What constitutes *ALL* of the accounting records? And Accounting oddities

JeanneH3 (North Carolina)
Posts: 158

Posted:

We recently made a request to inspect and copy all of the financial records of the HOA:

General ledger
All subsidiary ledgers including income, assets, liabilities, reserve accounts.
Bank statements
Invoices from HOA attorney

We were only given the general ledger. We wanted the bank statements because $182K was removed from the Reserve Account in one bank and placed in the operational account in a different bank. The request for the HOA attorney's invoices was based on a suggestion I read in the archives of this group to get around any objection the HOA may have regarding attorney client privilege.

The general ledger did reveal some....oddities. Such as assets being purchased that are placed in accounting categories such as "Building repair/Maintenance" or "Landscaping". A new $5K mailbox for example. The 24 large sheds the BOD acquired appeared to have been bought by the MC who was then reimbursed in 2 payments totaling just over $14K...and put in the "building repair/maintenance" accounting category. And there is a $5,500 payment to a real estate broker in the "Building repair/maintenance" accounting category with no explanation as to what this is.

SheliaH (Indiana)
Posts: 6,964

Posted:

They may seem odd and perhaps they are, but I don't see where you asked for board meeting minutes, and you should have. Getting a copy of the annual budget (with detailed line items) would also be helpful. When we send our annual budget every year, we include descriptions as to what the line items mean. Maybe you should ask for those as well.

For example, if you live in a high rise condo, you probably get your mail from a box in the lobby. The mailbox is likely on the wall with the mailboxes for all the units, similar to what you'd see in an apartment building. The mail carrier has a master key that opens the wall and places the mail in the appropriate box, then locks it. You have a key to that mailbox.

All that opening and closing can wear out the hardware and eventually, the entire unit has to be replaced. This isn't a mailbox system you get at the hardware store - you may have to go to a specialty company because the mailbox has to comply with the Postal Service standards. And someone has to install it. It's been years since I've lived in an apartment, but depending on the number of units of your building that might explain the $5K.

What's the date range of the stuff you asked for - if it's the last six months for example, you need to review the minutes from that period. In fact you may want to look at the last 12 for some perspective. For example, the board may have started talking about the mailbox last August so you should see a progression of the project: August- the project is discussed and a motion is passed to have the property manager look into getting bids for a new mailbox. September and October brings more discussion of possible vendors, conversations with the post office as to what's required and then votes on who will provide and install the mailbox. In November, the contract is signed and the mailbox ordered. In January, a date is set for installation (maybe the board picks MLK Day because that's a federal holiday and there's no mail delivery so installation won't interfere with regular delivery).

You haven't said if you've spoken to the board with your questions, so before you say something is odd, ask - there may be a relatively simple explanation. Or not.

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

ElleN (Idaho)
Posts: 4,420

Posted:

JeanneH3, based on my reading of the NC Condo Act and Nonprofit Corporation act, in my opinion owners have a right to inspect all the records above, with one caveat: Invoices from the HOA attorney should not contain privileged info, but sometimes the attorneys are slovenly and these invoices do contain arguably privileged information. Redaction may be necessary. The association might have the right to charge you for the time spent redacting. The latter possible charge is one of those "the law is what the court says tomorrow" situations.

I see the NC nonprofit corporation act has beefed up the ability of owners to inspect certain records. Courts are supposed to hear complaints "on an expedited basis" and order the HOA to pay the attorney fees of the complaining owner.

If you want a draft of a letter, that is elevated in tone, to send to try to get these other records, post back.

JamesB37 (California)
Posts: 351

Posted:

"Invoices from HOA attorney" In California, that is considered privilege information and not subject to disclosure

https://www.davis-stirling.com/HOME/L/Legal-invoices

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JamesB37 on 04/13/2023 7:58 AM
"Invoices from HOA attorney" In California, that is considered privilege information and not subject to disclosure

https://www.davis-stirling.com/HOME/L/Legal-invoices

I do not think what the web site you linked actually says and what you claim the web site says are the same.

I know of one state where the case law is emphatically clear: Shareholders in corporations have a right to see the law firm's invoices.

Regardless, I would like to know why JeanneH wants to see the invoices. If it's for a fishing expedition, then I do not support the request. If it's because she wants to know how much the HOA spends every month on the attorney, this is a fair question.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By JamesB37 on 04/13/2023 7:58 AM
"Invoices from HOA attorney" In California, that is considered privilege information and not subject to disclosure

https://www.davis-stirling.com/HOME/L/Legal-invoices

Conversely, in FL it appears that invoices are not in the list of records that can be kept from owners, here is what FS720 says:

Any record protected by the lawyer-client privilege as described in s. 90.502 and any record protected by the work-product privilege, including, but not limited to, a record prepared by an association attorney or prepared at the attorney’s express direction which reflects a mental impression, conclusion, litigation strategy, or legal theory of the attorney or the association and which was prepared exclusively for civil or criminal litigation or for adversarial administrative proceedings or which was prepared in anticipation of such litigation or proceedings until the conclusion of the litigation or proceedings.

Of course, none of this matters because OP is in NC.

Escaped former treasurer and director of a self managed association.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By SheliaH on 04/13/2023 5:36 AM
They may seem odd and perhaps they are, but I don't see where you asked for board meeting minutes, and you should have. Getting a copy of the annual budget (with detailed line items) would also be helpful. When we send our annual budget every year, we include descriptions as to what the line items mean. Maybe you should ask for those as well.

For example, if you live in a high rise condo, you probably get your mail from a box in the lobby. The mailbox is likely on the wall with the mailboxes for all the units, similar to what you'd see in an apartment building. The mail carrier has a master key that opens the wall and places the mail in the appropriate box, then locks it. You have a key to that mailbox.

All that opening and closing can wear out the hardware and eventually, the entire unit has to be replaced. This isn't a mailbox system you get at the hardware store - you may have to go to a specialty company because the mailbox has to comply with the Postal Service standards. And someone has to install it. It's been years since I've lived in an apartment, but depending on the number of units of your building that might explain the $5K.

What's the date range of the stuff you asked for - if it's the last six months for example, you need to review the minutes from that period. In fact you may want to look at the last 12 for some perspective. For example, the board may have started talking about the mailbox last August so you should see a progression of the project: August- the project is discussed and a motion is passed to have the property manager look into getting bids for a new mailbox. September and October brings more discussion of possible vendors, conversations with the post office as to what's required and then votes on who will provide and install the mailbox. In November, the contract is signed and the mailbox ordered. In January, a date is set for installation (maybe the board picks MLK Day because that's a federal holiday and there's no mail delivery so installation won't interfere with regular delivery).

You haven't said if you've spoken to the board with your questions, so before you say something is odd, ask - there may be a relatively simple explanation. Or not.

Date range of financial records requested.....all of 2022.
The mailbox is a multi compartment, free standing unit that was installed in the common area. It's an oddity because it is an accounting error, at best, to misclassify a depreciable capital asset as an expense. There are at least 3 capital assets purchased at over $20K that are misclassified as "building repair/maintenance" expenses in 2022.

We did ask for the BOD meeting minutes. They claim there are none...the MC confirmed this stating that everything they have possession of has been published to the owners portal (2 meeting minutes in 4.5 years). NC law (Non-Profit Act) requires that the BOD meeting minutes be located at the registered agent's offices as listed in the NC Secretary of State's listing for the corporation. So, we are dealing with a situation where the BOD claims to not have any minutes while ongoing projects and repairs are being done.

The BOD does not answer any questions hence the desire to acquire data that would answer questions.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/13/2023 6:30 AM
JeanneH3, based on my reading of the NC Condo Act and Nonprofit Corporation act, in my opinion owners have a right to inspect all the records above, with one caveat: Invoices from the HOA attorney should not contain privileged info, but sometimes the attorneys are slovenly and these invoices do contain arguably privileged information. Redaction may be necessary. The association might have the right to charge you for the time spent redacting. The latter possible charge is one of those "the law is what the court says tomorrow" situations.

I see the NC nonprofit corporation act has beefed up the ability of owners to inspect certain records. Courts are supposed to hear complaints "on an expedited basis" and order the HOA to pay the attorney fees of the complaining owner.

If you want a draft of a letter, that is elevated in tone, to send to try to get these other records, post back.

Yes, please, I would like a draft of a letter, elevated in tone, to try to get more records.

