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Subject: previous board kept no minutes
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LaskaS
(Texas)

Posts:89


12/03/2018 11:29 PM  
hi, what remedies do owners and a new board have against a previous board who not only acted outside of their legal authority with regards to how to spend common funds. But more importantly , kept no minutes. We have been asking for some meeting minutes or records to tell us when and how certain decisions were made. However, it turns out. the decisions were not made according to they should have been. no meetings. no official discussions.etc. Basically one or two board members informing others ,,this is the way its going to go.

Now we (the new board) are trying to audit the contracts that were signed illegally. However, we can't even get a straight answer as to how the contracts were agreed upon. there are no records. .. Just a signed contract, and former board members saying they did have the authority.. blha blah..

I guess i'm asking.. How can we begin to unwind the wrongs that the previous board did, when they didn't even keep minutes or records . .. We have a contractor that overcharged us by about 100,000 .. for work that he did not do.. and i'm not kidding here.. the president paid him without even checking. She also refused to listen to owners who were complaining about the lack of completed work. ..

Now the new board is going to try and go after the contractor. Luckily, they actually filled out work orders and signed off on work that we can prove was not done. so this is actual fraud. .But I keep hearing that the previous board is completely protected from any negligence claims.. and how can we even prove negligence when they didn't even keep records..ugggg
TimB4
(Virginia)

Posts:16045


12/04/2018 3:18 AM  
Posted By LaskaS on 12/03/2018 11:29 PM

I guess i'm asking.. How can we begin to unwind the wrongs that the previous board did, when they didn't even keep minutes or records . .. We have a contractor that overcharged us by about 100,000 .. for work that he did not do.. and i'm not kidding here.. the president paid him without even checking.




Being Realistic, You likely can't undo the wrongs (real or perceived).
You can move forward and put procedures in place (or simply implement those already in place) to minimize the chance of this happening again.
This may simply become an expensive lesson for the membership.


Regarding contracts - It's likely the contractor entered into them with good faith. It won't matter if the Board acted properly or not. A court would likely require the Association to honor the contract or negotiate a compromise with the company. Therefore, read the contracts and see what is required and how they may be terminated (and how much such termination will cost).

Regarding work not done but paid for, contact the contractor and ask that they take the time to show you what they have done. If the work wasn't done but the contractor says it was, the Board then needs to decide if they can afford a court case to have a ruling on if the work was completed or not.

I would also suggest an audit. This can cost 5,000 to 10,000. However, it will have an independent CPA verify what has been happening with the money.


Hope this helps,

Tim
AugustinD


Posts:1208


12/04/2018 6:58 AM  
LaskaS, do you suspect violations of the state criminal code where you live that you think the local district attorney would actually prosecute? Even if the current board brought suit against the ex-board members in a civil action, it's unlikely the court would impose any meaningful penalty on the ex-board members. I do not know all the details, but I think there is enough to do without trying to put together a HOA-Nuremberg like trial of the ex-board members. Maybe dedicate one board meeting to putting on record all the mis-steps of the previous board, for the sake of transparency. Give the ex-board members time to state their side. Put all in proper Minutes. Then move on.
GenoS
(Florida)

Posts:2518


12/04/2018 2:54 PM  
I attended a conference where an attorney spoke about maintaining official records. Another conference attendee asked what her board could do given that the previous board members left NO records behind except for the previous year's financial statements. The attorney giving the talk said that if the records didn't exist then they didn't exist, and that they should try as best they could to re-create past decisions based on existing contracts and whatever else they could find. I agree with Tim. Move forward as best you can.

It sounds like the last board was a real stinker, LaskaS. Did your association have problems before Harvey caused all the chaos?
JohnC46
(South Carolina)

Posts:7865


12/04/2018 4:49 PM  
Laska is looking how to hang people for mis-deed versus move on.
LaskaS
(Texas)

Posts:89


12/04/2018 9:06 PM  
johnc46,,

you are incorrect..

We are moving on.. we have to.

however, if possible, we would like to recoup some of the funds paid to contractors for work that was not done, and recoup some of the funds paid to contractors that was grossly higher than market price..
think,,,

80 dollars worth of insulation and install,,,, the contractor charged the hoa 1175 for that 80 dollars of insulation.. the previous board, never got a price breakdown of what was being charged. Actually, the previous board did have a price breakdown from other contractors. but then, unbeknownst to the owners or other board members. the president dismissed the board and community agreed upon contractor and brought in her another contractor who she had dealing with in the past.

this new contractor did not have to provide a price breakdown or any comparisons.. the former president literally ok'd the contract because it was similar in price to the agreed upon previous contractors bid..,
However, it turns out, the new contractor did not have the same scope of work that the other contractors were required to bid on.. so basically, the new contractor was awarded a 500,000 contract but the work that was included in that contract would have only added up to 175-220 thousand dollars (based on the other 5 companies bids)

I'm not making this up.
GeorgeS21
(Florida)

Posts:796


12/05/2018 11:58 AM  
Laska,

While good to get some ino T, you need to spend your time with a trusted attorney.
MarkM31
(Washington)

Posts:394


12/06/2018 11:10 AM  
Posted By LaskaS on 12/04/2018 9:06 PM
johnc46,,

you are incorrect..

