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GraceH
(Virginia)

Posts:224

03/21/2009 11:23 AM
What can Home Owners do if the Board is not exercising their Fiduciary Duty? How can this be proven?

MaryA1

Posts:0

03/21/2009 12:00 PM
Grace, In a word -- RECALL!! Fiduciary: a person of authority who obligates himself or herself to act on behalf of another and assumes a duty to act in good faith and with care, candor, and loyalty in fulfilling the obligation. Fiduciary means "of, relating to, or involving a confidence or trust". The business judgement rule is a guide used by the courts to determine fiduciary duty and should be a major guideline in a BOD's decision-making policies. In a nutshell, the business judgement rule means that the BOD will act in good faith, in what they consider to be the best interests of the corp and with the care that an ordinary prudent person in a like position would exercise in similar circumstances. Failure to supervise, constituting mis-management or non-management, are grounds for a breach of ficuciary duty. Most courts will not interfere with the decisions of the BOD as long as the decisions were reasonably made. A board member may be subjected to personal liability if he knowingly fails to take steps to avoid illegal action by the BOD. When this happens the D&O insurance will not pay for his legal costs. Same applies if the whole board is found to have breached their fiduciary duty.

GraceH
(Virginia)

Posts:224

03/21/2009 12:07 PM
Mary, Thank you for your reply. How can we prove that they are breaching their duty?

MaryA1

Posts:0

03/21/2009 12:10 PM
Grace, What are they doing, or not doing, that you feel is a breach of their fiduciary duty? Remember, the courts will use the business judgement rule to make their determination.

GraceH
(Virginia)

Posts:224

03/21/2009 12:16 PM
Mary, The association is being run into the ground physically and financially. The board is just sitting back as the property manager time and time again ignores the By-Laws. Isn't adhering to the By-Laws part of their Fiduciary Duty also?

JonD1
(New York)

Posts:782

03/21/2009 2:12 PM
Grace: It would help if you were more specific about the actions of the Board members which now have led you to the point where you believe perhaps removing the entire Board is best for the property. Your general comments that they alow the PM to run the property and ignore the by-laws doesn't satisfy my requirements as to when an entire Board should be removed. Allowing the PM to run the property, if grounds for removal, would result in many Boards being without a job. If happens alot. In my opinion to many times when folks get the impression things aren't going the way they would like then the only solution is to remove and replace the entire Board. And that would be a positive thing? Perhaps maybe one or two of them actually know something. Does you property hold yearly elections? How many Board members do you have currently? Were they elected? How long have they served? Then who elected them and if they are as bad as you suggest why would anyone vote for them? The process of removing the Board can be long, require much effort, difficult and expensive. And you run the risk of being unsuccessful. My final question would be in the perfect world when you win WHO will take the positions open on the Board? And they have what level of knowledge regarding the property's operations? And this sounds like a good thing?

RobertR1
(South Carolina)

Posts:5164

03/21/2009 3:56 PM
JonD, Your points are well made and well taken. But, does this poster deserve consideration for her fears and suspicion's. Maybe if we could direct the question this way: Can you name a list of specific considerations that result in a Board action of inaction that would constitute a failure to provide judiciary protection, or something like that. I might suggest that this poster find all the minutes she can and study them for inconsistencies and improper meeting procedures. Then there are the financials that should be published by the Board. Then there are the requirements as listed in the covenants that the Board is directed to conform with. Just an idea.

GraceH
(Virginia)

