BOD spending for Capital Improvement w/o membership vote, OK?

Started by DanaA • 13 replies • 3431 views

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DanaA (Florida)
Posts: 117

Posted:

Just learned that our HOA is spending $20,000 this month to widen our pool cabana area, increase the covered sitting area, etc. The contractor started laying the new slab last week. Apparently, this expansion project was decided upon two + years ago, prior to my being on the BOD. Several members have complained that the membership did not get to vote on this decision. I have read 720, and can not find the answer to whether members should have been able to vote on this. I have asked our BOD Secretary to find a reference in the minutes of 2005 or 2004, as she does not know who voted to approve it, but thinks it was just the BOD. Since this is a capital improvement, not maintenance, should the members have voted on this? We did not have a special assessment, so maybe the BOD can decide? Need to know how to answer these members complaints. Thanks.

PatrickH (California)
Posts: 204

Posted:

As far as I know, the BOD wouldn't need a vote of approval from the membership to do a capital improvement or new construction, unless the project required a special assessment. Building a swing set, a barbecue area, installing a security system or expanding the cabana area, as in your case, are all decisions that the Board makes.

Now, they way want to consult with a Recreation Committee or Facilities Committee before doing it, but they don't need to put the decision to a vote of the members.

RaymondC (Minnesota)
Posts: 64

Posted:

Your bylaws should tell you how much they can spend without a vote of the owners. In a big association it may well be more than $20,000. In smaller well.... You get the idea. The answer is almost certainly in the bylaws.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

DanaA: You can request to review the minutes of the meeting in which this decision was made to find out if it ever went to the residents, or was it only the Board who voted.

Further, if the expense of this common area project is also part of the capital appropriation expenditures, and especially if the fund can cover the cost of the project, I believe the Board does have authority to go ahead.

Based on your statement that you did not have a special assessment, do you believe the capital expense fund can cover the cost? A line item on "Capital Expense" should show the fund balance if you refer to your latest financial report.

DanaA (Florida)
Posts: 117

Posted:

Thanks, I just received a response on the details and timelines from our President. I asked for the documentation for our upcoming BOD meeting, so he sent an email out to the BOD tonight. Reason, I have members asking me about the project, and I haven't a clue about it. In 2001, at our annual meeting, the membership approved to increase monthly dues by $5.00 a month for a line item called "Major Repair and Improvement Fund". This $5.00 a month would go to this "fund". In 2004, the BOD approved motions that funds from this Major Repair and Improvement fund be used to enlarge the Cabana incorporating a storage room. Apparently, the membership "approved the expansion" through this back door line item, and did not realize they were giving the BOD discretion to spend as they wished. Do other HOAs have such a fund? Once again, our committee for this project consisted of our President to oversee the project, and two other members of the community. Our President is in charge of every single committee in our HOA. I have members screaming at me because they feel this expansion was not necessary (and in my honest opinion, they are right). We have other maintenance issues that have been tabled due to "no funds".

BradD2 (Florida)
Posts: 418

Posted:

The Board of Directors runs the affairs of the association. However, something started two years before and is just happening now smells funny. A lot could have happened in two years and the current situation needs to be evaluated rather than just staying the course.

You might want to look at FS 720.3055. Based on the annual budget and the price of this you might have had to get several bids and might be able to stop them there if you did not.

DanaA (Florida)
Posts: 117

Posted:

Thanks, Brad. I sent an email to our President asking that this Cabana issue but put on the agenda for next week's BOD meeting. His email reply was that past board decisions are not warranted to be an agenda item with the current BOD.

RaymondC (Minnesota)
Posts: 64

Posted:

You still have not addressed the question of the limits imposed by your bylaws. Till you establish they have no such authority, your efforts are only sour grapes and disruptive. They are well within their rights to deny your agenda item if the decision is in correspondence with your documents. You don't have an issue till you establish otherwise.

DanaA (Florida)
Posts: 117

Posted:

Raymond, per your suggestion, I went through our recorded documents, ours are very old, prior to 720 establishment in FL, and there is no reference to any budget caps, spending caps, or assessment caps. All it states is that the BOD will collect monthly assessments, including have adequate reserves. I did locate a separate line item for special assessments, which must be approved by 80% of the voting membership. This was not a special assessment. I have no sour grapes on anything, just a lot of questions because I want to have the BOD make proper decisions. I realize our docs need to be amended in many areas, and am working on that committee as well. Thanks for your help, Dana

DonnaS (Tennessee)
Posts: 5,671

Posted:

Dana,
The only thing that you will find in Fl.S.S. 720;3055 is for competitive bids. It states the "if a contract for the purchase, lease or renting of materials or equipment or for the provisions of services, or payment by the association that exceeds 10% of the total operating budget, including Reserve funds, competative bids will be required"

If your Budget is over $200,000, then this expenditure is within the State limits for competitive bids. IF your budget is less than $200,000, then you would have been required to get 3 bids before allowing the project.
The statutes do not state any requirement for a membership bid but your budget should have shown allocation of the funds marked for this project.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Correction I meant that any requirement for a membership VOTE-- not membership bid. Sorry, my brain goes faster than my typing.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

DanaA: I am not going to expand on your question re spending for Capital Improvement. However, I want to offer a caution to you.

You stated that you are new to the Board of Directors and members are asking you questions about this expenditure. You, as one single Board member, want to be very careful in giving information out to members.

You, as a member of the Board, are entitled to research the history of the cabana expansion project, and should also be 'brought up to speed' by the other Board members. But, members' questions should be answered by the Board as a whole--whether its in a meeting, newsletter, notice, etc.

Members will have respect for you if you listen to their concerns and convey to them your interest and sincerity in resolving problems; however, you should never give out information apart from the rest of the Board. Good Luck in your desire to be a positive influence in your community!

NancyD1 (Florida)
Posts: 447

Posted:

Quote:

Posted By DanaA on 11/20/2007 5:06 PM
Thanks, I just received a response on the details and timelines from our President. I asked for the documentation for our upcoming BOD meeting, so he sent an email out to the BOD tonight. Reason, I have members asking me about the project, and I haven't a clue about it. In 2001, at our annual meeting, the membership approved to increase monthly dues by $5.00 a month for a line item called "Major Repair and Improvement Fund". This $5.00 a month would go to this "fund". In 2004, the BOD approved motions that funds from this Major Repair and Improvement fund be used to enlarge the Cabana incorporating a storage room. Apparently, the membership "approved the expansion" through this back door line item, and did not realize they were giving the BOD discretion to spend as they wished. Do other HOAs have such a fund? Once again, our committee for this project consisted of our President to oversee the project, and two other members of the community. Our President is in charge of every single committee in our HOA. I have members screaming at me because they feel this expansion was not necessary (and in my honest opinion, they are right). We have other maintenance issues that have been tabled due to "no funds".

Dana,

You are correct in thinking that a vote is needed for this capitol expenditure. What your board did in 2001 was add a line item to the budget. This in itself is OK, but the board still cannot make the decision. They could have added 5 different line items but that does not give the board the right to add to a fixed asset without approval of a majority of the members. This improvement still needs a vote.

Fl recently added to 720 and it states that if there is a line item in the reserve fund it now has to be funded each year. This item cannot be eliminated or used for something else not intended unless there is a majority vote from the members. Since the wording "major repair and improvement fund" it may be used for the expansion of capitol assets but it does not specifically state a cabana improvement. Again, even if it did state an improvement to the cabana, that does not mean adding to the capital expense without a vote.

When the board voted to fund this item they thought they could by-pass the need for a vote. If that were the case then why not add a new clubhouse to the community. All the board has to do is vote on it. That is in essence what they are saying.

RW1 (Texas)
Posts: 149

Posted:

There is no mention of "3 bids" in FL 720. It simply says competitive bids...2 is OK, 20 is OK.

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