Ask the Expert

Marjorie Jean Meyer, CMCA®, PCAM®
Vice President and National Director of Education and Certification
ASSOCIA

Hello; Are there any articles dealing with a Landowners' Board Member who has joined a lawsuit against the Association as a plaintiff. In your opinion, is this a conflict of interest requiring the member to resign? We are currently excluding him from participating in any discussions of the lawsuit itself. Thank you.

- Edward

Community association board members are expected to fully participate in the decision-making process relating to the operations of the association. Since one of your board members is involved in litigation against the association, it is inappropriate for him to continue to serve as a director since he may not participate in nor have access to discussions among board members and with legal counsel regarding that matter.

Sincerely,

Margey

Conflict of Interest

I am on the Board as Treasurer for our association. I am inquiring about bids that were submitted for tree plantings. I obtained 3 bids from a company for trees to be installed. Our President obtained two bids. One from a local company, and one that he created himself and submitted on behalf of his business partner. He did this after receiving copies of the other bids. While not the lowest he challenged the reputation of the company with the lowest bids even though they are currently working with over 10 other HOAs installing trees. I am trying to explain that a revote of the bids must be taken, because he should not have been allowed to know the other bids, and secondly should not have been able to influence the other members to accept the bid he prepared (they did not know that he prepared the bid), but they knew he would be subcontracted to perform some of the work. Help!

- Clayton

It is certainly a conflict of interest for a board member to bid on work after seeing other proposals. Rebidding the work is in order, with the understanding that the board member in question 1) not have access to the other bids, 2) submit a written notice to the board explaining his relationship to one of the bids, and 3) not participate in the discussion nor the vote regarding awarding the contract.

Sincerely,

Margey

I've searched the Association Times site without success to our Homeowners Association question and hope that you can provide us with some direction.

Can the board members take the action in the form of a motion to ban a homeowner from ever becoming a board member in the future? The reason we ask is while our bylaws state we can remove a board member whenever it's in the best interest of the corporation it makes no mention as to the more severe outright restriction.

Background. We have a former shall I say 'king' that was president for 6 years that practically buried us financially until he was deposed and subsequently resigned last winter. Yet still through today takes no responsibility for his actions and pesters the board members with emails with apparent thoughts of grandeur that the homeowners will sweep him back into office. Now I know if we can ban him it won't stop the emails, but his energies may turn elsewhere or possibly move somewhere else to greener pastures where he can join some other unwary board.

We would greatly appreciate your advice in this matter.

- Dan

Unless your association's bylaws specify otherwise, you cannot prohibit a member in good standing from running for the board. However, there is nothing preventing someone from alerting owners to the facts surrounding the board member's actions during his "reign". Be sure to stick to the facts and not insert commentary or "attitude" to preclude possible legal retribution.

Sincerely,

Margey

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I am a new director on a 7 member board - although one board member lives out of state and is unable to attend any meetings. Most of the other directors have been on the board almost continually in one capacity or another for many years. This includes our secretary who keeps the only copy of our HOA documents and records in his home. If his house were to burn down, all the association records would be destroyed. Also, because it is not his primary residence, access to the association records is usually delayed for many weeks.

When an association member makes an inquiry about a matter, the Board as a whole (except for me) defers to whatever piece of paper the secretary produces at the board meeting. The secretary does not make any information available to the Board in advance so we have no opportunity to make an informed opinion about anything. Basically, whatever the secretary says is supposed to be rubber stamped by all Board members.

I have offered to scan all our documents so that we will have a safe backup copy of them. The secretary told me he wanted to go through everything and index them before he would give the records to me.

Next I submitted a written request to the entire Board (which seems odd as I'm a Board member) for the records - and cited our VA HOA law which says they must be supplied within 5 days.

The secretary replied he would not be at his residence until 11 days from now so I would have to wait until then. And, even at that, he will not let me access all the records, saying he will "try" to feed other documents to me over the coming months.

The "old guard" portion of the Board appears to be giving me the cold shoulder on this. My only support is another new director on the Board.

How am I supposed to exercise my fiduciary responsibility to the members of our association when I have zero historical knowledge of what has gone before me and am denied access to the records that hold the information?

How are we, as a Board supposed to legally respond to association member requests for records in a legally timely manner if the only copy is locked away in the home of a person who is only sporadically available?

What do you suggest?

- Skylark

I suggest that you copy the relevant provisions of the Virginia statutes that clearly state that all owners must have reasonable access to all records. You should have received copies of your association's governing documents when you closed on your home. However, as a board member, you absolutely must have access to the minutes, to the financial reports, and to whatever other information you deem necessary in order to adequate perform your duties and responsibilities.