Posts:224

03/21/2009 4:11 PM
John, Thank you for responding, I do not feel like we have rushed into this conclusion. The more I look into how things are going financially, to me, the worse it looks. I have been requesting documents since October 2008. When the P.M. told me to put my request in writing, I sent it certified mail, the P.M. did not pick it up from the post office. My second request, I submitted in early November, I dropped in the office drop box and sent in the mail addressed to the HOA and Condo Board Pres. and the Secretaries in care of the P.M. because we do not have any contact information for the BODs. Mid November was our annual meeting, I asked if the BODs had gotten my requests and they had not. Last week, I finally did get the one request for the P.M. contract. It cost me a total of $70.25 for 18 pages. We have not done an annual audit since 2003. The By-Laws state annually. When questioned, the P.M. said it is due to the lack of funds. We have no money in the reserve fund, yet the P.M. feels that we can afford to give the association employees pay increases. We budget $8,500.00 a year for telephone and related. Last year it went over budget by more than $3,000.00 $20,000.00 was in the budget last year for lighting - no lights have been done yet the money was not placed into reserves. We have had special assessments and fee increases for the same line items but if you add the income it exceeds the amount paid out. Where is the money going if not in reserves? I questioned the resale documents disclosure of the reserve fund, in my book, it stated a balance of $50.000 It was clearly a misprint. I asked if it was $50.00 or $50,000.00 the P.M. said that it was more than $50.00 but less than $50,000.00. My book is not the only one and not the only month or year that was done. Money that is paid to the association does not seem to be accounted for properly. -We have 33 rental parking spaces, at $35.00 a month. In 2007 only $390.00 was declared as income under parking spaces. When I questioned this, the P.M. said that unless she knows that it is for parking, it goes into the general fund. The BODs do not know what the P.M. salary is. It is not in her contract. The P.M. has made quite a few statements that later said was never said.(I am not the only one that hears this) When we started residents meetings this past October, the P.M. contacted the associations Attorney to try to put a stop to the meetings. One of my neighbors started a blog and again, the P.M. contacted the attorney to try to put a stop to it. The P.M. is the only signature on checks even though the By-Laws state 2 - The Pres. and the Treasurer. When questioned, the P.M. says well they can sign if they want. The time they have served varies. Some have been 10 years and some 3 months. We have yearly elections as the seats become available, however the P.M. does receive majority of the proxies and this past election, we questioned the proxies and some did turn out to be bogus. We currently have 6 on Condo the 7th will be holding the vacant seat come next month. We have 5 on the HOA and again the proxies elected. One of my neighbors was also on the ballot and did not know until I told him. Here is another example. 2007, we had 4 seats open on the Condo Board 4 people running. (myself included) we did not have a quorum for the votes. Ballots were sent out to the Home Owners. Now it was 4 seat and 5 people running. I did not get voted onto the board, however the 5th person that was now on the ballot did. for over 1 year, that person had not attended any meetings. At the same meeting in which I was requesting the board to ask for a resignation, they announced that the board decided to appoint someone. In the newsletter was the advertisement for the seat. Interested parties needed to submit a Bio. by the 5th of March. 4 people submitted. The person who was voted in by the board is a person that has not attended meetings and was not even attending the meeting (that was canceled because of no quorum) in which he was to be announced the new BOD.

GraceH
(Virginia)

Posts:224

03/21/2009 4:21 PM
JonD I apologize for the misspelling of your name. Robert, Thank you for your input also.

GraceH
(Virginia)

Posts:224

03/21/2009 4:26 PM
Please keep in mind that my original questions were: What can Home Owners do if the Board is not exercising their Fiduciary Duty? How can this be proven?

RobertR1
(South Carolina)

Posts:5164

03/21/2009 6:15 PM
Grace, I think you have to realize you don't prove anything to anyone. You contest something that is being done or not being done and present the evidence or file the charges. However, I understand what you want to do, as do others here, but for starters I don't know where you are starting from. Are you part of a group? Have you held Town Hall Open meetings to discuss the actions of your board? Do you have legal advice or on retainer. When you talk of the Board making you take down a Blog..............how did they do that? Do you have a web site.........not connected in any way to the association? Have you tried to muster the owners for a joint legal challenge. Have you attempted to get support for a Board recall? Do you know your documents? What is your personal agenda for all this, if you have one...............I hope you don't. You have yet to mention if you are the long ranger or the leader of a posse. It sounds as if you should be concerned, deeply concerned, and if you want to go it alone, I doubt you will get people to stand up for you. Mary mentioned at the onset.............Board recall, yet you mention a recent Meeting, where you all elected Board members. I would question the use of proxies to vote an election. How can you use proxies if you have a nomination from the floor. In your condo are your votes apportioned? Make them use absentee ballots instead of proxies, use proxies to establish a quorum for annual meeting. Do you operate under the Virginia State statute? Are you incorporated? How? You speak of a HOA and a condo and offer not distinction between them. You apparently are in a condo, does the condo have a Board? Is that the group you are contesting? Maybe I just don't understand correctly, and honestly, it appears you all (whoever that is) should be troubled. The Board or PM or both have not treated your requests for information with the respect you deserve. Do you want to take them to court for that, I would imagine you could, but that issue is a small piece of the problem and your attorney will want to know what you you expect to get if you sue. That is the first question a good lawyer will ask, "What do you want to do," You have to know what and why and it presents a tough issue for you to explain. Believe me, I know.