Why did we ask for the attorney invoices? Originally we asked for the communication between the attorney and the BOD which gave the BOD the OK to move forward with the shed project. To refresh your memory, our BOD bought 24 large sheds with plans to buy another 30, and place them in the common areas under the condo buildings. It was a conversion from common to limited common benefiting only 50% of the owners. ByLaws and state law required a 100% majority of owners to approve that conversion but never happened. Ultimately the sheds were found to be a huge violation of fire codes and the building codes and the town forced the removal of them all. In two separate emails, the first to my husband and I, the BOD and the MC; and the second about two months later to the all of the owners, claiming that the HOA attorney had reviewed the shed situation and approved it. The HOA attorney was not cc'd on any of these emails.

The first email, dated December 10, 2022, emailed from the BOD president: "This email serves to confirm receipt of your letter of concern regarding actions taken and being proposed by your XXX Board of Directors. Since our Annual meeting your Board of Directors has met to reorganize and also held a conference call with our Association Attorney regarding some of your procedural concerns. As part of the the Boards due diligence regarding the Storage Shed project the common area issue was reviewed and received approval from our Attorney. Recently an owner complaint to a Town Official has led to the need for further due diligence before this project moves forward."

This is the second email,dated Feb 23, 2023, email from the MC on behalf of the board: "Storage Sheds – A legal opinion was obtained by the Board before even starting down the road of proposing Storage Sheds. That opinion was provided to the membership. There was a call made to the Fire Marshall regarding the sheds, which has the project at a current standstill. The fire inspector had just been to the property and completed the 2022 inspection without noting anything about the sheds that had already been placed under the buildings. The sheds will not be installed until approved by the proper authorities. This anonymous report was the impetus for the Town and Fire Marshall to deem that the sheds would not be allowed under the building. Alternate plans are also now being investigated for feasibility."

The second email contains a clear falsehood, i.e. that the "legal opinion" was shared with the membership. The Shed Project made its debut at the 2022 annual meeting as a done deal. We have the screenshots of the slide presentation of the shed project and there is no mention of a legal approval nor was the HOA attorney in attendance at the meeting. And if that legal opinion was shared with the members, either by email or in the annual meeting presentation, why is the BOD fighting our request to see that opinion?

We asked to see the evidence of the attorney's approval (a letter, an email, BOD meeting minutes) and that information was deemed to be protected by attorney-client privilege. Perhaps my understanding is wrong but I am thinking attorney-client privilege refers to pending litigation with a third party. Something seems off here....as if the attorney is being thrown under the bus to take the blame for what turned out to be a big mistake by the BOD that cost the owners $$$ and which was quite illegal. Basically BSing the owners into believing the BOD was misled by the attorney. Or the attorney is incompetent in which case he needs to be fired. I lean towards the former possibility because I find it hard to believe an attorney who specializes in association law for decades, is well known in the area, would give such poor legal counsel.

And I'm wondering if the two emails waive the attorney-client privilege. Both the BOD president and the entire BOD made claims to over 100 owners to have sought legal counsel, that the legal counsel approved the sheds enabling the BOD to move forward and that this legal opinion was allegedly shared with the members.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By JeanneH3 on 04/15/2023 3:49 AM

Date range of financial records requested.....all of 2022.
The mailbox is a multi compartment, free standing unit that was installed in the common area. It's an oddity because it is an accounting error, at best, to misclassify a depreciable capital asset as an expense. There are at least 3 capital assets purchased at over $20K that are misclassified as "building repair/maintenance" expenses in 2022.

We did ask for the BOD meeting minutes. They claim there are none...the MC confirmed this stating that everything they have possession of has been published to the owners portal (2 meeting minutes in 4.5 years). NC law (Non-Profit Act) requires that the BOD meeting minutes be located at the registered agent's offices as listed in the NC Secretary of State's listing for the corporation. So, we are dealing with a situation where the BOD claims to not have any minutes while ongoing projects and repairs are being done.

The BOD does not answer any questions hence the desire to acquire data that would answer questions.

Even if the minute were posted on the owners portal, there should be a permanent copy in the association's records because those are permanent legal documents. Like you, I agree this doesn't seem to pass the smell test.

The misclassification of the mailbox expense might be a simple fix, but I'd ask the association accountant about that. If you don't have one, that's something that should be changed because it spears whoever prepared the financial documents screwed up - whether that's because he/she doesn't know how to do it or is cooking the books is a question that requires answers.

If this board isn't talking or refuses to, it may be time for a special homeowners meeting to demand answers and/or recall them. Check your documents to see how that's done and have a slate of other homeowners lined up to step up and take over. Yes, you may need to be of them, so make up your mind right now to decide how far you're willing to go with this. This may get ugly and it won't get fixed overnight.

If you succeed in sacking this board, the next task is to get an audit of the association financial records. No, it won't be cheap, depending on how far back you need to go. If 2022 is the only year that looks funny, you could start there, but you may need to look at the last four or five years to be safe. The former board should be put on notice complete cooperation is expected- or thus may lead to legal action and more drama.

By the way, I suspect communication between the board and association attorney is privileged, so you won't get access to that. Right now, I'd worry less about that and more about accurate accounting of the association's finances. Youu have to see where you are before you can determine where the problems are and how to fix them.

In the meantime, some education on association record keeping and budgeting wouldn't hurt. Check out the CAI website (community association institute) and its education materials on lots of association issues, like reserve funds and budgeting. You may already have a handle on it, but a good refresher wouldn't hurt. Besides not all of your new board members (if you get them) may know this information and if they're going to volunteer to serve, they need to understand what they're doing. Good luck!

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

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JeanneH3 on 04/15/2023 8:57 AM

[snipped stuff for brevity. Jeanne, thank you for your clear presentation of the facts here. This is too rare.]
The second email contains a clear falsehood, i.e. that the "legal opinion" was shared with the membership. The Shed Project made its debut at the 2022 annual meeting as a done deal. We have the screenshots of the slide presentation of the shed project and there is no mention of a legal approval nor was the HOA attorney in attendance at the meeting. And if that legal opinion was shared with the members, either by email or in the annual meeting presentation, why is the BOD fighting our request to see that opinion?

We asked to see the evidence of the attorney's approval (a letter, an email, BOD meeting minutes) and that information was deemed to be protected by attorney-client privilege. Perhaps my understanding is wrong but I am thinking attorney-client privilege refers to pending litigation with a third party. Something seems off here....as if the attorney is being thrown under the bus to take the blame for what turned out to be a big mistake by the BOD that cost the owners $$$ and which was quite illegal. Basically BSing the owners into believing the BOD was misled by the attorney. Or the attorney is incompetent in which case he needs to be fired. I lean towards the former possibility because I find it hard to believe an attorney who specializes in association law for decades, is well known in the area, would give such poor legal counsel.

And I'm wondering if the two emails waive the attorney-client privilege. Both the BOD president and the entire BOD made claims to over 100 owners to have sought legal counsel, that the legal counsel approved the sheds enabling the BOD to move forward and that this legal opinion was allegedly shared with the members.

I say with confidence that:

-- To the extent that your groups seeks a specific communication (meaning letter, email or recording) from the attorney to the board, the attorney client privilege was //not// waived here.

-- Attorney advice can be quite nuanced. Misunderstandings can occur.

-- Or the attorney did goof and failed to check with the right authorities. But for the following reasons, I would not pursue further evidence of this.

-- You hope to see in the invoices documentation that the attorney billed (or did not bill) for advice on the sheds, to prove or disprove whether the board "lied" to you all. What happened here is legally serious enough that if I were on this board, I would view the situation as "pending litigation" and vote to deny the invoices. Yes you could hide your true purpose for wanting the invoices, but this is violating the statute concerning records requests, IMO.

-- The legal cost to your of trying to hold any director personally responsible for the mess-up with regard to the sheds would be prohibitive. Plus you are not guaranteed a victory. These folks are volunteers.

-- Could your HOA hold the attorney responsible for malpractice? Maybe, but an owner trying to do this is poorly positioned. The board could try to sue on behalf of the HOA, but the hurdles for doing this are high. Like first, the board fires the current attorney and then hires another and gets the new attorney's advice.

-- I would stop trying to seek the legal invoices. Associations are often difficult about providing the attorney's invoices. In this case, the HOA would have good legal ground to deny the invoices (or at least the part of the invoices that would respond to your questions about what happened).

-- If this went to court, these invoices might be "discoverable." Or they might not be. The cost of finding out is prohibitive.

