President of Board's Home in Foreclosure

Started by JohnW6 • 21 replies • 1266 views

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JohnW6 (Arizona)
Posts: 8

Posted:

The home of our Board President is in foreclosure and has been turned over to a trustee for auction. Is he still eligible to be on the Board? Our CC&Rs states board members must be on the deed. It looks like the house has been deeded over to the Trustee. Your insight is appreciated.

KirkW1 (Texas)
Posts: 1,665

Posted:

First, understand that until the unit is sold, the president still retains some rights and may in fact be legitimately there.

Having said that, I think someone on the board should speak with the president and simply request resignation. I would speak to the fact that a quiet resignation might keep the circumstances of his/her resignation quiet. A simply letter stating the intent to move will keep the why off record. Putting the why in seldom serves the organization well.

If that fails, then the board needs to look at what the documents say about removal. If there is no removal mechanism, then the road gets a lot harder and will probably involve an attorney. And at some point someone will need to decide how much money is justified on the issue. A few hundred is easy. But legal actions can get very expensive.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Kirk,

Just a minute, Kirk. The home may be in foreclosure however, giving the benefit of the doubt, he may not be delinquent in payment of assessments. Now, I would find that highly unlikely; however, one never knows. I would think the gov. docs. only stress being delinquent as cause for removal from the board. Many docs state removal can be taken by the board in this instance. As long as the home is still titled to him, he may not be violating any provision of the gov. docs. Depending upon the size of the assn, only his immediate neighbors may even know about the foreclosure. As long as he continues to perform his duties I don't believe the board can ask for his resignation, unless of course he is also delinquent (John didn't mention this!). Whether they should is another matter. Without knowing more about this person and his financial situation, I don't believe that is something we can judge. There are far too many circumstances that can arise in a person's financial life which might lead to foreclosure making it too difficult to judge if it's merely a lack of financial prowess or some other uncontrollable reason.

JohnW6 (Arizona)
Posts: 8

Posted:

Hi Mary & Kirk:

Thanks for your response. The President is not delinquent on his assessments. We're not sure the property is still deeded to him since the property is now in the hands of the foreclosure company. There is a concern in the community about him remaining on the Board since we have an election coming up in a few weeks. I also forgot to mention that he hasn't lived in the community for the last ten months. He vacated the house last September. We'd like to see him resign so someone else has an opportunity to be elected to the Board.

I guess we'll have to get a legal opinion regarding the status of the deed.

Thank again for your input.

MaryA1 (Arizona)
Posts: 7,043

Posted:

JOhn,

Considering the extra info you've supplied, I would suggest perhaps one of the board members having a chat with him -- perhaps the V.P. If I were on the board, I would be interested to know what his plans are in regard to serving on the board. Explain to him that if he is unable to hang onto the house he will eventually have to resign from the board. It would be so much easier to fill his eventual vacancy at the next election rather than several months down the road.

You say he moved out of the house 10 mos ago. Has he continued to attend board meetings? Some bylaws give the board power to remove a director if so many consecutive meetings are missed.

I don't know that the board needs to spend money on an attorney. As long as he continues to pay the assessments and as long as his name appears on the deed, the only way to remove him from the board is by a vote of the members. I don't know what other advice an attorney could offer -- at $500/hr or whatever! Unless you have an attorney on retainer and no cost would be involved, then go for it.

BradP (Kansas)
Posts: 2,640

Posted:

John:

Here are my 3 1/2 cents on the situation. I think the first order of business is to find out who actually owns the home, that should be able to be accomplished through your local register of deeds at the county. That will tell you one of two things...1) he is no longer the owner, in that case it is simple he isn't a board member since he isn't an owner...2) he is still the owner and you have stated that he isn't delinquent...Does he still contribute to meetings and attend?

I would approach him and ask him to resign under the circumstances...If your board elects officers why don't you strip the title of president away from him and elect someone else? If he refuses to resign he can then spend his time as a board member but not at president.

GlenL (Ohio)
Posts: 5,491

Posted:

Is he running for re-election to the BOD? Since the election is a few weeks away he may simply be waiting to bow out gracefully.

