$50-95k assessment without vote

Absent Hawaii laws that override your CCRs it appears your board may have overstepped its authority.

I don’t know many boards faced with raising $3.5 million from about 100 homeowners over 18 months wouldn’t be an emergency.

It sounds like yohr board is trying an end run in two areas. First, you said your documents allow the board to raise regular assessments up to 20% over the current amount without a homeowner vote. This project would cost more than that if they put it in regular assessments, which are supposed to pay for routine expenses and this isn't it.

The board can try to call this an "additional assessment", but it's still a special assessment to me because all this us for a specific project involving the common area. Those also require a homeowner vote and I suspect the board thinks homeowners would vote this down, so they're trying to call it something else, but the end result is the same.

Since this board doesn't seem like it wants to have a come to Jesus meeting with homeowners so they can make the tough decision on how to pay for this, I think you should have a chat with your neighbors to see if they are just as concerned as you. All of you should read your documents to see what they say about calling a special homeowners meeting, which may or may not be about recalling these people and electing in their replacements. There should be people ready to step up and one may have to be YOU.

Please read your documents carefully - you don't want someone to sue and have the results tossed because you didn't do everything as your documents required. If you need to, pass the hat so you can hire an attorney to advise you.

If you bring in a new board, it will still have to deal with the need for repairs because it appears previous ones kicked the can down the road for too long and failed to follow the reserve study recommendations on funding. Or failed to get an updated study (they should be done every 5 years) and possibly all three.

You and your neighbors will likely need to cough up more money whether you like it or not, but you deserve to understand why and what the implications will be if you don't. One word- Surfside. Read those stories again and consider what you may need to do to prevent that in your community. Good luck to you.

Patrick,

It's highly possible that the board didn't follow the process correctly.

That said, what is your goal?

As you pointed out, the infrastructure is failing and needs attention "soon."

It appears that your board is trying to accomplish that.

You may be able to have the board jump through hoops to get that work completed or take the perspective that you are glad the work is finally being done and protecting your investment.

Hence: What is your goal?

Sounds like good goals.

I also suspect, based on what you are providing, that the board isn't going to listen and will simply dig in their heals.

Are you willing to pony up and pay an attorney to achieve those goals?

I agree your Board needs to be transparent and present the facts to the members and present this to a vote.

And you need to be transparent with the Board. You need to explain that you are underwater, debt exceeds assets, and your plan is for the HOA provide an unsecured loan for you so you can use your unit as a for profit rental.

When you are transparent with the board, I don’t believe you will get much sympathy.

Many people who buy in a CIC have no clue how HOAs work, especially condos. They are under this misguided illusion
that HOAs are some mega-corporation with deep pockets and can write checks for anything and everything.
Quite honestly there should be some sort of buyer education before they cut the check for their earnest money.

Uh, taking out a loan won't lessen the financial burden. Loans have to be repaid with interest - and if your reserves are already shaky, you might be denied or the loan you're offered will have a high interest rate. Assessments will then need to be adjusted so you can pay loan payments, routine expenses (they don't go away) AND fund reserves (this time properly). If you want to go that route, be sure you understand the pros and cons, and run the numbers so homeowners understand exactly what's at stake so they can make an informed decision. Sadly, increasing assessments will happen no matter what you do.

I understand this will put people in financial distress (it's something I often worry about in my own townhouse community), but everyone has ignored this for too long and your board hasn't helped by not being straight up with everyone. That's why it may be best that you appoint another board because if these folks weren't honest about this, I'd wonder what else is going on that they aren't telling you.

Exactly. It's one thing to say the board hasn't followed the rules as set in the documents, but I suspect they knew people would howl (again) about "assessments being too high", but this was still an end run they tried to do, which isn't right either.

Sometimes, all you can do is tell people the truth and let the chips fall where they may. Speaking truth to power ain't easy and if you're asked to resign or get recalled, so be it. The problem will still be there for someone else to clean up - and this time there's no more kicking the can down the road unless people want the roof to fall in or sinkholes to develop on the sidewalk or street. People can blame the board, but in the end, EVERYONE's responsible for how things go to this point.

Are you saying your new roofs have only a 10 year life?

