IL Lake community extensive damage to dam

Sorry for the length but I have included all details so I can get the best help.

I think this one will get the award for most screwed up HOA!

I am currently the president of a small HOA (28 homes) and bought my home 2 years ago. 10 homes are on the 5 acre lake and on August of 2007 severe rains overtopped our small dam and breached it (17 feet high, 200 feet long, made of earth). Half of the water has since drained. Our board had been inactive for the last two years and I ran and was elected.

All members have access to the lake via two easements that exist on both sides.

Mind you, I did not know any of these matters prior to purchasing and would have run screaming if I had. I couldn't make up anything this screwed up. (caveat emptor huh)?

I began researching and discovered the dam had been identified as being deficient in 1986 (not a typo) by an engineer the association had called in. Turns out the spillway was never adequate from its 1975 inception (too small, developer is now deceased). Recommendations were made but never acted upon.

1996 a home is built just outside association boundaries, 400 feet from the dam. This increases our classification from a Class 3 dam to a Class 1. Association members discussed purchasing the empty lot before the home was built but, as you would see past board members buried their heads in the sand and chose to do nothing. This class increase is really haunting us now due to construction guidelines.

In 1997 the dam overtopped and was damaged. The state Dept of Natural Resources visited the site and issued the association a notice to comply with state regulations and obtain a permit for the dam and repair the damages (yes, the dam never had an operating permit). The association dumped some concrete ruble in the breach, never obtained a permit (hence the repair was an illegal repair). In 2002 yet another DNR notice was issued and again, nothing was done (they ignored it).

Fast forward 2007 rains hit and this time, severe damage happens and the lake is gone. I get elected and begin pursuing grants and loans. We had about $3,500 in the bank (again, no typo).

Assessments had been kept at a ridiculously low rate of $150 a year and some years were not even collected. All this even though they knew a major renovation project loomed in the future!

I contacted FEMA. Although no FEMA funds were available I did get the association a Small Business Administration Disaster Recovery Loan. The currently are covering the remaining $38,000 on our engineering bill on a 4% six year loan and said we can amend our request for the repairs and will extend the loan for 30 years (still at 4%). I also identified and began a 5% loan from the state (which we won't use) just to cover all bases.

Many members want to dismantle the dam and drain the lake and be done with it. These are many of the same members who were successful of bullying the previous boards into inaction since they were the most vocal. I for one want to keep it since I reside on the lake and because the lake adds value to the properties. It had turned into a battle royal.

The Articles of Incorporation, by-laws and CCR's all identify the responsibility of the association to maintain the dam and lake.

OUR ARTICLES OF INCORPORATION STATES;

S. The purpose or purpose for which the corporation is organized are;

a) Maintenance of a dam across the stream... and situated between the subdivisions ...

b) The construction and installation of a centralized system for the furnishing of water to all lots; the ownership of such well or wells as may be drilled for the production of such water system and such pipes, conduits and other appurtenances as are installed for the distribution thereof; the maintenance of such well or wells and such distribution system.

c) To hold the legal title to that strip of real estate situated immediately between the aforesaid subdivisions... and such other real estate as may be required to fulfill the purposes of the corporation.

6 The owners of each lot in both of said subdivisions are automatically members of the corporation, and entitled to cast one vote per each lot owned at any meeting of the members.

7. The owners of each lot in both of said subdivisions, are subject to assessment, in such proportion as may be specified in the by-laws, for such funds as may be required to accomplish the purposes of the corporation.

8. The obligation of maintaining the dam specified in Paragraph 5(a) hereof, and power to assess the members specified in Paragraph 7, may not be altered or deleted by amendment to these Articles without the express consent of the County Board.

9, Corporation shall at all times carry public liability insurance with limit of at least $100,000 insuring against legal liability which may occur as result of the existent of said dam, lake and appurtenances. This obligation may not be altered or deleted from these Articles by amendment without the express consent of the County Board.

OUR BY-LAWS STATE:
Any person acquiring either the legal or beneficial title to any parcel situated within either of said subdivisions shall automatically thereupon become a member of the corporation. Such membership shall automatically terminate at such time as a member divests himself or is divested of all ownership interests in any parcel of land in either of said subdivisions.

