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Subject: HOA Board repeatedly violating bylaws with captial improvements
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LaurieS
(California)

Posts:5


08/07/2017 4:02 PM  
I'm in California and according to my reading of my HOA bylaws our board has to have a member vote for any capital improvements (there is no language to regarding a minimum - so it would appear any project).

I would estimate that our board has spent well over $1 million dollars on various new projects and none of these would qualify as maintenance - they have created a new sports park (previous land was a patch of dirt), a rose garden (ditto), and redid our both of the front entries to the community to fix ponds with non-working waterfalls (this could be seen as maintenance) but they also completely refaced the walls with new and very different materials (wasn't necessary - just done for cosmetic reasons) and erected 3 (brand new) towers. There was not a single member vote on any of these projects and there wasn't even notification that these projects had been approved by the board (unless you happened to have been in attendance at the board meeting where these were discussed).

Also I think the sports park construction required a loan - I'm still wondering how they were able to get a loan (again it looks like the bylaws specifically prohibit them taking a loan of any size without a member vote). If this is the case - I would like to think they couldn't have gotten the loan approved...

There are A LOT of unhappy homeowners in my community because of the amount of money the board is spending on projects that most of us feel are a complete waste of money and the complete and utter lack of communication on these projects. During the middle of a drought basically the board decided the best thing to do was plant a bunch of grass and many homeowners wanted the land that was used for the rose garden to be a dog park (more water friendly and we have a lot of dogs in the neighborhood).

Unfortunately - the only thing I'm 100% sure is that our CC&Rs and Bylaws have no mechanism for removing a board member, only the board President has the power to remove board members. Ideally we'd vote them out - but the members have two year terms and we aren't sure how many of the members will actually be up for reelection this year.

I know I should probably consult a lawyer to confirm exactly what the bylaws are stating (they are a complex read due to membership classes and membership conversions at transfer, etc, etc). But let's say I'm misinterpreting the bylaws and our board is authorized to spend as much money as the 5 of them see fit on whatever projects they get into their crazy heads per the CC&Rs and Bylaws - isn't there anything in California State law that would prohibit the board from undertaking extensive capital improvements without a membership vote?

If I'm right about the bylaws - what's the best course of action? Formal letter to request that the board actually follow their own bylaws?

TimB4
(Virginia)

Posts:14509


08/07/2017 4:11 PM  
Posted By LaurieS on 08/07/2017 4:02 PM

Unfortunately - the only thing I'm 100% sure is that our CC&Rs and Bylaws have no mechanism for removing a board member, only the board President has the power to remove board members.





I would love to see those bylaws.

I've never seen Bylaws that don't allow the membership to recall Directors. In fact, corporate law supports such things.


Is your development still under control of the Declarant (developer) or does the membership have full control of the Board?
LaurieS
(California)

Posts:5


08/07/2017 4:20 PM  
Here's the bylaw section on improvements:

"To manage, operation, maintain and repair the Master Common Area and all improvements located thereon, and to make capital expenditures for and on behalf of the Association with the vote or written assent of a majority of the voting power of each class of Members of the Association: provided, however, that after conversion of the Class B membership to Class A membership, capital expenditures shall require the vote of written assent of a majority of the voting power of Members of the Association, and, for so long only as the Declarant holds or directly controls twenty-five percent or more of the voting power of Members of the Association, a majority of the voting power of Members of the Association other than the Declarant."

Class A membership is all owners. Class B members are co-declarants (I'm guessing the builders units - but construction was completed 7+ years ago - so all these have been sold).

DouglasK1
(Florida)

Posts:839


08/07/2017 5:31 PM  
Posted By TimB4 on 08/07/2017 4:11 PM
Posted By LaurieS on 08/07/2017 4:02 PM

Unfortunately - the only thing I'm 100% sure is that our CC&Rs and Bylaws have no mechanism for removing a board member, only the board President has the power to remove board members.

I've never seen Bylaws that don't allow the membership to recall Directors. In fact, corporate law supports such things.


I've never heard of a bylaw that lets the president remove board members.
RichardP13
(California)

Posts:2025


08/07/2017 6:14 PM  
The first question, on capital improvements, any improvement NOT in the reserve study, and over 5% of the budgeted annual expenses of the Association, must be approved by secret ballot by a majority of a quorum of the membership.

In regards to removing a director, I have seen no Bylaws that reference what you may think they say that only the president can remove someone. Someone that has experience should review your documents.

