the President can schedule the special meeting on Thursday as your governing docs require 12 days notice be given.

I would phrase it a bit differently - Not as a recall.

I would hold the vote "to elect a new Prez, who assumes that role immediately after the vote is counted."

"Recall" has very specific connotations and I think you should try to avoid using it to describe what you're doing. It's not a recall vote. A "recall" takes place when the members want to get someone off the board. If the members recall a Director then that Director becomes an ex-Director. If said Director was also an Officer then he would be stripped of that title/role as well.

What you're doing is much more pedestrian. You're having the board vote on who the new President (and possibly other officers) will be, but afterwards the composition of the board of Directors will not have changed. A "recall" usually implies that the composition of the BoD has changed.

I've found two paragraphs that discuss removal:

Section 2. Election. The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section 5 of this Article IV shall be
chosen annually by the board of directors, and each shall hold his office until he shall resign or
shall be removed or otherwise disqualified to serve, or his successor shall be elected and
qualified.

Section 6. Removal and Resignation. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any regular or special
meeting of the board, or, except in case of an officer chosen by the board of directors, by any
officer upon whom such power of removal may be conferred by the board of directors.

And now we have YET ANOTHER problem. When I spoke to our bank to determine what documents are needed to have other board members on the account, I was given a list of items. On it was a Letter of Good Standing from the Secretary of State. Well, I went to our state's web site and we are NOT in good standing. I then called them and they confirmed that our management company did not file annual returns for 2013 or 2014 but the management company made sure he was in good standing. What now?

Yikes. I think the "good standing" situation can be fixed fairly quickly once you've got your officers situation straightened out.

Your bylaws are written to give you a lot of flexibility, but with that flexibility comes added complexity. So, to coin a phrase, "Be Prepared".

Your bylaws provide for a plethora of officers besides the regular President, Treasurer and Secretary. After you've got your new president installed, you want to clear the decks. You don't want any surprises, like the old management company guy showing up and claiming the board elected him "chairman of the board" two years ago, or something like that. This is paranoid and extreme but you need to be thorough imo because nobody can produce board meeting minutes from the last 3 years and you should be sure you have everything under control. Your directors need not be members so I would not leave anything to chance.

So, if this was my meeting here's what I would have on the agenda (the numbering is arbitrary) ...

1. Removal of Officers.
2. Board appointment of new Officers.
...
6. Re-estalishment of corporate "good standing" with the state of Kansas.

Don't forget to document this meeting carefully. Record it if possible. If any of the other officers resign in protest you have to also be prepared to appoint replacements. Your bylaws say "any number of offices may be held by the same person", so you have a fallback position just in case.

Here's hypothetically how part of the minutes could appear after the meeting is over...

1. In accordance with Article IV, Section 6 of the bylaws, Alice made a motion that Joe be removed from the office of president. The motion was seconded by Bob. The board voted in favor of the motion and Joe was removed from the office of president. The vote results were as follows: (list how every director voted)

2. Due to the removal of the previous president, a vacancy was created in that office and the board proceded to fill that vacancy in accordance with Article IV, Sections 2 and 5 of the bylaws. Bob made a motion that Charlie be appointed to the office of president, and the motion was seconded by Alice. The board voted in favor of the motion and Charlie assumed the office of president. The vote results were as follows: (list how every director voted)

- Here is where #2 would be repeated for other vacancies that may result at the meeting if other officers resign in protest -

3. Article IV, Section 1 of the bylaws provides that the corporation may have the following officers at the discretion of the board of directors: (a) chairman of the board, (b) one or more vice presidents, (c) one or more assistant secretaries, (d) one or more assistant treasurers. Charlie made a motion that any persons, known or unknown to the board at this time, who presently hold such offices described in (a) through (d) above, be removed from said offices effective immediately. Alice seconded the motion. The board approved the motion. The vote results were as follows: (list how every director voted)

The wording of your bylaws is a bit convoluted, but Article IV, Section 2 clearly says "appointed in accordance with the provisions of ... Section 5", and Section 5 deals with vacancies, so I would say the board is "appointing" a new president. Some of this might be semantics but, again, I don't think you can be too careful. You can take your foot off the paranoia pedal down the road when things settle down.

Now if directors resign from the board at the meeting, you can do something like this...

4. The board recognizes and acknowledges that Marsha has resigned as director of the corporation.

5. Article III, Section 4 provides for remaining directors to fill vacancies on the board of directors by majority vote. Bob made a motion to appoint Fred as a director of the corporation to serve out the remaining term of Marsha who resigned during the meeting. The motion was seconded by Alice. The board voted in favor of the motion and Fred joined the other directors at the table. The results of the vote were as follows: (list how every director voted)

- Repeat #4 and #5 as necessary; your bylaws allow for even a sole remaining director to fill such vacancies -

As far as your situation regarding the corporation being in good standing with the state, do something like this...

6. Fred made a motion that the corporation's Registered Agent be directed to expeditiously file all necessary paperwork and take any other action necessary in order to re-establish the corporation's "good standing" status with the state of Kansas, and that the board authorize payments required to satisfy filing fees, late fees, penalties, fines, and other reasonable expenses required to re-establish same said "good standing" status be made out of the corporate treasury. Alice seconded the motion. The board voted to approve the motion. The results of the vote were as follows: (list how each director voted)

You want to avoid nasty surprises like the "good standing" revelation you just had. Don't be surprised if you currently don't even have a registered agent.

Whew! I don't envy your position, but I wish I was there as a fly on the wall when this meeting takes place.