We are moving on.. we have to.

however, if possible, we would like to recoup some of the funds paid to contractors for work that was not done, and recoup some of the funds paid to contractors that was grossly higher than market price..
think,,,

80 dollars worth of insulation and install,,,, the contractor charged the hoa 1175 for that 80 dollars of insulation.. the previous board, never got a price breakdown of what was being charged. Actually, the previous board did have a price breakdown from other contractors. but then, unbeknownst to the owners or other board members. the president dismissed the board and community agreed upon contractor and brought in her another contractor who she had dealing with in the past.

this new contractor did not have to provide a price breakdown or any comparisons.. the former president literally ok'd the contract because it was similar in price to the agreed upon previous contractors bid..,
However, it turns out, the new contractor did not have the same scope of work that the other contractors were required to bid on.. so basically, the new contractor was awarded a 500,000 contract but the work that was included in that contract would have only added up to 175-220 thousand dollars (based on the other 5 companies bids)

I'm not making this up.




There's a big difference between $80 of bagged insulation material only and a completed job of installing that insulation. So it's almost impossible to comment on that aspect.
JohnC46
(South Carolina)

Posts:7865


12/06/2018 11:34 AM  
The rear main seal on an automobile cost about $1.00. For a Certified Mechanic to replace this seal cost about $500.00.

The material cost of a $400.00 Callaway Golf driver is about $100.00. The sale price of such is $400.00.

The tool a plumber uses to plunge a clogged toilet is about $10.00. For the plumber to do so, the cost is about $125.00.

Need I go on?
LaskaS
(Texas)

Posts:89


12/08/2018 1:07 AM  
geezer,, ,,insulation installed in between studs on a single dividing wall... , the studs are completely open and exposed.. we're not talking a rear main seal here!.

I talked to a contractor today,, ,, 2 labor hours max to install the ammount of insulation that went into the walls....

TimB4
(Virginia)

Posts:16045


12/08/2018 2:45 AM  
Laska,

So the Board made a bad business decision.
Granted, it appears to be an expensive decision.

In court, boards are protected by the business judgement rule if they make bad decisions.

MelissaP1
(Alabama)

Posts:7762


12/08/2018 5:43 AM  
May I ask what the expectation is versus reality? I've helped build 25 plus houses with Habitat for Humanity plus have remodeled a few on my own. So know a bit about house construction. Insulation can be applied multiple ways and types. Were you wanting the blown in kind and got the old fiberglass fill?

Insulation has to be hung a certain way due to it's ability to entrap moisture. A reason why many experts suggest NOT putting insulation under flooring in a crawl space. It can rot the floor boards from the bottom up. Many still think putting insulation under the floor in the crawl space is a good thing and insist on it. They are shocked to find their contractor ripping it out. (Not saying the new "spray foams" shouldn't be applied but CLOSED cell foam is EXPENSIVE).

So when you say they applied the insulation into the studs...Is it because you don't like the way it looks or is there a code thing? Fiber insulation is still very applicable and less expensive. There the kind with backing and the kind without. Both work the same but applied differently. Most likely the non-backing type was put in and wrapped around any electrical/plumbing in free standing studs in interior. Easier to apply and once the dry wall goes in should fill up the space. It won't be "tight" as it has to breath and let moisture out. It may not look attractive but it's doing it's job.

My question is how expert are you and your neighbors/members knowledgeable about construction and codes requirements? Knowing what I know about codes and construction, reality doesn't match my mind's expectations. They aren't supposed to either. That is why there are codes and inspectors. Which most likely is another expense your not factoring in. Paying for inspections is not cheap and time consuming. The next step can't proceed without a sign off from an inspector. You have inspectors for electrical/plumbing/construction. Each one different and each one responsible for signing off before next one can do their job. Was inspections part of your estimate in your mind's eye too?

Former HOA President
GeorgeS21
(Florida)

Posts:796


12/08/2018 6:45 AM  
Laska,

Get busy, fix the stuff and stop lamenting.

Move on.
JaredC
(Texas)

Posts:139


12/08/2018 10:14 AM  
I have to agree with TimB4 on so many levels.

If a board doesn't keep minutes you need to sue the HOA/COA. That costs money and what will it achieve. Yes, I am fully aware the reality sucks. Can board members be sued personally for gross negligence? Will E&O insurance cover them? Gotta pay a lawyer for that one.

