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Subject: Vendor Contracts and Reserve Studies
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TinaC3
(South Carolina)

Posts:1


08/13/2019 2:47 PM  
I am a new HOA Board member is SC. Do Association members have a legal right to see vendor contracts and reserve studies? Our reserve study has been funded by the Association but Board members seem to believe only Board members have a right to review it. Thoughts? What about other contracts like landscaping and insurance?
AugustinD


Posts:2049


08/13/2019 3:05 PM  
First, please quote exactly what your bylaws and CC&Rs state on the subject of records inspection by members.

Second, see the nonprofit corporation act linked at https://www.hopb.co/south-carolina . Go to the section titled, "inspection of records by members." So far, and to my surprise, it looks like the South Carolina nonprofit corporation act does not have a provision for reviewing reserve studies, and nor does it have a provision for reviewing contracts.

JohnC46
(South Carolina)

Posts:8877


08/13/2019 4:50 PM  
Tina

All members have the right to see finalized/signed contracts that the BOD signs. They do not have the right to see proposals of those not awarded the contract. As far as a Reserve Study, I say the BOD paid for it so owners have a right to see it.

JohnC46
(South Carolina)

Posts:8877


08/13/2019 4:53 PM  
Posted By JohnC46 on 08/13/2019 4:50 PM
Tina

All members have the right to see finalized/signed contracts that the BOD signs. They do not have the right to see proposals of those not awarded the contract. As far as a Reserve Study, I say the BOD paid for it so owners have a right to see it.





I did not quote Bylaws/Covenants as they all vary. The above is, I believe, more law than Bylaws/Covenants.
KellyM3
(North Carolina)

Posts:1433


08/14/2019 9:27 AM  
Regardless of by-laws, the HOA is funded and represents the interests of the property owners. There's no ethical support for an HOA board to withhold such information, especially Reserve Studies.
AugustinD


Posts:2049


08/14/2019 10:00 AM  
Posted By KellyM3 on 08/14/2019 9:27 AM
Regardless of by-laws, the HOA is funded and represents the interests of the property owners. There's no ethical support for an HOA board to withhold such information, especially Reserve Studies.




South Carolina statutes appear to me to be unusually limiting with regard to records a HOA member may view. Section 27-30-150 of the South Carolina HOA statutes instructs that the nonprofit corporation statute sections on access to records apply. I quote these below. Maybe John knows something different. Else I do not see where vendor contracts or reserve studies are required to be shared with members. It seems to me the OP's only hope is if her governing documents say something on the point (and they may very well).

South Carolina Nonprofit Corporation Act,
SECTION 33-31-1601. Corporate records.
(a) A corporation shall keep as permanent records minutes of all meetings of its members and board of directors, a record of all actions taken by the members or directors without a meeting, and a record of all actions taken by committees of the board of directors as authorized by Section 33-31-825(d).

(b) A corporation shall maintain appropriate accounting records.

(c) A corporation or its agent shall maintain a record of its members in a form that permits preparation of a list of the name and address of all members, in alphabetical order by class, showing the number of votes each member is entitled to cast.

(d) A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.

(e) A corporation shall keep a copy of the following records at its principal office:

(1) its articles or restated articles of incorporation and all amendments to them currently in effect;

(2) its bylaws or restated bylaws and all amendments to them currently in effect;

(3) resolutions adopted by its board of directors relating to the characteristics, qualifications, rights, limitations, and obligations of members or any class or category of members;

(4) the minutes of all meetings of members and records of all actions approved by the members for the past three years;

(5) all written communications to members generally within the past three years, including the financial statements furnished for the past three years under Section 33-31-1620;

(6) a list of the names and business or home addresses of its current directors and officers; and

(7) its most recent report of each type required to be filed by it with the Secretary of State under this chapter.


SECTION 33-31-1602. Inspection of records by members.
(a) Subject to subsection (e) and Section 33-31-1603(c), a member is entitled to inspect and copy, at a reasonable time and location specified by the corporation, any of the records of the corporation described in Section 33-31-1601(e) if the member gives the corporation written notice or a written demand at least five business days before the date on which the member wishes to inspect and copy.

(b) Subject to subsection (e), a member is entitled to inspect and copy, at a reasonable time and reasonable location specified by the corporation, any of the following records of the corporation if the member meets the requirements of subsection (c) and gives the corporation written notice at least five business days before the date on which the member wishes to inspect and copy:

(1) excerpts from any records required to be maintained under Section 33-31-1601(a), to the extent not subject to inspection under Section 33-31-1602(a);

(2) accounting records of the corporation; and

(3) subject to Section 33-31-1605, the membership list.

(c) A member may inspect and copy the records identified in subsection (b) only if:

(1) the member's demand is made in good faith and for a proper purpose;

(2) the member describes with reasonable particularity the purpose and the records the member desires to inspect; and

(3) the records are directly connected with this purpose.

