Past Fiduciary Breach

I was recently elected as President of my community's HOA when the past President chose to resign in the middle of the year with knowledge that the HOA's funds would not pay the bills past October of 2009. In reviewing the HOA finances, several issues have arisen. 1. The past President: chose to file liens against every property that is delinquent in assessment payments, thereby creating over $5000.00 in attorney's fees. 2. Committing over $20,000.00 in HOA funds to changing the water meter from one master meter to indivdual homeowner meters thereby placing a serious financial strain on the HOA. 3. Allowing her boyfriend to make calls to homeowner's with delinquent assessment and advising them that he is a "consultant" for the HOA. Does the HOA have any form of recourse regarding what appears to be a breach of fiduciary and ethical responsibilty?

Errol,

I suggest you thoroughly read all your gov docs to determine exactly what duties and authority the BOD and/or Pres have. These action that the Pres took may not have been in violation of the gov. docs. Only if they were would a breach of fiduciary resp. occur. If the Pres acted alone in making all these decisions I must ask, "where is the rest of the board?" The Pres is only one vote on the BOD and shouldn't be doing anything the other board members haven't agreed to. However, that is a problem with the board members that they need to resolve.

Filing liens against h/o's who are delinquent in payment of assessments may have been the right course to take depending upon how many months in arrears each h/o was. As for the attorney's fees, they should be added to each h/o's account that had a lien filed against them. Only if the lien is not paid and a foreclosure would be necessary would there be a possibility that the sttorney's fee would not be collected thereby necessitating the HOA to pay it.

Having her boyfriend act as a bill collector for the HOA would not be a breach of fidicuary resp just a very stupid decision. Third party debt collectors must comply with the FDCPA (Fed Debt Collection Practices Act). It's best to let the assn attorney deal with serious delinquencies. Again, did the other board members agree to this?

Were you elected as Pres by the members of the assn or by the other board members? Were you a member of the BOD at the time this Pres. was in office? If so, perhaps you can shed some light on whether the Pres made these decisions on her own.

I don't understand. If the majority of board members don't agree then why is the president - president?

The president has an overbearing nature. In speaking with the other board members, she would follow through with issues whether or not the board was in agreement.

I was elected by the association memebers. I was not a member of the previous board. We face serious financial issues and are challenged to keep the HOA afloat. Just found out that a signed contact does not exist for the water meter project (conversion to individual meters) and the contractor has already received $15000.00 upfront. The work is in progress.

Thanks Mary. As I stated, I was not a member of the previous board. Does the present board have any recourse action regarding the previous board's mismanagement of HOA funds?

Errol - you should request the minutes of the meeting where the MOTION to spend those funds is recorded.

Somehow, I find it unusual (no, unbelievable) that the president (one person) is authorizing this kind of project without it being approved. If she is, then you have more problems than just that . . .

Ask the secretary for the minutes of the meeting where this was discussed and look for a motion.

Sorry Mary for the delay in responding. I did not serve on the board with the past President. When she announced that she was resigning, elections were held to install a new board. I was elected President of the new BOD.

Thanks Glen for your assistance. Please explai what recourse we would have should the BOD be bonded. How would she be protected bt the D&O portion of the HOA insurance?

There is no signed contract. Only emails between the contractor and previous HOA management company. Asked contractor about the absence of a signed contract and he admits it was a mistake not to have a signed contract.

Stated in our bylaws: No one member can act as an agent of the corporation without authorization from the board.

I suppose any agreement between board member A and a contractor could be held not valid.

Can you imagine if all board members went about entering into agreements or contracts willy-nilly?

Errol,
Come on, you have been asked this. First you said you were elected by the members to be president of the Board. Above you are implying a new Board was elected. So now, no one served under this resigned president.

If you are legal president and if you were elected by the members and if the new board was elected by the members, and if all the rest of this is accurate, do you have some sort of a confidence vote from the new board members? If all the new members were elected at the same time, did you have a second election to elect the new president.

I think, in view of what you are saying about the past board where the president decided to retire and I guess the rest of the Board also, and you elect BOD the way you say, you are just setting up to create the same situation again.

The question I have is your BOD and the President legal. Fine if they are, but it seems difficult to establish.

Sure we do it all the time. Just post your e-mail address, and ask them to write you. I've done it several times and e-mail privately with lots of people on this forum.

MichaelK,
There's a lot of logic it what you post and undoubtedly resolution has to be along these lines.

However, all this is dependent on a stable and wise Board of directors. So far, we have not heard how this new board stands nor have we heard about how the election/recall, whatever, was conducted and was the process vetted and there is now a legal leadership as per documents.

I don't question the election that allows the members to directly elect the president. I know that there are some states that apparently allow this, although I believe it is not the norm.

Unless some owner wants to personally make a charge of Fiduciary irresponsibility, I really believe the Board and administration should be solid and represent the owners. If not they would open the association to a wide range of counter charges.

If I recall, the OP was about a rogue President circumventing the process and acting in some dictatorial unilateral fashion that was putting the association in danger. Have they now fallen back into the same trap. Of course this is just a personal read and not meant to be all conclusive or right for that matter.

MichaelK,
I am also not sure how my post relates to yours other than to comment that your post showed good reasoning and suggest that, if appropriate, your proposal would be the way the process would proceed.

I am not questioning the validity of the OP. I do feel there is lots that need to be established before I would want to opine about court charges against the departed Board.

I want to know more about this election and how it came about and if it is now established and recorded. If it is a bunch of new people taking over the helm I say don't get involved in any court process if you have a choice, learn your job as BOD and President. If this was a collective change over time and the new folks had done their homework and collected facts and had evidence, then maybe they could jump into a court case, I wouldn't know.

We have all kinds of good people posting on this site, that is what keeps the regulars around, lots of variety, lots of different approaches and very little dissension. We can end up helping a few, end up pissing a very few off, and really serve as a sounding board for many. Look at the traffic here.

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