More in the next post about a records request that is elevated in tone.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JeanneH3 on 04/13/2023 5:09 AM
We recently made a request to inspect and copy all of the financial records of the HOA:

General ledger
All subsidiary ledgers including income, assets, liabilities, reserve accounts.
Bank statements
Invoices from HOA attorney

We were only given the general ledger. We wanted the bank statements because $182K was removed from the Reserve Account in one bank and placed in the operational account in a different bank.

Try this:

Dear Board of Directors,

On ____, 2023, we requested certain official records. The Association provided only the general ledger.

Today we repeat our request for all the HOA's subsidiary ledgers and bank statements for the period ___ to ____.

The proper purpose of this request is to understand the board's decision-making on a number of infrastructure and service issues, including but not limited to expenses for landscaping, sheds and a mailbox. We make this request in good faith.

Bylaw section ____; N.C.G.S. 47C-3-118(a); and N.C.G.S. 55A-16-01, 55A-16-02 and 55A-16-03 provide the lawful basis for this request. We also call your attention to N.C.G.S. 55A-16-04. Per the latter, please observe that if a court order to inspect the requested records is necessary, then the HOA will have to pay the owners' expense (including the reasonable attorney's fees) to obtain these records. Please also observe that N.C.G.S. 55A-16-04 (b) instructs that courts "shall dispose of an application under this subsection on an expedited basis."

Please inform us within five business days of a location and time when we may inspect the records requested above. In the alternative, if you intend to continue to deny us our lawful rights to inspect these records, then please let us know within five business days.

Thank you,

names
addresses
phone numbers
email addies

Send the letter registered mail, return receipt requested, to the registered agent of the HOA or the manager (whichever you believe will get you action the quickest).

ElleN (Idaho)
Posts: 4,420

Posted:

[SheliaH's comments and concerns about Minutes noted.]

Quote:

Posted By JeanneH3 on 04/15/2023 3:49 AM
We did ask for the BOD meeting minutes. They claim there are none...the MC confirmed this stating that everything they have possession of has been published to the owners portal (2 meeting minutes in 4.5 years). NC law (Non-Profit Act) requires that the BOD meeting minutes be located at the registered agent's offices as listed in the NC Secretary of State's listing for the corporation. So, we are dealing with a situation where the BOD claims to not have any minutes while ongoing projects and repairs are being done.

As I think you know, the NC Nonprofit Corp Act says this about minutes:

"A corporation shall keep as permanent records minutes of all meetings of its members and board of directors... "

As you also know, it is absolutely 120% lame and corrupt for a board to say, "The Board does not keep minutes. We vote. The manager writes down what he/she is supposed to do. The manager does it." The board might go onto insist that what the manager writes down is not an association record. They are wiggling and squirming, because they are blithering idiots and apparently, welcome being thrown off a cliff.

To get documentation of what happens at board meetings, I advise the following:

Dear Board of Directors,

On ____, 2023, we requested the Minutes of all Board meetings for the period ___ to ___. The Board responded that it does not keep Minutes. If this is the case, then we now request all records of board meetings, including the board packet and any notes or journal the manager maintains so that he/she may take action as directed by the board.

In support of this request, we call your attention to NCGS 47C-3-118 (a). It states:

"The association shall keep financial records sufficiently detailed to enable the association to comply with this chapter. All financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any unit owner and the unit owner's authorized agents as required by the bylaws and by Chapter 55A of the General Statutes if the association is a nonprofit corporation." [emphasis added by the undersigned]

Relatedly NCGS 55A-16-01 states:

"(a) A corporation shall keep as permanent records minutes of all meetings of its members
and board of directors, a record of all actions taken by the members or directors without a meeting
pursuant to G.S. 55A-7-04, 55A-7-08, or 55A-8-21, and a record of all actions taken by committees
of the board of directors in place of the board of directors on behalf of the corporation."

The statutes' wording clearly indicates that a record of all actions the board takes must be maintained as permanent records of the association.

Somehow, some way the manager and other agents of the HOA are leaving board meetings with instructions to take certain actions.

For each board meeting in 20_ _, we want to inspect the documentation of these instructions.

The proper purpose of this request is to understand the board's decision-making on a number of infrastructure and service issues, including but not limited to expenses for landscaping, sheds and a mailbox. We make this request in good faith.

Bylaw section ____; N.C.G.S. 47C-3-118(a); and N.C.G.S. 55A-16-01, 55A-16-02 and 55A-16-03 provide the lawful basis for this request. We also call your attention to N.C.G.S. 55A-16-04. Per the latter, please observe that if a court order to inspect the requested records is necessary, then the HOA will have to pay the owners' expense (including the reasonable attorney's fees) to obtain these records. Please also observe that N.C.G.S. 55A-16-04 (b) instructs that courts "shall dispose of an application under this subsection on an expedited basis."

Please inform us within five business days of a location and time when we may inspect these records of what transpired at board meetings. In the alternative, if you intend to continue to deny us our lawful rights to inspect these records, then please let us know within five business days.

Thank you,

names
addresses
phone numbers
email addies

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/15/2023 1:05 PM

Posted By JeanneH3 on 04/13/2023 5:09 AM
We recently made a request to inspect and copy all of the financial records of the HOA:

General ledger
All subsidiary ledgers including income, assets, liabilities, reserve accounts.
Bank statements
Invoices from HOA attorney

We were only given the general ledger. We wanted the bank statements because $182K was removed from the Reserve Account in one bank and placed in the operational account in a different bank.

Try this:

Dear Board of Directors,

On ____, 2023, we requested certain official records. The Association provided only the general ledger.

Today we repeat our request for all the HOA's subsidiary ledgers and bank statements for the period ___ to ____.

The proper purpose of this request is to understand the board's decision-making on a number of infrastructure and service issues, including but not limited to expenses for landscaping, sheds and a mailbox. We make this request in good faith.

Bylaw section ____; N.C.G.S. 47C-3-118(a); and N.C.G.S. 55A-16-01, 55A-16-02 and 55A-16-03 provide the lawful basis for this request. We also call your attention to N.C.G.S. 55A-16-04. Per the latter, please observe that if a court order to inspect the requested records is necessary, then the HOA will have to pay the owners' expense (including the reasonable attorney's fees) to obtain these records. Please also observe that N.C.G.S. 55A-16-04 (b) instructs that courts "shall dispose of an application under this subsection on an expedited basis."

Please inform us within five business days of a location and time when we may inspect the records requested above. In the alternative, if you intend to continue to deny us our lawful rights to inspect these records, then please let us know within five business days.

Thank you,

names
addresses
phone numbers
email addies

Send the letter registered mail, return receipt requested, to the registered agent of the HOA or the manager (whichever you believe will get you action the quickest).

Ellen, thank you so much for the time taken to respond. I've been recovering from Covid so my response has not been timely. These two draft letters will be used to put more pressure on the MC and BOD.

I do have a question about 47C-3-118(a) which says: Notwithstanding the bylaws, a more extensive compilation, review, or audit of the association's books and records for the current or immediately
preceding fiscal year may be required by a vote of the majority of the executive board or by the affirmative vote of a majority of the unit owners present and voting in person or by proxy at any
annual meeting or any special meeting duly called for that purpose.

I feel like this BOD is daring us to take legal action which is not out of the realm of possibility but would certainly be the absolute last resort. Basically we want an audit of the financial records. My husband has tried in 2021 and 2022 to get a discussion of this on the annual meeting agenda so that owners can vote for an audit but we are being denied. In 2021 the BOD denial was aggressive leading to ad hominem comments about my husband by the BOD president and another BOD member. How does one hold special meeting if the BOD will not hold one? Can owners hold their own special meeting to vote for an audit to be done? If we did this, I can guarantee the BOD will send out an email to all owners warning them that this special meeting is not BOD approved. I am running out of ideas to resolve these issues without filing a lawsuit because the BOD thwarts us at every turn.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/15/2023 12:11 PM

Posted By JeanneH3 on 04/15/2023 8:57 AM

[snipped stuff for brevity. Jeanne, thank you for your clear presentation of the facts here. This is too rare.]
The second email contains a clear falsehood, i.e. that the "legal opinion" was shared with the membership. The Shed Project made its debut at the 2022 annual meeting as a done deal. We have the screenshots of the slide presentation of the shed project and there is no mention of a legal approval nor was the HOA attorney in attendance at the meeting. And if that legal opinion was shared with the members, either by email or in the annual meeting presentation, why is the BOD fighting our request to see that opinion?

