Can HOA President Overspend Budget without Authorization?

Started by NealR1 • 4 replies • 4310 views

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NealR1 (Maryland)
Posts: 2

Posted:

We have a situation where the current HOA president (self appointed then eventually elected under questionable terms) has spent NINETY-THREE 93% of the total possible HOA income on Landscaping alone. We are a small community with a max of $43,000 that can come in from Homeowners. $40,000 was spent on contact services and "Site Improvements" NOT including $3,000 left for snow removal. They actually sent out this budget to everyone, but with no bank balances or details.

The original budget had approx $17,000 contracted services for Landscaping and $500 amount for "site improvements". This president is a freak about landscaping and once he took over the Association has gone crazy spending almost $24,000 over budget for "site improvements" without homeowner approval or even a plan. As a result for the first time since we have owned here (10 years) there was a posted LOSS of almost $17,000 WITHOUT A PENNY going into a much needed reserve fund this year and A ZERO DOLLAR ($0) budget item for the reserve fund for next year!

The anger is that although eventual site improvements would be a long term goal, to spend 93% of total possible income on mulch, tree removal and landsaping seems irresponsible without any part of this money at least going into a reserve. The other fear is that if he can overspend by so much without authority, could the board then change HOA Dues massivly to then "compensate" for the overspending.

Do we have recorse to Demand a recall or resignation of this Board and President? There is an apathy in the community where many do not even bother to read the budget, which is no doubt exactly what the current Pres is hoping. At HOA meetings, this PRES just shouts anyone down if they disagree with him. He has a small number of his own supporters that will agree with him and ridicule anyone else. There must be better legal ways to stop this.

Any suggestions for how to get a majority of homeowners to vote for a resignation? Obviously, those of us that disagree with his spending/policy do not want to be the victim of his wrath, which is another reason why several of us are getting angrier and frustrated.

There is much more to this story, but the above info are the basics. Would appreciate any feedback anyone would care to share!!

NancyD1 (Florida)
Posts: 447

Posted:

Neal,

What state are you in? In some states such as FL, if you have a reserve account with items specified, you cannot alter any item and not fund any item without a community vote. If the budget that was approved, provided for certain monies to go into the reserve, it must before the end of the year. Check your documents.

A budget, if approved by vote, should be adhered to as much as possible. If there are changes throughout the year a vote can be taken to change that budget. Over spending leaves other items on the budget not funded and a special assessment may be needed, as in your case. Where is the money going to come from to pay the remainder of the bills for the balance of the year? Depending on how your doc's are worded, certain site improvements may fall under capitol expenses which again may need a community vote, unless the board has an amount that they can spend up to for these expenses. The easier way to spend more than is in the budget for an item is to have a special assessment. Most likely you will need a vote for this and that is way your BOD did not do this.

The President is not the only one who makes the decisions for the BOD. As for the apathy in the community, that will end when they have to vote for more money to support the community because of over spending the budgeted items. the President cannot did not decide to over spend himself. He would need the support of the other board members.

The President or anyone else on the board should not be dictatorial. Rules of conduct apply to any any meeting or any member be it BOD or homeowner. There should be no action taken by the board toward any one individual in the HOA unless it is perscribed for each homeowner. If you and others feel that any board member is not negligent in his duties, as a fiduciary should, there are ways to recall, but you have to again, have to check your documents. They specify how, why and when this may be done.

HaroldS (Arizona)
Posts: 906

Posted:

Looks like you are going to need to do some grassroots to galvanize enough of your members to get rid of this guy and his cronies before you end up with increased dues and/or hefty assessments to fund what he is neglecting. For surely those expenses will come due. Check your documents and state laws carefully and gather information where he is circumventing your documents and/or state laws. You need evidence to prove to your neighbors that you are not just being a Chicken Little. Does your documents or state laws allow you to request finiacial documents that he isn't supplying? Good luck. Harold

NealR1 (Maryland)
Posts: 2

Posted:

Thanks for your replies so far!! Most appreciated! That's our fear - this money is going to have to come from somewhere. That will wake people up if there is a special "assesment"!! I have contacted a local attorney who has dealt with HOA law. He is a friend and willing to do a free consult and will look over the Bylaws carefully. At my own read, I do not see where the HOA can do whatever they want. I am slowly working a "grass roots" effort by asking people if they have actually read the budget. Most say "no". One person said he thought the $40,000 figure was a "typo"! I told him to go back an read it again!! Look at the totals. I have been encouraging people to talk to their neighbors too. I have to be careful if seen walking from door to door myself. Thinking about mailing a postcard telling people to look again at the figures. Not enough time before HOA meeting this week and need more legal answers first. But this can still happen over next few weeks.

As far as Board Members, the current president has surrounded himself with his friends who act as VP, Tresurer and Secy. Who knows how "official" the election was. No one formally asked for a "recount" or "verification", again general fear and apathy. So who knows what the deal is. We have no idea how Prez even makes those decisions, on his own or with the board. I think he does what he wants and his "board" just goes along with whatever he says. So much for checks and balances. I'll keep you posted on updates. Reading other messages on this board I am amazed at how common such HOA abuses of "power" are, based on one person or small group's desires!! Where is the fair and responsible management for everyone's benfit?

NancyD1 (Florida)
Posts: 447

Posted:

Neal,

Your last sentence says it all. The BOD has a fiduciary duty to the Homeowners. If they are not performing in that capacity, you have every right to question them. Be persistent. Forget about his wrath at a board meeting. You and every homeowner who are paying the dues want to know why.

My question to you is, what has this man got on you? that you are afraid to speak with your neighbors. The knowledge is in your documents and he cannot do anything to you personally, as long as you abide by those documents. We have homeowners in our community who do not favor our board. Do we think that they are talking to their neighbors about us (the board)? Who cares. If and when they enact a recall or whatever they believe they have suspicions of, then we will answer them.

As for the President making the decisions himself, the other board members should know that they all have a fiduciary duty to the community. He will not/cannot take the responsibility himself. Where is the Treasurer in all this. he signs these checks. If the Treasurer or any other board member, tries to weasel out of this mess, you have to ask him why he did not make some sort of a stink about this situation before. He knew, and if he really wanted to protest the actions of another board member there is always resignation. Nothing stops other board members faster from doing something that is wrong than a board member resigning over the fact.

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