Get 2 months of free community web site hosting from Community123.com!
Friday, April 19, 2019
Get 2 months of free community web site hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: When are board members personally liable?
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
JaredC
(Texas)

Posts:174


04/11/2019 12:42 PM  
Currently we have a total of two board members. One is decent enough while the other is a complete nightmare. I won't go into all the details but I will give just a couple of examples:

1) This board member is our "Treasurer" and complained, during an open meeting, that the annual audit had not been completed on time. I asked if she was going to sign the engagement letter to begin the audit with the CPA firm and she said "No". Weird eh? Then she again refused to sign the same engagement letter for the 2018 audit.

2) We have a SIGNIFICANT electrical meter issue in that most of our meters are not functioning properly and homeowners are therefore not being billed correctly. The Texas PUC has issued a letter saying our HOA is not in compliance yet she votes "No" to replacing the meters.

The history is actually far worse than these two examples but the question remains:

At what point does a board member exercise such willful gross negligence (actually those words aren't strong enough) that they lose the legal protections afforded to board members? Can they ever become personally liable for their actions? I would not go so far as to say that her actions are criminal but they definitely expose our HOA to unnecessary legal liability. In fact there are currently several lawsuits against the HOA solely because of her actions.
GenoS
(Florida)

Posts:2825


04/11/2019 12:49 PM  
Sounds like negligence to me.

Is it legal in TX to have only 2 board members?

Regardless, I think you should talk to an attorney ASAP.
JaredC
(Texas)

Posts:174


04/11/2019 12:59 PM  
Our governing documents state that we need a minimum of three (3) directors. Our third board member moved away from our community months ago and the appointment of a replacement cannot be made due to the highly toxic nature of this person. She refuses to even engage in any such discussion.

Worse yet she plotted to have an annual meeting to replace our decent board member and tried to shut out all homeowners that did not vote for the person she wanted to be on the board. I didn't even get to vote! I shut that down quick fast and in a hurry.

Our PM and HOA attorney all realize this woman is a complete unhinged, unreasonable, irrational, belligerent, toxic individual.

Other homeowners and myself will likely be hiring an attorney to sue the HOA for other reasons next week and I suppose it would be a good opportunity to also ask about suing this woman personally.
MelissaP1
(Alabama)

Posts:7990


04/11/2019 3:52 PM  
Why sue when you can remove? Suing your HOA is suing yourself and your neighbors. If you got more than one person willing to join the fight to sue, then you have enough to join to remove them from the board.

BTW: I am not sure about the electrical meter thing and replacement. That may be a utilities department thing.

Former HOA President
TimB4
(Virginia)

Posts:16257


04/11/2019 6:49 PM  
Posted By JaredC on 04/11/2019 12:59 PM

Other homeowners and myself will likely be hiring an attorney to sue the HOA for other reasons next week and I suppose it would be a good opportunity to also ask about suing this woman personally.




Be very careful here.
Since you are on the Board, being part of legal action against the Association/Board may have your D&O insurance not pay (as most have a director v. director exclusion). It's likely that the membership will be paying the full legal costs of the Association through assessments.

It's likely better to gather support and wait until the general election, then vote that individual off the board and fill both seats (expecting you would be staying on the board) with those you believe will do a better job.
LetA
(Nevada)

Posts:663


04/12/2019 12:06 AM  
Posted By MelissaP1 on 04/11/2019 3:52 PM
Why sue when you can remove? Suing your HOA is suing yourself and your neighbors. If you got more than one person willing to join the fight to sue, then you have enough to join to remove them from the board.

BTW: I am not sure about the electrical meter thing and replacement. That may be a utilities department thing.





I think the HOA buys the electricity in bulk then resells it to the members at a metered price, since the HOA is the reseller, the HOA is on the hook to replace the malfunctioning meters. That's my best guess.
SteveM9
(Massachusetts)

Posts:3189


04/12/2019 5:48 AM  
Simply remove her. Use your CCRs and bylaws to do it. If your not sure how talk to a lawyer, but do not sue her. Good grief.

If you sue her she will use the D&O insurance to represent herself and they will drop your HOA. Getting a new policy will be super expensive, each year.

All this money spent will come out of "your" pockets, the homeowners. Its coming out of your dues!

When things go to the courts and lawyers, the homeowner always looses. Financially. Solve it yourself. (with the help of everyone else in the community)

You need to first gather support. Let other homeowners know whats going on, stick to the facts. Also talk about expenses coming up in the future such as lawsuits, increased insurance, and how much it will cost each homeowner. Knock on doors or send a letter to each homeowner. A .55 cent stamp to each homeowner is far less than talking to a lawyer. Specify what to do next. Show up at a meeting to vote her out, etc....
JaredC
(Texas)

Posts:174


04/12/2019 8:14 AM  
To be fair I loathe the idea of suing. Even if I won I wouldn't really win. Furthermore although I was the president for 11 years I am no longer on the board so that concern is moot. Regarding the electrical meters I have gone through a process and just recently filed a formal complaint with the PUC which is a full blown legal process and it's a slam dunk win for me. Unfortunately our HOA attorney will get be forced to get involved which means legal fees.