Studies show that 5 out of 4 people have problems with fractions

JohnW6 (Arizona)
Posts: 8

Posted:

Hi Brad:

Unfortunately, our current board wants to keep him on until after the elections so that they can then select who they want. There are currently three openings on the board. His resignation would open up 4 positions. This something that the current members don't want. It's one of these situations where a few people want to maintain control over the management of the community and do not want to see new faces on the board.

We've checked the county records and the title of the property was transferred to the foreclosure company. Is the title and the deed the same? I'm not knowledgeable in this area.

Thanks for your input Brad. I appreciate it.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

John,

For these purposes, consider title and deed as the same thing.

If everything you state is accurate, Prez is no longer a Board member. Whether he is still Prez would depend on how your ByLaws handle officershipness.

So now you have 4 vacancies. How you appoach filling them is your call.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

If your president no longer meets the requirements for board membership, he can't remain on the board. If he no longer meets the requirements for being an officer, he can't be an officer either. What people want or don't want is irrelevant. You have to go by the requirements in your governing documents and by state law. However, it may be possible that your documents do allow non homeowners to be on the board. If this were not true, there would have been no way for the original declarant (developer) to be on the board or to "elect" people to the board before there were ever any homeowners. An unlikely situation. Check your documents.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

I think the more important question is, "Are the actions or votes taken by the board valid, if a member, particularly the chief executive officer, is no longer eligible for membership."

This is a different situation from a board having vacancies. This deals with the legality and legitimacy of votes.

You may be dealing with a situation here in which any vote could be challenged. It could be that legally the board is unable to take any official action until the situation is resolved.

JohnW6 (Arizona)
Posts: 8

Posted:

Thanks Bruce, John & Glen!

The governing documents state that only homeowners can be on the board. I suspected that the title and deed were the same but wasn't sure. We'll pursue this further to see that he resigns prior to the election.

Thanks again for all of your help.

JohnW6 (Arizona)
Posts: 8

Posted:

Hi GeorgerwilliamsW:

Excellent point about the votes! I'll keep this in mind as I continue investigating this issue.

Thanks.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

John,

As I see it, technically, resignation is unnecessary as your docs do not allow Prez to remain on the Board. Therefore, he was no longer a Board member as of the date of the title transfer.

However, "allowing" him to quit, if for nothing other than public face-saving reasons, might not hurt. Although he'd be quitting a Board he is not a member of.

Looking ahead, do your docs permit what's left of the Board to appoint replacements, or do they have to be elected?

JohnW6 (Arizona)
Posts: 8

Posted:

Hi John:

Thanks for your comments. Yes, our governing documents do allow the board to appoint replacements to serve until the next election. I agree that allowing him to resign is a gracious way of handling his exit.

Thanks again!

John

JohnK3 (Pennsylvania)
Posts: 967

Posted:

John,

Now assuming you have 4 open spots on the Board, and the remaining members don't like "new faces" on the Board:

1. When is the next election for Board members?
2. How do the remaining Board members (in your opinion) plan to keep the new faces out?
3. Are you planning on running for the Board?

As you've found, or will find, many of our contributors have excellent strategies for taking control of Boards-Gone-Bad.

Keep the faith.

KirkW1 (Texas)
Posts: 1,665

Posted:

Keep in mind that even if he resigns now, the board will not necessarily have four positions open for the election. In my situation, the board selects a person to fulfill the unexpired term. Thus if the position is not up for election, then the board does not have to put that position on the ballot at the next meeting. In my opinion they should. But the don't always have to.

If I were on the board, I would ask for the president's resignation. If I were inclined to steer the direction of vacancy, then I would fill the position until the election at which time an election for the unexpired term would occur. This would give my choice a good chance since the incumbent has a decided advantage in any election. And if the incumbent were to lose said election I would consider it a strong message that the membership was not behind me.

There is a 1.5 cent opinion.

