Non-Profit HOA funds to tenant business

Started by EdwardB5 • 6 replies • 370 views

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EdwardB5 (New York)
Posts: 4

Posted:

As a resident of a 55+ gated community in central Florida classified as non-profit. There is concern about evidence of the HOA providing finances to keep a tenant-owned business solvent. The business is leasing space from the HOA to render restaurant services to the community. The restaurant supports the community-owned golf course. It is alleged that one member of our Board approved a $10K+ payment to supplement revenue to the restaurant operator when the course closed for renovation. It occurs to me that we could lose our non-profit status as a result, not to mention being involved in litigation against "the board" for this financial fiasco developing from the surreptitious handling of this mess.
I appreciate and thank you for any constructive comments.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Are you sure it is non profit? Not all HOAs are. Some do have business like golf or beverage services. Wonder if it is more of the for profit type.

Former HOA President

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By EdwardB5 on 08/04/2021 9:42 AM
It is alleged that one member of our Board approved a $10K+ payment to supplement revenue to the restaurant operator when the course closed for renovation.

When the golf course is closed, the tenant loses a lot of business, correct? I think it's possible the tenant's lease has a provision in it about losing business on account of an action by the HOA. I would maybe ask questions but for now, not judge.

EdwardB5 (New York)
Posts: 4

Posted:

Yes, absolutely a non-profit. And yes,we have since determined that the "donation" to the restaurant is covered by the lease agreement which takes into consideration the restaurants support of the community owned golf course. The sticking point now is that even with our long standing pleas to improve the Board's transparency, this was OK'd and the check signed by the President, with no input from the Board. The majority, like the homeowners were left completely in the dark disregarding both the code of ethics and the spending authority.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By EdwardB5 on 08/04/2021 5:36 PM
Yes, absolutely a non-profit. And yes,we have since determined that the "donation" to the restaurant is covered by the lease agreement which takes into consideration the restaurants support of the community owned golf course. The sticking point now is that even with our long standing pleas to improve the Board's transparency, this was OK'd and the check signed by the President, with no input from the Board.

If the lease was clear about the terms of the HOA compensating the tenant, then I am not sure this is a fight I would pick.

-- To me, what's important is not "pleas to improve the Board's transparency." Instead what's important is whether the HOA broke the law or violated a contractual term.

-- For educational purposes: Any competent HOA attorney will tell you that, if you do not like the way the board does business, then the quickest way to remedy this is to run for the board yourself, preferably with others who feel as you do.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I agree with Aug. If this was a term in the lease, then the BOD was simply honoring that term. No need for any additional approval as it was already in the contract. Simply honor the contract.

CarolF (Florida)
Posts: 435

Posted:

Are you certain that your HOA has obtained 501 C-3 status from the IRS?
Florida uses the term "not for profit" corporation, but that is not
automatically a non-profit under the US IRS .

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