Requirement of Transittion team member to sign an NDA agreement

RickJ6 (Nevada)
Posts: 31

Posted:

There are two issue that I see:

1. This requirement was issued after the team had performed a substantial amount of work. It was not set up at the very beginning of the start of the team. I have not seen the scope of the NDA so cannot comment on that. But it seems like it is a very non transparent way to do business. As most homeowners are very concerned about these issues.

2. If an action were brought based upon a violation of the NDA, would the HOA master policy cover the signers of the NDA.

The idea is there would be no committee members if the HOA master policy did not cover them in the ordinary course of their work, as it covers the board. But, a lawsuit based upon a perceived violation of an NDA is most likely not
covered by the master-policy that covers committee members.

Since violation lawsuits happen quite a bit, with many of them being spurious, or designed to exert pressure on negotiations, to expose a committee member to that expense seems unreasonable. Especially since they are all unpaid volunteers who are trying to help the community.

Would appreciate any input.

Thanks

Rick

TimB4 (Tennessee)
Posts: 21,059

Posted:

I'd simply refuse to sign.

If the person or Association requiring the NDA doesn't like it, tough.

If they don't want me to serve on the team, fine.

Mind you, I would also inform the entire membership about the request to sign the NDA and simply ask the question, "what might they be hiding?" and let the chips fall as they do.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Are you talking about the transition from Developer control to homeowner control? Is the Developer the one who wants a signed NDA?

I don't like it. Legal disputes over construction defects are unfortunately common. You don't want anything that would hamper the board's ability to fully inform the association attorney in such cases.

I also have the same objection that some lawyers have to requiring boards to sign codes of conduct. By signing, the board is agreeing ahead of time to behave in a predetermined way, regardless of the details of the issues under discussion. These lawyers believe that this could make the board ineligible for the business judgment defense should a dispute arise.

You could also argue that signing an NDA is a violation of the board's fiduciary duty to the association.

It's also possible that such an agreement is not enforceable. If the Developer is involved, it could maybe potentially be an attempted end-run around warranties and other legal protections.

I can see having such agreements when there are legal disputes that have been settled in court, and the parties agree to it. This is pretty common. But a signed agreement ahead of time suggests that the requester anticipates legal disputes of some sort and wants to take some options off the table.

This would be a solid NO for me.

RickJ6 (Nevada)
Posts: 31

Posted:

I agree so far with the comments, but my concern primarily is for the residents that volunteer their time, and may be uninsured in the event of a lawsuit alleging a violation of the NDA. Being on the committee you are insured under the HOA master policy, but I doubt it would cover alleged violations of an NDA agreement. It could be devastating for the residents that signed it, and could be used as leverage by the contractor down the road in negotiations.

As far as who was behind requiring this, I have no idea, but I assume it was a combination of several residents who serve on the board, property management who was hired by the developer, and the developer. That is a guess

DeanJ
Posts: 1,786

Posted:

Yea, tell who ever wants this no thank you.

CathyA3 (Ohio)
Posts: 6,299

Posted:

The board can consult the association's attorney about this. You want a legal opinion on whether or not the other party can require this. I'm not convinced they can - otherwise we'd have heard of similar cases. The attorney can push back and hopefully get the other party to back down.

Also take a hard look at the master policy to make sure you are in fact covered. Again, I'm not convinced that you are.

With all of the issues in the insurance market these days, the last thing you want to risk is making a claim against the association's policy even if it is covered. An uninsured event is bad, but receiving a cancellation notice from the association's insurer may be worse.

RickJ6 (Nevada)
Posts: 31

Posted:

That is an excellent point regarding cancellation. I see no circumstance however where a alleged violation of an nda would be covered unless there was a specific rider.

As far as the individuals that signed the agreement, they did it as they had no knowledge of the issues involved, I am a homeowner who does not like to see people
taken advantage of. In addition, if this were to blow up, and they were not covered, it could create a lawsuit by the committee members against the HOA for alleged breach
of their fiduciary obligations.