(d) This section does not affect:

(1) the right of a member to inspect records under Section 33-31-720 or, if the member is in litigation with the corporation, to the same extent as any other litigant; or

(2) the power of a court, independently of this chapter, to compel the production of corporate records for examination.

(e) The articles or bylaws of a religious corporation may limit or abolish the right of a member under this section to inspect and copy any corporate record.

---

See
https://www.scstatehouse.gov/code/t27c030.php
and
https://www.scstatehouse.gov/code/t33c031.php
RichardP13


Posts:0


08/14/2019 11:39 AM  
Laws in some of those southern states just don't make a lot of common sense. Wasn't it less that two months ago that a pregnant woman from a southern state was charged with manslaughter because someone shot her and the bullet killed the fetus.
JohnT38
(South Carolina)

Posts:130


08/14/2019 11:58 AM  
AugustinD,

If I'm reading this right, it means Tina can show residents the Reserve Study. The above info just means that she and the board are not obligated to do do. Is this correct?
AugustinD


Posts:2049


08/14/2019 7:55 PM  
Posted By JohnT38 on 08/14/2019 11:58 AM
The above info just means that she and the board are not obligated to do do. Is this correct?
John, I agree. (My wording could have been better.)
JohnC46
(South Carolina)

Posts:8877


08/15/2019 9:30 AM  
My BOD will show any owner, any document, contract, invoice, etc. that they ask for. But we are not mind readers. They have to ask for it.
FredS7
(Arizona)

Posts:916


08/15/2019 12:51 PM  
I can't understand why the board would NOT want members to see the reserve study.

I would post it on the HOA website, if it exists, and would consider emailing it to all owners.
GenoS
(Florida)

Posts:3364


08/15/2019 3:24 PM  
Posted By FredS7 on 08/15/2019 12:51 PM
I can't understand why the board would NOT want members to see the reserve study.

I can think of several. If the reserve study concludes contributions to the reserves need to be increased substantially, a board who doesn't want to increase assessments (for whatever reasons) might want to conceal that fact. A reserve study might bring up reserve components that are currently not being reserved for. A board might want to hide that information, too, lest they have to increase assessments. Those are just a couple of reasons. They're not "good" reasons, but not all boards are committed to doing the right thing.
JohnT38
(South Carolina)

Posts:130


08/15/2019 6:02 PM  
Geno, I am on the same board as Tina and can give you some background info. Our community is facing a serious financial crisis. Our roads are in terrible shape and it appears it will cost at least $800,000 to repave them. The large concrete pad around our pool is in such bad shape that it can't be pressure washed. The tennis courts are deplorable and the AC unit for the clubhouse is about to die. There are other problems as well. We have approximately $500,000 in reserves. No Reserve Study had been done for 7 years and the previous board did not use this information to plan accordingly. I've been here for two years so I can't give you any good reasons on why/how we got into this situation. I suspect that part of the problem is we are made up of older residents and many of them are on fixed incomes. From what I have been told they have strongly resisted any increases in their HOA fees. In addition, it is my opinion that the previous boards didn't want to face the problem head on and stuck their heads in the sand. Like I said, I am speculating based on what I've been told and what I have observed while on the board for the last year and a half.

The current board got a new Reserve Study done and it was no surprise that it confirmed we are seriously underfunded. Now that we have this document to help justify how bad things are, we would like to share this information with all residents. Part of our plan is to try and hold a couple of meetings, and send out updates via email, to communicate with the community. Before the next annual meeting is held we want to make sure that everyone is fully informed and that we've done our part to prepare them for what's to come. That is the reason that Tina is asking about sharing the Reserve Study. It is part of our attempt to be transparent and informative about what is going on.
AugustinD


Posts:2049


08/15/2019 7:16 PM  
John, gosh yes, this is one of the best reasons to share the reserve study (or a capsule summary of it): So people understand why the assessment has to go up or why a large special assessment is necessary. Of course, the board that does this might get canned at the next election. But do it you must.
GenoS
(Florida)

Posts:3364


08/15/2019 10:35 PM  
Posted By JohnT38 on 08/15/2019 6:02 PM
I suspect that part of the problem is we are made up of older residents and many of them are on fixed incomes. From what I have been told they have strongly resisted any increases in their HOA fees. In addition, it is my opinion that the previous boards didn't want to face the problem head on and stuck their heads in the sand. Like I said, I am speculating based on what I've been told and what I have observed while on the board for the last year and a half.

I understand. I've said it before and I'll say it again: your HOA and mine could be twins.

80% of our reserve requirements are for the re-roofing and re-painting of the 100 homes. A $12,000 roof that lasts for 15 years comes out to about $66 per month. A $3,200 exterior paint job that lasts for 8 years is about $33 a month. $100 total. The HOA has NEVER put away anything near that amount in the last 11 years. Finally, this year, the board agreed to $100 per month per home for reserve contributions. The reaction was such that you'd think we were stealing money from peoples' grandkids. Boards for years have been most reluctant to even make the effort to grasp the problem, never mind take steps to head it off.

