Cash Deal with vendor

Started by BarbaraD11 • 15 replies • 506 views

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BarbaraD11 (Washington)
Posts: 10

Posted:

Our current board just found out that our nine year old roofs don’t have a warranty because the board at that time did a cash deal with the roofing company. Some of those involved still live in the community. Does the current board have an obligation to disclose this finding to the homeowners? Homeowners at that time were each assessed for a portion and the rest came from the reserves. There are only 18 units and they were self managed at the time. We have copies of the checks paid to employees of the vendor and the treasurer wrote out and signed a check to himself and the homeowner who spearheaded the project. It’s assumed they cashed the checks and gave the money to the roofer.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds more like your HOA doesn't have a warranty on the work the roofer did. Do you know if that extends to the materials that were used? There is usually a warranty for materials which is different than warranty the contractor does.

Former HOA President

SheliaH (Indiana)
Posts: 6,964

Posted:

What do you want to happen as a result of this disclosure? If someone profited off this deal (like the homeowner who spearheaded the project and perhaps the treasurer), I suppose you could try to request a refund of some sort, but you'll have to prove that's what happened if they refuse.

At this point, your best bet might be to compel the former board members to meet with the current board and explain what happened. The statute of limitations may prevent you from doing anything to them (check with your association attorney), so learn from this and develop some policies to prevent something like this from happening again. I'd start with a strong policy on conflict of interest and reviewing contracts before they're signed (otherwise someone would have asked about a warranty).

It sounds like the roof is in need of repair, so focus on getting that done - and be prepared to pay for it. It's odd that the roofs aren't warranted because of a cash deal - the only advantage to the association at that time may have been some sort of discount because there wasn't a loan and the interest that comes with it. Take another look at the paperwork - materials may still be covered, but I suspect you're SOL on labor - that's usually a one or two-year deal.

If repairs are an issue, you'll probably need to bite the bullet and pay for them if it's not something covered by insurance. Again, the association would likely have to pay something on labor anyway. As for the materials, if there's any paperwork regarding a warranty, see if there's something about premature failure and if that can be covered (providing the materials anyway). I doubt you can go after the roofer - they were hired to do a job and did so - where the money came from isn't their concern.

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

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By BarbaraD11 on 06/27/2021 6:35 PM
Our current board just found out that our nine year old roofs don’t have a warranty because the board at that time did a cash deal with the roofing company. Some of those involved still live in the community. Does the current board have an obligation to disclose this finding to the homeowners? Homeowners at that time were each assessed for a portion and the rest came from the reserves. There are only 18 units and they were self managed at the time. We have copies of the checks paid to employees of the vendor and the treasurer wrote out and signed a check to himself and the homeowner who spearheaded the project. It’s assumed they cashed the checks and gave the money to the roofer.

I would want the facts. First, I do not think paying cash necessarily equates to no warranty. Call the roofing company and see what its people say.

Second, if the roofs are leaking, this does not necessarily mean the roofing company did poor work. Lots can cause leaks.

More information is needed.

MaxB4
Posts: 3,513

Posted:

I can only come up with one reason why you pay cash to a vendor. They low balled the others because they were not licensed, therefore your warranty goes up in smoke.
Of course cashing of association check for cash would never raise a red flag, besides they were self-managed with an abundance of checks and balances.

AugustinD
Posts: 3,698

Posted:

Many folks pay cash because the vendor (illegally) does not want to report the income and pay tax on it, hence the vendor can charge less.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By BarbaraD11 on 06/27/2021 6:35 PM

Does the current board have an obligation to disclose this finding to the homeowners?

No.

Additionally, what good would it do?

Simply move on and put procedures in place to prevent it from happening in the future.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

What brought this issue up?

BarbaraD11 (Washington)
Posts: 10

Posted:

A homeowner thought they had a leak and when the vendor was called they had no paperwork. We have a copy of an invoice that is marked as paid, but when we followed the paper trail with the bank, we found numerous checks written to individuals, including the then treasurer and homeowner, but no check made payable directly to the roofing company.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Follow Tim's advice and move forward.

Fund the leak repair as a maintenance project. The roof is nearly a decade old. I'm not sure that a roof warranty would cover this anyway after a decade. Shingle replacement is different from seals, etc., so it can't get convoluted.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By TimB4 on 06/28/2021 12:33 AM

Posted By BarbaraD11 on 06/27/2021 6:35 PM

Does the current board have an obligation to disclose this finding to the homeowners?

No.

Additionally, what good would it do?

Simply move on and put procedures in place to prevent it from happening in the future.

So it's sweep it under the carpet? Sorry, the association has a liability issue with its owners.

SheliaH (Indiana)
Posts: 6,964

Posted:

I don't think anyone's sweeping this under the carpet Max, but how do you propose this gets fixed? I think the former board, especially this homeowner and former treasurer SHOULD explain themselves, but then what? There could be a statute of limitations that may prevent anyone from going after them personally, and even if you tried, the amount of money that may be at stake could prompt them to declare bankruptcy and you know how that can complicate things. Sometimes shit happens and while it may be someone's fault, you may have no choice but to let karma take care of them (in my experience it DOES happen sooner or later, even if you aren't there to see it).

