I have a mess to clean up! Please help!

Started by JillH9 • 16 replies • 1408 views

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JillH9 (Michigan)
Posts: 6

Posted:

I've been elected president of our small hoa (7 properties). Now that I've had a chance to review the records, I'm having second thoughts and fully understand why no one wanted this position.

Just to give you an idea what I'm dealing with, I've attempted at the last two meetings to get permission for an attorney to review our documents with no luck. Money is an issue as the funds are low, one resident is at least 5 years behind on paying their dues, no one knows the exact amount because the records are missing. To make matters worse this particular homeowner owns two lots and was the treasurer for many years.

The current treasurer has no accounting knowledge and cannot do financial statements. I made a budget for the last meeting, apparently they have never had one before, we will had to triple our dues and will still be broke in a few years.

The secretary is a godsend but trying to locate records on anything is difficult at best as they seem to have been lost over the years. I have been unable to find any information that says we are incorporated though everyone assures me we are. Is there a website for Michigan where I can find this info? I've been looking here http://w1.lara.state.mi.us/businessentitysearch/ Is this the correct website?

I'm 99% sure that the newest resident is going to sue us before the end of the year, they are extremely unhappy, extremely impatient and yell profanities at the meetings. They are demanding that we spend 10x what we have in the bank on a commons area that is near their home, that is obviously not going to happen now and probably never will.

As far as I can tell no taxes have ever been filed, that is probably something that needs to be done as well.

Are there any online or local Washtenaw County or SE Michigan classes that you would recommend to increase my knowledge base on running an hoa? I want to make sure I'm not missing anything because there are obviously a lot of holes that need to be filled.

On the other hand, maybe I should just move, lol. Seriously, though, any advice would be greatly appreciated.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

First off, you don't need a lawyer to review your documents. You can read them for yourself and then ask us questions. We aren't lawyers but we can try to clarify some things for you. This site has many older posts to review. However, just don't respond to them if they are very old. Create a new topic will help you.

I would tell the person who wants to sue: Suing your HOA is suing yourself and your neighbors. Plus your HOA is under no obligation to do work because 1 person wants it done. It's a board decision where the money goes. The person can make a suggestion to the board/HOA. However, if you can't afford it, you can't afford it. Tell them to get bids and present them to the board if they want it that badly. Usually 3 bids would be suggested for any work. So if they see the budget for themselves, maybe then they will get the idea of what can be done.

It's best to get a copy of your CC&R's and/or bylaws ASAP. Bring them to every meeting. Do not respond until you can reference it in those documents. Too bad if someone wants an immediate response. If you can't be allowed to consult your documents, then you can't be able to answer that question.

Please feel free to come here to ask questions. Many of us have been where your at. Each HOA is different and each state laws are different. Take the advice here at face value until you can verify. We can give a direction that hope gets you where you want to be. good luck!

Former HOA President

TimB4 (Tennessee)
Posts: 21,059

Posted:

Jill,

Take a breath.

Welcome to the forum.

My suggestion is to prioritize what needs to be done.

You mention a few things.
To me, based on what you mentioned, I would prioritize things this way:

1) Create a Budget (identifies the amount of assessments).

1B) Organize Association Records (you need to know what you have and what you don't have).

2) Reconcile Lot Ledgers (records can be obtained from the bank showing deposits, deposit slips and, perhaps, actual copies of deposited checks). From these items, one can create/recreate ledgers to see where everyone is on paying assessments.

3) Start the process to collect past due amounts.

4) Perform a reserve study (this can be done by yourself).
For more info on Reserve studies see the following thread on this forum:
http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx

5) Create a budget for the following year based on the reserve study

6) Verify and reestablish (if needed) corporation status. You are looking at the correct site. If, as you say, taxes haven't been filed, I suspect that annual reports to the Corporation Commission weren't filed either. When enough time has passed without an annual report, the State will administratively dissolve the Association. Depending when the last time a report was filed, it may be possible to become reinstated. The Commission can assist.

7) If you don't have financials for the past few years, it may be best to simply start filing taxes for this year and see if the IRS asks about past years. If you do not owe any money (most small Associations do not), there is no penalty at the federal level. I do not know about your State level dept. of revenue.

Why do you want an attorney to review your governing documents?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Oh, when you do your corporation search, do a key word search (vs. name search).
This way, you only have to know part of the Corporation name (vs. the beginning of the name as in name search).

Example:

Search word: Homeowners

Name search gives: Homeowners Association of Timber Creek

Key word search gives: Timber Creek Homeowners Association
Homeowners Association of Timber Creek

DouglasK1 (Florida)
Posts: 2,046

Posted:

Tim gives excellent advice as usual. I'll add that threatening to sue is a lot more common that suing, in large measure because threatening is free and requires no work, will suing is just the opposite.

If the owner who is behind won't pay voluntarily, at least make sure lien is recorded so the property can't be sold without dues being paid. Beyond that you can talk to a collection attorney and see if they can help. Finally, you might be able to foreclose, even the threat might be enough to get some dues paid.

Escaped former treasurer and director of a self managed association.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Everyone above has offered great advice ... so great I currently cannot think of anything to add. Tim is the BOMB and very good. Melissa is correct ... if you have any questions, please ask us first as you need to control your costs. If you have an issue where we feel you need to hire a professional we will tell you our opinion (LOL ... and you can take it or leave it as desired). Douglas is also spot on in that you need to make sure in the near future a lien is recorded in case the home is sold or falls into foreclosure to protect the HOA.

As Tim noted ... take a deep breath and take one issue at a time. As Melissa noted don't be pushed around or scared of threats. If that individual obtained bids and then took that bid and divided by 7 owners ... that would be a potential Special Assessment to be immediately paid by all owners. And if some do not pay such as your owner who is behind on payments it would be an additional amount for all others. You might want to meet with this owner one on one and explain the HOA situation (with certain items confidential such as who is behind). Most often an open honest conversation can tone down an angry owner.

