Developer Turning Over HOA Control to Homeowner Board - can we vote right after earning a seat on the board?

Started by BenjaminD • 7 replies • 1655 views

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BenjaminD (North Carolina)
Posts: 20

Posted:

So after 10 years, the builder has finally sold all the homes and the developer (our declarant) is holding our annual meeting and budget ratification tomorrow night. As shared by our management company: "the purpose of this meeting will be to update homeowners on Association business, review the Association’s financial state, transition of the property from Declarant to Owner control and elect five (5) members to the Association’s Board of Directors."

We will vote tomorrow for out BOD based on us having a quorum, which we will have no problem. Currently we are unhappy with almost every decision the declarant has made and we have a list of items we want to put to a vote immediately. My question is, how quickly can we put things to a vote with our new BOD? We have simple things like changing clubhouse rental fee from $250 to $100. That can wait.

However we supposedly have a $265,000 debt with the builder that we are paying $5,000 a month to yet the builder has been able to provide zero proof as to what the debt is for or from. We want to stop the payments immediately and want the builder to provide proof or they would need come after us legally.

Can we call a vote as early as tomorrow? What is the protocol for something like stopping a payment?

As a sidenote,the declarant told us they have the legal right to drain our bank account before they leave. I am assuming once we have a board tomorrow they would be unable to request a money transfer/payment like that.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Ben,

I think you need to review what the membership has authority over and what the Board has authority over.

This should be within your governing documents and, perhaps, applicable State statutes.

Typically, the membership has the following authority:
1) Amend the governing documents
2) Elect Directors
3) Remove Directors
4) Perhaps approve or disapprove a budget (more typical for Condos then HOAs)
5) Call a special meeting of the membership for the purpose of 1, 2 or 3 or to discuss but not vote any other issue.

Everything else, the Board has control and authority over.

If you want to make changes like you are discussing, you need to be a member of the Board to be part of that decision process.

Tim

BenjaminD (North Carolina)
Posts: 20

Posted:

Quote:

Posted By TimB4 on 11/29/2016 6:33 PM
Ben,

I think you need to review what the membership has authority over and what the Board has authority over.

This should be within your governing documents and, perhaps, applicable State statutes.

Typically, the membership has the following authority:
1) Amend the governing documents
2) Elect Directors
3) Remove Directors
4) Perhaps approve or disapprove a budget (more typical for Condos then HOAs)
5) Call a special meeting of the membership for the purpose of 1, 2 or 3 or to discuss but not vote any other issue.

Everything else, the Board has control and authority over.

If you want to make changes like you are discussing, you need to be a member of the Board to be part of that decision process.

Tim

Thanks so much for the reply. We are voting in the board tomorrow actually and it will be made up of 5 homeowners. We are trying to understand if once voted in the meeting tomorrow if we can then call a vote to stop paying the builder/developer. After the board is elected, does some type time period need to pass before voting on a specific action can take place?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Ben

I personally believe you can go directly from the election (Annual Meeting) into a BOD Meeting, elect BOD Officers (do not forget this step), then the BOD can order the payments to the developer stopped.

Many Bylaws call for the BOD meeting within a specific period of time (like within 60 days) but within does not mean one has to wait that long.

The developer legally coming back for the monthly payments is a separate issue and one that might have to be fought at a later time.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Benjamin,

If your state does not require an agenda to be posted in advance of the meeting, you should be able to vote immediately on anything your governing documents and state law allow you to vote on.

Your neighboring state of South Carolina has some common law covering the duties and responsibilities of a developer when he turns over a subdivision to home owners. Among other things, he must provide adequate funding for operating and reserve budgets and all infrastructure must be in good repair. See http://www.judicial.state.sc.us/opinions/displayOpinion.cfm?caseNo=25453

The funds in your association's accounts do not belong to the developer. His control of the association and its finances are of a fiduciary nature - he is holding the money for the benefit of the members. If he takes the money it is theft. Report the loss immediately to the bank and to the police. My experience with developers is that most of them are jerks who know nothing of the law and always argue - wrongly - that they are immune from the law. Do not be afraid to sue him and ruin his reputation as he sounds like a real piece of work.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Ben,

The Board may, at a properly noticed meeting, vote on anything they desire.

However, I would suggest that you first and foremost change the signature cared at the bank (or perhaps withdraw all funds and open a new account).

Don't make votes based on personal agendas. Do your research first.

BenjaminD (North Carolina)
Posts: 20

Posted:

Thanks for the feedback and we will look into a required time period in which we should have our first BOD meeting.

KerryL1 (California)
Posts: 14,550

Posted:

It's possible, Ben, that you may not need to wait at all to call your first Board meeting in NC. If not, I think it would look like this.

1. Members Meeting/Annual Meeting --vote for 5 directors. Adjourn

2. Convene an Organizational Meeting (if required in NC). Vote among directors for the officers your Bylaws require. Establish a regular meeting schedule. Adjourn

3. Convene a Special Meeting of the Board IF NC or your Bylaws have no agenda-posting requirement, e.g., there must be posted notice and meeting agenda 4 days before any meeting of the Board (as in CA). If there is a notice requirement, prepare the notice, post it and convene a special meeting of the board whenever it's permitted.

You've received some good advice! Hope Kelly of NC checks in as s/he is very knowledgeable.

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