So this is the statue that their lawyer referenced as well. My question is what prevents them from adding anything they want in the budget for the next year? Let’s say they want to build a monorail? What guardrails are in place to limit their power over the budget. My argument is that it needs to based on the reserve study as per Hawaii statue (which we do annually). This infrastructure was purposefully excluded from the study for the last 8 years.

PatrickG2,

I agree with JohnC46, because a careful reading of the COA's CC&Rs should indicate that, unless the CC&Rs are amended by a vote of the owners, and with some caveats, legally the board can only spend money to maintain the present infrastructure.

Remember that courts view the CC&Rs as a contract between and among owners, the board and the corporation. With some caveats (like state laws that override a covenant), a board cannot suddenly change the terms of this contract without serious repercussions.

The Hawaii Condo Act also limits how the board can spend money. For example, see 514B-38.

I think these are worth skimming:

https://www.clemonslaw.com/hoa-condominium-law/removal-of-a-community-amenity/
(paraphrase: Changes likely to influence purchasing decisions demand careful consideration et cetera)

https://static1.squarespace.com/static/5f720599adde0126a08cb6ec/t/5f73825eefff8360b75a1860/1601405562463/Adding+Amenities.pdf ("Adding Amenities" by Jennifer James Esq.)

https://wmdouglas.com/eliminating-adding-amenities-hoa/

Regarding abiding by what is in the reserve study:
In my opinion the reserve study is not legally binding the way the Declaration is legally binding. If a mistake was made and xyz was not included in the reserve study, but the Declaration says the COA has to maintain xyz, then the Declaration controls IMO.

I echo DavidJ21's point:


Nationwide it is not uncommon for quite large assessments to suddenly be imposed. They seem to be occurring increasingly more often. By law, boards are required to maintain the common elements.

If you are completely dissatisfied, you could certainly try to rally your neighbors and seek a board recall. At the meeting where directors were removed, new directors must be elected. Per chance would you like to be on the board and have to give countless hours to deal with this situation, and do so pursuant to the law?

Update.

I attempted mediation and received no response from the board.
I hired a lawyer who also served them with demand for mediation, no response.

Lawyer filed for an injunction to stop the assessment under multiple causes.
1. Meeting to approve budget was done in secret and not following our bylaws
2. Assessment was placed into the budget to circumvent Hawaii law that would have otherwise required an owners vote
3. Board refused to mediate
4. Board breached their fiduciary duty in knowingly attempting to bypass owner participation.
5. Budget was not based on a reserve study as required by law

Injunction was granted

Some snips of the judges decision:

“Defendant's failure to comply with its governing documents when conducting
business outside of a meeting means that the action(s) taken is invalid. Thus, the 2024 budget
passed by the Defendant is invalid, as is anything based upon that budget including the
Assessment.”

“Despite the Board's attempts to evade the law and a review by the owners, their
actions were still in error. After all, and of great significance, the Association's governing documents MANDATE that certain matter must be put to a vote of the owners when:”

“ Despite violating the governing documents and law, and making decisions beyond
the eyes and ears of owners, the Board also boldly threatened its own condo member owners:”

“ The facts and the law show that Plaintiffs have a strong likelihood of prevailing on the merits of
this action at trial.”

Given the judge's decision, this is why it's time for a special meeting to sack this board and bring in new people. Once again, the OP may need to be one of the homeowners to step up - which may be a good move, because he hired the attorney who helped get this done.

Once you bring in a new board, an audit of the finances wouldn't hurt. You already know your infrastructure is an issue, but you also need to ensure there hasn't been embezzlement, unauthorized payments, etc. And forget about avoiding assessment increases- it's going to happen, no matter what and homeowners need to accept that.

Regarding the infrastructure issues, see if you can hire a general contractor or someone to help prioritize what needs to be done sooner rather than later and focus on getting them done,mand then you can work on the next biggest issue(s). Keep homeowners informed of everything and encourage their suggestions- no whining. If they want to sell and move, they should want to do what's necessary to put the association on firm financial ground, because no one wants to jump in a mess. Good luck to you.

Kudos, Patrick! It's so good to see updates. Thank you.

Great answer.

Great answer.