Dues & Assessments
The Board of Directors shall have full power and authority to raise money for the payment of expenses incurred or to be incurred in carrying out the corporate purposes of the corporation as stated in the articles of incorporation, by the establishment of either a system of dues payable by the members for such routine expenses as may be so incurred, or by special assessment in the case of an extraordinary expense. The total amount of any such dues or assessments shall be such sum as may be determined by the Board of Directors, and shall in all cases be imposed at a flat rate on each of all of the lots in both of said subdivisions.

Any resolution of the Board of Directors establishing the amount of dues or assessments, shall specify a date when the same shall be due and payable, and such date shall be reflected on such bills for the same as are sent to the members. In the event that any such bill for dues or assessments is not paid by the date specified, the same shall be considered as an indebtedness due to the corporation by the member to whom it is sent, and the collection thereof enforced by the corporation in such manner as any other legally enforceable debt.

Amendments
The power to alter, amend or repeal the bylaws or adopt new by—laws shall be vested in the Board of Directors unless otherwise provided in the articles of incorporation or the by-laws. Such action may be taken at a regular or special meeting for which written notice of the purpose shall be given. The by—laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with law or the articles of incorporation.

CCR'S STATE (NOTE A RESOLUTION WAS PASSED TRANSFERRING THE POWERS AND DUTIES OF THE DEVELOPER TO THE ASSOCIATION).

Whereas it is the desire of the developer of said subdivision that the same ultimately become a highly protected community of country homes and for that purpose has directed the undersigned to establish these restrictions...

The right is reserved to the developer to overflow ... Lots ... Said contour is the water line of a lake that has been constructed ... and ... available for use by all residents...

The owner of each lot... shall automatically become a member of the not-for-profit corporation... which has been established for the purpose of maintaining the dam which forms the aforementioned lake and for owning and operating any centralized system that may in the future be constructed for the furnishing of water to all the lots... As members ... the owners of each lot ... shall be subject to assessment for a proportionate share of all expenses that shall be incurred by ... corporation in the performance of its duties and obligations as set forth in its corporate charted and by-laws.

Some of the membership is under the impression that a repair to the structure has to be voted on and pass a simple majority. My argument is that the association and board is duty bound by the above documents and the only way to not repair the structure is for a change in the by-laws and charter (Articles of Incorporation).

Removal is estimated at $225,500. Repair is estimated from $360,000 to $500,000 dependent of the design (we are pursuing a class reduction to save money but do not know if the state will approve it).

The board met prior to the final engineering cost coming in and decided to fix the dam given some of the rough figures that were coming in. (This board is all pro lake homeowners on the board due to the disaster).

QUESTIONS;

1. The by-laws state they can be changed by the board. I keep reading about 2/3rds vote. Where would 2/3rds apply to us. Homeowners on the lake have enough votes to block a 2/3rds majority. As long as we can, would we be correct and safe in proceeding with repairs? We are probably going to have one of the homeowners sue over this. We do have board insurance.

2. We have already made our decision but have not yet signed any repair contracts since a few more things have to be done. The by-laws call for an election of officers next month. We may get voted out. If a new board takes over and decides to remove the dam and ensuing lake, can the homeowners who want to retain the lake sue? (Yes, I know we are suing ourselves). File an injunction against the new board to repair the structure?

3. What problems can we expect from the opposition who want to remove the dam? I am of the opinion we are within the guidelines of the articles of incorporation and by-laws and that residents bought into the association when they purchased.

4. Some of the membership have stated they will not pay any special assessments and allow leans to be placed on their homes since they plan on never moving. They may be bluffing but with a project this big and no reserve, we would need all members to pay their fair share. In Illinois, once a lien is placed, is it possible to then go into foreclosing the property to get the funds?

Yes it is a mess. Some of the same people that want to take down the dam are saying their property values will not be affected. It's insane!

All the homes on the lake are set up for lake views. I myself have 13 sliding glass doors facing it. They will be useless without the lake. We are telling these same people that if so many homes decrease in value simultaneously, they WILL see a drop in their homes value also but they are refusing to see the big picture.

Thanks for replying.

Proof against the past Board would be difficult to prove. They could say the membership ties their hands.

Dear Joe;

Thanks so much for reaffirming what I believed all along. To tell you the truth, after 6 month of fighting this battle, I was beginning to doubt myself (although as you stated, it is clear cut in the by-laws).

