No Board- question about payments

Started by AdamD • 11 replies • 1189 views

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AdamD (Indiana)
Posts: 42

Posted:

Indiana HOA here. No official Board. Waiting on a Special Meeting next month to elect a few homeowners who are currently acting as a Board (not officially elected and were never appointed) since entire legitimate Board resigned last fall without appointing any successor.

Currently "treasurer" signs management company checks and other monthly expenditures. When I asked him to authorize funds for an annual audit, per our Bylaws, he is refusing saying he is not elected and is just volunteering. So he's authorizing some, just not all items.

Does this past the sniff test?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Adam

I assume he is just paying what has been authorized/budgeted in the past as in keeping the place operating and he will not approve any additional expense. That aside, what makes you assume because you asked for an added expense item that you would get it?

AdamD (Indiana)
Posts: 42

Posted:

My assumption is based off our Bylaws which state: Such accounts, books, records, financial statements, and other papers of the Association shall be open for inspection by the members and other persons having an interest in any Lot, including any Owner, any lender and any holds, insurer or guarantor of the first mortgage on any Lot, during reasonable business hours or under other reasonable circumstances and shall be audited annually by qualified auditors. The cost of such audits shall be a Common Expense.

The past Board/management company is being investigated by state attorney general for a few things including misappropriation of funds. An audit should clear up any doubt and is clearly stated in our documents. It is to my understanding that the Bylaws are not a mere suggestion for the Board, but act as their mandate. Am I wrong in this thinking?

Thanks for your reply!

GenoS (Florida)
Posts: 4,276

Posted:

How many owners in the HOA? Why wait until July for a special meeting? Can't a certain percentage of the owners call for a special meeting sooner? With an ongoing investigation I would think getting an audit done - in accordance with your Bylaws - needs to be done yesterday and if the acting Treasurer won't authorize payment for it then time is of the essence in getting directors and officers in place who will do what needs to be done.

SheliaH (Indiana)
Posts: 6,964

Posted:

What Geno said. I understand the concern about the previous Board's conduct, but why in the hell have you and your neighbors let this go since last fall and we'll be halfway through June next week!?

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

AdamD (Indiana)
Posts: 42

Posted:

439 single family homes. Apathy rampant. Last September when the entire board resigned, it took until January to form a group willing to become the board. That was due to mismanagement of the past management company (thy signed their own paycheck with no Board).. After the new board failed to get elected at the annual meeting in February due to a lack of quorum, they just assumed they were legitimate. I recently discovered a court case that proved the board to be illegitimate and sent it to them. They forwarded that court ruling to the HOA attorney and he verified my claim that the board is illegitimate. That was last month, hence the special meeting happening in July.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Adam,

Keep in mind that a Director and an Officer are two different positions with different authority even when they are filled by the same person.

Directors make the decisions.
Officers implement those decisions.

Your Treasurer is simply paying the bills. I doubt he is authorizing any additional items that haven't already been decided on at a Board meeting. You should be glad he/she is staying on in that position. Otherwise, contractors who provide services wouldn't be paid and the Association would have other issues to deal with. I suspect that he simply resigned as a Director and not the Officer position. This means, his appointment as Treasurer by the previous Board stands until he resigns from the Treasurer position or until a new Board appoints someone else to serve as Treasurer.

You, as a member, do not have the authority to order an audit. That is a board decision. It may be mandated that the Association has audits every year, but the Board makes the decision who to solicit bids from and who to award the contract to. Additionally, there is a lot of work that must be done by the Board, MC and Officers in order for an auditor to complete an audit.

This is something that the new board will have to deal with.

Perhaps you can gather enough support to be elected to the Board and be part of the decision process.

Tim

AdamD (Indiana)
Posts: 42

Posted:

Hey Tim,

You make valid points. Something I'd like to add: apparently the treasurer is the treasurer by name only. Since this post, I have found out that he does not sign checks (the property manager signs all the check including his own).

You mentioned that may have resigned as a Director and not the Officer position. Again, this is such a weird situation my HOA is in. He was never a Director, officially speaking, nor has any former legitimate director (we have no legitimate directors currently) appoint him as director or treasurer.

I actually like the guy as a person. This situation that we are in is so backwards and no one in our subdivision really has a grasp on it...or more likely, they just don't care.

I appreciate everyone's advice. This evening, I emailed the "board" along with management company and HOA attorney letting them know I intend to run for the board during the upcoming Special Meeting. I am ready to get this HOA turned around...that's if we get enough participation at the meeting and don't end up in receivership!

KerryL1 (California)
Posts: 14,550

Posted:

Are there others you can encourage to run for the board too? I't great you're becoming involved. Meantime and given your bylaws, have you reviewed the contract you have with your management co.? Might be instructive.....