If you have pdf copies of both documents I would be more than happy to review. My email address is [email protected]
KerryL1
(California)

Posts:4162


08/07/2017 6:16 PM  
Laurie, it sounds like your developer no longer controls your HOA. If that's true, you can ignore all the Class A, Class B stuff. Your Bylaws do say the membership must vote for capital expenditures. /the board may not do this alone.

But for every little new capital expenditure?? Now you want to turn to CA cicvil Codes. There's a very large section, the Davis-Stirling legislation, that applies only to Common Interest Developments and a lot of it is to protect Homeowners in HOAs.

There's a website called davis-stirling.com put together by a CA HOA law firm. Visit it and the Main Index will have a listing about Capital Expenditures or some name like that. Go there to see these attorneys' advice. If their advice is linked to CA Civil Code, you'll be able to click on the actual legislation. As I recall, they advise that any capital expenditure over 5% of your annual budget should be put before the membership.( I might very well be wrong though.)

Like Douglas, I have serious doubts that the president is the only one who can "fire" directors. If the members elected them, the membership can recall the or vote them out at your next election. This would not be in your CC&Rs, but only in your bylaws. You can find who there are and how long there terms are by reviewing the minutes of your annual meeting & election. If some were appointed by the Board itself, you'll have to find those minutes.

Meanwhile don't any of you who are concerned go to the board meetings??? In CA, they must be open to Owners. If the Board got a loan, they or your property manager must let you read the terms, etc. All of the meeting minutes must be made available to any owner who wants to read them and requests a copy in wiring.

What are the "towers" the board approved? Do note that the board may have used funds from your HOA's reserves to re-do the entry features IF they were in your reserves study.

What size is your HOA, Laurie? Condos, or?? Do you have an onsite property mgr (PM)?
LaurieS
(California)

Posts:5


08/08/2017 9:02 AM  
Thanks all - I re-read the Bylaws and a director can be removed by a simple majority vote, but there's no information on how to trigger such a vote, and in any case a simply majority is not going to be something we are likely to get. I think our community has roughly 2,500 homes and I can't even begin to think how I could get over 1,000 votes to remove a director. Every homeowner I've spoken to is unhappy with the board - but our group of unhappy homeowners is only in the hundreds. It could be that there are over 1,000 of us - but trying to get that many people organized will be difficult. For our normal elections - we vote for the slate of directors and in every year I can remember we've only had one candidate for each slot (I think two of our three board members have been on the board for as long as it's existed). So, our best bet is just to get someone more homeowner friendly to run. There's at least one board seat open this round and I've got two people so far besides myself willing to run (and yes, I'm running). I think if we can only get one person on the board at least we can do a better job of informing the members of what the board is up to, if we can get two friendly people on the board we can ensure the bylaws are followed regarding voting on these projects.

Our board hasn't been turned over to the members - the old developer is still sitting on the board (why I don't know - construction was completed in phase 1 many years ago), there's a second developer for phase 2 and they have a slot. So of our five member board we have three homeowners and two developer members. The phase 1 developer member usually doesn't bother to attend the meetings - so we really just have a four member board.

There is a monthly board meeting that members are invited to attend where members are invited to address the board - but this isn't where/when any voting or issues like this are brought up it's the place where homeowners can bring complaints to the board. Prior to that is the real board meeting - and the agendas are posted in the clubhouse office. So - if you drive down to the clubhouse every month and are lucky enough to figure out from the agenda that a major project will be voted on you are welcome to attend the whole 4 hour meeting and give your feedback - which the board feels free to and does ignore. And when that pisses you off, you complain to your like minded neighbors and nothing happens. Only once in the 13 years I've lived here has the board sent an email (they have all of our email addresses) encouraging homeowners to attend the meeting because of a major concern and this was related to mailbox theft - which had nothing to do really with the board. We also have a monthly-ish newsletter that goes out - but none of these projects were mentioned in the newsletter until after the projects were started (usually they get a mention right before they were completed). We also get the yearly annual budget info - it's something like 50 pages with no summary. So - yes if I would have been spending something like 50 hours a year - I would have caught all of this. But the first 11 years the board existed, there was nothing to find - all of this has happened in the last two years.

If we can't get anyone new on the board, I'm thinking a formal letter from an attorney requesting that the board start following the bylaws. I'm not hopeful that will work though - our board seems to feel that if they involve the homeowners they won't be able to get anything done. And they aren't wrong - none of the projects would have been approved if put to a homeowner vote - not a single one.
TimB4
(Virginia)

Posts:14509


08/09/2017 2:49 PM  
Posted By LaurieS on 08/08/2017 9:02 AM

but there's no information on how to trigger such a vote,




Members vote at general membership meetings.

Your governing documents should specify that x% of members may call a special membership meeting for a specific purpose.


In this case, you would circulate a petition to call a special membership meeting for the purpose of recalling Director [name].

Since you are in CA, see an example of such a petition at: http://www.davis-stirling.com/Main-Index/Sample-Petition
LaurieS
(California)

Posts:5


08/30/2017 7:54 AM  
Update - I went to last night's board meeting and specifically asked about the three major projects:

Sports Park and New Rose Garden - these two projects were paid for from developer funds set aside for this purpose. The board president stated that although these were capital improvements - since HOA funds weren't used for them no vote was needed.

Front Facade redo and monument construction - again agree this was a capital improvement and were major material alterations to existing features as part of the project - but again since no HOA funds were used the members weren't asked to vote. This was specifically paid for by the board getting the county to use funds that were set aside in a special tax assessment fund.

So - the board (and really, this is all just the board president) feels that as long as they aren't spending HOA dollars - homeowners shouldn't get a vote in major changes made to the community. My problem with that is that during the normal board meeting they discussed the need to increase reserve funds and our earthquake insurance specifically for these items as part of this year's reserve study. We are also spending thousands of dollars to water the grass at the sports park each month - so even though these items weren't initially paid for with HOA funds - we are certainly going to have to continue to outlay non-trivial funds to maintain these features.

So, I can't undo all the terrible and budget draining "improvements" that board has already made, but that's not my main concern. My main concern is how to prevent the board from making additional material alterations to existing features or installing any new major features without a vote. They have exhausted 100% of the funds from the developer and the tax fund, but we now have a phase 2 development going in and there could be additional changes to the existing common areas that if the new developer pays for - we apparently won't be informed of or get to vote on.

Interestingly, roughly 20 minutes after I brought up my concerns regarding the bylaw requirements for member votes on all capital improvements - the board decided to vote to install new speed bumps in the sports park (using HOA funds). There was no discussion regarding whether or not this should be considered a capital improvement. (I looked this up - it's a gray area). I actually have no issue with this - but the homeowners that are going to live right next to the speed bumps might be bothered by the increased noise. There was also no talk of getting feedback from the neighbors in the immediate area.

So - thoughts can the board make unlimited changes to existing common areas or install entirely new features and skip a bylaw required vote because the HOA didn't pay for these projects?

And anyone know a good HOA lawyer in LA? I feel a letter drafted with the help of a lawyer might be my next best step.
JanetB2
(Colorado)

Posts:3355


08/30/2017 8:44 PM  
Posted By LaurieS on 08/30/2017 7:54 AM
Update - I went to last night's board meeting and specifically asked about the three major projects:

Sports Park and New Rose Garden - these two projects were paid for from developer funds set aside for this purpose. The board president stated that although these were capital improvements - since HOA funds weren't used for them no vote was needed.

Front Facade redo and monument construction - again agree this was a capital improvement and were major material alterations to existing features as part of the project - but again since no HOA funds were used the members weren't asked to vote. This was specifically paid for by the board getting the county to use funds that were set aside in a special tax assessment fund.

So - the board (and really, this is all just the board president) feels that as long as they aren't spending HOA dollars - homeowners shouldn't get a vote in major changes made to the community. My problem with that is that during the normal board meeting they discussed the need to increase reserve funds and our earthquake insurance specifically for these items as part of this year's reserve study. We are also spending thousands of dollars to water the grass at the sports park each month - so even though these items weren't initially paid for with HOA funds - we are certainly going to have to continue to outlay non-trivial funds to maintain these features.

Keep in mind the developer submitted a plan to the local government. That plan was approved PRIOR to selling any homes and needs to be abided by with any funds set aside by the developer. These were prior promises made and which potentially purchasers who bought based on said promises expect.

So, I can't undo all the terrible and budget draining "improvements" that board has already made, but that's not my main concern. My main concern is how to prevent the board from making additional material alterations to existing features or installing any new major features without a vote. They have exhausted 100% of the funds from the developer and the tax fund, but we now have a phase 2 development going in and there could be additional changes to the existing common areas that if the new developer pays for - we apparently won't be informed of or get to vote on.