I see it as a way to protect the developer which the way the transition team was set up to begin with, about a week before transition is contrary to everything I understood about
the timing of starting transition teams.

KerryL1 (California)
Posts: 14,550

Posted:

Excuse my ignorance. Please define NDA.

KerryL1 (California)
Posts: 14,550

Posted:

Excuse my ignorance. Please define NDA.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Non Disclosure Agreement.

https://en.wikipedia.org/wiki/Non-disclosure_agreement
https://www.investopedia.com/terms/n/nda.asp

Companies with valuable intellectual property often have employees sign such agreements to prevent them from disclosing business information to a new employer.

In some jurisdictions and in some instances, they may be illegal.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Some things that could make an NDA unenforceable:

* Overly broad or vague language

* Agreement does not correctly identify confidential information

* Lack of mutual consent

* The agreement is used to cover up illegal activities

* Information that is covered by the agreement is disclosed elsewhere

* The agreement interferes with a signer's other legal obligations

KerryL1 (California)
Posts: 14,550

Posted:

Thanks for definition.

Who comprises "the team," RickJ? What Issues" are of "concern" to owners?

Oh, I finally got it. The team is some sort of Committee to help make the transition from the developer to the owners.

What shoud these Committee members NOT disclose?

KerryL1 (California)
Posts: 14,550

Posted:

Thanks for definition.

Who comprises "the team," RickJ? What Issues" are of "concern" to owners?

Oh, I finally got it. The team is some sort of Committee to help make the transition from the developer to the owners.

What shoud these Committee members NOT disclose?

CathyA3 (Ohio)
Posts: 6,299

Posted:

Looking back, my community's transition was handled by the board. They weren't privy to any new confidential information during this period. I can see having unit owners sign such an agreement, because they don't have the same fiduciary duties as the board members do and they may deal with confidential information that ordinarily would not be available to them.

I don't know the legal implication of this. I do know that some owners have loose lips. Some won't understand what they're looking at. Some may misinterpret what they're looking at and see nefarious deeds where there aren't any. And they may feel that they have to tell everybody what they think they have uncovered.

I got curious and discovered NDAs are used in HOAs. One type applied to community managers. In other cases the NDA served as a code of conduct for board members.

My reservations about NDAs are the same as those for other codes of conduct:

* They're well intended but not effective.

* They provide a false sense of security.

* A piece of paper won't deter someone who's willing to ignore CC&Rs and state laws.

* Once the confidential information has been disclosed, there's no putting it back. The only option is legal action against the offender and possible monetary damages.

In other words, an agreement does not prevent - it only provides remedies after the agreement has been violated. If you're in a position where this is not good enough, then the only option is keeping confidential information out of the wrong hands.

LetA (Nevada)
Posts: 2,679

Posted:

What is the NDA attempting to cover? On a side note, I don't feel an NDA would fly because Nevada is an open
meeting state, and any homeowner has a legal right to review all HOA documents including contracts, payments etc.
An NDA would be moot and a waste of time and paper. BTW an NDA makes you look like you are trying to hide something.

The only area an NDA belongs in an HOA would be your vendors, i.e. your security vendor. The Vendor would have their employees
sign an NDA not to disclose names, addresses and personal information on the owners and residents.

RickJ6 (Nevada)
Posts: 31

Posted:

The open meeting argument is an interesting one. The only reason I can think of why this was put in was to prevent homeowners to know what issues they may have with the developer, to facilitate perhaps a lawsuit by a homeowner.

Or one could also argue that it is in there to make the developer more comfortable negotiating and settling the transition issues without exposure to liability.

As a resident, I am a full transparency type. I want to be able to know what is going on, with nothing being hid from any resident.

Unfortunately the law in Nevada does not address conclusively whether this can be done by a Transition team who is negotiating on behalf of the community. And secondarily who answers to the board, who I doubt has signed an NDA.

