Letter campaign by an upset owner

I am the president of our very small HOA (10 condo units in total). In November '05, our MC (who was a friend of a friend and a poor choice in hindsight) suddenly resigned and simply walked away from us leaving the books with another Board member. We have self-managed for about 7 months now and have begun to build up our reserve cash amount as the previous MC was paying bills late or not at all and wasn't collecting consistently from owners. When we got the books there was about $800 in our account. We have opted to hire another MC and are in the final stages after checking references, etc. Unfortunately, through this fiasco, one owner has become very difficult and has begun a "letter campaign" sending letter after letter quoting Bylaws and Texas Condo codes, etc. He is refusing to pay a new increase in HOA dues and a one-time special assessment. In fact, he originally paid the increase and assessment but has now sent a letter saying the Board didn't follow the Bylaws and thus he is reclaiming the money he originally paid (and had agreed to in a vote by owners). This owner has been terribly disruptive in meetings by overtalking everyone or missing the meetings then sending letters/emails complaining about the decisions voted upon in the meeting (despite giving his proxy to another owner). His most recent letter included 11 items which he demands be addressed by the Board and Owners within 30 days or he intends to seek legal counsel. Most of the demands are completely unreasonable (i.e., having the books audited for the last 7 years, hiring licensed/bonded contractors to review all previous work done on the property to ensure it is safe) not to mention incredibly costly. As I said, we are a very small HOA collecting only $2000 each month in dues with most of that money going to pay our bills. Can you suggest where to start with this difficult owner since he won't seem to listen to the Board?

Yes, that's basically what we have done. Oddly, he paid the special assessment and the increased dues until April of this year when he decided we hadn't followed the Bylaws by not giving the stated 30 day written notice before the increase was instituted. A letter was sent to him forgiving the first months increase because, in fact, a full thirty days notice hadn't been given but more than 30 days notice was given for the subsequent months and more than 30 days notice was given for the assessment. What he has opted to do is withhold the amount he feels he overpaid from his subsequent HOA dues.

He is also claiming any work we have done by contractors on the property must provide a copy of their license and proof of insurance. We've not made a practice of doing so. I cannot find anything of this nature in our Bylaws/Declaration. Is this, in fact, true?

The previous work was completed satisfactorily, but I think this owner is angry with the new Board and making an issue of work items in the past, which obviously we can do little about. If I understood you correctly, as long as licensure/bonded/insured contractors is not stated in the bylaws/declaration and it's not a state/local law, then it's really a matter of preference for the present Board to determine and has nothing to do with past work items? Do you think we should check with our insurance coverage of the property/common elements to make sure using non-licensed contractors won't affect any future claim, if any actually occur?

One other question. He wants us to audit last years books. We had our taxes completed by a CPA and the Board views this as our annual audit. Is that acceptable or what would an annual audit consist of? We sent him a letter indicating our view on the taxes serving as our annual audit and if he wants a separate audit conducted we would charge him. We were uncertain if that would fly, but thought we'd give it a shot.

Michelle, you understand correctly. I use unlicensed contractors all the time when it is allowed. They often do the best job and for a significantly lower cost. Insurance is always desireable but not necessarily manditory- check your controlling docs. Depending on the work, if the contractor does not have insurance I get a signed wavier from the contractor and any subs. It would be a good idea to confirm the HOA's insurance coverage.

An audit for a 10 unit HOA is very expensive and thus unwarranted unless it is required by the Declaration or by statute. Tax preparation by a CPA is not an audit; it isn't even a financial review. A review by a financial committee or at the least a member is adviseable due to the history of your HOA.

If you chose to do an audit you can not charge him. If he wants an audit and will pay for it in advance I still would not do it.

Michelle, the only financial statements you need for paying tax are the year end statement of income from interest, dividends, etc. You can probably do the taxes yourself. If you use IRS form 1120-H, taxes due = taxable interest(line 2) less federal and state taxes paid last year (line 12) less $100 standard deduction (line 18). That amount times 30% = amount due.

You should include a Income Statement for the year from which you can fill in lines A, B, & C. I do these free for the HOAs we manage because it is simple and takes about as much time as typing this note.

I would suggest to be careful when hiring vendors that do not have the proper insurances. We require all vendors to have liability, workers comp, and auto insurance to protect the assest of the community. If you hire a vendor that may not be required by law to carry workers comp,and he is hurt on your property - you could be opening yourselves up to a law suit. Check with your attorney to make sure you protect your association.