Has anyone’s HOA sued former officers?

Started by EmilyW2 • 6 replies • 663 views

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EmilyW2 (Indiana)
Posts: 13

Posted:

Our former president and secretary (who are married to each other) entered into a lease of part of our common area to an outside organization. The lease is devoid of any protections for the residents and the majority of current residents would like to terminate the lease except there seems to be a renewal clause that can’t be breached for cause (never mind without cause with proper notification). The former officers of course relocated out of the community after subjecting us to this. Any advice?

BenA2 (Texas)
Posts: 1,273

Posted:

Former officers can be sued but I think only an attorney in your state could advise whether you have a cause or if it would help you. I would question the legality of any lease that automatically renews with no way to stop it. I'm not an attorney but that just sounds unreasonable. I have heard of 100-year leases but it sounds like yours goes to infinity and beyond.

I found this article with a quick Google search which supports that line of thinking:

https://www.lexology.com/library/detail.aspx?g=eef82ed0-100d-46f7-98c6-9268bde7ef8a

TimB4 (Tennessee)
Posts: 21,062

Posted:

Keep in mind that the HOA would end up paying the attorney fees.
Since the issue happened when they were Officers of the HOA, they are indemnified.
D&O insurance, typically, won't cover actions between directors/officers.

If you can't break the lease, you need to find out how to terminate the auto renewal.

As a final resort, you can negotiate to buy out the lease. This may be less expensive then legal action. Most companies would rather negotiate out of a lease the other party isn't happy with then force the unhappy party to continue.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The other question is: Did the HOA enter into this deal or is it their names on the Lease agreement? It has to be proven if they were acting as HOA Officers and on it's behalf. Which would probably have the HOA's corporate stamp on the document or under their name reference to the HOA. If that is not there, then this may be an agreement entered individually.

I would contact a lawyer familiar with contractual or lease laws. (Not necessarily a Real Estate attorney). There are many facets to this agreement without knowing all the details. Especially since a HOA is a corporation and would be representing ALL the owners. The President/Secretary are just the elected official that act for the HOA. Being that they are married doesn't mean they are both allowed to be members of the HOA. 1 owner per lot typically. Unless your HOA allows for non-owners to be members.

Former HOA President

EmilyW2 (Indiana)
Posts: 13

Posted:

We completely understand that the legal fees would be an HOA expense.

If we could terminate the renewal clause we wouldn’t have an issue.

There is no way a buy out will be considered by the lessee. They will let go of this only if they are legally required.

Our insurance attorney thinks the former officers were not acting in good faith and will not be indemnified as a result. There are some other factors at play and this may actually be a criminal issue.

EmilyW2 (Indiana)
Posts: 13

Posted:

Technically it was an HOA agreement or it is being presented as such. The individuals have no standing to enter into the agreement, only the HOA although I would argue that a lot of the representation was fraudulent. All HOA contracts must be signed by two officers to be valid. Generally that has been president and VP or treasurer depending on the nature. In this case the then VP and treasurer refused to sign so the secretary was used. By our bylaws that is permissible although many other aspects of all of this were not in accordance with the bylaws.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Emily,

From your latest posting, the Board knew of the issue.
From your posting, the President and VP refused to sign but you don't say if the Board approved the deal or not.

We don't know what the agreement is for.
We don't have access to the actual contract.
We don't know what is contained in the minutes of the meetings prior and after the contract was in place.

You likely need to, and it sounds like you have, consult an attorney specializing in contract law who would have access to all of these items.

There are simply too many unknowns for me to give you better advice.

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