A board made an expensive bad business decision. You're mad and have every right to be. You and every other homeowner got screwed. So what can you do about it? Spend money. Have a lawyer review the contract with the vendor. From my own personal business experience I hope you have detailed documentation about real or perceived deficiencies because if you do and you present those to a vendor AND don't pay them you *might* "convince" them to never pursue a legal remedy.

From a high level you really have to think about your future course of action, why you would pursue any given course, and what benefit it may have for your community. That's my .02
MelissaP1
(Alabama)

Posts:7762


12/08/2018 10:46 PM  
Suing your HOA is suing yourself and your neighbors. Do you really want to add onto the costs they are facing by the alleged bad construction work? If that issue isn't already expensive enough?

It's time to just move forward. You wanted change. You got it. So stop trying to change it back and blame the past. This is an opportunity stop making it an excuse to keep beating a dead horse...

Former HOA President
LaskaS
(Texas)

Posts:89


12/08/2018 11:58 PM  
melissa. congradulations on your work with habitat for humanity. that is one of my favorite charities. I have volunteered with them before.


The insulation was just regular insulation , r-13 , in the divisor wall between two units..
I too have done major remodeling, I, haven't ever done a build from the ground up,, but i've done many kitchen and bath remodels. flooring, , etc..

My point is, the contractor that the former president brought in to the job charged the hoa 500,000,, for a scope of work, that was drastically different than the scope of work the board had agreed upon and gotten bids from 7 different contractors... the board unanimously chose a certain contractor.. then several of the board members resigned because of accusations of bid rigging etc.. this left only one two board members.. and one of the board members. assumed the position of president,,, she then,, on her own,, decided that she would bring in a completely different contractor.. one that hadn't even bid on the project.. and she gave them the contract.. and they were supposed to be doing the same scope of work,, but apparently,, since she was the only one involved, there was no voting or scrutiny of this contract.. and it turns out,, the scope of work is significantly reduced.. yet the price is only 10 percent less than the agreed up on contractor..(the scope of work is about 60% less actual work.


when the new board, and volunteers began asking questions.. she refused to answer,, it took us 4 months to even see the contract.. and that's when we realized what had gone on..


back when she brought on that new contractor(who she knew socially) after she gave them the contract, and had them give their price.. she then appointed 6 board members so that there would be enough board members to approve a contract. however, she told these new appointees, that the decision had already been made, and that she just needed another signature....

it was a total abuse of the process.. she circumvented the entire due diligence process..and entered a contract that noone had actually seen,, apparently the newly appointed board members assumed it was the same scope of work and contract that was originally awared to a different company... but in fact it was not.
LaskaS
(Texas)

Posts:89


12/09/2018 12:13 AM  
luckily,, I was continually asking for the contract, and continually questioning the bait and switch.. and other owners were beginning to understand that we were being kept in the dark, being told one thing,, when another was done.. and all the while , owners were prevented from rebuilding their homes .. the president said, if owners rebuilt their units.. and it wasn't done how the board dictated.. they would come in and make the owner tear out their work.. this was just ridiculous.

we have a city permitting department,, every owner already knew they were required to get permits and inspections... however, the boards misinformatoin and threats caused 8 months in delays ...


anyway, ,, that's in the past.. we are on the board now.. luckily, I along with other volunteer homeowners who know something about building and contracting were able to stop that president picked contractor from actually completing any work ,, other than the work that was the hoa responsibility,,,

the president had decided that she was going to use common funds to put up sheetrock and do electric inside each unit.. this is a clearly outlined in our declaration as the responsibility of the homeowner.. .... and not only was she going to uuse common funds,, she was going to pay 8 to 10 x the market price for materials and work!....... and none of the other board members would listen,, they just stuck their heads in the sand..
even when clear fraud was pointed out.. they didn't do anything,, ..


gosh,,i don't want to describe it again,, it's just the worst year ever!.. but in the last 6 weeks or so,, the new board and volunteers had put a stop to t he nonsense.. we have stopped the sinking ship,, and now we have to actually finish what should have been done 8 months ago.. as well as,, we have to now spend countless hours trying to find out what exactly happened,, and see if there are any legal rememdies the hoa has against some of these contractors who billed and were paid for work they did not do..

contractors who had sweetheart deals that had no oversight,..,,yet the board president paid them ,, without every having actually taken a vote.. she just informed the other board members after the fact...

it's just sickening,, And then she has the nerve to tell several owners,, "i don't care,, i can do whatever i want,, I have immunity"..... well,, this is clearly an abuse of power and procedure,,and for that,, we will investigate all of our options to have her personally liable for the ammounts of money her negligence,, and actions outside of her legal authority cost the hoa... .l.. we are doing many things at once.. the primary focus is getting the common areas rebuilt,,and communicating clearly with any and all owners about what is going on.. we also have begun the audit process which is ridiculously impossible because the prevoius board didn't keep any minutes,,and the previous board won't admit they were wrong.. even though they clearly realize they were wrong,, they won't admit it, because then they open themselves up to liablilty,,,

this is way outside of the business judgement rule.. the business judgement rule requires reasonable inquiry and prudent investigation,,, none of this was done!
LaskaS
(Texas)

Posts:89


12/09/2018 12:19 AM  
jared,, I agree with a lot of what you said.

