LEGALITY OF ARIZONA HOA & EXECUTIVE SESSION

What illegal activity.

Based on what you posted:

The Board hired an attorney. The attorney attended the annual meeting and was paid for their time.

After the annual meeting the Board met with the attorney in ES (as allowed by statute) to discuss these issues. The attorney was paid for their time.

After x amount of time (or perhaps in the Executive session), the Board discovered that the attorney blew them off, was incompetent or there is some regulation that specifies only a specific attorney must be involved in writing governing documents (I'm thinking one of the first two reasons). The Board or attorney terminated the relationship.

This was a bad business decision.

Similar to you choosing a doctor, you may end up choosing the wrong one and need to find another one. That doesn't mean that you don't owe the first doctor for the office appointments you had.

The statute I quoted above is for HOA's. For Condos, the relevant statute is ARS 33-1248 and the provisions of that statute are identical to what I quoted:

"Any portion of a meeting may be closed only if that portion of the meeting is limited to consideration of one or more of the following:
1. Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment."

I re-read the statute after I posted and yes, I realize that there can be EX discussions. Just personally don't get a good feeling when owners do not get any worthwhile updates and then all of the sudden, the attorney was not the right one and they are onto spending another 7K for the next one on a project that will be outdated as soon as the new laws get adopted next year and the years following. I kind of feel that you must updated annually on the new laws or you are spitting in the wind.Thanks again. This group still tells folks that they can't put satellite dishes on the roofs.

Good Morning, Thanks for your concurrence Larry about the kind of "secretive" method my BOD is implementing in a futile attempt to bring the docs "current". Since the BOD and one member in particular is so hell bent to do this, they have gotten bids from several law firms and ALL CAUTION them that this task is going to be very difficult because of the general apathy that prevails in most communities. I have choosen to do a formal request for records of the letter of engagement, financial costs and work product involved in this failed attempt to update the docs with this particular law firm. I am told that the board members never had an opportunity to even review the actual re-writes that the attorney did and that the members paid for. It concerns me greatly that there was no other board member participation in this process. The apparent failed project was drawn out for a full year and now we are told they are starting over! The history in my community also includes a $93,000 water saving revamp of the irrigation system which saved us NO additional water and had a return on investment of 25 as in twenty-five years!! It was only because of great effort by a small group that got the program halted.....they wanted to spend another $32K until we shined a light on the whole scam.

Melissa, thank so much for this thoughtful response. The catch 22 in our CC&R's is that the first mortgagees ALSO have a vote on the changes. Someone tried to explain a rather elaborate process involving a notarized signature but honestly, it was beyond my scope of understanding. We asked for a legal opinion on parking trucks overnight on the driveways because that is not permitted in the CC&R's. I don't want to get into a discussion about that but the point I am making is that the HOA is not sharing the legal opinion that we requested. As I understand it, it is not "case law" in the state of AZ. I know about California. So trucks are on the drives overnight and I feel bad for a new owner whose truck will NOT fit into his garage and unfortunately they read the CC&R's but heard from a neighbor...."Oh they don't enforce that so don't worry." And that was true because for about a year they stopped giving violation notices and when the community became littered with pick ups in varying conditions, other owners began to complain so now No one knows what the H is going on. It is a mess because of lack of leadership and consistent governing. I am not in favor of updating the CC&R. I would rather see a Rules & Regs Committee make some sensible changes. There has to be community involvement on these kinds of issues. No one wa nuts stuff crammed down their throat without input. IMO.

Melissa

First Mortgagee is the holder of the NOTE, usually, the BANK

Joanne

Some years back our townhouse HOA wanted to allow some architectural changes. One owner did not like them and she objected (in a formal letter to the BOD) based on her reading that the mortgage holder would have to be notified and approve such changes. We had the HOA attorney look into it. He said she was wrong and he wrote the BOD a letter stating such and why with a copy to her. She withdrew her letter. Now the ironic part was that she is a Professional Property Manager that manages quite a few upmarket associations. I would want a legal opinion on the right of a mortgage holder needing approval on Covenant changes.

