Thoughts on our HOA president (first post!)

Hi all! This is my first post here! Hope I can contribute a lot to this community. Anyhow, I need some advice. I joined our HOA's board this year. We have 3 people who have been on the board for years, 2 for one year, and me and another joining this year. The old HOA president was apparently incompetent; he didn't spend a dime on CapEx when needed, and the board didn't do much. So, when I joined, we also replaced the old president with one of the guys who has been on it for 3 years. He's an old guy, ex-military, been in the development for 17 years (but doesn't pay dues because his brother owns the house).

We got into a tiff early because he was volunteering other people to do things and taking major renovation projects under his own belt, without much participation from others. Now, he's just being negative toward all my suggestions. Our HOA (130ish SFHs) has an operating budget of about $55k. We have $25k in a "cash operating account", $26k in a money market "operating account", and $53k in a money market reserves account.

Now, I've seen a ton of issues with him in only a few months. For example, he wanted to spend 10% of our revenue on having the streets blown weekly (in Atlanta, where it rains like... always). He had a $5000 key-fob-based lock for the gate for our pool installed that also included a $100/month phone bill just to give people access. I told him that we could use that $100/month to get internet/phone at the clubhouse and use a wifi-enabled lock, meaning we pay less per month AND actually have WiFi at the clubhouse (he claims WiFi is a luxury we don't need... in 2017). We also have NEVER done a reserve study in 20 years. He says that idea is bad because that is essentially too advanced for us. Our reserves also sit in money market accounts, meaning we're losing money to inflation each year. He said in GA, we need 100% of owners to agree to put that money in something like CDs or bonds. I don't buy that. Finally, our management company's budget does not separate CapEx from Operating Expenses, and we don't have a separate CapEx budget. The President thinks that this is all fine and that the management company's team of lawyers is doing their job correctly (me thinks he has 0 financial management knowledge).

How do you deal with HOA presidents who ... just seem like they are living in the 60s and don't have any financial knowledge?

What Douglas said. It may be the guy approaches things in such a way that no one will dare speak up (the force of being ex-military, I guess), but this isn’t the military and NO ONE the board can spend money as if it’s their personal piggy bank. So, keep speaking up – you can be professional about it, but don’t mince words. Stick to the subject, as other people will do their best to try and make this personal (because they don’t know how to respond to actual facts and figures).

The other board members and whoever else is being volunteered to do stuff need to grow a pair and tell this man to stop it – if he can’t (and probably won’t, if what you say is true), they need to vote him out as president and put someone else in. You can’t kick him off the board – only the homeowners can vote him out or recall him, but you need to be clear that being president does not make him God

(Recent events would suggest a lot of people have that problem these days, but that’s a subject for another day…)

One thing I would suggest that you push for is to get a reserve study done as soon as possible. You didn’t say what the association is responsible for, but given the way this man spends money, I bet you’re extremely underfunded. There are dozens of conversations on this website about reserves and their funding, as well as convincing other people why it’s important to have one at least every five years. You might also want to suggest that the board review income and expenses over the last five years to see what line items are growing faster than others and see where spending priorities should be. That may help demonstrate how crazy some of the president’s current thinking is.

Johnathan,

In Florida condominiums, a reserve study is required every three years. You might want to see if Georgia has reserve study requirements. For our reserves we went from CD's and money market instruments to very high quality, insured bonds laddered to meet the future needs for those monies. We do far better than CD's and Money market instruments, by far. Need to check if Georgia laws allow or does not prohibit such. If you go that route just make sure you stick with high quality and very safe bonds.

I should clarify a few issues, but I super appreciate everyone's feedback! He is not making unilateral decisions on expenditures. He does do votes, but unfortunately, most of the HOA just says yes to everything. I'm also not sure how other board members feel. They are likely just on the board because they are bored... no pun intended.

Anyhow, speaking to the various points given here:

We are probably not underfunded, and our management company says that we have good sized reserves (although I do not take that as gospel). The previous President didn't spend anything for years on end, although that does mean that many of our assets are in near disrepair.

The management company essentially handles everything. Our input is "Hey, this person's yard is bad/car is parked illegally, send them violations." They do the budget and just hand it to us. They do all the lawyer/insurance stuff. They make sure all the recurring bills are paid as well. The HOA basically handles upkeep of the grounds/repairs/capital improvements. The HOA is respnosible for a 130ish unit development of single family homes.

Yes, I mean the board (the structure is the President, VP, Treasurer, Secretary, and 3 members "at large") basically says yes to everything without much due diligence. We also do propose ideas through email. In fact, half of votes are done through email or slack (not that I or anyone seems to have any issue with where the votes occur). I think the only thing we've said no to has been when the President wanted to spend the outrageous amount on having the streets blown weekly, although I think that was less of a vote and more of just 2 people saying that it's not a good idea, and it didn't go anywhere from there in the email thread.