If you have a Phase 2 then you are potentially still under Developer Control. Phase 2 will also be something your local government will need to approve, if not already approved. You need to check with your local government Planning Department to see what is going on and what potential upcoming government meetings are scheduled to approve (again, if not yet already approved). It will be at these meetings where you can hear what is being proposed and give input.

Interestingly, roughly 20 minutes after I brought up my concerns regarding the bylaw requirements for member votes on all capital improvements - the board decided to vote to install new speed bumps in the sports park (using HOA funds). There was no discussion regarding whether or not this should be considered a capital improvement. (I looked this up - it's a gray area). I actually have no issue with this - but the homeowners that are going to live right next to the speed bumps might be bothered by the increased noise. There was also no talk of getting feedback from the neighbors in the immediate area.

Check with your local government regarding speed bumps. Depending on circumstances and where placed some areas do not like because of emergency vehicles traveling at higher speeds hitting speed bumps.

So - thoughts can the board make unlimited changes to existing common areas or install entirely new features and skip a bylaw required vote because the HOA didn't pay for these projects?

Potentially YES ... if the items were required by the local government as part of the contract with your developer for any new features. However, existing common areas are to be maintained and approved as noted in your governing documents.

And anyone know a good HOA lawyer in LA? I feel a letter drafted with the help of a lawyer might be my next best step.

NOPE ... do not live or know of any in LA area ... plus on this site we do not give names of any entities. However, until you gather more info and if you are under developer control ... that might be a waste of money.


LaurieS
(California)

Posts:5


08/31/2017 10:09 AM  
I have been assuming that the board is no longer under developer control - the first developer no longer owns a single piece of property in the association and it's been this way for 10+ years. We have one rep on the board from the old developer and one from the new - the other three board members are homeowners. But - I'll double check just in case, thanks.

All of the builder promised amenities were completed by the original builder over 10+ years ago and the lots for the sports park land was transferred to association control. The sports park was a maybe and I suspect the developer set aside funds for it with no specific plan filed - but again thanks so much - I'll double check that as well. If we didn't use the funds to build a sports park - we would have lost the funds and no one is arguing that we shouldn't have built a sports park - our concern is ongoing costs related to the specifics of what was built (the water bill alone...) and the fact that the seemed to have come up with a plan without even informing the owners what they were up to and more than that - we should have voted on it. Also the association is renting the park out (which they are allowed to do) to a private school - which is bring up liability issues. None of our other common areas have been rented out to non-homeowners specifically to avoid the liability issues that come with going from being considered a "private" to a "public" space.

Relevant CC&Rs "it is anticipated, but not guaranteed, that the athletic park areas will be located on lot....", "the owner of the Athletic Park Areas may, without obtaining consent from the Association, enter into a ground lease with (an outside athletic association)" This didn't happen so in the event it couldn't find a group to lease it to - it was conveyed to the association "or convey the Athletic Park Areas to the Association without a lease". If the association wasn't able to find someone to lease it (they didn't). They had some funds set aside to build the sports park.

The board seems to be taking the position that since the law states that a member vote is only required to vote on improvements that cost more than 5% of the overall HOA budget to mean that if no HOA money is spent - no matter what the size of the improvement - no vote is needed. I just keep thinking that CAN'T be right. Also - our bylaws clearly state that ALL capital improvements (no dollar limit) have to be approved by the members. And we are having to spent tons of extra HOA money on water, insurance, maintenance, etc. The ongoing maintenance is definitely more than 5% of our operating budget.
GenoS
(Florida)

Posts:1446


08/31/2017 1:40 PM  
If the first developer no longer owns even a single piece of property in the community, and hasn't for over 10 years, then why do they still have a seat on the board?

I'd like to understand that before going any further.
JanetB2
(Colorado)

Posts:3355


08/31/2017 8:50 PM  
OP stated:

"They have exhausted 100% of the funds from the developer and the tax fund, but we now have a phase 2 development going in and there could be additional changes to the existing common areas that if the new developer pays for - we apparently won't be informed of or get to vote on."

Which means potential still some Developer Control. We have developments in our area where the Developer might reserve the right to add more lots due to owning adjoining land. The developer is building in different "phases". Potentially this is what is happening with the OP.
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Forums > Homeowner Association > HOA Discussions > HOA Board repeatedly violating bylaws with captial improvements



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