We asked to see the evidence of the attorney's approval (a letter, an email, BOD meeting minutes) and that information was deemed to be protected by attorney-client privilege. Perhaps my understanding is wrong but I am thinking attorney-client privilege refers to pending litigation with a third party. Something seems off here....as if the attorney is being thrown under the bus to take the blame for what turned out to be a big mistake by the BOD that cost the owners $$$ and which was quite illegal. Basically BSing the owners into believing the BOD was misled by the attorney. Or the attorney is incompetent in which case he needs to be fired. I lean towards the former possibility because I find it hard to believe an attorney who specializes in association law for decades, is well known in the area, would give such poor legal counsel.

And I'm wondering if the two emails waive the attorney-client privilege. Both the BOD president and the entire BOD made claims to over 100 owners to have sought legal counsel, that the legal counsel approved the sheds enabling the BOD to move forward and that this legal opinion was allegedly shared with the members.

I say with confidence that:

-- To the extent that your groups seeks a specific communication (meaning letter, email or recording) from the attorney to the board, the attorney client privilege was //not// waived here.

-- Attorney advice can be quite nuanced. Misunderstandings can occur.

-- Or the attorney did goof and failed to check with the right authorities. But for the following reasons, I would not pursue further evidence of this.

-- You hope to see in the invoices documentation that the attorney billed (or did not bill) for advice on the sheds, to prove or disprove whether the board "lied" to you all. What happened here is legally serious enough that if I were on this board, I would view the situation as "pending litigation" and vote to deny the invoices. Yes you could hide your true purpose for wanting the invoices, but this is violating the statute concerning records requests, IMO.

-- The legal cost to your of trying to hold any director personally responsible for the mess-up with regard to the sheds would be prohibitive. Plus you are not guaranteed a victory. These folks are volunteers.

-- Could your HOA hold the attorney responsible for malpractice? Maybe, but an owner trying to do this is poorly positioned. The board could try to sue on behalf of the HOA, but the hurdles for doing this are high. Like first, the board fires the current attorney and then hires another and gets the new attorney's advice.

-- I would stop trying to seek the legal invoices. Associations are often difficult about providing the attorney's invoices. In this case, the HOA would have good legal ground to deny the invoices (or at least the part of the invoices that would respond to your questions about what happened).

-- If this went to court, these invoices might be "discoverable." Or they might not be. The cost of finding out is prohibitive.

More in the next post about a records request that is elevated in tone.

Again, thank you for the orthogonal perspective. I appreciate the counsel. To clarify a little more, the reason for requesting the attorney invoices was to determine which, of three, attorneys it was that was alleged to have approved the sheds project. One lawyer/law firm is working on a contingency basis to retrieve settlement moneys from the condo developer who has defaulted on paying a $1M settlement, declared bankruptcy and is hiding behind an LLC. That has been an ongoing case since 2017. I very much doubt this attorney had anything to do with the sheds. The second attorney is mentioned in pre 2018 minutes as the HOA association attorney who handles delinquent accounts and the 2022 general ledger does show nominal payments to his firm. The third attorney is a BOD member who is a real estate attorney and has been the BOD secretary for the past 2 years and is currently the secretary (the smae secretary who isn't producing BOD meeting minutes). This person campaigned in 2022 using this person's real estate law experience as being a benefit to the BOD and association. The BOD adamantly refuses to name the attorney who is alleged to have done a legal review and approved sheds we now all know are illegal. If it turned out it was the second attorney giving bad legal counsel, firing him seems the best solution.

Some owners suggested that small claims court be used to file cases against each of the seven board members, dividing up the cost of the sheds equally among them. The BOD claims they unanimously approved them (no minutes to document any of this) without any owner input. The concern was that the BOD members would claim the attorney to be at fault and thus negate the small claims suits. My primary role is researcher; owners ask questions, make suggestions and it's my job to research answers so that everyone is well informed. I'm not sure which way I'd chose to take in this. I've been successful in the few small claims court cases I've initiated over the years but it's still an investment of time. Referring to the ego/preference/principles discussion, there is a part of me that wants some legal accounting of a BOD that is incredibly secretive and takes the attitude of waving their collective middle fingers at state laws. But that has to the balanced with considering whether this is a smart, strategic legal move and if it's not, I need to be able to communicate that to a bunch of owners.

Regarding this sentence of yours : "The legal cost to your of trying to hold any director personally responsible for the mess-up with regard to the sheds would be prohibitive. Plus you are not guaranteed a victory. These folks are volunteers.", wouldn't the legal concept of constructive fraud apply? Per NC law,:

The elements of a constructive fraud claim are proof of circumstances (1) which created the relation of trust and confidence [the "fiduciary" relationship], and (2) [which] led up to and
surrounded the consummation of the transaction in which defendant is alleged to have taken advantage of his position of trust to the hurt of plaintiff. Put simply, a plaintiff must show (1) the
existence of a fiduciary duty, and (2) a breach of that duty.

The BOD has a fiduciary relationship with the owners and there is a level of trust that the BOD is doing the right things in how HOA money is spent. There should be trust that the BOD is following the law, building codes, and applying for permits. Had the shed project progressed, about 52% of owners would have been harmed by not having access to a limited number of sheds, as well as having their percentage of common area ownership reduced. All of the owners are harmed by the expenditure of $14K+ for now worthless sheds. Six of the current seven BOD members bought their condos when no storage of any kind was allowed under the buildings for years. The BOD has admitted to not doing due diligence. Constructive fraud does not need evidence of intentional deception; it is negligence per se. Constructive fraud is highly negligent performance.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JeanneH3 on 04/19/2023 5:42 AM

I do have a question about 47C-3-118(a) which says: Notwithstanding the bylaws, a more extensive compilation, review, or audit of the association's books and records for the current or immediately
preceding fiscal year may be required by a vote of the majority of the executive board or by the affirmative vote of a majority of the unit owners present and voting in person or by proxy at any
annual meeting or any special meeting duly called for that purpose.
[snippage]
How does one hold special meeting if the BOD will not hold one? Can owners hold their own special meeting to vote for an audit to be done? If we did this, I can guarantee the BOD will send out an email to all owners warning them that this special meeting is not BOD approved.

From 47C-3-108, https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_47C/GS_47C-3-108.html:
Special meetings of the association may be called by... unit owners having twenty percent (20%) or any lower percentage specified in the bylaws of the votes in the association. Not less than 10 nor more than 60 days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States mail to the mailing address of each unit or to any other mailing address designated in writing by the unit owner, or sent by electronic means, including by electronic mail over the Internet, to an electronic mailing address designated in writing by the unit owner. The notice of any meeting must state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove a director or officer.

Per the above statute section, prepare a petition that says at the top, "Call for Special Meeting to Vote on Audit of Association's Books." Briefly explain your concern that an audit has not been done since ____. Instruct owners to sign if they want a Special Meeting. Explain briefly that they do not need to attend but instead can vote by proxy. On the form ask for the owner's name and address. Reference the statute and bylaw sections pertaining to special meetings and audits.

The Board has the right to state it does not support this Special Meeting. It will continue to attack your husband and you personally. If you all can take it, go forward. Be polite to all and demonstrate that you will not take the low road.

When you have the required percentage, post back here for how to submit this to the board.

You are exercising rights that state legislators have emphatically stated you have. Anyone questioning what you are doing should be reminded of this.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JeanneH3 on 04/19/2023 6:46 AM

Again, thank you for the orthogonal perspective. I appreciate the counsel. To clarify a little more, the reason for requesting the attorney invoices was to determine which, of three, attorneys it was that was alleged to have approved the sheds project. One lawyer/law firm is working on a contingency basis to retrieve settlement moneys from the condo developer who has defaulted on paying a $1M settlement, declared bankruptcy and is hiding behind an LLC. That has been an ongoing case since 2017. I very much doubt this attorney had anything to do with the sheds. The second attorney is mentioned in pre 2018 minutes as the HOA association attorney who handles delinquent accounts and the 2022 general ledger does show nominal payments to his firm. The third attorney is a BOD member who is a real estate attorney and has been the BOD secretary for the past 2 years and is currently the secretary (the smae secretary who isn't producing BOD meeting minutes). This person campaigned in 2022 using this person's real estate law experience as being a benefit to the BOD and association. The BOD adamantly refuses to name the attorney who is alleged to have done a legal review and approved sheds we now all know are illegal. If it turned out it was the second attorney giving bad legal counsel, firing him seems the best solution.