It seems absurd to me that the secretary refuses to let you have full and unrestricted access to the records. You and your colleagues on the board cannot act in the best interests of the association without historical information to assist in the decision-making process.

Sincerely,

Margey

I live in an community in Florida where are there are about 400 units. About 85 units stopped making HOA payments due to foreclosure or simply neglect to pay. I know that some of those 85 units are currently being rented. In your opiniom, is there any way we can enforce HOA payment once liens have been filed for those units, through another venue (collection agencies, restrain use of comon areas like pool, gym for those rented units)? The rest of the owners will be paying a special assessment in order to meet the community's monthly expenses.

Thank you,

Carlos

If your association's governing documents and state statutes permit, you could initiate foreclosure proceedings against the delinquent owners. Sometimes, just receiving notice of impending foreclosure is enough to prompt the owners to pay the past-due amount.

Sincerely,

Margey

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If there are only two homes on a lot that share a driveway and a landscaped area, but are not attached, and are not incorporated and do not have a board or board meetings or pay dues. Do they have to insure themselves as an HOA or can they purchase individual homeowner policies with the same coverages?

Thanks!

- Mone'

If no community association exists, then there is no need to acquire community association liability and property insurance. However, I urge you to advise your insurance agent of the shared driveway and landscaped area to ensure that you obtain the appropriate individual insurance.

Sincerely,

Margey

As far as insurable responsibilities are concerned for property insurance, is there a difference between a Homeowners Association, statute 720 and a condominium Association, statute 718? I am very familiar with statute 718 with regards to what the association is responsible for insuring and what the individual unit owner is responsible for insuring. Are the insurable responsibilities the same for an HOA (720)???

- Brad

Your association's governing documents should contain provisions clearly defining the association's responsibility with regard to insurance. Rather than try to generalize between condominium and PUD requirements, it's safest to read the governing document provisions.

Sincerely,

Margey

I just purchased a piece of land in Virginia that's in a subdivision that has an HOA. There are about 14 other property owners along the road. The road which is actually an access easement that goes across all the properties is the only common area. It was recently paved by the HOA via funds from a special assessment. The entrance to the road has a sign that says its private( I don't remember the exact wording). The HOA does not have liability insurance and believes they are protected because of the privacy sign.

If someone gets hurt on the road can they sue the HOA or is the HOA protected by the sign? I'm not only thinking of uninvited guests, but also invited guests, minors, or one of the property owners themselves sueing.

If they can sue how can I protect myself if the HOA refuses to get insurance? I have my own liability insurance and umbrella policy in case someone gets on my property, but if someone sues the HOA I assume they would pass part of the costs on to me via a special assessment. Is there any insurance for me to protect against that? Thank you.

- Joe

As long as the association owns or is responsible for real or personal property, it should have liability insurance, which not only pays for judgments and settlements but also for attorney fees to defend the association in litigation. While the board may feel that the sign is adequate, anyone can (and often does) sue. If a lawsuit is filed against your association for injury or damage incurred by a visitor or guest and the association does not carry liability insurance, each owner may end up having to pay his or her portion of the defense, judgment or settlement costs if the association does not have adequate common funds to pay the attorney.

Margey

1. Do homeowners' associations generally carry both D&O and general liability insurance policies?
2. In the event of an "errors and ommission" type event, are Board members personally subject to litigation?
3. In the event of a "slip and fall" type event in a common area, who is liable - (a) the homeowners' association to the extent it has assets, (b) Board members personally, (c) all homeowners personally or (d) all of the above?

Thanks in advance for your feedback. This website is a terrific resource.

- Charles

All community associations should carry Directors and Officers liability insurance as well as general liability insurance. As long as the board acts in the best interest of the association in every decision and action made, the bylaws of the association typically contain a provision releasing them from responsibility in the event of litigation and the liability policies will cover the claim. However, if a board member or members acts in self-interest or on behalf of a select few owners, they may be held personally responsible for any subsequent judgment or settlement.

In the event of "slip and fall" incident which results in injury, the association's general liability insurance would cover the loss.

Sincerely,

Margey

I am a member of the Board of Directors for our HOA. The Board has reviewed contract proposals from a few companies to replace the wooden ramadas that cover each of our 84 units. The total cost is $200,000.

From your best understanding, is it customary practice that the HOA attorney does not review/sanction the contract before the BOD signs and enters into an agreement? Thank You.