The real solution of course is to get the votes necessary to get her off the board. The problem is she lies to everyone and is a great manipulator. I can't tell you the number of times I have produced irrefutable evidence of her lies and people don't care. It is truly an amazing thing to watch. I have lots of experience with people who suffer Narcissistic Personality Disorder, Borderline Personality Disorder & Bi-Polar. They are so convincing that the average person has no idea just how much they are being manipulated. Of course when these same brainwashed minions say to my face "Board members should know everything about everything" (except for this board member over here) it demonstrates their lack of intelligence or concern for facts. Sigh. I don't think we can get the votes necessary to vote the nutjob.

Seriously, yet another homeowner who wants to be on the board lied straight to my face and said they had hot water when it was impossible. We have one water heater unit for the entire community and it was out. She had the audacity to not only tell me she had hot water but told another homeowner the same thing! She didn't even know this other homeowner and chose to lie to her! My brain is incapable of understanding the logic.

Now I'm just ranting. I believe suing is the only way to accomplish anything now. It's that bad.
GeorgeS21
(Florida)

Posts:1179


04/12/2019 8:41 AM  
Steve provided the correct answer.

More talk is just talk.
SteveM9
(Massachusetts)

Posts:3189


04/12/2019 9:37 AM  
do you realize suing still wont remove her?
SteveM9
(Massachusetts)

Posts:3189


04/12/2019 9:40 AM  
homeowners will start to listen when you tell them how much it will cost them personally. per month. per year. etc. typically no one cares until you tell them a dollar amount.
JaredC
(Texas)

Posts:174


04/13/2019 7:41 AM  
Sadly they won't SteveM9. I've broken down the financials into easy to read graphs and no one cares.

So it seems that no one really has an answer to the original questions of if/when a board member becomes personally liable. I have spoken with an attorney and the opinion is that while you can certainly sue them personally at the end of the day it won't have any effect on removing them from the board unless they resign.
SteveM9
(Massachusetts)

Posts:3189


04/13/2019 8:56 AM  

So it seems that no one really has an answer to the original questions of if/when a board member becomes personally liable.


When you steal money, your personally liable.
When you suck at your job, your not.
RoyalP
(South Carolina)

Posts:578


04/13/2019 10:51 AM  
OP,

When they commit mal or non feasance.

D & O insurance would protect against misfeasance (errors of judgement).
JaredC
(Texas)

Posts:174


04/13/2019 11:27 AM  
She has done that RoyalP. Voting "No" to replace electrical meters despite letters from the PUC stating our HOA is not in compliance and a professional assessment from an electrical metering company.

Voting "No" to addressing a rodent problem in 50% of our buildings despite photographic evidence of damage caused to homeowners.

Purposefully stopping repairs on my building because she doesn't like me.

Voting "No" to collection efforts on delinquent accounts totaling more than $30,000 (to secure these homeowners votes)

This is beyond "sucking at your job". This is some pretty bad stuff.
JaredC
(Texas)

Posts:174


04/13/2019 11:27 AM  
She has done that RoyalP. Voting "No" to replace electrical meters despite letters from the PUC stating our HOA is not in compliance and a professional assessment from an electrical metering company.

Voting "No" to addressing a rodent problem in 50% of our buildings despite photographic evidence of damage caused to homeowners.

Purposefully stopping repairs on my building because she doesn't like me.

Voting "No" to collection efforts on delinquent accounts totaling more than $30,000 (to secure these homeowners votes)

This is beyond "sucking at your job". This is some pretty bad stuff.
MelissaP1
(Alabama)

Posts:7990


04/13/2019 12:31 PM  
Now don't hate me for playing "Devil's Advocate" here but how is the HOA's budget for such expenses? I've had to vote "no" for things because don't have the money quite frankly. You can't vote "Yes" and have no way to follow through. That's not being responsible.

The rodent issue, that may be considered an individual homeowner responsibility. When your asking/assuming the HOA to pay for something your NOT asking an individual to pick up the costs. Your asking FOR ALL members to pick up the cost of one individual. So if I don't have a rodent problem, then why am I going to pay extra money to cover yours or another building? Can you see that kind of blow back if Rodent control was voted "Yes"?

Meters aren't exactly cheap to replace. If your HOA doesn't have the money, will everyone be on board for a special assessment to purchase new meters? Do you know the process of having a special assessment? How many people will be on board to pay over $100 in addition to their dues to pay for the meters? That may be a vote of "no" because knowing no one wants to contribute additional funds or raise dues.

Not collecting on money owed? That takes money. Matter of fact it can be a few hundred dollars to file a lien. I think we paid $400 to file. (Which is added to amount owed). We could not afford to place liens. So we had a policy of 6 months behind we liened and 1 year considered foreclosure. It was 6 months before the break even mark for the expense of a lien. So does your HOA have the funds to pursue non-payers?

The logic of them securing votes doesn't hold much water why not collecting. Many HOA's you have to be up to date/in good standing to cast a vote. A non-paying member doesn't have a vote.

