Special Assessment Found to be Not Valid

One possible repercussion is that you will spend more money on fighting this legally than the original amount spent on "critical infrastructure repairs."

Especially since the repairs were critical, I would not fight this.

Blaming the management company is likely particularly inappropriate. Legally, the board has the final say. End of discussion, say the courts.

Down the road, if you are displeased with the board, elect a different one. And be ready to serve on the board yourself.

Point of clarification. This issue is being brought up by a disgruntled homeowner. The prior Board intentionally stayed out of the vote count since the community was divided and the Board didn't want this group of owners to think there was falsification of records. The Management Company agreed and thereby counted the votes (in the presence of "witnesses" and recommended the yes decision to the Board. The Board relied on the expertise of the management company whom they pay for professional advise. The Board never even saw the votes again since there was concerns with a group of unhappy owners.

Assuming a membership vote was required, legally it was still the Board that oversaw the vote. Even if the management acted as an intermediary, management did so under board direction.

Whoever is kvetching has no case against the management company, afaic.

The Board is responsible for seeing that elections are held legally and properly. They accept the advice of management, but it's the Board's job to know how to conduct it. It doesn't matter that the Board doesn't' understand these things (as someone might write), they are accountable. I agree with Augustin that the PM is off the hook. Often, the HOA attorney attends to make sure everything is done legally.

But if the PM did advise the Boards incorrectly, the board I might review this PM's performance in general.

Are property managers in AZ allowed to actually tally the votes? What was incorrect about the vote count, Cindy? Are you on the Board? What role do you think the Board should have played. Here in CA, they're basically just observers of elections although the Board president often presides at such meetings.

Say, Cindy was this a board meeting or meeting of the members? The latter, right?

The primary issue is the different interpretations of how many votes were required to pass a special (capital improvement) assessment.One group is saying: reach quorum, then 2/3 of eligible votes received. Other group is saying it's a super majority which would be 2/3 of all units. Prior capital improvement assessment was approved using the 2/3 of eligible votes after quorum as was this. This money has already been collected and spent on the intended purpose (roofs). Interesting is that the same HOA management company did both votes calculations the same way. Now, this single homeowner is claiming the vote calculation was not correct and the management company consulted there internal attorney who agrees. How can the management company not be liable?

If the management company made a mistake or, worse, did it on purpose, then they should be held liable. If they are a professional company they have insurance for that. Of course, you should consult with an attorney before filing suit.

I think many of you are missing the point. It doesn't matter how much the repairs are needed or how badly you need the money, you are required to follow procedures when collecting a special assessment. If you do not follow the proper procedures then you will likely have to give the money back. Taking someone's money without legal authority is tantamount to theft.

Let's say the management (abetted by a negligent board) did mess up with the voting. What damage did the HOA/COA incur on account of the management's mistake?

I guess maybe one could argue the roofs were replaced several months to a year or so early. But this cannot really be pinned down, can it?

I think you are missing the point.

Let's all lawyer up and see if a court can separate the wheat from the chaff and establish what the "points" really are.

If you collect a special assessment without legal authority then you would be required to return the money. My guess is there would be an expense to that. At minimum, legal fees to sort it out and determine the proper way to proceed.

If every owner agreed to donate the money collected because it is for a good cause, then I suppose there would be no damages but you and I know that is not going to happen.

To AugistineD...I totally understand your statement that a Board is ultimately responsible. However, Boards hire property managers for advise and guidance. As lay people, how would a Board member have any idea that a property manager was giving incorrect advise. As a side note, this situation is addressed way after the fact. This issue was brought to light after the vote, after the payments and ultimately the after the repairs have been completed. I don't know what the person wants. But there is this contingent at the complex who are unreasonable and unwilling to pay for repairs. We shall see what advise the management company and hopefully the Boards attorney gives the Board. I suspect the person causing all this simply doesn't want to pay for the repairs.

The courts expect boards to know enough to consult their own attorney.

I will say I am impressed the management company so far appears to be freely admitting its mistake. This is one reason why, if I were this Board, I in fact might be inclined to keep the management company.

This certainly hurts the chances of the member(s) who is (are) objecting. "Delay" is a big deal in the courts and even has a name: Laches.

I think these objecting members need a come-to-jesus meeting with their own attorney (that they sought out and hired), tasked with telling them whether they can get what they want and how much it will cost them.

Boards make mistakes. Managers make mistakes. I think HOA/COA members are generally a covenant-illiterate and HOA/COA statute-illiterate lot and make the most mistakes.