I think the problem with policy creation is that we're kind of doing things by the seat of our pants. We "know the problems that need to be addressed", and we tackle them one by one. We definitely get things done, but it's not really in any systematic sort of way.

Also, the problem with the duties and obligations is that we don't really follow the by-laws. The President's entire duty description can be summarized as 1) Preside at meetings, 2) see that orders and resolutions of the board are carried out, 3) sign all written instruments, and 4) co-sign all checks. He does that basically. The treasurer position, my position, is actually supposed to do everything you expect of a treasurer (handle all the money, do budgets, track finances, sign checks, make sure audits are done annually, etc. The management company basically does all that instead.

Finally, our bylaws say minimum of 3 board members, 9 maximum! I think 7 is way too many as well. 5 would be nice, but that would mean kicking some people out.

You have no way to know that if you've never done a reserve study.

It sounds like GA does not require that business be conducted in actual meetings, is that right, Jonathan? If done by email, don't your Bylaws and GA laws require that votes be unanimous? I might be called taking action without a meeting.

And I assume there's no open meeting laws in GA that require that Homeowners may attend to observe and hear the Board conduct the HOA's business??

Your bylaw's definition of the duties of the president sound just like our. A Sheila notes, they are not or at least should not, be dictators or queens or kings. Do not believe him when he says owners must vote on where to put reserves funds. Have him show you the law. Or have your PM show you that law.

Your duties as treasurer also sound like ours in our our bylaws and we have a PM too, so the treasurer mainly keeps an close watch on our financials. BUT ALL directors should.

If your MC says you have wonderful reserves ask them to show them to you!! As treasurer, you especially need to know that you're building up enough to replace things when they break down or age out.

Most HOAs seem to have basically two accounts: an operating budget and a reserves account. Why do you think you should have a capital expenditures account? What in the world is it earmarked for?

After 17 years, I think you & your newer colleagues on the board need to demand that the MC give you directors some sort of training. If the MC cannot or will not and if they can't show you a reserves study, I'd say you must shop for a new MC. I'm seeing too many red flags on your Board and in your HOA.

Our bylaws pre-date the internet really being a thing, so there's no mention in them. I've been going through GA code, but it's fairly extensive. To your point of taking action without a meeting, you don't need to vote on every expense though I would imagine? We basically do things half ass and in a practical manner, although we have been thinking of updating bylaws to set a dollar amount that someone can just spend for association business without requiring voting (I'm not sure if that's legit though).

So, I own multiple properties, and in landlord world, you typically have 2 funds, an operating account and a CapEx account, the latter receiving deposits on a regular basis to save up for replacing your depreciating assets. I guess it must be different in HOA world or maybe this is just mincing words/a terminology difference. For landlords, at least the way I and others I know do it (which doesn't mean it's right, of course), if you have a major unplanned expense, you take it out of your operating account. If you replace a roof because it's at its end of life, CapEx account. CapEx is basically for saving up for things that you know have lifetimes of longer than 1 year. Again, this could all just be terminology/differences in how things are done in different fields.

The management company does have some 30 minute seminar that I suppose we should all take, even myself. I'll look into that for sure.

Jumping back to your point on open meetings, we meet every month and actually welcome our members to join the meetings. Of course, we get like 2 people at the most, probably because the previous board was extremely hush hush. You didn't even realize we had a board until now. Also, as far as showing him the law, I actually found the relevant sections of the GA Code that seem to indicate that he is wrong! As a domestic nonprofit corporation, we are empowered, as the board, to invest in securities with a majority of only the board (with some exceptions, basically saying as long as those investments don't benefit a director personally). I'm thinking of how to best approach Mr. President with "You're wrong. Stop lying".

Okay, I was thinking they were the same thing, but it helps to have someone confirm that! The MC does our budgets it seems. We just approve them. And we are a Domestic NonProfit according to our Articles of Incorporation. We also don't have an operating agreement on file, but GA does not require that corporations give them to the Secretary of State.

Our management company sounds hilariously incompetent. I did just notice an email where I asked our contact with the company about a reserve study. She said that we've never had one but that one was budgeted for next year (I think that's code for "oops, let's just say it's on the agenda"). That also confirms my suspicion that the management company is the one who makes the budget.

We are 112 homes. 40 duplexes (two single story homes, side by side) and 32 standalone single or two story homes. We pretty well let our MC handle all the money, budgeting, etc. Many posting on here do not like this idea but it is how we operate and it works for us. Our BOD get extensive monthly financial reports (10-12 pages) down to each penny collected and each penny spent so it is up to us keep any eye on everything.