AdamD (Indiana)
Posts: 42

Posted:

Management company contract is not being followed since there is no Board. Just got an email from them stating:

I wanted to touch base and be sure we are all on the same page on a few things: The Special Meeting and the pursuit of getting a Board elected, MC Involvement in Management, Direction on Architectural Requests and Rules Enforcement.

Special Meeting and the pursuit of getting a board elected

First I would like to touch on the Special Meeting. My experience tells me that you will not reach your 60% minimum representation at this without canvassing. I have a lot of experience in mailings needing a response, and unfortunately its not very successful. I hope I am wrong about this one though! Were in a tighter spot in that the fact we cannot count 60 some homeowners vote as they are in arrears. I hope you all decide to canvass and target the homes that are paid up. I think it will be much more effective then letters alone. Again, I hope I’m wrong!

MC involvement in management

I wanted to again reiterate what I am comfortable doing/not doing given the current circumstances. I will continue to handle the normal day to day accounting: depositing payments, paying regular invoices, etc. I will continue to process sale information so people can sell their homes and new folks can purchase. We will maintain current and valid records of homeowners. We will help you with obtaining the 60% the best we can, completing hours of internal logistics and data entry.

I am not comfortable enforcing any rules/regs, pursuing any accounts in arrears outside of sending an invoice, and I am not comfortable enforcing/approving/denying architectural requests. Should you all want these tasks I am not comfortable doing, I am happy to meet to go over this in more detail as to my reasoning behind that decision, but I think we are all on the same page as we have touched on this before. Essentially I am more than willing to keep the HOA functioning at its base level using vendors you all have had for several years at prices that are very reasonable for the work being done.

Direction on Architectural Requests and Rules Enforcement

I ask that you all come up with some sort of response to those inquiring about both violations and architectural requests. I would definitely ping a lawyer on this if I were you, but I would prepare a statement that pushes them to participate in the special meeting/annual meeting (should the special meeting not yield the numbers you need) and explain that the functionality of the HOA is limited. I think *HOA attorney name* (or any lawyer of your choosing) would be able to help you in preparing this response if you like.

Again, I am not a legal professional, not a lawyer, so I would advise you to obtain written opinions on most if not all of your decisions as a group of volunteers trying to get your HOA back on track. I see nothing unethical about what you or we (MC) is doing. We are all in a place where we didn’t expect to be and are acting in the best interests of the membership while being guided by legal counsel to help navigate this unique space. We are doing so in a “bare bones” way in that we are not enforcing rule violations or filing on anyone in small claims for not paying their dues.

Please let me know if you have any questions or ideas. We are always open to them as we work for you and act at your direction.

RichardP13 (California)
Posts: 3,868

Posted:

Adam

A few comments based on me running a management company. I will comments from the first of your posts.

1. A management company should no further than providing BASIC services. When it comes to items requiring a Board decision, it is "hands off".

2. In regards to possible misappropriation of funds, get a Board elected to then conduct an audit or approve an outside agency to provide an audit.

3. Special Meeting-a management can only and should only do certain things to make sure people actually vote. Many states may have a procedure that requires some body to suspend one's voting privilege. It's called due process. With 439 homes and a 60% quorum requirement, you need lots and lots of volunteers canvassing a neighborhood to get people to vote. Just putting your name on a ballot doesn't cut it. I strongly believe quorum shouldn't be required for the election or removal of a director. You may very well be in this mess because of the requirement and owner apathy.

4. MC Involvement- I agree, do what is necessary to keep the doors open until an elected body can make valid decisions.

5. Direction on Architectural Requests and Rules Enforcement -Again, up a creek until an elected body is in place. As far as the ARC, an attorney may come back and say that committee can be formed BECAUSE it is required in the majority of HOA's throughout the country.

With as many homes as there are in your community, one person can't do it. Someone needs to get 20 hard core residents to be part of the success of their community when no one else will.

AdamD (Indiana)
Posts: 42

Posted:

Hi Richard,

Thanks for your response. I think a great rule of thumb is a Board instructs a MC, not the other way around. Again, we are in a tricky situation with a Board that hired current MC in March, yet found out they are illegitimate. So, without a Board (we are just some homeowners who want to help and want to be on the Board) we are stuck for the time being.

There is a wonderful lady who has been on board with me (pun intended) since last fall in hopes of bettering our subdivision. She is also trying to get on the Board. I keep telling her that two people can't do this alone... we need to enlist other volunteers and USE them as well. I'd hate to see her or me burn out with the amount of work that is currently needed.

Thanks for the advice!

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