If you are saying that the board imposed a special assessment and some are refusing to pay, on account of illegality of the vote (and, pffft, after the work was done), well then you all as a community do have a huge conundrum. In my experience, the quickest way to resolve this is for all to keep a close eye on how the attorney's fees will add up.

I do advise liens and not foreclosing on anyone who refuses to pay. This might minimize the damage (meaning the attorney bills, which will eat all alive).

Of course, the most important thing is for the Board to do as the HOA/COA attorney directs. Do not under any circumstances take advise from the management company's attorney. Though the board can and maybe should share what the MC attorney says with the HOA/COA attorney and then see what the HOA/COA attorney says in response.

Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.

Okay, this rings true most (or all) of the time.

All I feel comfortable saying is that some owners, who now have a new roof, but who also believe the vote was illegal (and they may be right), are mad. I am sure they are expressing their rage verbally, early and often. Will they lawyer up? Maybe. Will they legally fight a board who has directed liens placed on their homes for refusing to pay the special assessment? Maybe. Should the board try to foreclose on these liens? If it's pretty clear the vote was messed up, then I advise not doing so, unless of course we have a Champlain Towers South type situation, and more repairs are coming up.

I think there are some creative solutions to all this. Some of the others here are going down paths for imposing assessments in general. I am not keen on reading up on Az law at the moment when the OP appears to still be absorbing the fact that the MC works for the Board and not the other way around. Being a HOA/COA director is difficult. Ya gotta understand financial management. Ya gotta understand infrastructure management. Ya gotta work to try and understand a lot of real property law. You and I know this well. The OP should encourage the board to proceed to an attorney. This thread might help the OP to prepare for a meeting with the attorney and ask intelligent questions.

To gather further proof of how the vote should have been done, look at the requirement for amending your CCRs. It will have language stating 2/3 of unit owners to amend, so the approval would need 67 votes out of the 100 units.

I am guessing the attorney said that 67 votes per 100 were needed and I am afraid they would be wrong. Your association needs to get it right. Five months is not a lot of time to challenge an election.

Final thought:

Language dealing with assessments form part of the contract on people's homes, and as with amendments to the CC&Rs, anything affecting assessments should be voted on by the entire membership, not just those who show up at a meeting. It's a high bar and it should be: - so 2/3 of the entire membership.

That's my story and I'm stickin' wii' it.

In the Chapter dealing with special assessments in Arizona and this was also truen in my association, their is language further down that identifies the meeting in which the meeting is called and what the quorum requirements are.

In the OP's case it is 2/3 of the votes cast at a duly noticed meeting where a quorum of 60% is present. That's for a special assessment. If the requirement was 67%, you would never get funding for projects when needed.

For the CCRs, that will have the higher threshold of 2/3 of all units or lot.

Cindy

Am I reading your posts properly? You say this change began with one owner complaining some 5 months later? Seems to me that one owner had more "power" then just being one complaining owner. Like the power behind the throne.

Max

Where was quorum mentioned? My response was to what Cindy posted, which did not mention quorum.

With a quorum requirement of 60% then 2/3rds of the 60% needed would be 40% of all owners. I think........LOL

I also run a HOA election company in addition to the management company, and I know how CCRs are written and what to look for. As with special assessments, there is a notice of meeting and quorum requirement.

Here is a link to a HOA in Arizona, https://www.sevillehoa.org/resourcecenter/15790/documents. On page 13 is the requirement for the special assessment, Section 4.4 and Section 4.5 deals with Notice of Meeting and Quorum. On pages 33-34 is the requirements for amending the CCRs.

It's not clear to me what this snippet refers to. Please tell us the title of this section of your CC&Rs and cite it completely. "...approval of the Unit Owners representing two-thirds (2/3) of the votes entitled to be cast by Unit Owners who are voting in person or by proxy at a meeting duly called for such purpose, or at an annual meeting with notice such Assessment will be considered."

Was about your Bylaws? Are there any sections about special assessments or voting on them there? Are there any sections in the CC&Rs or ByLaws about "capital improvements" or "capital expenditures?" Aren't roofs in your reserve study? And if so, how is replacing them a capital expenditure? (which generally is for new stuff, unless the materials to replace the roofs was a big upgrade)

With a few others here, your board needs to consult with the association's legal counsel for an opinion. This is a legal issue and beyond the expertise of any MC. I agree to ignore the MC's legal counsel. Are you on the Board, Cindy?

Getting 30% of the membership's approval is an ungodly ordeal?

Do dangle this sword (of receivership) over the heads of those owners objecting to the special assessment. Because I expect a receiver will have the legal right to disregard all the rules on special assessments. Plus HOA/COA members get to pay the receiver's salary. It will not be cheap.