Also your comment on the BOD saying one cannot put a satellite dish on a roof. The BOD could be correct. A BOD cannot stop satellite installation but they can "somewhat" control where the dish might be placed. If common roofs (meaning a roof shared by several units) then I would not want anybody crawling around installing dishes on the roof for fear of leaking.

JoanneD1,

You mention Satellite Dishes. Not sure if a concern or you were just mentioning as an example.

If placement is a concern – are you aware that Satellite Dish placement is governed by Federal FCC Law.

Here are some links:
https://www.fcc.gov/guides/over-air-reception-devices-rule
https://www.fcc.gov/guides/installing-consumer-owned-antennas-and-satellite-dishes

http://www.hindmansanchez.com/resources/article/fccs-rule-satellite-dishes-and-other-antennas

For readers into the details:
Following up on the outcome of a request for records regarding the letter of engagement between my HOA and a law firm that was hired to re-write and update the governing documents. I met with the administrator of the HOA management company and my personal representative. My first request to view the letter of engagement garnered a response from the manager that they were contacting the firm because the management company did not have a copy of the letter. (Really?) The law firm responded with a boiler plate document and a cover letter dated June 5, 2015.....HOWEVER, the attorney was hired in 2014. There was no signature page. So I made a more succinct request for records by adding the word "signed" letter of engagement. I opted for a face to face meeting, to review my request for not only and the letter of engagement but also the detailed invoicing and the actual work product. I was told there was no signed letter and that it was not necessary and it was "common practice" to not require one. My representative explained that is wrong and the manager backed off finally when my rep revealed that she not only was a retired attorney but had been affiliated with large firm hired by the HOA. My rep went onto explain the importance of the letter of engagement and if there was none, it could constitute a bar complaint (which no lawyer wants to deal with). The manager did provide the work product but there were no financials per my request. I was shown one invoice which I found to be unsatisfactory so I then requested a detailed invoice showing the time allowed for each of the documents reviewed. My rep also requested the manager to make one more attempt at providing a signed letter of engagement because she found it quite stunning that there was none. I am sharing this detailed information so that we can all learn from this experience. KNOWLEDGE IS POWER!

Thank you for the questions.....The BOD meeting minutes state a flat fee "not to exceed" $5500. I was shown one invoice for just over $2000 but the general ledger is unclear as to how much of the legal fees paid were assigned to this specific process because there are other on going matters involving attorneys. On that invoice, there was logging of time and that is why I have requested a more detailed accounting. Legal fees at the end of 2014 were almost $7000. The lack of transparency surrounding the entire issue is what peaked my concern and since you have not read the thread....in a nutshell, the work product received from the attorney was reported by the BOD president that it was not applicable to what the board wanted yet they paid $3000. Something is amiss. Then at the following BOD meeting, the work product was applicable and they have gone ahead and switched firms. This likens to someone who goes to a doctor and cannot accept a diagnosis and then keeps getting opinions until they hear what they want. I am sorry if this is confusing.

i had scanned the thread but i didnt read every post. before commenting on things, i usually like to understand the numbers. i understand that the HOA hasnt provided you with much, but i would like to understand what you did get a bit better. If the $2000 bill had detail, it probably showed an attorney billing rate and an admin/paralegal billing rate. lets say the attorney rate is $250 and the paralegal rate is $100 to make things simple. $5500 would cover 10 hours of attorney time and 30 hours of paralegal time. im just making up these numbers as examples. but its so much easier for me to think in terms of a project that is expected to use 10 lawyer hours and 30 paralegal hours instead of dollars - which doesnt give me a picture of how involved the project was expected to be.