Some owners suggested that small claims court be used to file cases against each of the seven board members, dividing up the cost of the sheds equally among them. The BOD claims they unanimously approved them (no minutes to document any of this) without any owner input. The concern was that the BOD members would claim the attorney to be at fault and thus negate the small claims suits. My primary role is researcher; owners ask questions, make suggestions and it's my job to research answers so that everyone is well informed. I'm not sure which way I'd chose to take in this. I've been successful in the few small claims court cases I've initiated over the years but it's still an investment of time. Referring to the ego/preference/principles discussion, there is a part of me that wants some legal accounting of a BOD that is incredibly secretive and takes the attitude of waving their collective middle fingers at state laws. But that has to the balanced with considering whether this is a smart, strategic legal move and if it's not, I need to be able to communicate that to a bunch of owners.

Regarding this sentence of yours : "The legal cost to your of trying to hold any director personally responsible for the mess-up with regard to the sheds would be prohibitive. Plus you are not guaranteed a victory. These folks are volunteers.", wouldn't the legal concept of constructive fraud apply? Per NC law,:
[snippage]

-- Only the board has the power to fire an attorney. Clearly this board does not want to fire this attorney. I would cease trying to identify which attorney it was until such time as you are on the board with a like-minded majority.

-- All I wrote above about filing suit, even in small claims court, stands. Unless a director has committed a crime, the chances of any court forcing //volunteer// directors to pay for a bad decision is minuscule. The "volunteer" part is not trivial. Courts do not want to discourage people from serving on HOA boards.

-- Do your covenants say anything about how pays attorney fees if an owner files suit against the board and loses? Remember that the board //will// have the legal right to free counsel, either via the HOA insurance policy (where the insurer picks the attorney, typically) or an attorney the board picks. In court, this attorney would eat a pro se person alive.

-- About this "constructive fraud": I want you to know that I think this board did the owners wrong here. I doubt it was intentional, though. In my opinion the better reason for filing suit was the failure of the board to take a vote of the owners. But again, what will this get you? It would cost years in court. It would cost oodles of money, with no guarantee of winning. I do not see a court ordering the board to pay out of pocket. Under some circumstances court can remove a board and appoint a receiver, but in my experience the owners would be far better off pursuing fair elections and possibly recalls.

-- If you feel so strongly about making this board pay, then spend $500 to a few thousand dollars and get an opinion from an attorney experienced with condos and HOAs.

-- I think your time is far far better spent seeking the audit, certain records, and seeing if you have enough people who will vote and elect new directors.

-- There is no easy choice here. All will involve a lot of labor and time, possibly months or years.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/19/2023 7:41 AM

Posted By JeanneH3 on 04/19/2023 6:46 AM

-- If you feel so strongly about making this board pay, then spend $500 to a few thousand dollars and get an opinion from an attorney experienced with condos and HOAs.

At the beginning of the shed project issue we did obtain legal counsel from a Super Lawyer in association law because we were not confident in our understanding of common versus limited common areas. We came prepared with large print outs of the plats for the complex, the By Laws, Covenants, amendments, etc. All of these documents noted that the only limited common areas were each condo's balcony. Everything else was common area. In 2014 the BOD succeeded in getting 2/3rds of the owners to vote to change the HVAC units for each condo from common to limited common. A later version of the Rules, as created by the BOD, does mention that the parking under the building is limited common but there is no legal evidence of this change from common to limited common. The BOD saying something is limited common doesn't make it limited common. The attorney's opinion was that the evidence was clear that the BOD was trying to convert about 1800 sq feet of under the building common area to limited common for the exclusive use of about 50% of the owners and if we sued, we would win but to start that process would require a minimum of $5K. Fortunately we did not have to resort to this since the Town determined that the sheds were violating fire code and the building code and required the BOD to remove them. I'd love to solve issues with our BOD using non-litigation tactics like using the Town as the "bad guy".

One interesting thing that came out from this attorney meeting was the realization that many owners are under the belief that they own their designated parking spaces when in reality, all of the parking spaces are common area. Any owner could park in any space they wish. Given that there is a huge disparity in sizes of parking spaces, as much as 150 sq feet difference, and that there are owners who have no under the building parking spaces at all, if it were known that none of the spaces are "owned" I think there would be unhappiness by those whose parking spaces are not as nice as others.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/19/2023 7:41 AM

Posted By JeanneH3 on 04/19/2023 6:46 AM

-- I think your time is far far better spent seeking the audit, certain records, and seeing if you have enough people who will vote and elect new directors.

-- There is no easy choice here. All will involve a lot of labor and time, possibly months or years.

An update as of last night. We began the records request on March 23rd and it took until April 09 to receive just the general ledger. Below is my husband's email response on April 10. We received a response yesterday, April 19th, from the CEO of the MC informing us that the email had been forwarded to the HOA attorney for review. Nine days!

Begin email**************

Thank you for sending the expense portion of the General Ledger, which is a part of what I've requested but not fully responsive to my request.

Please note that of course I do not intend to post the General Ledger to any blog or social media platform where it would be exposed to non-members of the Association.

As you know, a General Ledger consists of transaction data segregated by type into accounts for assets, liabilities, owners’ equity, revenues, and expenses. It provides a record of each financial transaction that takes place during the life of a company and holds account information that is needed to prepare the company’s financial statements, including income & expense statements, balance sheets, reserve registers, and other financial reports. An owner has a right to inspect and copy all the financial records of the corporation, as discussed in prior emails.

General ledger transactions are a summary of transactions made as journal entries to sub-ledger accounts, which an owner also has a right to inspect and copy. In turn those transactions consist of individual payments of invoices, transfers of funds, receipt of revenue items, etc. Those records of the individual transactions are also part of the financial records of the corporation, which an owner also has a right to inspect and copy.

The Corporation's bank and other account statements are also part of the financial records of the Corporation. An assertion to the contrary is incorrect and of no effect on the responsibility of the Association and its agent to provide access to owners for inspection and copying, though full account numbers may be redacted (leaving sufficient digits or account names to differentiate accounts) in disclosure for security of the accounts.

While I do not at this time deem it necessary to request to inspect and copy the record of every transaction, I do request the following for the year 2022, all of which are financial records of the corporation and thus subject to owner inspection and copying:

The remaining portions of the General Ledger documenting assets, liabilities, equity, and revenues, as discussed above.
The sub-ledgers detailing the entries supporting the General Ledger entries for assets, liabilities, equity, revenues, and expenses.
All invoices, receipts, or other documents giving rise to or relating to payment of any expenses for the following GL accounts:
70-7160-00 Collection and Legal Fees (with redaction of any unit or owner information relating to collection or other sensitive matters)
90-9115-00 Building Repair/Maintenance
99-9907-00 Reserve Transfer (M)
Any other invoices, receipts, and other documents giving rise to or relating to payment of any expenses relating to any of the following:
Transfer of funds into and out of reserve accounts
Expenditures relating to purchase, construction, setup, or installation of the 4 x 6 Storage Sheds discussed in the XXXX Annual Meeting of November 3, 2022
Attorney or other fees paid to receive, or otherwise in connection with, the legal opinions referenced in my March 23, 2023 email
All statements of bank accounts, credit cards, investment accounts, payment accounts (PayPal, Venmo, etc.), or other financial accounts used by or for the use or benefit of the Association during the year 2022.
The GL 90-9310-00 Elevator Maintenance entries that were truncated in the previous response, such as "84941-ThyssenKrupp Elevator Corporation; ThyssenKrupp Elevator Corporation Chk # 100", resulting in incomplete check numbers. Provision of the complete check numbers for each entry by date would be sufficient.

If it is necessary that I come to your office to inspect and copy the records, please let me know. If you would rather propose that your staff again compile and provide the information in electronic form (including, for example, scanned Portable Document Format copies of original documents), please let me know the approximate labor cost thereof.

Thank you for your attention in this matter.

***End of email*********

MC's response, April 19: "This has been sent to the Association's attorney for review."

It appears to me that everyone, the BOD and the MC, is hiding behind the attorney. This is not the first records rodeo the CEO of the MC has been in. Three years ago an owner in another HOA filed a BBB complaint specifically against the CEO citing a failure to yield requested financial records. It was not resolved for four months. What I really find ironic (or hypocritical) is that the MC has a blog on which there is an article about NC HOA legislation your HOA must follow. Phrases such as "important to understand...these crucial pieces of legislation" and "your HOA must adhere to these NC laws" and failure to adhere "may put your HOA at risk" and concludes with the brag that this MC has been assisting associations in the area "become familiar with and adhere to" NC laws for over ten years. So, why are these requests for access to inspect and copy financial records being referred to the HOA attorney?

ElleN (Idaho)
Posts: 4,420

Posted:

I am sorry your husband's letter did not: provide a "proper purpose" as required by statute; give a time deadline; speak of the five business day requirement; and speak of the special powers of the courts with regard to corporate records requests.

If I were the board and wanted to give you a hard time, I would ignore this most recent request, because it fails to provide a "proper purpose." The HOA would be doing a disservice to the membership in providing records in response to a request that lacks this statutorily required "proper purpose." It is not the HOA's job to explain the law to a person who requests records.

Nationwide many states' statutes have this requirement. Providing a "proper purpose" is mentioned in case law from time to time. What you all think is trivial is not.

If this board and its attorney are nice, they will simply get back to you all and ask for the "proper purpose" of the request.

TimB4 (Tennessee)
Posts: 21,059

Posted:

JeanneH3

Keep in mind that the MC may simply be the voice of the Board in this matter and not the decision maker.

Hence, the issue of lack of records may be with the board vs. the MC (or it could be a bit of both).

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/15/2023 1:44 PM
[SheliaH's comments and concerns about Minutes noted.]

Posted By JeanneH3 on 04/15/2023 3:49 AM
We did ask for the BOD meeting minutes. They claim there are none...the MC confirmed this stating that everything they have possession of has been published to the owners portal (2 meeting minutes in 4.5 years). NC law (Non-Profit Act) requires that the BOD meeting minutes be located at the registered agent's offices as listed in the NC Secretary of State's listing for the corporation. So, we are dealing with a situation where the BOD claims to not have any minutes while ongoing projects and repairs are being done.

As I think you know, the NC Nonprofit Corp Act says this about minutes:

"A corporation shall keep as permanent records minutes of all meetings of its members and board of directors... "

As you also know, it is absolutely 120% lame and corrupt for a board to say, "The Board does not keep minutes. We vote. The manager writes down what he/she is supposed to do. The manager does it." The board might go onto insist that what the manager writes down is not an association record. They are wiggling and squirming, because they are blithering idiots and apparently, welcome being thrown off a cliff.

To get documentation of what happens at board meetings, I advise the following:

Dear Board of Directors,

On ____, 2023, we requested the Minutes of all Board meetings for the period ___ to ___. The Board responded that it does not keep Minutes. If this is the case, then we now request all records of board meetings, including the board packet and any notes or journal the manager maintains so that he/she may take action as directed by the board.

In support of this request, we call your attention to NCGS 47C-3-118 (a). It states:

"The association shall keep financial records sufficiently detailed to enable the association to comply with this chapter. All financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any unit owner and the unit owner's authorized agents as required by the bylaws and by Chapter 55A of the General Statutes if the association is a nonprofit corporation." [emphasis added by the undersigned]

*snippage of good stuff

This is an excellent letter. I should clarify something however. When we requested minutes of BOD meetings back in late March, we were informed by the MC that any minutes they had on location at their offices had been published to the owners portal. There are only 2 or 3 BOD meeting minutes published for the past 4.5 years, one of those minutes (Jan.14, 2023) is a draft version. We requested all of the unpublished draft minutes of BOD meetings. The following was sent to us from the MC regarding the attorney's initial review of our request for draft minutes:

"Owners are entitled to minutes of all meetings of the members and board of directors or records of all actions taken by the members and board of directors without a meeting, and minutes of committees, for the last 3 years. Not entitled to "draft" minutes."

The attorney is acknowledging that owners have a right to minutes but there are none. They are in draft form which the attorney claims we have no right to. There is the precedent of draft versions of BOD meeting minutes being published to the owner portal, two prior to 2018 and the Jan. 14, 2023 BOD meeting. The only reason that latter set of draft minutes was published was because I called out the BOD for failure to respond to a different important issue and the BOD president posted the draft minutes to Facebook and the owner portal as evidence that the BOD was addressing that issue (there has yet to be any evidence the BOD is actually doing anything they claim). So they can pull out draft minutes quickly when it serves their interests. I noted that the Jan 14., 2023 minutes did not include any mention of approval of the previous meeting's minutes.

So, we are dealing with a hyper secretive board that does apparently have minutes they decline to approve for publication and an HOA attorney that facilitates this by denying any owner access to draft minutes. Would you amend your suggested letter in any way to address that peculiarity?

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/20/2023 6:34 AM
I am sorry your husband's letter did not: provide a "proper purpose" as required by statute; give a time deadline; speak of the five business day requirement; and speak of the special powers of the courts with regard to corporate records requests.

If I were the board and wanted to give you a hard time, I would ignore this most recent request, because it fails to provide a "proper purpose." The HOA would be doing a disservice to the membership in providing records in response to a request that lacks this statutorily required "proper purpose." It is not the HOA's job to explain the law to a person who requests records.

Nationwide many states' statutes have this requirement. Providing a "proper purpose" is mentioned in case law from time to time. What you all think is trivial is not.

If this board and its attorney are nice, they will simply get back to you all and ask for the "proper purpose" of the request.

This is the MC's email regarding the purpose of the request:

"One final question from the Board before I send you the requested items. Per the attorney, requests such as these must be made by an owner "in good faith and for a proper purpose". As such, the Board would like to know for the record, what is the purpose of the request?"

This is my husband's response:

"The Association handles many thousands of dollars of owner money, so it is natural that I feel responsible as an owner to understand in sufficient detail how the Association is spending that money. In addition to that general responsibility to be an informed owner, the controversies over the purchase and installation of sheds, the transfer of money from reserve accounts, etc., have heightened my awareness of the need to have the facts regarding financial matters that have caused owners concern. This will help me foster and champion the responsible and transparent financial management of the Association.

As for the attendance list of the 2022 Annual Meeting, it is important to know what owners and guests participated as the Association was transacting its official business, including holding an election for members of the Board. Several attendees were identified only by partial phone numbers, creating unnecessary mystery about who was present in the meeting.

Please let me know if I can provide any other information or assistance."

The last paragraph is referencing a request we made to see the full attendance list for the 2022 Annual Meeting which was done by Google video. We screenshot the attendance list and about 8 of those attending were identified only as partial phone numbers. Given that 2 weeks prior to the annual meeting the BOD had sent out an urgent email stating that they had not received enough proxies to reach quorum, and given that there was an unscheduled BOD election that was quite illegal, the fact that there were about 1/4 of the attendees as anonymous partial phone numbers looks odd. Had we had an in person annual meeting, everyone would have been visible to each other with no mystery as to who is who but these online video meetings are not conducive to transparency imo. Those partial phone numbers could have been MC employees or friends of the BOD president for all we know. Do owners have a right to anonymity at an annual meeting? This request was denied by the attorney btw.

ElleN (Idaho)
Posts: 4,420

Posted:

Jeanne, You asked for examples of letters elevated in tone. The letter I would write would still quote 47C-3-118 (a). My letter would contend the Draft Minutes are "records of meetings of the... executive board" and are not confidential. I would repeat that I have a statutory right to view them. My letter would ask for the Draft Minutes to be provided, with each page clearly marked "Draft."

I trust your spouse and you do not care to quote statutes. Just keep an eye on the reality that these requests could become a part of a lawsuit's legal record if push came to shove. You are writing to convince a judge as much as anything else, in as concise language as possible.

I keep in mind that you all might be applying so much pressure, with these requests, that some directors might resign. Or the board will target you all for harassment. Or both. Or they might cooperate.

LoriM15 (Florida)
Posts: 1,009

Posted:

Quote:

Posted By JeanneH3 on 04/19/2023 6:46 AM

It appears to me that everyone, the BOD and the MC, is hiding behind the attorney. This is not the first records rodeo the CEO of the MC has been in. Three years ago an owner in another HOA filed a BBB complaint specifically against the CEO citing a failure to yield requested financial records. It was not resolved for four months. What I really find ironic (or hypocritical) is that the MC has a blog on which there is an article about NC HOA legislation your HOA must follow. Phrases such as "important to understand...these crucial pieces of legislation" and "your HOA must adhere to these NC laws" and failure to adhere "may put your HOA at risk" and concludes with the brag that this MC has been assisting associations in the area "become familiar with and adhere to" NC laws for over ten years. So, why are these requests for access to inspect and copy financial records being referred to the HOA attorney?

Just a comment - our board does everything as transparently as possible. However, if I got letters like you've been sending, I would refer everything to our attorney also. You clearly are teeing up for a lawsuit and I'm going to protect myself as best I can. That's why we have an attorney.

Obviously you have every right to most of the information you requested and your board has either been negligent in keeping minutes or is playing games. The PM is most likely responding based on the attorney's advice. I'm not saying you are wrong, but from the outside it looks like you are clearly on a fishing expedition trying to get information to prove your accusations. They have to comply to the statutes, but that doesn't mean they have roll over and make it easy.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By LoriM15 on 04/20/2023 11:18 AM

Posted By JeanneH3 on 04/19/2023 6:46 AM

It appears to me that everyone, the BOD and the MC, is hiding behind the attorney. This is not the first records rodeo the CEO of the MC has been in. Three years ago an owner in another HOA filed a BBB complaint specifically against the CEO citing a failure to yield requested financial records. It was not resolved for four months. What I really find ironic (or hypocritical) is that the MC has a blog on which there is an article about NC HOA legislation your HOA must follow. Phrases such as "important to understand...these crucial pieces of legislation" and "your HOA must adhere to these NC laws" and failure to adhere "may put your HOA at risk" and concludes with the brag that this MC has been assisting associations in the area "become familiar with and adhere to" NC laws for over ten years. So, why are these requests for access to inspect and copy financial records being referred to the HOA attorney?

I agree.

Just a comment - our board does everything as transparently as possible. However, if I got letters like you've been sending, I would refer everything to our attorney also. You clearly are teeing up for a lawsuit and I'm going to protect myself as best I can. That's why we have an attorney.

Obviously you have every right to most of the information you requested and your board has either been negligent in keeping minutes or is playing games. The PM is most likely responding based on the attorney's advice. I'm not saying you are wrong, but from the outside it looks like you are clearly on a fishing expedition trying to get information to prove your accusations. They have to comply to the statutes, but that doesn't mean they have roll over and make it easy.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By LoriM15 on 04/20/2023 11:18 AM

Posted By JeanneH3 on 04/19/2023 6:46 AM

It appears to me that everyone, the BOD and the MC, is hiding behind the attorney. This is not the first records rodeo the CEO of the MC has been in. Three years ago an owner in another HOA filed a BBB complaint specifically against the CEO citing a failure to yield requested financial records. It was not resolved for four months. What I really find ironic (or hypocritical) is that the MC has a blog on which there is an article about NC HOA legislation your HOA must follow. Phrases such as "important to understand...these crucial pieces of legislation" and "your HOA must adhere to these NC laws" and failure to adhere "may put your HOA at risk" and concludes with the brag that this MC has been assisting associations in the area "become familiar with and adhere to" NC laws for over ten years. So, why are these requests for access to inspect and copy financial records being referred to the HOA attorney?

Just a comment - our board does everything as transparently as possible. However, if I got letters like you've been sending, I would refer everything to our attorney also. You clearly are teeing up for a lawsuit and I'm going to protect myself as best I can. That's why we have an attorney.

Obviously you have every right to most of the information you requested and your board has either been negligent in keeping minutes or is playing games. The PM is most likely responding based on the attorney's advice. I'm not saying you are wrong, but from the outside it looks like you are clearly on a fishing expedition trying to get information to prove your accusations. They have to comply to the statutes, but that doesn't mean they have roll over and make it easy.

I agree.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By LoriM15 on 04/20/2023 11:18 AM
However, if I got letters like you've been sending, I would refer everything to our attorney also. You clearly are teeing up for a lawsuit and I'm going to protect myself as best I can. That's why we have an attorney.

I believe every state gives owner-shareholders of a nonprofit the right to view financial records. This is so owner-shareholders can protect themselves the best they can. When a HOA is not transparent is often when the lawsuit threats start.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/20/2023 9:53 AM
Jeanne, You asked for examples of letters elevated in tone. The letter I would write would still quote 47C-3-118 (a). My letter would contend the Draft Minutes are "records of meetings of the... executive board" and are not confidential. I would repeat that I have a statutory right to view them. My letter would ask for the Draft Minutes to be provided, with each page clearly marked "Draft."

I trust your spouse and you do not care to quote statutes. Just keep an eye on the reality that these requests could become a part of a lawsuit's legal record if push came to shove. You are writing to convince a judge as much as anything else, in as concise language as possible.

I keep in mind that you all might be applying so much pressure, with these requests, that some directors might resign. Or the board will target you all for harassment. Or both. Or they might cooperate.

Your trust is misplaced. I cannot copy and paste every email that transpired between my husband and the MC regarding the request for records. The initial request, sent by email on March 24, 2023 included references to four NC state statutes, including the two you referred to (§ 55A-16 and § 47C-3-118(a)).

The email also referenced these two state statutes pertaining to specific records requests:

5. Evidence of the Board of Directors having at regular intervals provided unit owners an opportunity to attend a portion of an executive board meeting and to speak to the executive board about their issues and concerns as required by NCGS § 47C-3-108(b).

6. The names and addresses of all officers and board members of the association, as required by NCGS § 47F-3-103(f). Addresses must be currently valid postal mail addresses.

This was the attorney's response to those two requests as forwarded by the MC:

5. Not a record that is required to be produced, but the Board is required to have such a meeting no less than once per year.
6. Must be provided.

There is no evidence for at least five years of the BOD ever complying with NCGS § 47C-3-108(b). There is nothing on the owner portal, in emails from the BOD to the owners or annual meeting agendas, etc of the BOD ever offering this legal right to owners. The BOD keeps the date, time and location of their meetings quite secret. We've asked for the past 18 months to attend a BOD meeting and have been ignored. If such evidence existed and somehow we missed it, transparency would easily squash any suspicions of non-compliance with the law. That the HOA attorney has stated that the BOD is "required" to have at least one such meeting with owners per year has been noted by us. We'll see if the BOD complies with the lawyer's counsel.

As for NCGS § 47F-3-103(f), it should be NCGS 47C-3-103(g) since we are not a planned community but a condo association. Nonetheless the attorney replied "Must be provided". The language of the statute is straightforward, "The association shall publish the names and addresses of all officers and board members of the association within 30 days of the election." Did the BOD really need to pay an attorney to parse this sentence and give legal counsel? It's been 168 days since the BOD election and still no publication of who the officers of the BOD are and their addresses.

I would not be surprised if a BOD member resigned. But my hope would be that the resignation was done in protest of what the BOD has been and is doing.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By LoriM15 on 04/20/2023 11:18 AM

Posted By JeanneH3 on 04/19/2023 6:46 AM

It appears to me that everyone, the BOD and the MC, is hiding behind the attorney. This is not the first records rodeo the CEO of the MC has been in. Three years ago an owner in another HOA filed a BBB complaint specifically against the CEO citing a failure to yield requested financial records. It was not resolved for four months. What I really find ironic (or hypocritical) is that the MC has a blog on which there is an article about NC HOA legislation your HOA must follow. Phrases such as "important to understand...these crucial pieces of legislation" and "your HOA must adhere to these NC laws" and failure to adhere "may put your HOA at risk" and concludes with the brag that this MC has been assisting associations in the area "become familiar with and adhere to" NC laws for over ten years. So, why are these requests for access to inspect and copy financial records being referred to the HOA attorney?

Just a comment - our board does everything as transparently as possible. However, if I got letters like you've been sending, I would refer everything to our attorney also. You clearly are teeing up for a lawsuit and I'm going to protect myself as best I can. That's why we have an attorney.

Obviously you have every right to most of the information you requested and your board has either been negligent in keeping minutes or is playing games. The PM is most likely responding based on the attorney's advice. I'm not saying you are wrong, but from the outside it looks like you are clearly on a fishing expedition trying to get information to prove your accusations. They have to comply to the statutes, but that doesn't mean they have roll over and make it easy.

That's delightful that your board is transparent. Ours is 180 degrees opposite. I'm not going into the entire history in this thread but our board is intentionally not complying with at least 6 state statutes. There is so much "red flag" stuff going on that it's like trying to juggle 6 balls at a time trying to figure out the priority of which issue needs attention now. And when there are that many state laws not being complied with, and the board refuses all initial attempts to answer any questions and keeps the owners intentionally in the dark as to what is going on, the number of records requests increases. The intensity of their secrecy predates my ownership of our condo by several years and creates suspicion as what it is they are hiding.