We have several safeguards in place:

1. The MC has no withdrawal access to our Reserve Fund. They can put money in and they get a statement for inclusion in there monthly financial reports to the BOD. The Treasurer also gets a monthly statement direct from the bank holding the reserves. It takes the Pres and Treasurer both signing to withdraw any money from the Reserve Fund and we never have withdrawn any.

2. We pay our dues (assessments) quarterly to a bank lock box system. The money is then transferred to the MC. The Pres and Treasurer have a "pass code" which if they activate, will stop all monies being sent to the MC. Theoretically if the BOD pays attention to the Monthly Financials and sees any problem, they could stop the transfers thus limiting our losses.

3. Our major expense (60% of our budget) is landscaping. Our landscaper was hired by and reports to the BOD. They are paid monthly (equal payments per month) by the MC. If not paid, the BOD would be the first to hear about it from the landscaper.

Liars lie and thieves steal. It is near impossible to stop them no matter the system in place. All one can do is maintain a vigil.

Jonathan,

Sounds like you did an action without meeting.

Three individuals on the board.
One individual says we need to resurface, here are quotes.
The second individual says I'm down with that
The third individual says they prefer the lower bid.

Sounds like an informal motion to resurface, unanimous consent provided.
Hence, motion approved as an action without meeting.

Sorry, as someone else mentioned, we have 7 people on the board. A 4th individual said that she gave her ok in a separate email.

Right, I should have emphasized that she made this statement AFTER the President said that we were moving forward and after I questioned her about why only 3 votes were cast (she is the Secretary and thus her job to ensure the voting is recorded). I'm thinking she just said so to cover her butt. The vote again was also in an email that wasn't sent to anyone but the President... if that email even exists.

I can't really say that they did or didn't. Most will just say "yes" or "no" to an email asking for the vote, and we rarely discuss proposals in any depth. Most decisions are made fully through email, with minimal discussion (I've found that me and one other are the only ones who ever pause to make considerations most of the time).

Where can I go to find out this information about requiring unanimous consent? I'm getting familiar with GA code and would have an idea where to start if you gave me an idea of what it kind of "falls under".

Our by-laws do not have anything that would overwrite this. Does that statement mean that everyone must vote or that everyone must say yes?

My understanding, especially if you read the whole paragraph, is that everyone must agree.

Unanimous consent is very typical of all States statutes that address action without meetings.

I don't know if someone already stated this, but how is he on the Board being that he is NOT a homeowner? We do not allow renters/leasers to be on the Board. Doesn't it say somewhere in your CCR's that you have to be a homeowner? If already stated, just ignore. thanks.

The former President has brought this up with the management company, and the representative said that it's okay to be a renter.

However, I'm starting to not trust this representative. She just questioned why an HOA would want to put their reserve funds into government bonds/CDs (aka why we would want more money/not lose it to inflation?). Do SFH development HOAs never do this investing thing? Her thing is "Condos/town home associations do it because they save for major expenses such as new roofs, new pavement, etc., whereas your HOA just offers amenities". I'm like... what? Does our clubhouse not have a roof? Is the parking lot not also paved? Did we not just pay $15,000 to have our tennis court resurfaced? Am I waist deep in crazy town here?

Your Bylaws, Jonathan will tell if directors even or especially the president must be owners of record.
Do NOT trust your mgmt. co. rep. OR have her show you the verbiage in your documents.

Douglas, AZ may have state laws that r prevent your board form conducting so much business behind the backs of the homeowners. St law would trump you own documents. Btw, what IS the wording in your docs????
Please check all sources.

That's not uncommon, Jonathan. While the developer is in control, the Board often comprises the developer's staffers, relatives, etc., i.e., non owners. Once the HOA is turned over to the Owners, they should revise the Bylaws to assure only Owners may be on the Board (if that's what they want.) You did look in the bylaws, right?

To my mind, it's your so-called meetings that are a big problem, but not the only problem.

We had a developer appointed BOD of which I was on. Our developer was a professional and a gentleman. He wanted to leave and be thought highly off. The appointed BOD reviewed all docs and suggested some changes. The developer being in control talked with his attorney and the changes were made prior to we owners taking control. This was the easiest way to do this.

Then GA corporations code may say something. Often the president must be a member of the corporation even if other officers aren't.

Yeah, but the resistance I'd get from the President, considering he's not an owner...

The President and VP and Secretary seem to be friends, and the other 3 board members are all kind of there in name only it seems. They don't really do much other than show up to meetings as far as I can tell.