We do have a lot to consider,, we don't want to throw good money after bad..

however,, there is some indication that one of the contractors actually turned in invoices and signed off as having completed those invoices,, when the work was not done.. we have proof.. that contractor I believe by turning in and being paid for invoices that were fraudulent,, has committed criminal fraud,,and we believe we have a chance of getting some of the money back,,, but only after we have gone over ever single invoice and then compared it to the work that was actually done.. or not done..

if i turn in an invoice for painting 10 doors red,, and it turns out that only 5 were painted,,, this is fraud..

however,, the board should have caught this, the project manager should have caught this... oh but did i tell you,, the project manager, actually never showed up,, but the board president paid him anyway,, and she paid all the invoices.. despite owners protesting and showing proof that we were being cheated.
LaskaS
(Texas)

Posts:89


12/09/2018 12:21 AM  
again,, i don't think it's beating a dead horse..

this is not about just bad work.. or shoddy work.. this is the hoa being billed for work that was never performed.. and the former president went around the checks and balances in place( board vote, approval of the work, agreeing on the invoices and paying them) and she got inhouse checks cut to pay the contractor.. before the work was every verified..
LaskaS
(Texas)

Posts:89


12/09/2018 12:23 AM  
If we have to spend 10,000 on an attorney to advise us on the process,, and what chances we have ,,etc.. the upside is..it looks like we have overpaid by about 250,000.. (3 different contractors.. different work,, but that's the total)


so if we can even 100,000 back,, i think that's a good investment for the hoa.... these were all of the homeowners funds!.
TimB4
(Virginia)

Posts:16045


12/09/2018 4:39 AM  
Laska,

I wish you luck.
MelissaP1
(Alabama)

Posts:7762


12/09/2018 5:33 AM  
I say a bad investment for the HOA... That money will just have to go back into your budget and spent back on the repairs. The court can ONLY make you whole NOT a profit. So you could only sue for what you could prove you loss. Which you can't seem to do very accurately or clearly.

If the ex-President was depositing these checks into their own personal account and then paying the contractors from it, then you may have a case. It may even just be criminal. However, it doesn't sound like that is the case. It just sounds like there were checks written to various contractors for work you perceive wasn't done. Considering the situation that isn't unusual for multiple contractors to be involved. Not all work is "Seen". You don't see the work the insurance claims person does do you? Would you say they didn't do their job even though a check was written for the deductible?

Again, just move on and take on this project from this point. It's got to beyond annoying to these people who had their whole houses flooded on that first floor at this point to have you all whining/dragging feet. That's what it's coming off as to me atleast.

Former HOA President
AugustinD


Posts:1208


12/09/2018 7:16 AM  
Posted By LaskaS on 12/09/2018 12:23 AM
If we have to spend 10,000 on an attorney to advise us on the process,, and what chances we have ,,etc.. the upside is..it looks like we have overpaid by about 250,000.. (3 different contractors.. different work,, but that's the total) so if we can even 100,000 back,, i think that's a good investment for the hoa.... these were all of the homeowners funds!.


LaskaS, good for you for asking here and continuing to read answers that maybe you do not want to read. I figure your board and you maybe should meet with an attorney. For $10,000 or hopefully less, the attorney will review the documents the board has and hopefully give a wise opinion.

My first blush impression, based on some reading here and elsewhere about much smaller HOA disputes, is that going to court over this is going to cost on the order of $100,000 or more. Especially with three different contractors (and so three different defendants' attorneys) involved along with possibly the prior board members, who may very well be able to use a defense attorney paid for by any insurance the HOA has.
GenoS
(Florida)

Posts:2518


12/09/2018 1:10 PM  
I'm with AugustinD. I empathize with LaskaS's plight to the N'th degree. What happened to Laska's HOA is something I think could happen to a great many condos and HOAs in Florida some day. All it takes is a really bad storm, an incompetent board, some other bad actors and unscrupulous businessmen swarming like cockroaches to take advantage of the chaos in the wake of a devastating storm and just about everybody suffers. I wish you a good outcome, LaskaS, but look before you leap with any litigation.
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