Return of "donation" made by past president.

I've just been elected president of a small HOA in Idaho. When We bought the place the realtor said, "Don't worry. You pay $60 a month for Water&Sewer but there is no real HOA to worry about". You can guess the rest

There are roughly 16 waterfront lots, 7 non-waterfront lots, and a common-lot with a launch ramp that has been there since the developmet was started 25 years ago. The only money spent on this lot for 24 years was to maintain a fire hydrant that draws water from the river.
For 24 years 90% of the funds from the Water&Sewer bills were set aside for the day when the fragile systems will need to be replaced. At present we have $115K set aside for the expected $500K replacement cost.

The former board was recently voted out because they were using Water&Sewer funds in an attempt to install a dock that the membership voted against.
The day of the coo the previous president wrote an HOA check for the return of funds he donated for a dock, but he could not get a second signer to endorse it. He sent me an email stating that the memo on the front of his original donation check says, "Dock Only", but there is no written contract or mention that I can find in the minutes.
The previous president has a year remaining in his term as a board member, but is no longer an officer or a signer.
I emailed back stating that we will follow Idaho law regarding when a donation must, may or may not be returned.

Here's where it gets really complicated: Over the period of a few years the pro-dock members took over the board. They doubled the Water&Sewer fee, changed the monthly Water&Sewer bills to read, "HOA Fee", and then moved funds from the Water&Sewer account into a "Common Lot" account.

For 24 years the HOA has used the attorney that drew up the CC&R's and the ByLaws. The past board was paying this atty to fight against the majority
of HOA members and to fine the leader of the "No-Dock Against The Vote" group for atty fees. They wrote checks to this atty for nearly $5,000 from the
General Fund and gave a local contractor a large deposit so that he'd rush to install a dock. When a member asked to see records held by the atty the atty stated he could not share information because he " represented the board".
The former president showed me a cancelled check that he wrote to this atty from his own acxount because he "didn't want there to be a conflict of interest".
So, yje atty has been paid with both HOA funds and a small amount of board member funds to fight against the will of the membership.

This whole dock-issue is nothing but a conflict of interest.

QUESTIONS:
1) Should the $5,000 that the former president spent fighting the majority that are opposed to his pet dock project, and/ or the non-retrievable HOA money that he paid a contractor for a dock that will not be built be deducted from any refund of his donation? My thinking is that even if the legal fees are spent appropriately they should be attributed to "the dock" and not taken from the General Fund.

2) Does it sound like this lawyer should be sanctioned by the BAR or other entity?

3) There are 3 former members on the board. They wont do any work that does not get them closer to getting a dock. There are 4 of us that are newly-elected and want to get our books in order, hold a free and fair vote on the dock and then perminamtly reduce the power of the BOA so that it cannot spend over, say, $1,000-$2,000 on any pet project without a majority vote by the membership. Is there a way to do this? What the majority of us want is a reliable water supply and to not have to worry about the cost, liability and nuisance and enforcement issues of common-lot dock parties

Rick for your #3, this is what our CC&R's say on the matter:

Section 4.2. Capital Additions and Improvements. The Association’s power herein above enumerated shall be limited in that the Association shall have no authority to acquire and pay for out of the maintenance fund any capital additions and improvements (other than for the purposes of replacing or restoring portions of the Common Areas and Facilities, subject to all the provisions of the Declaration and these By-Laws) having a total cost in excess of Two Thousand Dollars ($2,000.00), nor shall the Association authorize any structural alterations, capital additions to, or capital improvements of the Common Areas and Facilities requiring an expenditure in excess of Two Thousand Dollars ($2,000.00) without in each case obtaining the prior approval of the members of the Association entitled to exercise a majority of the voting power of the Association, provided that during the seven (7) year period following filing of the Declaration, if Declarant shall own any of the units, its consent to such expenditure shall be required.

BTW. for something like this you would need to amend the Covenants, if you tried to simply make it a rule, it would be easy for a subsequent Board to change it.

GenoS,

I've only lived in the neighborhood for 4 months, but my understanding is that the maintenance on the 3 wells, pump house and nearly 2 miles of water-delivery and sewer pipe/drain field limited growth in the reserve fund until rates were raised in 2011. The ByLaws also allow the Board to refund excess funds though I don't know if this was ever done.

I just ran a balance sheet and P&L that show each year individually from Jan-2005 to Aug-2015. Dues were much lower prior to 2011.

In 2005 there was $19,900 in reserve. In 2010 it was $47,000. In 2011 the board doubled the Water&Sewer rate citing the need to build up a reserve for replacing the aging systems. A month later they changed the Water&Sewer Bill to read, "HOA Dues", then they created a new "Dock Fund" account and moved $13,000 of their new-found income stream into it.

This was 2 years after the membership voted 13-11 not to fund a dock.

I do have photocopies of the cancelled check for the donation that the president made to the dock fund.

What I'm not sure about is what portion, if any should be refunded(?)

Here are the actions this individual has taken since 1998. I'll call him Pro-Dock-Guy-1 (PDG1):

1998: PDG1 purchased a secondary lot from an agent that was unaffiliated with the HOA or the developer. He told me personally that neither the RE agent, nor the HOA told him there was a launch dock near the ramp.In spite of warnings by previous residents and board members, more than one RE agent has lied to buyers by stating that the neighboring dock (that is on a private lot) is part of the common-area. Unless you're looking for markers it is an easy assumption to make. The common-area has a primitive ramp, but no dock and no other amenities. It's always looked barren. The CC&R's say it is to provide the membership with "Water Access" and that it belongs to all members.

1998 to 2005: PDG1's lot was vacant. Neither PDG1 nor any other member to date had brought up the desire for a dock.