All this could have been avoided if the BOD had been transparent.

ElleN (Idaho)
Posts: 4,420

Posted:

I find violation of 47C-3-108(b), pertaining to open board meetings and owner commentary at these board meetings, particularly troubling. Do your bylaws require that board meetings be open to owners?

I have constructive criticism of your approach here, but I also realize writing requests for the board to comply with xyz statute, bylaw or covenant may be new to you all. You are getting your "sea legs" for how to be effective and efficient and have clean legal documentation (should push come to shove)? I am trying not to pick apart (pick at?) what you all did and instead offer suggestions for how to proceed step by step on such-and-such point in the near future.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/21/2023 6:28 AM
I find violation of 47C-3-108(b), pertaining to open board meetings and owner commentary at these board meetings, particularly troubling. Do your bylaws require that board meetings be open to owners?

I have constructive criticism of your approach here, but I also realize writing requests for the board to comply with xyz statute, bylaw or covenant may be new to you all. You are getting your "sea legs" for how to be effective and efficient and have clean legal documentation (should push come to shove)? I am trying not to pick apart (pick at?) what you all did and instead offer suggestions for how to proceed step by step on such-and-such point in the near future.

Our bylaws say absolutely nothing about board meetings being open to owners hence the our need to reference state law which does trump HOA by laws, rules, etc.

I forwarded your comments to my husband who, upon reading them, said, "Brilliant!" You've been very helpful.

It is all new to us and getting up to speed has been challenging. If it had been one or two issues, it might have been easier but when dealing with half a dozen significant issues, the amount of information needed is overwhelming. This August we'll have to gear up for a fight with the BOD over how elections are done. In response to our notice to them that the 2022 BOD election did not comply at all with § 55A-7-20(b) and 47C-3-108 (a), the BOD sent an email to all the owners claiming that this how all association BOD elections have been conducted for years (provably false) and no one has complained before (as if that makes it OK to not comply with the law). We are certain no legal eyeballs laid sight on that email before it went out because no competent attorney would have ever let them admit what they did.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JeanneH3 on 04/22/2023 12:39 PM

It is all new to us and getting up to speed has been challenging. If it had been one or two issues, it might have been easier but when dealing with half a dozen significant issues, the amount of information needed is overwhelming. This August we'll have to gear up for a fight with the BOD over how elections are done. In response to our notice to them that the 2022 BOD election did not comply at all with § 55A-7-20(b) and 47C-3-108 (a), the BOD sent an email to all the owners claiming that this how all association BOD elections have been conducted for years (provably false) and no one has complained before (as if that makes it OK to not comply with the law). We are certain no legal eyeballs laid sight on that email before it went out because no competent attorney would have ever let them admit what they did.

Jeanne, in my opinion, your board is about as rogue as they come.

I think legislators and lawyers wrote statutes pertaining to corporate and HOA transparency with exactly owners like yourself in mind. You and your husband are the "check and balance" on keeping the board and manager honest.

When I read of a board that is denying records, a certain older, well-seasoned attorney's response comes to mind. The attorney was volunteering at a free legal clinic. The clinic's pro bono attorneys were assigned based on the subject matter of the client's questions. I had drafted a court petition to obtain certain records, including the HOA attorney's invoices. I wanted to double check that I was entitled to see the legal invoices in particular and even brought my state's extraordinarily emphatic case law on the point, from a dispute in a town just ten miles down the road. The pro bono attorney knew the law on corporate records and maybe even remembered the 1990s era dispute over a law firm's invoices. She responded instantly and sharply, "Of course you are entitled to see the attorney's invoices [and same for all the other records]!" Then she edited my draft so it was presentable as a pro se court petition.

My little group never went to court. The HOA dragged its feet but finally did give us all records except the legal invoices. I got on the board and was allowed to see the legal invoices (weeks after my request as a director; such baloney). I wanted to know the legal billing for a certain dispute (that never reached court) over damage from tree roots. Like your situation, it was a case of the HOA attorney getting the law wrong.

JeanneH3 (North Carolina)
Posts: 158

Posted:

Quote:

Posted By ElleN on 04/23/2023 9:33 AM

Posted By JeanneH3 on 04/22/2023 12:39 PM

It is all new to us and getting up to speed has been challenging. If it had been one or two issues, it might have been easier but when dealing with half a dozen significant issues, the amount of information needed is overwhelming. This August we'll have to gear up for a fight with the BOD over how elections are done. In response to our notice to them that the 2022 BOD election did not comply at all with § 55A-7-20(b) and 47C-3-108 (a), the BOD sent an email to all the owners claiming that this how all association BOD elections have been conducted for years (provably false) and no one has complained before (as if that makes it OK to not comply with the law). We are certain no legal eyeballs laid sight on that email before it went out because no competent attorney would have ever let them admit what they did.

Jeanne, in my opinion, your board is about as rogue as they come.

I think legislators and lawyers wrote statutes pertaining to corporate and HOA transparency with exactly owners like yourself in mind. You and your husband are the "check and balance" on keeping the board and manager honest.

When I read of a board that is denying records, a certain older, well-seasoned attorney's response comes to mind. The attorney was volunteering at a free legal clinic. The clinic's pro bono attorneys were assigned based on the subject matter of the client's questions. I had drafted a court petition to obtain certain records, including the HOA attorney's invoices. I wanted to double check that I was entitled to see the legal invoices in particular and even brought my state's extraordinarily emphatic case law on the point, from a dispute in a town just ten miles down the road. The pro bono attorney knew the law on corporate records and maybe even remembered the 1990s era dispute over a law firm's invoices. She responded instantly and sharply, "Of course you are entitled to see the attorney's invoices [and same for all the other records]!" Then she edited my draft so it was presentable as a pro se court petition.

My little group never went to court. The HOA dragged its feet but finally did give us all records except the legal invoices. I got on the board and was allowed to see the legal invoices (weeks after my request as a director; such baloney). I wanted to know the legal billing for a certain dispute (that never reached court) over damage from tree roots. Like your situation, it was a case of the HOA attorney getting the law wrong.

Well, Ellen, it appears we will have to take legal action of some sort since the attorney and the BOD have declined to respond to the second request for access to all financial records and the draft meeting minutes since April 10. Per the statute I have the right to petition the superior court to get access to those records but isn't "petition" really a legal word for "lawsuit"? To initiate the process, I need an attorney and $5K, right?

We've been discussing the strategy of sending all of the owners a letter, as well as publishing to our blog, notifying them of the request for records access and the BOD's response (or lack of) that appears to be leading us to a legal confrontation that will likely cost the HOA (yes, you Mr. Owner) money. There are enough owners concerned about money and the lack of transparency that perhaps they will apply pressure to the BOD to comply. It would be interesting to see if I could get a posse of owners all making requests to the BOD for access to the draft minutes and financial records.

ElleN (Idaho)
Posts: 4,420

Posted:

JeanneH3, yes, "petition the court" means the same thing as "filing a lawsuit." I advise sending one more letter, now threatening a lawsuit. The gist of such a letter would be:

Dear Board of Directors,

Twice now we have requested ____, ____ and ____ records. Our requests have met the requirements of state nonprofit corporation statute section 55A-16-02; the state condominium statute section 47C-3-118; and bylaw ____. As you are aware, NC 55A-15-04 requires courts to hear applications for corporate records made pursuant to G.S. 55A-16-02(b) and (c) "on an expedited basis." Furthermore, when the court orders the HOA to provide the records for our inspection, the HOA will have to pay our attorney fees.

Please inform us within five days whether you intend to continue to deny us our lawful right to inspect these records.

Sincerely,

name
address
email addie
phone number

Please also check your covenants closely for what they say about an owner bringing suit against the HOA, and what happens if the owner does not prevail.

ElleN (Idaho)
Posts: 4,420

Posted:

JeanneH3, in my experience, you should be writing these letters keeping in mind that they are going to become a part of the official court record. You want to demonstrate to the judge that you did everything you could to keep this dispute out of court.

You must have a reasonable deadline for the HOA's response. I suggest five days above, but subsequently I am going to ask your husband and you to wait ten business days. Again this is to demonstrate to the judge that you are being patient and civil and landed in court (which costs the taxpayer) only as a last resort.