JohnW6 (Arizona)
Posts: 8

Posted:

Hi John:

The next board election is in three weeks. The board is basically a clique and they use several interesting techniques to get people off of the board such as personal attacks, negative email campaigns, marginalizing board members, or petitioning for their removal. Unfortunately, their neighbors support them in these actions by signing removal petitions and voting people off of the board. The remainder of the homeowners are intimated and mind their own business for fear of reprisals such as violations etc.

I was elected to the board last year. However, I was removed several months later. I made the mistake of requesting to review HOA documents such as community management and landscape contracts and a few other documents. I was given the run around by the community manager for several weeks. At the next Executive meeting, I was told by my fellow board members that I couldn't see the records. I told them that I only wanted to review documents that I was legally entitled to and that they should obtain a legal opinion before refusing me access to them. They voted not to give me access to the records.

I asked my attorney for a legal opinion on the matter and a letter was sent to the board demanding access to the records. Long story short, they removed me from the board a month later. Legal action is pending.

This board has a horrible record. We discovered that they had not filed federal and state tax returns for over four years, not paid property taxes (in fact there was a lien on our common areas that was sold to a third party), the HOA corporation was dissolved because state corporate reports were delinquent. We have three committees made up of primarily board members and their spouses. It's a tight knit group.

There are only a few of us fighting the battle. Any advice you have for us is greatly appreciated.

JohnW6 (Arizona)
Posts: 8

Posted:

Thanks Kirk. Appreciate the 1.5 cents worth.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By JohnW6 on 07/25/2008 1:09 AM
Hi John:

I was elected to the board last year. However, I was removed several months later.

John,

Please explain how you were removed from the board. If you were elected by the members, usually the only way you can be removed is by a vote of the members, unless you were recalled by the members. Or, are you saying the board removed you from your officer position, but you are still a board member with voting rights but no specific duties?

JohnK3 (Pennsylvania)
Posts: 967

Posted:

John,

I suspect Mary is right. Maybe your Board can remove you from an officership, but not from the Board. That would be a Membership call. But from what you've previously stated, perhaps they gathered enough proxies to deep 6 you?

In any case, also based on what you've detailed, it seems your Board currently has a lock on enough Member support to retain power. This would seem to lead to a pair of options, neither of which is very hopeful:

1. Find enough Apathetics/Fraidy Cats to back a slate led by yourself, perhaps through proxies, follow whatever rules to put your slate up for election, and wait for the Election Meeting.

2. But, as you say, if the HOA was dissolved for failing to file required reports, then your Board apparently has no powers to do anything. In that case, you might look into how to reincorporate, though that could be very expensive and beyond any expertise i could offer at this juncture.

On that note, what does your Board have to say about this lack of incorporation? The implications are considerable. Such as, are your insurance policies, management contracts, bank accounts, etc. still valid?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By JohnK3 on 07/25/2008 9:59 AM
John,

I suspect Mary is right. Maybe your Board can remove you from an officership, but not from the Board. That would be a Membership call. But from what you've previously stated, perhaps they gathered enough proxies to deep 6 you?

In any case, also based on what you've detailed, it seems your Board currently has a lock on enough Member support to retain power. This would seem to lead to a pair of options, neither of which is very hopeful:

1. Find enough Apathetics/Fraidy Cats to back a slate led by yourself, perhaps through proxies, follow whatever rules to put your slate up for election, and wait for the Election Meeting.

2. But, as you say, if the HOA was dissolved for failing to file required reports, then your Board apparently has no powers to do anything. In that case, you might look into how to reincorporate, though that could be very expensive and beyond any expertise i could offer at this juncture.

On that note, what does your Board have to say about this lack of incorporation? The implications are considerable. Such as, are your insurance policies, management contracts, bank accounts, etc. still valid?

John,

In AZ the process to be reinstated is quite simple -- file the back annual reports and pay the unpaid annual fees. There may be a small penalty which I'm not sure about. The Corp. Commission is really not concerned with nonprofits. I was told by an employee, they are not a policing agency! What I would be even more concerned about is the state of the common areas. John stated they were sold to a 3d party for back taxes. The board should contact an attorney to find out how to get those parcels back.

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