2006: PDG1 builds a house and wants a dock on the common-lot. He sends a letter to the board threatening to sue the HOA if he doesn't get a dock.

2007 to 2008: Another house is built on a secondary lot by PDG2. This lot is directly across the street from the common-area which has the primitive boat ramp. Next to this common-lot is a private water-front lot that does have a dock but no house. PDG2 rents the private lot from the out-of-state owner and proceeds to cut down 90% of the trees on it and the over-grown common-lot. PDG2 now has a view of the river, a (rented) dock and a (HOA) ramp across the narrow dirt road from his house. PDG2 now proceeds to leave multiple paddle-boards on the common lot overnight and lets his 2 dogs run loose on the lot and through the neighborhood. These are clear violations of the CC&R's. PDG2 has the rented dock but also wants a dock on the community lot (presumably so he won't have to rent the private dock).

2009: A vote of the membership is taken. The result is "NO" on a dock.

2010: Both PDG1 and PDG2 get onto the board.

2011: The board doubles the Water&Sewer fee citing the need to build reserves for an aging Water&Sewer system. A month later they change the Water&Sewer bills to read, "HOA Dues", then create a new account called, "Common-Lot Fund" (sometimes referred to as "Dock-Fund" in various paperwork, and move $13,000 from Water&Sewer into it.

2011 to early 2014: The membership fought the board through email, by requesting special meetings to hear amendments to prevent the use of money they'd paid into Water&Sewer from being used to build a dock, etc.

2014: PDG1 (Now Board President) donates $10,000 of his own money to the "Dock Fund" account with no contract or board minutes. The $10,000 is entered as Income rather than a deposit. The memo on the front of his check reads, "For Dock Only". A few days later he writes a check for $10,000 from this HOA account to a local contractor. It is attributed to "Capital Asset" in QuickBooks so it was not expensed.
This would seem to indicate it was for building a dock rather than repairing the 24 year-old ramp.

PDG1 and PDG2, as well as the other board members that are all in favor of a dock, pay the HOA atty nearly $5,000 to fight the HOA members that are opposed to the dock. The "No-Dock Against The Vote" group is led by a former president that resigned in 2010 when the board first went rogue. We'll call him Gandhi for the remainder of the story. The board even sends a bill to Gandhi for atty fees! Meanwhile, PDG1 writes the HOA atty a personal check for $500 for personal consulting. When Gandhi requests information from the HOA atty he is told that the atty represents the Board and will not talk to individual members. The board passes new Common-Lot Rules that allow up to 2 dogs on the lot, camp-fires and other activities that are in clear violation of the CC&R's. Note- The CC&R's require written permission from 75% of members to change.

2015 Spring : The local contractor starts work on the ramp and installs a gate but is afraid to start work on a dock because of potential litigation. None of the invoices presented by the contractor match any amounts drawn from our HOA accounts, the work to the ramp is incomplete. A special meeting is called and the membership is extremely vocal against the rogue board. It is by far the largest and most vocal turn-out in HOA history. PDG1 steps down as president and the VP resigns before the annual HOA meeting is to be held the following month.

2015 August: At the annual HOA meeting 4 of us on the "Anti-Rogue-Board/No-Dock-Against-The-Vote" side are voted in. Because we had the majority of seats locked-down we allowed a young man that just bought a secondary lot and very much wants a dock to be voted in as VP.

So, in a nutshell: PDG1 was the president. He contributed $10K of his own cash for a dock that he and the BOD wanted but that the membership did not. He increased the Water&Sewer fee stating that it was to build reserves. Then he changed the billing to "HOA Fees". He moved this money into a new "Dock Account". He wrote a contractor a check from this HOA account for $10,000. There is no way to reconcile the work done or not done. The contractor is said to have chemical dependency issues.
PDG1, as president, used nearly $5,000 in HOA funds to pay a lawyer to fight against the HOA members that wanted the majority "No-Vote" on the dock to stand. The morning after the vote, in which the board was crushed by the "No-Dock" coalition, PDG1 wrote himself a HOA check for a $10,000 refund of his donation. Fortunately, the outgoing officers would not co-sign it. He asked me to and I said, "We will follow Idaho law as to when a contribution may, may not or must be returned".

Question 1) Aside from weather or not anything that PDG1 did is criminal, should the nearly $5,000 in legal fees spent by PDG1 in an attempt to get his dock be deducted from the $10,000 "refund" that he has requested?

Question 2) Did the ATTY get himself in trouble by taking HOA money to represent BOD members against the HOA? If he refuses to cooperate
with me (the new BOD president) then it seems very clear that he has been representing the individual BOD members and not the BOD or the HOA. If so, how can I and our new BOD force the former BOD to repay the nearly $5,000 paid to the Atty?

Question 3) I was elected president because I promised to abide by the CC&R's and ByLaws and to stop the rogue board. I promised a re-do of the 2009 Dock-Vote by the full membership. If the vote is YES and a dock is built, how much personal liability do I have if I am unable to stop PDG2 from violating the CC&R's and an injury happens as a result?

The HOA attorney represents and provides legal advice to the board of directors.
If an association member, board member or not, approaches the attorney to represent them on any matter that is HOA-related, they should advise that person that they are unable to do so because they represent the board. Non-HOA related matters are fine though.

i.e.
1) Joe wants to hire the HOA attorney to defend the location of his fence. No can do. Conflict of interest.
vs
2) Joe wants the HOA attorney to write his will and work on his estate planning. No problem. No conflict.

If this attorney is willfully taking on work that is an obvious conflict of interest, you should notify the state attorney general's office.