In the meantime, I know this will make the homeowners angry as hell, and it should, but that's not going to fix the homeowner's leak and the association will still have to address how it'll handle repairs in the future. So, Barbara, have a sit down with your association attorney and perhaps your master insurance carrier to see what should happen next. I still say the current board needs to meet with everyoe who was around at that time and blast the truth out of them. If they refuse to cooperate, turn this over to the attorney and get ready for war.

If there are dozens of checks that were written to individuals, a full audit of the association records wouldn't hurt - this may be the tip of the iceberg. Depending on how recent other discovered foolishness occurred, the association may be able to pursue civil and criminal action against those responsible.

As to the question of telling the homeowners, I think that should wait until you get all your facts together along with a plan as to how the board will prevent such actions going forward. Your attorney can also craft a statement to work for now and as more information becomes available. You don't want rumors and half-truths to take over and it's critical that you get ahead of the former board members before they try to spend this.

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

MaxB4
Posts: 3,513

Posted:

Absolutely, get all the facts, but the initial response should never be "Let it go".

Have a group of owners file a class action lawsuit against the Association. Sorry, you're suing yourself to help protect the rest of the owners. The Association will turn it over to their insurance cover. What the owners should be looking at is a settlement, put into a special fund to pay for what repairs needed to cover un-warranted work. Unused funds to pay for the next roof. Yeah, premiums might go up, but it will be far cheaper than paying for individual roof leaks and possible internal damage.

The OP stated that the Association wrote two checks made payable to two Board members who then cashed them and paid cash to the vendor. I will then swear ona stack of bibles that the board members never got a kickback off the phony invoice, right? This forum has accused PM's of the same thing.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Barbara

The roofing business is fraught with "shady" roofers. Many come and go. Shutting one company down to avoid warranty work and starting a new company. The 20 to 30 year warranty they all talk about is from the shingle manufacturer and even then it covers materials only, not workmanship. No matter how paid, you are looking for warranty work from them on a 10 year old roof. My belief is paperwork or not, 10 years is a long time and I doubt many companies would warranty their work for that long. They will claim "acts of nature" caused the problem. Also do no be surprised if the company has change ownership in those 10 years and the new owners have no records. Typical of that business.

In my HOA, the HOA is responsible for roof replacement on each, smallish, patio home. We will have to begin replacing roofs in 2029 or later and it will be over a 7 year time frame as was the original build out. We have one neighbor (in our newest section so probably a 10 year old roof) that called in a local roofing company as she had some water stain on her ceiling. She was given an estimate of $6,500.00 for roof replacement. They saw her coming. Last year as an update to our Reserve Study, her style home was priced out by a local roofing company at $4,000.00.

In my area typical new HVAC systems have a one year labor warranty and 10 years parts warranty. One local company is advertising 10 year labor and parts warranty. All well and good if they stay in business but I just do not trust it.

PatJ1 (North Carolina)
Posts: 568

Posted:

Quote:

Posted By MaxB4 on 06/28/2021 12:54 PM
Absolutely, get all the facts, but the initial response should never be "Let it go".

Have a group of owners file a class action lawsuit against the Association. Sorry, you're suing yourself to help protect the rest of the owners. The Association will turn it over to their insurance cover. What the owners should be looking at is a settlement, put into a special fund to pay for what repairs needed to cover un-warranted work. Unused funds to pay for the next roof. Yeah, premiums might go up, but it will be far cheaper than paying for individual roof leaks and possible internal damage.

The OP stated that the Association wrote two checks made payable to two Board members who then cashed them and paid cash to the vendor. I will then swear ona stack of bibles that the board members never got a kickback off the phony invoice, right? This forum has accused PM's of the same thing.

There's a leak of a 9 year old roof, why a class action lawsuit? Repair the roof. They're very fortunate with the integrity of the roof if there has only been 1, or even a few leaks, in 9 years. Most roofing companies only cover labor for a year. The shingles may have a warranty of 10 - 30 years, but not labor.

How the payments were handled is very suspicious. If there were only 2 checks written, the roofing invoice wouldn't have been very large. We spent $220,000 roofing 21 buildings 5 years ago. Payments over $10,000 are reported to the IRS automatically. How many volunteer Board members would open themselves to IRS scrutiny by depositing really large funds on behalf of an HOA?

This was over 9 years ago. What would the settlement actually be on a 9 year old roof? Depending on the shingles installed, the life of the roof may even have past 75% of it's useful life.

Is there a dollar figure on the repair? In NC, in our case, stacked housing, the HOA does not pay for interior damages unless they are negligent or once the repair bill is over the deductible on the Master Policy.

In the case of an insurance claim, due to our age, we are only able to secure insurance from 1 insurance company. No one else will cover us. You have to ask yourself if it's worth losing insurability or much higher premiums.

Many times you have to let it go and move on.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

First.
Typically the roofing companies dont warranty roofs. The manufacturer of the roof product will warranty the product they used.

Second.
The companies that warranty their product pro rate the "warranty" So lets say it has a 10 year warranty and it failed after 9 years. Since its 9 out of the ten years that's 10 percent left. So they will give you 10% of the value of the failed pieces. And only those pieces. Not all of them.

Conclusion: Roofing warranties are worthless.

Fix your roof and pay for it.

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