Rick

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By RickJ6 on 09/30/2024 1:30 AM
The open meeting argument is an interesting one. The only reason I can think of why this was put in was to prevent homeowners to know what issues they may have with the developer, to facilitate perhaps a lawsuit by a homeowner.

Or one could also argue that it is in there to make the developer more comfortable negotiating and settling the transition issues without exposure to liability.

As a resident, I am a full transparency type. I want to be able to know what is going on, with nothing being hid from any resident.

Unfortunately the law in Nevada does not address conclusively whether this can be done by a Transition team who is negotiating on behalf of the community. And secondarily who answers to the board, who I doubt has signed an NDA.

Rick

Normally an agreement is a document where each party exchanges something of value. What is a board member getting of value for themselves or the HOA by signing an NDA?

There a reason the developer wants an NDA and it is not in your interest or your fiduciary duty as a board member to sign it.

GregoryT1
Posts: 315

Posted:

I agree with everyone's sentiments that the NDA should not be signed.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By RickJ6 on 09/30/2024 1:30 AM
The open meeting argument is an interesting one. The only reason I can think of why this was put in was to prevent homeowners to know what issues they may have with the developer, to facilitate perhaps a lawsuit by a homeowner.

Or one could also argue that it is in there to make the developer more comfortable negotiating and settling the transition issues without exposure to liability.

As a resident, I am a full transparency type. I want to be able to know what is going on, with nothing being hid from any resident.

Unfortunately the law in Nevada does not address conclusively whether this can be done by a Transition team who is negotiating on behalf of the community. And secondarily who answers to the board, who I doubt has signed an NDA.

Rick

There is an exception to the open meeting requirement, and that's to allow discussions of confidential information. That's what happens during Executive Session. Generally if there is some sort of negotiation going on, especially if the association attorney is involved, then these discussions belong in Executive Session.

It's also not unusual for disputes between the developer and the HOA to arise during the transition period. If there is a hint that something like this is in the wind, I recommend having the board serve as the transition team (no homeowners at all). The board already has a fiduciary duty to the association and an obligation not to reveal confidential information until the matters are settled. Homeowners have no such obligations, and having them present at the meetings risks violating attorney-client privilege if a dispute ends up in court. Attorney-client privilege is a big deal, and signed NDAs wouldn't get around this issue.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By CathyA3 on 10/01/2024 4:39 AM

Posted By RickJ6 on 09/30/2024 1:30 AM
The open meeting argument is an interesting one. The only reason I can think of why this was put in was to prevent homeowners to know what issues they may have with the developer, to facilitate perhaps a lawsuit by a homeowner.

Or one could also argue that it is in there to make the developer more comfortable negotiating and settling the transition issues without exposure to liability.

As a resident, I am a full transparency type. I want to be able to know what is going on, with nothing being hid from any resident.

Unfortunately the law in Nevada does not address conclusively whether this can be done by a Transition team who is negotiating on behalf of the community. And secondarily who answers to the board, who I doubt has signed an NDA.

Rick

There is an exception to the open meeting requirement, and that's to allow discussions of confidential information. That's what happens during Executive Session. Generally if there is some sort of negotiation going on, especially if the association attorney is involved, then these discussions belong in Executive Session.

It's also not unusual for disputes between the developer and the HOA to arise during the transition period. If there is a hint that something like this is in the wind, I recommend having the board serve as the transition team (no homeowners at all). The board already has a fiduciary duty to the association and an obligation not to reveal confidential information until the matters are settled. Homeowners have no such obligations, and having them present at the meetings risks violating attorney-client privilege if a dispute ends up in court. Attorney-client privilege is a big deal, and signed NDAs wouldn't get around this issue.

If the board agrees to an NDA, they are not permitted to disclosing facts to the members. The only fact the members would see is the final agreement and not any of ingredients that went in to the sausage,