- Barbara

I'm a big proponent of using an attorney to review contracts before the board executes them. After all, board members are typically not accustomed to reading legal documents, but they have a fiduciary obligation to the owners to ensure that all contracts protect them and the association.

I also think it's a good idea to send a copy of your minutes to your association's legal counsel to ensure that the board is making good decisions and acting in the best interests of the association under relevant federal, state and local law and within the parameters detailed in the governing documents.

Sincerely,

Margey

How do you pick a good attorney that is willing do the job and not just after your money?

- Wardell

I suggest that you interview attorneys who are members of the Community Associations Institute. Go to www.caionline.org, then scroll down to the link to chapters. While there is no guarantee that attorneys who are members of CAI won't charge what may be considered excessive fees, you have a better chance of finding one who is sympathetic to your issues and knowledgeable about community association law.

Sincerely,

Margey

I am a past board member of a homeowner association for town homes who resigned. Our past board and 183 homeowners voted in $54,900.00 for three improvements 1) power washing 2) column repair or replacement and 3) additional pine straws. There was a statement to the entire community during our annual meeting that this money would be used ONLY for the things mentioned and NOTHING ELSE and any monies saved would be returned at the end of the year the improvements were made.

In February 2005 we held our board meeting and the President said she found a construction group to do the work and would email us their final offer amount. One month later without emailing the entire board their offer she alone solely signed a contract for $77,129.00 and included things that were not in good faith previously stated to the homeowners. She added painting of all the doors and shutters and to drill holes in our doors and place brass numbers on them for our addresses. No pine needles were ever delivered within the year it was promised.

She later said she told two of her friends that served on the board about the contract but left out entirely two other members of the board for a proper vote, including me as Secretary/Treasurer. Now we have only $5,000.00 left in cash reserves instead of $200,000.00 for a ten year old community for roof and paving needs. MY QUESTION TO YOU IS THIS. IS NOT PARLIAMENTARY PROCEDURE PROTECTED BY LAW TO BRING SUCH LARGE SUMS IN EXCESS AS THIS $22,229.00 ABOVE THE ORIGINAL AGREEMENT WITH THE COMMUNITY TO ALL MEMBERS OF HER BOARD FOR DUE PROCESS AND NEEDED DISCUSSION FOR A PROPER VOTE BEFORE SHE SIGNED A LARGER AMOUNT FOR A CONTRACT?

IF SHE DID THIS ANYWAY, IT THIS ILLEGAL? CAN I SUE HER FOR MY UNIT'S PORTION AND CLAIM THE NON USE OF PARLIAMENTARY PROCEDURE. I AM GOING TO COURT THIS MONDAY BASED ON THIS.

LET ME KNOW YOUR THOUGHTS OR ANY REAL LAWS THAT SAFEGUARD PARLIAMENTARY PROCEDURE AS SOON AS POSSIBLE. THE LIABILITY INSURANCE CARRIER FOR OUR OFFICERS HAS ALREADY MADE ME AN OFFER FOR MY CLAIM FOR SMALL CLAIMS COURT. THE AMOUNT FOR SMALL CLAIMS IS UNDER $6,000.00. I AM ALSO SUING HER FOR SLANDER SINCE SHE MOVED TO HAVE ME VOTED OFF THE BOARD ONCE SHE FOUND OUT I DISCLOSED HER ABUSE OF OUR MONIES TO 33 MEMBERS OF OUR 183 MEMBER COMMUNITY.

Sincerely,

Jane

Unless state statutes or your association’s governing documents mandate the use of parliamentary procedure, there’s no legal requirement to follow it. You’ve taken the appropriate steps by filing a claim with the association’s liability carrier, but you may want to alert your neighbors to the situation so that they may do the same. You might also consider persuading your neighbors to join you in filing a claim against your association’s Directors and Officers Liability Policy and against the Fidelity Bond in an effort to replenish the reserve account.

Sincerely,

Margey

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Our complex has two dwelling with two floors each and eight units to a floor for a grand total of 32 units. The buildings are 22 years old. Some owners are having problems with their clothes dryers. One gets moisture in hers when the person living above operates his dryer. Another has heat coming into her dryer when her dryer is off but the person below her is drying clothes. We are having all 32 units dryer vents cleaned. The cleaners will go up on the roofs and use suction equipment and go down into the pipes as far as they can go. They will also go into each unit (with permission and access) so the cleaning is 100% done. I understand clogged dryer vents are a major cause of fire. Do you have an opinion on how often dryer vents should be cleaned? Thanks!

- Naomi

I applaud you and your neighbors' proactive approach to addressing a very serious issue in multi-family dwellings. If the dryers are used frequently, I recommend having them cleaned yearly, and no later than bi-annually, to prevent a devastating fire.

