HOA amendments issue - ethics

Hi all, hope to get some advice. I am on the board for a smaller community of about 150 homes in Missouri. The developer turned over control of the HOA to us in 2008 using some sort of majority vote based on the 2003 CC&R requirements. Well, come to find out that the language states that there is to be a majority vote and signed document of all homeowners at the time. Turns out, maybe 15 or so out of the 50 homes in 2008 actually voted. So there is some legality of are the 2008 amendments in play which grants authority to a board for enforcement and other such tasks. The attorney recommended two options, one is to go back through and attempt to get a majority of the homes to sign, which is a tall task, but certainly doable. The other option is to continue business as usual until someone sues if they don't like an architectural rule or a fine and possible have the amendments struck down which wipes out the board.

With all that said, I currently have an ethical dilemma. I feel that it is in the best interests of all parties to ensure that our CCR's are iron clad and can be defended from any angle. This means to go and get the signatures or a new vote that supports 50%+1 of current homeowners. Others on the board think business as usual is the approach, which means continuing to collect dues for an HOA that may not be able to defend itself or prevent the remaining lots from not meeting requirements. They believe it would open a can of worms and infuriate everyone and eventually would shut the HOA down.

This was long, but I'm not sure I can allow this to happen in good conscience. They want to keep this from the membership. Any advice? Anyone been in a similar situation? Can I force disclosure of this? Former board members have acknowledged that they knew that it wasn't a majority as required by initial covenants. There is no document or even meeting minutes from 2008 that supports that a majority supported it. There is only the county clerk notary saying that the new board that formed in 2008 signed and acknowledged that they got the majority.

Thank you for your time.

One more piece of info. The reason we went to digging about this is a land owner was refused permission to build a house and they challenged our authority to do so by sending our attorney a letter. It's possible they could take this further and our lawyer may not be able to defend.

... and on the other hand, what do the original CC&R's indicate is necessary to either dissolve the Association or amend the CC&Rs? As a matter of law, the 2008 vote may very well have failed to turn control over to a board elected by the HOA's members. But does this mean the CC&Rs just vanish? I doubt it. Often the CC&Rs contain language about their "running with the land."

Do the CC&Rs by any chance offer members the remedy of taking legal action against one another to enforce the covenants, in lieu of the board being the enforcer?

John

What proof do you have that the amendments were done improperly? All you have is hearsay but the county has a document saying it was done properly.

The two most common methods for amending the CC&R's are: 1) a vote by a specified percentage of owners; and 2) an instrument executed by a specified percentage of owners. Yours is the first I have heard of to require both.

If there is no recorded instrument indicating approval of the 2008 amendments by the required percentage of owners then you do not have a lawfully amended declaration, regardless of any other statements that the board recorded.

My advice to you is to let all members know of these problems. You might want to draw up a new set of CC&R's and see if you can gather enough signatures to amend the existing CC&R's. If you ever find yourself in the position to do so, dump that attorney and his "fake it until you get caught" advice.

What was needed: Majority of those in attendance at the meeting OR majority of homeowners?

Great point. I will be asking this question next opportunity. My guess is that the developer had gone bankrupt by then and the bank owned the undeveloped lots. He also was not on good terms with the homeowners at the time as there was some money missing from the pool account. If I can get consensus from the old board that he did participate in this "vote" then I believe that it would satisfy the majority issue in my mind, despite still not having any signed document by the majority of owners. Thanks for this!

JohnS95 MISS:
1- Respectfully think carefully about disclosuring to stakeholders if you are still a Board member.

Respectfully, 'ETHICS ' in the condo/HOA universes gets frequently applied ( or at least understood ) by many Boards NOT as to your own personal conscience - as I believe you may be describing above. Not in a consumer-friendly way. Not clearly as to transparency &/or duty to stakeholders.

In that other universe, 'ethics' may just a soften get construed by a Board majority as non-disclosure to stakeholders. Or "After the Board made its decision, did the Director stop publicly disclosing any contrarian views or inconvenient truths acquired as a Director ?" "Did he publicize divurgent opinion ?" "Is the Director rocking the boat ?"

Maybe it's a variant of the risk run by any stakeholder asking - at a general owners or stakeholders meeting - any question that tends to expose the Board to look incompetent or even dishonest.

( Many of my jurisdiction's condo communities have adopted Ethics By-laws with few judicial tests so far about applying their frequently imprecise definitions. Lower & appeal courts upheld an internal Board unseating, deferring to the point of not even asking specifically what had been the details of the alleged ethical shortfall begfore the Baord majority expelled the alleged ethical breacher.

Almost a year later a legal article allowed a slip that the "ethical breach' had been an alleged physical assault against the Board President, a minor criminal offence albeit between volunteers at close quarters . . )

2 You may find high levels of judicial tolerance for turn-over loose-ends if decades have elapsed.

Asking around, the developer appears to have no connection what the board did and possibly didn't vote, or provide signature to turn his vote over to the rest. At least nothing was written down or recorded that officially turned over administration to the board from the developer himself. I'm still going to try to use that angle and see what the consensus is at the next board meeting.

Typically not. Even if the D&O insurance refuses to cover, most governing documents and many States applicable statutes require that the Association indemnify their Directors, Officer and Committee members.

As Tim noted above and which was a great attention to detail it would generally be the Developer had 100 votes and therefore majority voted. Developers will have at least one vote per unit and in some states can have multiple votes (i.e. class votes) per unit.

It is one vote per lot. 194 lots. So without the developer at the time, it would have never passed unless they had near record turnout. Which they didn't, it was only about 15 yes votes.