Hiring a Decorater as a vendor for $60,000

The Board of Directors hired a Decorator as a vendor for $60,000 without a vote from the residents saying they had the authority to do it as per Articles Of Incorporation. The Decorator was hired to draw up plans for a refurbishment of the Clubhouse ranging from $1-3 million dollars. Do the rules and regulations supersede the Articles of Incorporation?

The order of precedence for documents are:

Federal Laws
Federal regulations
State Laws
State Regulations
County codes
City Ordinances
City Regulations
Deed Restrictions (your Covenants)
Articles of Incorporation (if incorporated)
Bylaws
Resolutions (formal decisions made by the Board)

The Articles supersede the Rules & Regs. But in my HOA's CC&Rs, the board has that authority too--to hire a vendor for such work.

I don't understand, Martin, why limits on what the board can spend would be in your Rules & Reg anyway. Can you tell us what it says in the rules & Regs? And in the Articles?

See Tim's list above, Martin.

What exactly DO your articles say??

Martin,

You have seen the paperwork, we have not.

Is it possible that the contract provides for materials, labor, etc. vs. just consultation?

If you desire to stop the contract, you need to act quickly and likely go through the courts.

Of course, even if you win, the Association may have to honor the contract or pay a portion. This is because the vendor acted in good faith and has a contract signed by the Board President (or a board member). The contractor was of the expectation that these individuals had the authority to enter into such a contract. The contractor may have even done work related to the contract that will have to be paid for.

With that said, you would have to do the following:

1) organize (get other members involved)
2) File legal action in court to stop work and force a vote on the contract.
3) If the vote is held and the contract voided, you now have to decide if you and those you organized desire to file additional legal action to make those who approved the contract pay for it from their own wallets. Association funds will be spent to defend the Board (as they are idemdified). However, any judgement would be against the individuals themselves. This may also have the effect of nobody wanting to run for the Board. Hence your organization to have a slate of candidates ready to serve and to share the cost of the legal expenses.

1. It would be surprising to have a 10K limit on the board authority to spend for a large association. (An association contemplating a 1M expenditure must be pretty big). With a 10K limit they would need resident approval for almost everything.

2. Doing a large project WITHOUT an architect or decorator would not be a good idea.

It's not clear who you are addressing this to, but if it is Tim, he is not saying the board has that authority, he is saying if they are violating your governing docs, your primary recourse is probably via the courts. Most states don't have an "HOA Police" that will get involved with matters like this. In Florida, the Department of Business and Professional Regulation does help enforce some items for Condos (see FS 718, mainly elections and meeting violations), but less so for HOAs (see FS720).


According to Martin his covenants limit the board to a 10k expenditure without owner approval. I don't think most governing docs have such a clause, and as such, give broad powers to the board to run the association including spending large sums of money without owner approval.

Same here except owner approval is not needed for a Special Assessment. The board has pretty much total discretion on spending, assessments and budgets. No owner approval needed for anything at all.

Martin

As Sue asked: Is there a budget in place for this remodel? If so, I expect the $60K came from it and would be proper.

Martin,

As all have said, the CC&Rs are above the Articles of Incorporation and will control (must be complied with) when there are conflicts.

The articles of incorporation are for the corporation, regardless of who is in charge.

You need to reply to the Board, copied to the attorney, that although the Articles do allow the Board to award contracts, when those contracts exceed $xx,xxxx, then the covenants control and the contract must be submitted to the membership for a vote before being awarded.

If you want to make a better impact, have an attorney write the letter on your behalf.

If you want to make even more of an impact, gather support and have the attorney write the letter on behalf of all the members who agree with you (naming them).