Thank you NpS and I wish I had more to share with you. I am expecting a detailed invoice from the HOA as they agreed to give that to me by week's end. I have a copy of a letter from the firm that states: "pursuant to our agreement with __________, HOA President, I have agreed to perform the work for a flat fee of $2500 through the review and edits of same with the HOA until ready for presentation to the HOA homeowners. However, once that work is completed, the following rates will apply for any further legal services: my current hourly rate is $395; other attorneys, if needed, will be billed at hourly rates which currently range from $200-$715, depending on levels of experience..." and it goes onto talk about paralegals from $95-$230. I am about to compare word for word the work product given to me per my record request to see what the HOA got for its money, the amount which is yet to be determined. Attached to this is the boiler plate terms of engagement. After reviewing, I will continue my post....but my concerns are great because of the way the project was suddenly dropped, the attorney's expertise was challenged and now suddenly the work product is acceptable. Thank you for replying. When trust issues are raised, my red flags are flying.
Joanne

Thanks again and that is what I want to know.....what did the HOA get for it's money and just how much money? Have a great day.

Ah...you are correct....first of all, I am told that there must be a signed letter of engagement....state law in AZ. If that is true, this attorney has done something unethical and secondly the HOA paid him in full and apparently did not get the data that was verbally agree to and that harkens back to a signed letter of engagement so that there is clarity without false expectations. I am perfectly willing to accept whatever is the outcome except my HOA has spent some four-figure amount of money and did not get a useful product but a month later told us that the product is now useful but we are hiring another firm to get the result we were wanting the first time around. This issue has been draped in secrecy with no sharing of work product even when a casual request was made. So then I have to make a formal request to view public data. This does not go down well IMO. Hope that helps and if you have any suggestions, I am all ears. By chance, are you familiar with HOA law and ethics?
Joanne

Ms or Mr Philly....I ADORE that you have sent me this sample and all seems fine until the signature page. I DO NOT HAVE THAT. If there is no signed document, how can one verify that both parties agreed to the terms? I am trying to understand. Also how can any HOA management company NOT have a copy on file ? The manager outright told me they did not have a copy and she had to request the copy from the firm and what they sent was dated 2015 NOT 2014 the year of hiring. I was told twice on two different occasions that there is No letter of engagement and No signed letter of engagement. Should one not be suspect and I take criticism pretty well?

So good to speak to someone who is so much brighter than I am and I want to make myself clear so that I don't make you or any other reader crazy.

The terms of the contract that are referenced in the 2015 attorney response read: Re: HOA Governing Documents
The writer then goes on to say that the 2015 letter confirms the firm's continued representation of the HOA in connection with the preparation of governing documents for the HOA. Now, I happen to be keenly aware of the intent of someone on the BOD to re-write the entire Declaration (CC&R). I publicly opposed the action to rewrite the entire document and was the recipient of a nasty email informing me that nothing was going to alter the intent to accomplish the goal. Operative word here is "entire". The CC&R's are vintage 1979. It was like pounding sand attempting to get the BOD to understand what docs supersede, so on and so forth. You know all of this. So is it fair to assume that an HOA's governing docs are composed of CC&R, Articles of Incorporation, Bylaws and Rules & Regulations? If the answer is yes, I have only received the work product of the Rules & Regs and Amended and Restated Bylaws. I have NOTHING, nada, zippo on the DECLARATION(CC&R). What am I to think? That was the document they wanted to update most. If I am breaking your back, I apologize.
Joanne

I used to tip a few at the Armadillo Grill in Milwaukee. Good thing you have the hard wax finish as I am not easy. Unfortunately you read this probably right...I forbid myself to concede yet. I need to keep busting their chops. It is because of the history in this complex that we are not a community have a board that fights over ice-cream social vs pot luck and then the whole damn even gets cancelled because too much time has passed and the seasonal owners have all left for cooler climbs. It beats the hell out me for sure. Well......until I have something more significant to report, thanks a million for all the level headed good comments and great assumptions. It has been a pleasure.
Joanne

Here is a "follow up" to our discussion regarding letters of engagement. I have questioned and maintained that there needs to be something in writing between a law firm and it's client, whether it is an HOA or an individual that states the terms that are agreed upon. For a quick refresh, the board verbally hired an attorney for a specific task and a year after the initiation of the relationship, I asked to see a letter of engagement and was told by the management company that there was none. The attorney drafted a letter ONE FULL YEAR later that contained only his signature. Upon further investigation, by a top legal beagle, the Arizona State Bar, Rules of Professional Conduct 1.5B clearly require a written statement of the terms of engagement prior to or within a reasonable time after commencing the representation. A lapse of one year is not acceptable as a reasonable length of time. Additionally, I contacted the firm to make inguiry as to whether or not a letter of engagement signed by both parties was mandated and was told yes. I have written directly to the attorney and await a response as to why this was not executed.
There are billing issues and quality of work product also involved in this matter. Have a great day......KNOWLEDGE IS POWER.
Joanne

Hi Joanne
The AZ State Bar has a Disciplinary Board that deals with complaints againsts lawyers who aren't following the Rules of Professional Conduct. If you want, you can send them your complaint and see how they respond.

On the other hand, the failure to follow the professional rules does not negate the contract with your association. The lack of an engagement letter does not negate the contract. Realize that a contract is formed when two parties are in agreement. The lawyer says there there's an agreement. Your BOD says there's an agreement. Both sides agree. There's a contract.

You don't agree - but you're not a party to the contract. You're a beneficiary of the contract but not a party.

A lapse of one year may be unacceptable to you, but apparently it's acceptable to your BOD. If they aren't satisfied, then can get rid of this lawyer and get a new one. If you don't like what they are doing, replace them with someone you think will do a better job.

Best to you too.

And the beat goes on......I wrote a letter to the BOD sensibly encouraging to rethink the direction by which they are "updating" the CC&R's. I encouraged them again to form a committee comprised of owners and directors and/or do a survey and take the pulse of the owners on how they feel about the proposed changes and/or hold a special meeting.....ALL of which were rejected. THEY NEED 75% of 174 to get changes made. I then stepped out of the box and wrote a letter to the attorney who was involved the project and asked him for a detailed accounting of expenses, asked who actually drafted the work product and asked why there were no strike out or red-lining applications. I also cited AZ bar rule 1.5b. I did not threatened but noted that his letter of engagement was one year post hiring. I attended the BOD meeting with my representative, an amazing attorney and I was told she would have to leave the meeting because the letter giving her the authority to speak on my behalf was not notarized. The manager had the audacity to call out and ask if anyone at the meeting was a notary(knowing full well there wasn't one). I had to laugh out loud and asked her to show me the statute requiring this. She left the room for 10 minutes....returned and apologized for being in error and said I could not speak if I wanted her my representative to speak. They gave my rep 3 minutes and she did a wonderful job. The president of the board kept hitting the leg of the treasurer everytime he opened his mouth on the subject of the CC&R change until I asked the president why she was hitting him under the table! She recoiled and said this subject was not going to be discussed further because they were seeking legal advice from their attorney.....they apparently were going to attempt to get some legal action to try and shut me up for questioning the whole process and the fact that the attorney did not do a very good job for which he was handsomely paid. The next day, the president of the board resigned and the project has come to a screeching halt. And of course you know who is the bad guy in all of this!! Now one person on the BOD is asking me to accept an appointment to fill the vacancy because they are concerned that I am going to file a bar complaint and feel they have more control with me in the camp than out of it. The board president loudly proclaimed at the meeting that the BOD was threatened by me. I talk loudly with passion, I speak the truth and have the facts.....yes.....I guess that would be threatening to some. There is only one of three that understands how HOA works and that HOA is a business. The management company is deplorable.The bottom line is, I am responsible for stopping a project that was going to expense out at no less than 10K and was DOOMED TO FAIL. I am torn about serving on the BOD. I fully understand the opportunity but don't know if my acid reflux would do me in.
Thanks.

Can't make this stuff up!

Again.....thanks so much for your thought provoking response. That is what I am asking myself.....can I make a POSITIVE difference. I am the greatest nightmare for an HOA and management company because I enjoy law, know the documents and statutes pretty well, not afraid to call a spade a spade and have time. They pulled some selective enforcement stuff on me so what do you think they did when they were challenged......they stopped enforcing everything....yes no violations to anyone for over a year until other owners started to complain and they admitted that in a meeting. This is what I would be working with. And the thing that is most aggravating is that they would rather shoot the messenger rather than make the corrections going forward. If I would get the appointment, I would have access to a whole lot of stuff they would rather not share...like executive session minutes. And from their aspect, it would better to have me in the camp than out of it. Thanks again for your postings.
Joanne

My question was whether you can get things accomplished as a member of the board. Your answer is that you'll be able to go in with both guns blazing, you'll have access to the docs that will prove whatever you think you need to prove against the other board members, and you have superior knowledge that the rest of them.

Let me rephrase the question: Assuming you have a 5 member board, can you get 2 other board members to agree with you? Without that support, you will be ineffective.

Nothing in your posts demonstrates a willingness to work with others. Nothing in your posts demonstrates any level of respect for those you will need to vote with you and get a majority. You sound like a bully. Is there another side to you?

Thanks again.....I am not sure what a bully is but you seem to think I fit the mold and maybe you are right. You are correct.....have little to no respect for these volunteers who don't really do their homework and have no respect for the documents which is what HOA living is all about or thought it was about. Took one of the members to breakfast and shared all my concerns with her in the hopes that she would come to a better understanding of where I was coming from. She took it all in.....nodded and agreed ...said she thought people did have a better understanding and then she turned around and used all information against me. I reached out to a broad member....not the community and it backfired. So I question any potential effectiveness because of this recent experience. Have a great week and thanks again.
Joanne

Big deal. You met with a board member who didn't tell you to your face that she didn't like what you were saying.

I've been on my board twice.

The first time I had a single agenda item that I thought was important - bringing natural gas into our community. It would have saved our community over $600,000. I got squelched because the other board members weren't ready for it. Nobody said no to my face. They just let the issue die by dragging it on forever.

The second time (around 20 years later), I could see that the board was in trouble by the way they handled a special meeting called by some of the HOs. I knew they were in trouble - they didn't. My first objective was to gain support from the existing members or get them replaced over time. Today, only one of the original members remains. I have had a positive effect on changing both the composition of the board and the activities were pursue.

Both times, with 2 different boards, the biggest obstacle I had to overcome was fear - lawsuits, threats, demands, change, commitment, disappointed HOs, whatever. There was a tendency to stay with what they knew even though they knew what they had wasn't great. It's taken me almost 3 years and I'm still working on some of the items that I thought were important to change 3 years ago.

I see that you brush my comments off without much consideration. Doesn't bother me. I don't live in your community. Then again, I am not the only one in this thread who has commented on your accusing tone without providing much meat in the way you describe things. You do know what I am talking about.

NpS....I don't know why you feel I have not addressed your response to me. I am truly trying to decide if I want to attempt to be appointed to the board. I don't know if I can be effective and don't want my efforts to result in failure for anyone. My only agenda is to serve the owners who live in my community.I have something to offer...the passion, a working knowledge of documents and want to create a sense of community....not a compound. The current board is so divided they can't even figure out a social event and have cancelled 4 because by the time they figure it out, the seasonal owners have left Arizona until next winter. There is very little transparency...terrible communication and folks who really have no clue. Expressing myself has never been my short suit but apparently I have not done well. My concerns are accuracy on the general ledger which always has errors and no one seems to care about that either. So the task of joining the board is major because it is a mess from top to bottom and I do NOT want to take a seat and start criticizing so it will be just as much a process for me as it was for you. You may have more patience than me. We have 174 owners and a very small pool of folks who want to be involved and I would guess such is the case in most HOA. I do not take my commitments lightly and know this will not be an easy road. Thanks for all the input. I will continue to read your posts as well as other who care enough to participate in this forum which I think has great great benefits.
Have a wonderful week.
Joanne

Again, Thanks John.