At the end of this year we'll have (ballpark) $900,000 in our reserves. At the current rate, and ignoring inflation and interest rates, we'll have $1,200,000 at the end of 2022. We're planning to paint in 2021 which takes $300,000 off the top, leaving $900,000 at the start of 2023. That's the year the re-roofing is tentatively scheduled for and the estimated cost is $1,200,000. A $300,000 shortfall looms in 4 years. We are trying to find a way or ways to avoid that hit and it's complicated by the fact that the roofer we deal with told us last year that "the roofs are wearing out faster than expected."

This is all on previous boards who put their heads in the sand and whose only goal was to keep assessments low.

I did a spreadsheet 2 years ago that mimicked a few Pooled Reserve Studies I found online. The final report was 38 pages long. It was very detailed and I made sure that every number in there could be backed up. I know for a fact that only 2 board members read it. That's why a few of us who understand what's happening are trying to persuade the board to have an outside, independent and professional Reserve Study done. We've never had one. At the very least we feel it's something we would definitely make the homeowners aware of, even hand out copies to whoever requested one, and be able to refer to it as, in part, justification for a continued increase in our annual reserve contributions.

The other 20% of our reserves obligations aren't disappearing, either. Some of that is for our privately-owned roads. We have about 13,000 square yards of asphalt covering 2 small-ish parking lots and 4,400 ft of 22-ft wide roads. The price of asphalt is highly variable and fluctuates along with the price of oil. A neighboring HOA paid $8 per sq yard a few years ago. We're working with that number for now. The roads were last milled and paved 12 years ago. Never re-sealed. They're not in bad shape but there's evident wear and tear in some spots that will only get worse. Snow and ice isn't the problem in FL, it's the unrelenting sun that breaks down the volatiles in the asphalt itself. At an estimated $105,000 (and who knows how much down the line), that's just on the back burner for now. With properly funded reserves, there should be no need for a "back burner" at all.

Sorry, I know you're looking for something you can use, not to listen to my tale of woe. I do wish you and Tina good luck. It's really a thankless job for the most part. Our go-to reasoning is that increases are necessary in order to maintain the top-notch appearance of the neighborhood and a desire to put the community on a firm financial footing for the years ahead.
JohnT38
(South Carolina)

Posts:130


08/16/2019 3:59 AM  
You are right that in the end, the board could be canned at the next election. For myself, I'm O.K with this as long as I feel I have the best interest of the community at heart and that I have done everything possible to find the best solution possible to address our issues. It's been brought up many times on this forum that apathy on the part of the board or it's residents is a silent killer. During my short time I've been on the board, I've come to fully understand this now.
JohnT38
(South Carolina)

Posts:130


08/16/2019 4:07 AM  
Geno,

It does sound like you're in the same boat as we are and it can feel very overwhelming at times. However, I guess that's why they pay us the big bucks! :')
JohnC46
(South Carolina)

Posts:8877


08/17/2019 1:20 PM  
JohnT

Though not all Covenants are the same, our SC covenants allow the BOD to increase dues as much as they want to but there is a procedure:

1. On or before Dec 1 the BOD must present each owner (US Mail) a copy of the next years budget including the dues increase to happen on Jan 1. This is the only time during the year we can increase dues. We went up 40% this year to build reserves for future roof replacements. Along with the budget, we did a mail out explaining, along with a spreadsheet showing, the needed increase. We had also handed the spreadsheet out at our Annual Meeting in April so some expected something.....LOL

2. Our owners can call a Special Meeting prior to Jan 1at which 51% of all owners (I repeat all owners) must vote to disapprove the upcoming budget. No one made a move to do so.

We only had one member that threatened legal action. We Emailed him a copy of the Covenant Section showing that we could do this. He went away. I was quite surprised only one raids he!!.

Check you Covenants closely as to how to increase dues. If like ours, you do not have much time left to do so for the coming year.
JohnT38
(South Carolina)

Posts:130


08/17/2019 4:43 PM  
Great feedback John. I'll go back and make sure I'm correct but I think we have a limit on how much the board can increase rates by ourselves. If memory serves me correctly it is 9%. It sounds like you guys handled it well and I'm encouraged that the blow back from residents wasn't bigger. FYI, we are on a July to July fiscal year but you are right that we better have our ducks in a row! Thanks again for the feedback.
JohnC46
(South Carolina)

Posts:8877


08/18/2019 8:14 AM  
Posted By JohnT38 on 08/17/2019 4:43 PM
Great feedback John. I'll go back and make sure I'm correct but I think we have a limit on how much the board can increase rates by ourselves. If memory serves me correctly it is 9%. It sounds like you guys handled it well and I'm encouraged that the blow back from residents wasn't bigger. FYI, we are on a July to July fiscal year but you are right that we better have our ducks in a row! Thanks again for the feedback.




If July to July Fiscal Year you could not use the above method, even if allowed, until beginning of next Fiscal Year. And as I said we get one shot a year. Budget presented on or before 12/01 and becomes effective on 01/01.
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