Which calculation did the management company's attorney agree with? As I mention, I run an election company conducting all sorts of elections for HOA's I am not under contract with. When I do a special assessment vote, it is a no brainer, I disregard the CCRs and go with state statues. When ballots are sent out, all owners know what type of election it is, what if any quorum there is, how many votes are needed to achieve quorum and how many votes to pass. If there were to be an adjournment, what the rules are.

For example, the same HOA we did the special assessment for and passed, is having their annual meeting. I know that not enough ballots will be received and that the presiding officer will ask if the members present want to adjourn to collect more ballots. I know that they will have enough people attending the meeting to vote down the adjournment and the election will stop and the 5 member board will remain the same. Some know how the game is played and more need to learn.

I know. what a shock.

Here is state statue, which in the hierarchy of documents supersedes the CCRs.

Civil Code §5605. Assessment Approval Requirements.

(a) Annual increases in regular assessments for any fiscal year shall not be imposed unless the board has complied with paragraphs (1), (2), (4), (5), (6), (7), and (8) of subdivision (b) of Section 5300 with respect to that fiscal year, or has obtained the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.

(b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association’s preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.

(c) For the purposes of this section, “quorum” means more than 50 percent of the members.

In the instance of the OP, you have to read the CCRs backwards. I'm not a lawyer and would have written the language so a layperson could understand. You have to have a meeting where quorum is present, in their case 60%, whereby 2/3 of the votes cast by the membership will be needed to pass the special assessment.

In the same CCRs, under Amendments, it states that in order to amend these CCRs, 2/3 of the unit owners must approve. There is no quorum requirement for a meeting,

Yes, it is from California, and it was to answer the post from Cathy.

Arizona has no statue for Special Assessments, so you defer to the CCRs. Proxies are no longer allowed in your state.

I am unclear by your statement, I think it is clear from all the comments that the property manager counted the votes correctly (after removing ineligible votes/i.e.past due etc) but incorrectly told the Board that according to the CC&R's the vote passed. The rules should have been known and addresses before one ballot was sent out. If the Board has no clues as to what the rues are, how did the PM incorrectly tell the Board the vote passed.

Here are the two sections I was referring to about a HOA in Arizona, one for Special Assessments, the other for Amending the CCRs.

Section 4.4. Special Assessments. In addition to the annual assessments authorized above, the Association may levy, in any fiscal year, a special assessment applicable to that fiscal year only for the purpose of defraying, in whole or in part, the cost of any construction, reconstruction, repair or replacement of a capital improvement of the Common Area, including fixtures and personal Property related thereto, or for any other lawful Association purpose, provided that any such special assessment shall have the assent of Members having at least two-thirds (2/3) of the votes entitled to be cast by Members who are voting in person or by proxy at a meeting duly called for such purpose. Special Assessments shall be allocated among the Owners on the same basis as Annual Assessments.
Section

4.5. Notice and Quorum for Any Action Authorized Under Sections 4.3 or 4.4. Written notice of any meeting called for the purpose of obtaining the consent of the Members for any action for which the consent of the Members is required under Sections 4.3 and 4.4 shall be sent to all Members no less than thirty (30) days nor more than sixty (60) days in advance of the meeting. At the first such meeting called, the presence of Members or of proxies entitled to cast sixty percent (60%) of all the votes of each class of Members shall constitute a quorum. If the required quorum is not present, another meeting may be called subject to the same notice requirement, and the required quorum at the subsequent meeting shall be one-half (1/2) of the required quorum at the preceding meeting. No such subsequent meeting shall be held more than sixty (60) days following the preceding meeting.

Section 12.3. Amendment. The Declaration may be amended at any time by (a) an instrument signed by the Owner(s) of at least two thirds of the Lots or (b) a certification by the President of the Association that the Owners of at least two thirds of the Lots have voted in favor of the amendment at a duly called election. Any such amendment shall be recorded with the Maricopa County Recorder and shall take effect immediately upon recordation regardless of the status of the then current term of the Declaration under section 12.2 above. A properly executed and recorded amendment may alter the restrictions in whole or in part applicable to all or any portion of the Property and need not be uniform in application to the Property. Any amendment made at a time when Declarant owns any Lots shall require the approval of the Declarant.

Kerry...
I find your comment inappropriate. I know the applicable ARS title 33 but you wouldn't know that since you are in CA which operates under different statues. Additionally, I cites an excerpt from the actual CC&R's which follows requirements of state statue which of course I had already checked before even posting my first comment.