Sincerely,

Margey

I am currently the treasurer on our HOA Board. We are a PUD in a 248 home single family development.

My question is this: I have only been on the board for a few months, but it's become obvious the poor job our management company is doing in keeping up with the money she has paid out on our account. She does not have a real ledger/accounting system as it is all paper in boxes. We are now searching for a new management company. So my question is two fold.

1. Is there some where I can go to find a current list of Homeowner Association Companies in Georgia as well as Association Attorneys?
   
   
2. Where would I be able to find an "auditor" of types so that we can make sure everything is on the up and up before we transfer to a new company and have problems to start off with?

Thank you.

- T.W.

The Atlanta chapter of the Community Associations Institute should be able to provide you with a list of member management companies and CPA firms. Go to www.caionline.org and click on "Find a Chapter", then scroll down to "Georgia".

I strongly recommend that your utilize the services of CAI members because they have demonstrated a commitment to the community association industry. You have a better opportunity to find the most qualified, industry-educated and experienced management companies if they are CAI members.

Sincerely,

Margey

I wanted to know what frequency a board should bid out its property management company? We have had the same management company for over 18 years and I feel that it has become rather complacent.

There are a few board members that are old fashioned and feel loyalty (they have more emotional ties than logical ones), I have been the President for close to a year and really feel we can do better.

If we don t do better, then at least we interviewed a few other companies and have done our due diligence. We can't expect a different reaction from the same behavior for the last 18+years. There's area for improvement and we have never challenged our current company.

Thanks for your insight!

-Brian

After eighteen years with the same management company, it is not a bad idea to look around to see what other services may be available and for what price. However, your management company has eighteen years of historical knowledge and perspective on both the physical and financial aspects of your association's operations, which should give them a few extra points.

I suggest you prepare a Request for Proposal listing all the attributes you determine are important in a management company, then send out the RFP to management companies for whom you have received recommendations from other board members and homeowners.

There's nothing wrong with having the same management company for eighteen years. In fact, there are many benefits, primary of which is the continuity of knowledge and understanding of the unique foibles and peccadilloes of your community. Perhaps rather than changing companies, it may be more worthwhile to sit down with the incumbent company's CEO to evaluate management's performance and determine what areas may need improvement.

Sincerely,

Margey

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I am presently in a dilemma with my homeowners association in Georgia. I just bought my house and I brought to the board that I would like to park my boat in my backyard behind a covered 6 foot fence. My backyard is over 100 yards from the main road in which case the boat would not be visible from the street. The covenants say "Boats, trailers, trucks with a load capacity of one ton or more, full size vans excluding mini vans or utility vehicles used as passenger vehicles recreational vehicles (rv's and motor homes), vehicles used primarily for commercial use purposes and containing visible evidence of commercial use (such as tool boxes or tool racks and vehicles with commercial writings on their exteriors) are also prohibited from being parked on the property, except in garages or other areas designated by the board as parking areas for particular types of vehicles."

The fact is it says except "in garages or other areas designated by the board as parking areas for particular types of vehicles." The fact that it says (or) does it commit them to provide me with an designated area to park my boat.

In their denial letter, they say that the designated area has a problem flooding and that the cost will be too much to fix so I can't park my boat there. What canI do about this? Thank you for your time.

- J.

It is unfortunate that you did not discuss this issue before purchasing your home. I do not believe that the provision in the covenants that you quoted requires the board to grant approval to you to park your boat. However, if the intent of the rule was to protect the property values of neighboring homes, and if neither your neighbors nor anyone walking on the common property would be able to view the board or the structure protecting it, then the board may want to consider granting a variance to the covenant. However, there does not appear to be a mandate that they must approve a variance.

Sincerely,

Margey

I live in Minnesota, and at times we have snow storms that knock out power for hours and even days. My two condominium buildings have all-electric everything - water heaters, baseboard heat, stoves, etc. We can manage without some things, but not having heat would be a big problem. Eight units have fireplaces, but would those owners let us congregate in them? As an association could we make them do so determining the situation was an emergency? Of course, we would not have a wood supply.

- Naomi

You cannot force owners to open their doors to their neighbors in the event of a electrical outage. Community associations are limited in what they can do legally for their members. However, it's certainly a good idea to conduct townhall meetings at which you could invite experts to speak to your members about preparing for potential disasters such as electrical outages. Easy solutions may be to have a cell phone available in emergencies in order to contact friends or family members for assistance.

Sincerely,

Margey

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