I have stated numerous times that the board is duty bound by the Articles of Incorporation and the by-laws and that past boards were remiss when they allowed the problem to continue. I have implemented a private web page for the homeowners to keep them apprised of the developments and a monthly newsletter and have tried as much as possible to be the peacekeeper and the doormat for those who are against the project.

We do have D&O insurance and I thought of going that route (suing past board members). We also had liability insurance on the dam and I told the membership that the last 10 years of insurance payments for the liability were a waste since if the dam had broken and injured or killed someone or damaged property, the insurance would have baulked at paying since the board knew the dam was out of compliance and damaged.

Thanks for taking the time out to answer my concerns, I feel a little better now!

Yes some of the old members have moved and about half of the old board members also (funny huh, sounds like they knew there was a problem and bailed out)!

Some of the homeowners are accusing my board of forcing the repair down their throat. My reply is that we are finally doing our fiduciary responsibility that should have been done by the past boards long ago. I also keep trying to tell everyone it is a blessing it failed when it did since now we can get a low interest government loan since we were declared a disaster area. I guess the ones who want to see the lake gone are too close to the forest to see the trees.

No, we haven't tried to get an arbitrator in here. Nor have we contacted any of our county board members but I am planning on doing so to see if we can have a tax referendum for our subdivision to fund the project since I think collecting the money will be one big headache.

The EPA has no interest and due to budget cuts, the dam inspectors division now only has one person for the whole state. I might also add he has not been helpful at all in providing us any technical assistance (as is required by the dam standards in that "technical assistance SHALL be made available to dam owners").

Unfortunately, no one else benefits from the dam since it is a private water body. It impounds 21 foot aces of water which is not that much (enough to cover 21 acres, 1 foot deep). The area downstream is wooded after the one home at the base and it empties into a major river about 2 miles down. It does provide some retention but not enough to really provide any flood relief. I already contacted the county board to ask them if we were willing to raise and lower the level of our lake when severe storms threatened the area, if we could get some county assistance as a flood retention area and they stated our capacity would be of little help.

No endangered species. I already looked at that too. The very best may be a US Fish and Wildlife grant of $75,000 for wetlands restoration but they already stated the nature of our repair may preclude us from receiving the money since they want to see more restoration of an area to natural status.

Thanks for taking the time out to reply. Keep them ideas coming because I'm out of them!

John,

I certainly am not an environmental engineer but could you explain to me about this?

"Many members want to dismantle the dam and drain the lake and be done with it. These are many of the same members who were successful of bullying the previous boards into inaction since they were the most vocal. I for one want to keep it since I reside on the lake and because the lake adds value to the properties. It had turned into a battle royal. "

Where will the water go from the stream? I think that there will always be a lake .

TO DONNA: Just as Joe said, the lake (5 acres) was created by damming a creek and flooding the area.

TO JOE: Thanks. The property owners on the lake have brought this to the membership's attention. These same people are claiming the lake creates the same amount of mosquitoes. They just don't want to listen and are very unreasonable.

Thanks for reaffirming my beliefs. It has been a very exhausting and frustrating battle. I work several hours on this project every day either educating myself on dams so I can intelligently discuss issues with engineers and understand their lingo or scouring the internet for loans, grants and funding options (looking at a US Fish and Wildlife grant now).

We are giving membership the option of paying the assessment off in one lump sum to avoid interest and I pursued the funding just to help those that would have had problems doing so. The SBA loan is a simple interest loan with no penalty if it is paid early. I've bent over backwards and broke my back trying to help these people out and get treated like dirt for it my half of them. It's truly amazing.

I do plan on asking the attorney to attend the next meeting. We have two attorneys in the membership in the area of criminal and injury law respectfully. One who was on the board for many years until this last election. I would think they should know of the liability involved but seem to not really care.

That would be a violation of the by laws since it calls for an equal assessment for each lot but it's an idea. What I was thinking was let the homeowners on the opposite side of the street pay their portion of a dam removal and a $2,000 fee to break their contract with the association and get out. That money goes into the kitty and those of us on the lake finance the project with the 30 year loan and form our own association.

I've discussed this with some of the owners who are on the lake and they are against it. They state the owners across the street are responsible and are tied into the association. They further state it was their bellyaching which caused all the boards in the past to take no action and that this juvenile behavior should not now be rewarded with the ability to duck out on their contractual obligation.

I do like the creativeness of your idea thought. Rather ingenious! Thanks.