conflict of interest

Started by DavidS23 • 6 replies • 1157 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

DavidS23 (California)
Posts: 9

Posted:

I live in a HOA RV resort in Southeren California. We have a group called the "The Friends Of Fitness". They would like to build a new fitness center in our resort. A previous board told them 3 years ago if they could raise $100,000 in private funding the board would help make it happen. The Fitness Center people have some how placed members of their commitee in board positions. The majority of our 2400 residents are against it. Our board has decided through a vote to levy a special assesment of our members in the amount of $165.00 per lot, or a total of 5%, around $350,000. The problem I am having is Four of our board members have contributed personally to the Fitness People, two are active members. They refuse to put it to a vote fully knowing it would not pass. In my mind this is a huge conflict of interest! Please help me as our season is coming to an end. Is this a criminal act, how can one group of people have a special interest group voted into office for the sole purpose of achieving their personal goals? Thanks so much, waiting to hear from anyone!!-Dave

JaneK (California)
Posts: 175

Posted:

Is the area on which they will build common area? Will the association own the fitness center when completed?
Jane

DavidS23 (California)
Posts: 9

Posted:

Yes Jane we will own it. Thank you so much for your reply. I just can't see how this whole procedure by our BOD is ethical.

GeraldT4
Posts: 1,022

Posted:

DavidS23 - You state, "how can one group of people have a special interest group voted into office for the sole purpose of achieving their personal goals?". You are aware that special interests are what fuel the political process throughout the world, correct? : )

As for ethics or "criminal acts" in your association, the decision of the Board to special assess $350,000 is probably not permitted without a vote of the owners. Here's how YOU determine it. Research California Davis Sterling Act http://davis-stirling.com/index.html and see if it applies to HOA RV resort style communities. You may also contact your Secretary of State Office to see if your community is considered a Common Interest Development (CID) and if Davis Sterling applies. Research your governing documents to see if there is a threshold of Board spending without the vote of the owners. Davis Sterling will override the gov. docs. in that respect but you may find the simple answer of threshold spending right in your own backyard (so to speak).

If Davis Sterling applies to your association than according to D.S. Civil Code §1366. Duty to Assess, Limitations on Assessments (b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, quorum means more than 50 percent of the owners of an association. This section does not limit assessment increases necessary for emergency situations. For purposes of the above referenced section, an emergency situation is any one of a list of extraordinary expenses. Go to the above referenced link for details.

Even if the Board is permitted to levy a special assessment, the "majority" of your 2400 residents that are against the action can and must petition the Board to cease and desist. That may have some effect.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Was there a motion and vote concerning the original agreement (if they raised some money, this project would go thru?)

If so, and they have kept their end of the bargain, then your association may be obligated to enter into this joint venture! Double check the obligation to build this thing.

Is this "Friends of Fitness" a non profit group or a business?

RobertR1 (South Carolina)
Posts: 5,164

Posted:

I doubt very much if this whole business will fly, if the special assessment is for the Fitness. Thyat requires a vote from the owners and also, if any contracts that obligate the owners in any way, each and every owners would have to sign off. The Board can propose anything they want, they just can't obligate the owners through contract without written agreement, and full disclosure.
If any number of owners go to a meeting and go on record as being against this contract, I don't believe the Board can unilaterally obligate the Regime. A Fitness center is an amenity not a requirement.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

DavidS23: A verbal promise made 3 years ago is not relevant when the project
will require a membership vote and an amendment to the official documents.

"They would like to build a new fitness center in our resort." The key word here is 'like'. What one group of fitness buffs would like for the association is not necessarily what the majority of residents would like or want to continually pay for in the future.

You need to refer to your documents as to the process to amend the Declaration (it is normally a very large percentage of residents and can even be all at 100% voting yes to pass), since usually it is in the Declaration where the 'common area assets' are listed as being association responsibility.

Obviously, this will be a new asset if the Association owns it, and it will require funds to build it, and funds for continued repair and maintenance. A vote of the membership will be required. The entire community must understand the funds necessary and that assessment fees will be greatly increased as well as the likely need for future special assessment/s levied on all owners. I would suggest you/Board investigate this proposed project with a local fitness center to learn all that is necessary--liability, manpower, equipment and repair, process for membership, etc. This is huge!!!

As an alternative, maybe a local fitness center would run a 'special' for community residents to take advantage of their services. Leave the headaches to them. Good Luck!

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here