HOA being sued

We are a small HOA (63 homes), we have forclosers, dues and repairs pending with approximately $8,000 in the budget. We incorporated single-family homes with existing quadruplexes that were already in the subdision for about 8 years. As part of the incorporation new bylaws were issued. As an enducement to sell the homes the bylaw state: replacement of roofs, painting exterior of home and the replacement of gutters. Of course these are captial expenses and the bylaws were from 1998. A new roof costs about $15,000 for the quads and of course the HOA's budget just doesn't have the monies. We need 2/3 votes of all members to amend the articles ref. these capital expenditures. Many of the homeowners are senior, some as mentioned in arears for their dues, some homes already have pending liens on them. A homeowner has decided to sue the association and we can afford legal fees but it isn't cheap and the little monies we have would go for those legal bills. Is there any recourse the association has in this situation.? Just curious if anyone else's hoa is facing the same dilema.

Thank you!

Jacqueline,

Don't you have D&O insurance? That's supposed to cover lawsuits arising out of the board's errors and omissions.

So what exactly is the homeowner suing for?

> As an enducement to sell the homes the bylaw state: replacement of roofs, painting exterior of home and the replacement of gutters.

This is very unclear. Explain. Maybe the explanation helps us understand what the suit is about?

We have never been able to save that much for even one roof ($15,000) which is for one quadruplex. When the economy to a hit, it made things evern worse, we were just surviving. Also, what is D& O insurance, I've never heard of it.?

The only oversite that I had always fought for was that about 6-7 years ago I told the board that we needed to look into "article amendments" well, there was always a reason why we couldn't, I was made to feel rather stupid for even suggesting it. Now they are saying, they should of listened to me. There isn't an error I don't thing by the board, just the lack of judgement I think.

If in the bylaws it states "roof replacements" would the D&O cover that?

(D & O insurance protects your board if it gets sued.)

Your roof problem falls under the fail-to-plan category. I suppose someone could sue your board for failure to take care of the common areas, as identified in your documents. But, so what if someone sues? There's no money!!

Has the board failed to take care of the roof?

Amending your bylaws would go against your CCRs which most likely state that the HOA MUST take care of common areas. The roof is common area.

Is this an emergcncy (leaks, etc) A Special assessment might be the way to go for this repair, if that is the case.

I cannot imagine ANYONE serving on a board WITHOUT protection of insurance. All it takes is one claim to wipe you out. How can you consider a special assessment if you know that there are owners in financial distress already? I am not even sure that a roof is COMMON AREA other than one that covers a clubhouse or the like. But besides that, you need some professional advice from either a PM or your attorney as the lawsuit is more pressing than anything I would think.

JACQ

I am deducing your HOA is about 24 years old. This is typically the time frame that roofs might need replacing. Seems one member expects their roof needs replacing and has asked the HOA to do so (rightly so it seems but another issue) under the CC&R's but the HOA does not have the money.

Well if your HOA does not have the money, you are in deep trouble.

It appears the issue is your Capital Reserve Fund has little to no money in it. Typically a Reserve Fund is built over the years by setting aside a specific amount of dues (as an example, the FHA says a minimum of 10%) knowing that repairs/replacements will needed to be made sometime in the future. As an example let us say typically a roof replacement will be $20,000.00 and will probably need replacing in 25 years. This means we should set aside $800.00 per year so that in 25 years we have the $20,000.00. Now we have 10 roofs to replace so set aside $8,000.00 per year so in 20 years we have the $200,000.00.

Now if it is time to replace those roofs and we do not have the $200,000.00 we must raise it. There are two choices:

1. Access the HOA Members. So let us say 4 units per building so 40 units so you access each unit $5,000.00, payable now.

2. The HOA borrows the money (say from a bank) and then raises the dues to cover the loan repay.

Based on what you have said, I am sorry to say but I think push has come to shove there and the budget shortcomings need to be addressed. It will not be pleasant, especially if done with a heavy hand.

Jacqueline......Do your governing documents require the HOA to have a BLANKET insurance policy?? This would include the "common areas" as well as claims on the exterior structures. CHECK YOU DOCUMENTS OR HAVE THE PM DO IT! You may have a deductible so get ALL the data. Any deductible that is less than the cost of the roof replacement is better than paying the whole cost.

I wasn't aware that the "roofs" were common areas. We did contact our attorney who advised that if the subdivision got 2/3 votes we could write an "article amendement" but as you say getting 2/3 of anyone to agree is the challenge. We have always repaired any roof leaks that homeowners have had in the past. Our attorney, when we asked for an "opinion letter" to include information on "dissolving" the association they said that, that is the only part of HOA's they DON"T do. I guess they don't want to bite-the-hand-that-feeds-them.

JacquelineB2,
Please examine your Doc's. Under Florida 720 law your Board may have the ability to vote for an assessment to cover all of the costs involved.
Typically, your Board can engage with a bank for a five year loan.
Then you offer each owner a choice of a lump sum assessment payment or they can spread the assessment costs for each unit owner over 20 quarters which would include the interest.

When in doubt, contact your HOA attorney.

Good luck
Marty

JACQ

Tough love here but you seem to be looking for ways to get out from under mismanagement (insurance, dissolve, etc.) rather then face the issue head on.

Kind of like a marriage annulment after 30 years of marriage and several children. Are the children then "bastards".....?????

Am I wrong?

.....I wish they were illigimate it would be easier to disown them.......oh well a little humour!

Ladies and Gentleman, I have to take this opportunity to sincerely thank you all for the most informative replys to my sometimes confusing situation. I have been on many websites but this by far has proven to be the most worthwhile, such quick responses, so many sincerely suggestions which come across as people who care, i know that's an old fashioned word, but I do mean it.

Okay, I have my board meeting coming up this Thursday. One of the board members is the actual person sueing us and I guess herself. Tell me if I am correct in my thinking. If she has already made it a "legal" issue between her attorney and the association's attorney; should we be disgussing it in the meeting; seems like she would have the upper-hand to go back and tell her attorney whats going on before out attorney is told what the board's dicisions are.

My suggestion is going to be this based upon all of the input I have been given:

In order to do this roof and build-up the coiffers we are going to have two assessments annualy for approx. $300.00 ($600 yearly) for each member. After this is voted on, get with the bank to secure the loan for the pending re-roofing and hopefully stop any further legal action that would depleat any monies we currently have in our operating budget.

Any late dues or back arrears that have already been given to our attorney, have them speed them up to receive payment; if they cannot be satisfied sooner then have liens placed or whatever the next step is. I really do have a concience but I am struggling to pay my dues each month ($105) and I'm a single so there's only one paycheck, the kicker is, I like where I live. I created the "Garbage Committe" (I go around every Saturday morning at 6am and put notices on garbage cans and recycling bins to be retieved by the homeowners; I take a picture of the infraction and the house number just in case there is a problem.) I have received so many compliments it's amazing.....so I believe I am proactive.

I will defintely let you all know what the outcome is of the upcoming meeting....thank you all again so much, i am indebted.....

Be very sure that the HOA attorney is present at the meeting.
Be guided by the attorney as to whether to talk about the lawsuit.
Again, follow Florida 720 law regarding all issues in this case.
Good luck!

I would not discuss the lawsuit with person sueing us being present. I would ask that they excuse themselves and I would then go into Executive Session.

If they refuse to excuse themselves then I would request that the BOD attorney be present during any discussions on this issue.

If others on the BOD want to openly discuss it with the person there and not have the BOD attorney present, then I would excuse myself from the meeting.

Now I would have no issue discussing all other HOA business while the person was there including the how to build a Reserve Fund for roofing issues.