In my past HOA a new developer who engaged in illegal garbage tried to make me out as a bad guy to their clients. However, when I responded to their garbage it was always respectful and with FACTS. I always had the section of CCR's noted and the State Law section. Finally when we had another nasty issue a client told her husband .... I am going to go talk to Janet, because she is the only one who can back up what she says. I then had many others start asking questions and realize I was not the bad guy after all ... they realized I was looking out for everyone equally, no matter who you were.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

jill

All good advice. If you are comfortable, I would talk to the person 5 years behind on their dues or anyone else behind for that matter. Have your facts and figures ready to show them. Ask if they are willing to get caught up. If they resist inform them that you have no alternative but to place a lien of their home and turn the collection over to an attorney which could effect their credit rating.

Be vague. Say could effect their credit rating.

DaveD3 (Michigan)
Posts: 796

Posted:

Quote:

Posted By TimB4 on 09/04/2017 7:53 PM
Oh, when you do your corporation search, do a key word search (vs. name search).
This way, you only have to know part of the Corporation name (vs. the beginning of the name as in name search).

Example:

Search word: Homeowners

Name search gives: Homeowners Association of Timber Creek

Key word search gives: Timber Creek Homeowners Association
Homeowners Association of Timber Creek

Here's the Michigan Business Entity Search site
http://w1.lara.state.mi.us/businessentitysearch/

Put in a keyword for your association. If you're "Timber Creek Homeowners Association" try "TIMBER CREEK" as a search. Depending on the name, there could be a lot of hits. DO NOT search for the full name even if you think you know it. You might be surprised at how it was registered vs logged with the county.

That search will tell you if a incorporation documents have been filed with the state, if they're current, and when they were last filed if they're not.

Do you know if you're a "condominium" association? There are specific state rules pertaining to condo associations (as opposed to "normal" homeowner associations).

Tim's other advice above is good.

JillH9 (Michigan)
Posts: 6

Posted:

Thank you for all the replies, they are greatly appreciated! I'm going to start working on things in the order suggested taking everyone's advice. I'll keep you posted. I'm sure you will be hearing from me often, lol.

SueW6 (Michigan)
Posts: 814

Posted:

Can you look in the checkbook or go to the bank and see what has been written for the pas two years? If checks have been made out to State of Michigan, most likely its for the Annual Report and due in October of each year.

Or you can call the office of corporations, State of Michigan to see if your "corporation" is active or no longer recognized by the State, due to the Annual Report no being filed.

JillH9 (Michigan)
Posts: 6

Posted:

The checkbook has been moved to different banks several times in the past 5 years. Some of the records are missing. There have been no checks written to the state of michigan in the past 2 -3 years which is how far I have gotten. I searched the state of Michigan website and it does not list our organization. I understand I can pick up the forms at an office supply store. Are there any sample articles of incorporation here? I haven't been able to find any. If not can you suggest a sample somewhere for a starting point?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By JillH9 on 09/07/2017 5:27 PM
The checkbook has been moved to different banks several times in the past 5 years. Some of the records are missing. There have been no checks written to the state of michigan in the past 2 -3 years which is how far I have gotten. I searched the state of Michigan website and it does not list our organization. I understand I can pick up the forms at an office supply store. Are there any sample articles of incorporation here? I haven't been able to find any. If not can you suggest a sample somewhere for a starting point?

You might check your County Records to see what documents have been filed with them for your Association. My last association had a copy of the Articles of Incorporation filed, so maybe yours will also. It is at least worth checking.

You might check out this website and there is telephone numbers, so you could potentially call and ask questions.

http://www.michigan.gov/lara/0,4601,7-154-61343_35413_35426-120068--,00.html

I also found this discussing documents for Non-Profit Corporations:

http://www.michigan.gov/documents/lara/BCS_CD_269_08-15_527658_7.pdf

AlexP2 (Iowa)
Posts: 1

Posted:

Search the Business Entity Records in Iowa's Official Secretary of State page to check in the event that your picked business name is accessible. You may likewise take a stab at composing your brand name, business, or space name on any web crawler to create organizations with comparable names and to guarantee your brand name is one of a kind and meets the state's prerequisites.
https://businessentitysearch.us/iowa/

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Jill,

While you certainly do not need a full-time, property management presence, you do need the support of a quality property management company in your community. It's worth the expense and they can work with you on accounting and other high-level needs as you attempt to bring structure to your HOA board. Everything is negotiable with property management companies and you can explain your situation and exactly the service you need to bring better transparency to your seven owners.

Using this forum for serious advice is not something I can recommend though this community's engagement can be enlightening, especially if you're harboring any thoughts of being a DIY "manager/volunteer" with your experience level. Some of us have been at this for several years so it's "easy" or "easier." There's nothing easy about the job ahead of you.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

This post is from September 2017.

SheliaH (Indiana)
Posts: 6,964

Posted:

I wouldn't ask - I'd TELL this owner it's past time he or she to pay up, otherwise a line will be filed at his/her exoense. And if this lands up in court, the association will request he/she reimburse all expenses and attorneys fees incurred by pursuing the debt.

Depending on how much is owed, ask for half of the money up front (that's how you'll know he/she is finally serious about fixing this). If he/she wants a payment plan, don't extend it past 6 months at first (the board will decide if it should be extended another 6 months and its decision should be final). Insist on written verifiable proof of financial hardship before negotiating any payment plan. Good luck!

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

TimB4 (Tennessee)
Posts: 21,059

Posted:

Again, a five year post

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