LOAN FROM OUR PRESIDENT TO A CONTRACTOR

Started by ChiL • 12 replies • 1332 views

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ChiL (Arizona)
Posts: 5

Posted:

Our president of HOA used our funds to give a loan to a contrator (unlicensed) to work on a roofing problem. The president used our HOA money to do it, & without any notice to the homeowners. Is this legal? Is the president or the Board is responsbile for this misuse of funds? Can we sue the president or the board? One resident found out this loan & questioned him at the meeting, the president just claimed it'd be taken care of. But so far we have not heard anything about the loan. Any suggestions??? thanks!

Chi

DonnaS (Tennessee)
Posts: 5,671

Posted:

Chi,
Forget the "SUE" for right now. Work to get your money back. Why sue the entire BOard if they did not authorize the loan. It was the President who did a horrible, stupid, brazen thing and let association funds go. And on a loan? Whoa, that's grounds for removal from office. I am scared that an unlicensed contractor will be in a resort in St. Thomas before the work ever gets done and if it does, hopefully the roof won't leak.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

Could you tell us more about the loan? Was it for work at your HOA or elsewhere? How was the loan secured? How much was the amount? Interest? Terms?

Do your docs give the Board the power to lend HOA funds?

SusanW1 (Michigan)
Posts: 5,202

Posted:

YIKES!! It should be in your bylaws that NO one person can enter into a contract, make or take out loans against the HOA, or make promises on behalf of the HOA to anyone.

Big problem here!!

ChiL (Arizona)
Posts: 5

Posted:

Thanks everyone for the input. I will get more details of the loan. I will also check the CC & Rs of our condo to see if the Board or the presiden thas the power to lend HOA fund. I will post my findings here. Thanks again everyone!!!

SusanW1 (Michigan)
Posts: 5,202

Posted:

In GENERAL, boards do have the right to enter into contracts and take out and make loans - HOWEVER just the president doing this is not allowed. No ONE person is allowed to do this without the knowledge of the board.

A motion to give a loan (are you sure it was not a deposit for materials?) should be in the minutes. Look for it before you blow the whistle.

SharonM3 (Virginia)
Posts: 23

Posted:

I second SusanW1's comment: Make very sure you know what you are accusing anybody of before you make an issue of it. It may not specifically be stated in your bylaws and/or CC&Rs and/or articles of incorporation. State law may also allow the Board (the BOARD, not just one member) to enter into loans. Also, before you make accusations of "unlicensed," please make sure that you can prove this. One association I know of has been torn apart by such allegations that a few homeowners just kept adding to. Please understand that such situations can deteriorate in nothing flat to what can become a legal issue against you and/or others, depending how you/others approach this.

ChiL (Arizona)
Posts: 5

Posted:

Thanks everyone for your great comments. I found out that the Board agreed to this loan to an unlicensed contractor; which happens to be a friend of our president. The president admitted he didn't check if his friend is licensed. Even though the loan was approved by the Board, using an unlicensed contractor is still not acceptable. Also the term/interests/repayment of the loan has not been discussed in our monthly meeting. So what can we do about this situation? He is still acting as our president & acts like nothing has happend.

SusanW1 (Michigan)
Posts: 5,202

Posted:

WHAT is the loan for?
To put his kid thru college?
Buy himself a car?

Or was it to purchase materials for a job that he is doing for the HOA?

You need to be clear as to the PURPOSE of the "loan."

Be sure to check the Financial Report at the Annual Meeting. This transaction needs to show up there.

ChiL (Arizona)
Posts: 5

Posted:

Thanks, Susan, for your speedy reply. YEs, the loan is to the contractor for the roofing material that he uses for reparing the roofs of some of our condos. Assuming this is legal, it's still not acceptable for him to hire an unlicensed contractor to do it. We are hiring a licensed contractor to supervise his work, which means all the homeowners have to pay extra for the mistake that the president made. Can we hold the president accountable for such a costly mistake? Can we kick him out of the board? thanks again

Chi

SusanW1 (Michigan)
Posts: 5,202

Posted:

So Joe the Roofer (unlicensed) got an "advance" to purchase materials for a job. Now the HOA has to hire a licensed contractor to oversee the job.

Mm-Mm-Mm - seems the Board has some adjustments to make on the PAYMENT to Joe the Roofer (his fee minus the consulting costs for the licensed contracotr's services0

What a mess.

The board should be spanked for hiring an unlicensed roofer. The liability is tremendous! P.S. does he at least have his own Worker's Comp. insurance?

ChiL (Arizona)
Posts: 5

Posted:

Thanks, Susan, again for your reply. Yes, it means that our HOA dues are paying for the unlicensed contractor & a licensed contractor. What can you suggest we could do to hold the Board or the president accountable for this mess? What can we do now?
Chi

AB3 (Arizona)
Posts: 44

Posted:

Wow!

This should be a violation of your CCRs since most require insurance certificates naming the association as an insured to be on file.

Was this payment in advance or a loan? If you pre-paid for the contractor to buy materials it isn't a loan. You will just be lucky if the contractor finishes the work and doesn't run off with the funds.

If they are unlicensed are they undocumented as well?

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