Had to play some Devil's advocate here because sometimes it's necessary to see the other side of a situation. We hear yours. We don't hear theirs. There are reasons why someone may vote "no" that seem completely insane. Well if there's no money to support the idea then "Yes" isn't an option either.

Former HOA President
JaredC
(Texas)

Posts:174


04/13/2019 1:25 PM  
That is the elegance of the corruption Melissa. It is so bad that it is unbelievable.

The HOA has the funds to both resolve the rodent problem and electrical meters. I'll take your points one by one:

1) The rodent issue is caused by the HOA's failure to maintain/repair the exterior of the buildings. In this case our soffits and fascia a severely rotten on ALL buildings thus giving the animals a passageway into the buildings. If the HOA had maintained the exterior I would tend to agree this MIGHT be more of a homeowner issue however since 1 building houses 4 units and the attics are shared it does change the dynamic a bit.

2)We have received bids to replace the electrical meters and we have the money to replace them. It's sort of a moot point anyway because the HOA has no choice here. The PUC has found our HOA to be in violation of rule 25.142 (I believe that's the right rule) and WE MUST BILL HOMEOWNERS FAIRLY. I've done extensive math on this and it's funny that I'm the one benefiting the most ($10 electricity bill in the middle of a Texas summer yet also the one fighting the hardest to have the problem resolved because our HOA is losing an estimated 6k - 10k per annum as a result of the bad billing.

3)Yes we have the money to collect delinquent accounts. This really is as bad as it sounds and this person is so incredibly corrupt that she votes against collections to secure votes. In fact she even stated that all these homeowners should have their debts forgiven. It's truly unbelievable.

This goes well beyond Errors and Omissions. She is unreasonable, irrational and I would even go so far as to say insane. This is what corruption looks like.
SteveM9
(Massachusetts)

Posts:3189


04/13/2019 5:15 PM  
Posted By JaredC on 04/13/2019 7:41 AM
Sadly they won't SteveM9. I've broken down the financials into easy to read graphs and no one cares.


Well it doesn't happen overnight. Keep trying. You need to gather support from other homeowners. You have not solved that part of the equation yet.
SteveM9
(Massachusetts)

Posts:3189


04/13/2019 5:22 PM  

2)We have received bids to replace the electrical meters and we have the money to replace them. It's sort of a moot point anyway because the HOA has no choice here. The PUC has found our HOA to be in violation of rule 25.142 (I believe that's the right rule) and WE MUST BILL HOMEOWNERS FAIRLY. I've done extensive math on this and it's funny that I'm the one benefiting the most ($10 electricity bill in the middle of a Texas summer yet also the one fighting the hardest to have the problem resolved because our HOA is losing an estimated 6k - 10k per annum as a result of the bad billing.


So what kind of budget is it going to take to fix the electricity issue?
JaredC
(Texas)

Posts:174


04/14/2019 5:52 AM  
The meters, sockets and current transformers cost $3000 and the labor to install $8000. We have 35-40k in the bank (I'm still waiting for the March financials to be published). Rodents are 8k to patch the holes in all buildings and put out traps in the buildings that need them. Luckily for me 3 of 4 homeowners in my building have been catching tons of rats for the past several months so our rat problem is "under control". We're doing our own extermination which is fine with me; we just need those holes patched.

I send out emails to many homeowners giving updates. I really go out of my way to communicate with people but it falls on deaf ears. People believe what they want not what is true. The bad board member blames our lack of funds on another board member "stealing money". I give people three years worth of audits and highlight the summary saying this hasn't happened but it doesn't matter because they don't want to believe it. All I'm asking them to do is read two sentences stating there is no fraud and they won't even do that. In the final analysis half our homeowners are brainwashed minions who believe what they want, 25% know the truth but don't lift a finger to even vote and 25% of us are reasonably active and trying to do the right thing.
GeorgeS21
(Florida)

Posts:1179


04/14/2019 7:07 AM  
1. Keep simplifying the data into increasingly basic Information.

2. Find a respected individual in the local community to assess the situation and provide a short, written summary.

3. Hire a consultant with impeccable rep to assess and provide written summary and/or invite to member meeting.

4. See if there is a municipal office that can assess and provide summary or meeting.

Throughout, be consistent in the key points and costs ... don’t blame, just offer history and future courses of action.
JaredC
(Texas)

Posts:174


04/15/2019 8:08 AM  
Good advice George. We did have the HOA attorney write a letter stating that ALL board members should be replaced due to the toxic nature of things. One of the board members voted "No" to publishing that letter to the homeowners because it's all about her trying go gain control and power. The decent board member was willing to resign as an act of good faith because he too realizes what the perception is.

I guess the best course of action is to continue at least try to communicate. I've been holding off on my 2018 financial analysis (pie graphs, summary, etc) due to lack of motivation but perhaps I need to rethink that and just keep trying.
SteveM9
(Massachusetts)

Posts:3189


04/15/2019 8:20 AM  
Write your own letter.
Pay for postage yourself.

I'd personally hold a meeting at my own home so i could prevent that one person from showing up.

Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > When are board members personally liable?



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement