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Iowa HOA Financial Disclosures

Started by AmyR4 • 19 replies • 1858 views

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AmyR4 (Iowa)
Posts: 7
Posted:
I belong to a new HOA and no financial disclosures have been provided to any home owner (these are homes, not condos). I know when I bring this up, the developer will try to fight me on disclosing the finances, so I want to be able to quote an Iowa code, proving that they have to disclose the finances of the HOA to include all debits and those details, credits (payments from Home Owners) and anyone past-due. I cannot find this information anywhere on the internet; does anyone have this information or know where I can find it? TY!
JeffT2 (Iowa)
Posts: 880
Posted:
My understanding is that there are no laws in Iowa specifically for HOAs. However, most HOAs are incorporated as nonprofits, and we have a laws for both incorporated nonprofits and unincorporated associations. You can search for the name of your HOA here:

https://sos.iowa.gov/search/business/(S(gbbupfjalxyvzj45vgkygs45))/search.aspx

The Iowa Nonprofit Act states:

504.1602 INSPECTION OF RECORDS BY MEMBERS.
1. Subject to subsection 5, a member is entitled to inspect and
copy, at a reasonable time and location specified by the corporation,
any of the records of the corporation described in section 504.1601,
subsection 5, if the member gives the corporation written notice or a
written demand at least five business days before the date on which
the member wishes to inspect and copy.

You can see the whole act heat the link below. Check the sections on records.

http://law.justia.com/codes/iowa/2009/title-12/subtitle-5/chapter-504
SheliaH (Indiana)
Posts: 6,964
Posted:
If the developer is still running the show, it may be able to do whatever it wants until the community is turned over to the homeowners, although I think taking a look at them now is a good idea (you may get an early indication of whether it's set up reserves and they're being funded.) Start with asking for an income/expense statement and see what happens.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
BancsS
Posts: 269
Posted:
If the developer is still in control, you may not have access to this information until turnover to the homeowners. Even if you think you will get pushback from the developer ask anyway. You might be surprised and the developer will provide the info you are seeking. Start there first. Then consult with an attorney if you don't get what you want. Sometimes just a letter from an attorney to the developer will be enough to rattle their cage.

As Jeff said, Iowa does not have any laws on HOAs just condos. Legislation has been introduced a few times but it dies in committee.
AmyR4 (Iowa)
Posts: 7
Posted:
Thank you so much for this information; so helpful and appreciated!
AmyR4 (Iowa)
Posts: 7
Posted:
I will definitely be reaching out to them; our fees are only to go to common area mowing and upkeep on a retention pond; I have a feeling that they are being spent elsewhere and there is only one way to find out. Thank you!
AmyR4 (Iowa)
Posts: 7
Posted:
Thanks Jeff...that code info will really help me as I go back and forth with these folks!
BancsS
Posts: 269
Posted:
Keep in mind Amy that Iowa's nonprofit law would apply at the time your HOA nonprofit is formed after turnover. The deveoper is bound by Iowa real estate laws. That is why I suggested consulting an attorney as those can be quite complex.
BancsS
Posts: 269
Posted:
Quote:
Posted By BancsS on 08/08/2017 1:13 PM
Keep in mind Amy that Iowa's nonprofit law would apply at the time your HOA nonprofit is formed after turnover. The deveoper is bound by Iowa real estate laws. That is why I suggested consulting an attorney as those can be quite complex.

Developer. Apparently I can't spell today.
JeffT2 (Iowa)
Posts: 880
Posted:
Just to be clear, developers cannot do anything they want.

It is true that the developer typically controls the votes and can amend the CCRs. The developer also usually appoints the board members.

But the board members, including the developer-person, must act in the best interests of the corporation. That would include spending money on the association's obligations, not the developer's. The nonprofit Act (in most or all states) includes a section on conflict of interest for board members and officers.

If you are paying dues to the HOA, then the HOA is likely formed and must obey the law. This includes holding an annual meeting and keeping records that can be inspected.
BancsS
Posts: 269
Posted:
Quote:
Posted By JeffT2 on 08/08/2017 6:01 PM

If you are paying dues to the HOA, then the HOA is likely formed and must obey the law. This includes holding an annual meeting and keeping records that can be inspected.

Hope I didn't confuse. Thanks for clarifying that for Amy, Jeff. I was speaking from my own experience that the nonprofit was not formed until developer turn over. Actually in my case, the developer went bankrupt. I hope Amy gets the information she is seeking without too much pushback. I would definitely begin there.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Quote:
Posted By JeffT2 on 08/08/2017 6:01 PM
Just to be clear, developers cannot do anything they want.

It is true that the developer typically controls the votes and can amend the CCRs. The developer also usually appoints the board members.

But the board members, including the developer-person, must act in the best interests of the corporation. That would include spending money on the association's obligations, not the developer's. The nonprofit Act (in most or all states) includes a section on conflict of interest for board members and officers.

If you are paying dues to the HOA, then the HOA is likely formed and must obey the law. This includes holding an annual meeting and keeping records that can be inspected.

I would agree. Otherwise why would we have laws such as Real Estate Statute of Frauds (LOL ... which you should check). Keep in mind that developers originally had Carte-Blanche control and could initially choose anything in the whole world they want to develop. Therefore, after they make their choice what right would they have to DEFRAUD potentially both Homeowners and their Secured Creditors??? Potentially the answer to that question should be ZERO. Because you have no HOA laws I would not only review my Real Estate Statute of Fraud laws but also my Contract laws.
AmyR4 (Iowa)
Posts: 7
Posted:
Thanks to everyone who took the time to reply to my question. I plan on bringing this up to the Developer when they ask for our yearly dues in December/January because I have a feeling that our fees are being used to pay for things such as association parties, gift bags for new homeowners, etc., (I truly hope I am wrong) when we are told our fees are only to go towards lawn mowing of common areas and up keep of a retention pond. It's so frustrating, tho, that other homeowners will complain but not stand with or even behind me to make things right with these people if/when needed, so there may not be anything I can do unless I want to pay any and all legal fees myself. Again, thanks to all for your helpful replies! Cheers!
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Amy

Typically while under developer control their corporation has to give an annual financial statement. Now let us assume you see an expense of $500.00 for New Home Owner Gift Baskets. Other then taking them to court on your dime to stop the practice, there will be little you can do other then scream and cry about it.

Do not assume a judge will order them to stop the practice. A case could be made that it is an advertising/marketing expense. Somewhat like the coffee, water, etc. that the developer offers new prospects when talking to them about buying. In my case, he offer me a Scotch.....LOL
JeffT2 (Iowa)
Posts: 880
Posted:
The developer cannot use HOA funds for advertising/marketing of developer sales of lots/homes to prospects, or refreshments for that. That is a developer expense, not an HOA expense...conflict of interest.

However, the developer may be able to use HOA funds to buy gift baskets to welcome new owners to the community on behalf of the HOA. If that is not a proper expense, then the developer can most likely amend the CCRs to make it appropriate.

More importantly, is the developer using HOA funds to develop the neighborhood in ways that are the responsibility of the developer, such as installing drainage systems, roads, walls, etc.?

All members have the right to inspect the finances to see what is going on, and that can go a long way to making sure that money is being spent properly.
AmyR4 (Iowa)
Posts: 7
Posted:
A scotch...how nice! I am hoping my gut is wrong about how our monies are being used in some acts and hope to find out soon. Fingers crossed that the financials look ok and if not, perhaps my pointing out the "wrongs", if there are any, will get them to stop and realize that their marketing expenses are their cost of doing business and not ours! Thx!
AmyR4 (Iowa)
Posts: 7
Posted:
That's a great point that I never thought of and I hope when I see the financials (not if I see them) that I am wrong and our HOAs are being spent correctly. My initial thought of them possibly using our funds for marketing is hopefully wrong;however, I never thought about them using HOAs possibly for some of their development costs. Can they amend the initial CCRs they provided us at their will as the developer before they turn the association over to the homeowners, so we'd have no say until then? It's a huge development and building will be going on, I would guess, for 2-3 more years. Thx!
JeanI (Louisiana)
Posts: 112
Posted:

do you have an elected Board of Directors or is the board controlled by the developer? When you bought your property you should have been given Articles of Incorporation Bylaws and Covenants. Those documents should be thoroughly read and among those pages you may find some information regarding Board of Directors meetings which even if controlled by the developer are OPEN meetings for all homeowners to attend. There should be information regarding annual meetings and financial statements. Where are you located in Iowa? Jean
BancsS
Posts: 269
Posted:
Quote:
Posted By JeanI on 08/18/2017 1:05 PM

do you have an elected Board of Directors or is the board controlled by the developer? When you bought your property you should have been given Articles of Incorporation Bylaws and Covenants. Those documents should be thoroughly read and among those pages you may find some information regarding Board of Directors meetings which even if controlled by the developer are OPEN meetings for all homeowners to attend. There should be information regarding annual meetings and financial statements. Where are you located in Iowa? Jean

Iowa is not an open meeting state.
BancsS
Posts: 269
Posted:
Quote:
Posted By BancsS on 08/18/2017 1:36 PM
Posted By JeanI on 08/18/2017 1:05 PM

do you have an elected Board of Directors or is the board controlled by the developer? When you bought your property you should have been given Articles of Incorporation Bylaws and Covenants. Those documents should be thoroughly read and among those pages you may find some information regarding Board of Directors meetings which even if controlled by the developer are OPEN meetings for all homeowners to attend. There should be information regarding annual meetings and financial statements. Where are you located in Iowa? Jean


Iowa is not an open meeting state.

In my haste to get back to CNN's breaking news😊 I should have made my response more comprehensive. Not all states have laws requiring open board meetings. Iowa is one of those. That doesn't mean they can't be open to the owners but they are not lawfully required. Iowa's nonprofit law allows owners to request records and the HOA board must comply with those requests within a certain time period. I'm not sure how the law applies when the deveoper is still in control.

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