JonD1
(New York)

Posts:782

03/21/2009 6:49 PM
Grace: No need to worry about the spelling so you added an H no biggie. I have been on both sides of this issue. I joined the Board on my property after buying here and saw that the Board and PM worked together for THEIR benefit not the property's. To make a long story short I worked behind the scenes for 14 YEARS to see they were removed. Not a time I would like to go through again. To much time, effort, and frustration. Just to old now and I understand there are more important things in life on which to spend your life. As suggested and I agree you need to decide 1) What is it you hope to accomplish. 2) Do you believe that in time this is possible. As to 2) this would depend on who, how many, and how much effort other owners are willing to give to this cause. The general rule from my time on the Board most will gladly allow YOU to be the front man or woman in your case and stand by either doing nothing or little. Your chances of going this alone are to be frank, not good. The Lone Ranger pays a serious price for doing what's right. I know. From your description, and thank you for taking the time to provide it, you have serious issues down there. #1 being a Board that either allows or turns a blind eye to the behavior of the PM. Neither is good. The Board is supposed to run the property NOT the PM but the Board can either take the easy route or they are rewarded for doing nothing. Which is the case in your situation I can't tell. As to fiduciary duty. Many courts make allowances to Board members as they are unpaid, non-professionals volunteering their time. Their behavior has to be so clearly counter to the well-being of the property for some courts to hold them responsible. Unless criminal the court might give them a pass. You just never know. Do you have ANY Board members not falling in line with the Board's actions? Have you sought legal advice from an attorney with condo/HOA knowledge? As the laws vary from state to state I would suggest you take the time to gather the information you need to determine just how high the mountain is you might need to climb. Then can you make it and is it worth the effort? I have served on my Board for over 20+ years. For the last 5 as President. The last question is tough for me after all these years............ Was it all worth it??????

GraceH
(Virginia)

Posts:224

03/21/2009 7:57 PM
Robert, I am not in this alone. Yes, we have had residents meetings to discuss the actions of the board. The board did not make us take down the blog, the P.M. sought legal advice to try to have it taken down but was unsuccessful. No, we do not have a web site. We are in the process of mustering other home owners for support(just not sure if it will be for recall as of yet) I have been reading the documents for about 2 years and although I can not quote them verbatim, I feel that I am fairly knowledgeable with the By-Laws, Condominium Act and the Property Owners Act. I do not have a personal agenda for this other than I do know right from wrong. I am neither a lone ranger nor a leader of a pose. Our group of home owners have been working together and with every residents meeting, our group seems to be growing. I am not a board member. Not all board members were elected. some were appointed. I do not know if we operate under the Virginia State Statute. When I have mention the State Statute, The P.M. said that she did not know what State Statute I was talking about. However, I thought that the Virginia Property Owners Act and Virginia Condominium Act were the State Statutes. I do not believe that we are incorporated. Yes, I am in a condo, and yes they do have a board. I do not offer distinction between them because although Condo does have more issues than HOA does, we have just as much non compliance from the HOA. I do not know if court will be the answer. All I expect, or want from this is for a board that will honestly put the association first.

GraceH
(Virginia)

Posts:224

03/21/2009 8:15 PM
Jon, I am in the process of seeking legal advise. We do have 1 board member on the condo board that has been trying to educate the board as to what has been going on for too long. At this point, she is looked at as a trouble maker(if you will) by some of the other board members. To the point that the Pres. has outwardly chastised her for asking questions about the budget. At that budget meeting, the newest board member said that it was only the draft budget that they were voting on. (not realizing that once approved, it is now the approved budget) If justice prevails, than yes, in my opinion, it is worth it! I applaud you for taking the time that you have invested into your community and the time you have taken to help me try to better my community.

RobertR1
(South Carolina)

Posts:5164

03/21/2009 9:40 PM
JonD, It is a strange reality that you can spend 14 years on a project as you describe and still be unclear in your efforts and if results have been worth it, while I, can read the first few words of your sentence and know with certainty your doubts are unfounded. I owe you, as do most members of all associations now and in the future. I am not being melodramatic when I say this, I truly speak with a straight tongue. Listening to your story supports my efforts over the years as your story and actions will support your association, don't for a moment think this is not true. Think back a few years Jon and remember the times you were frustrated because your association problems seemed so deep seated and immovable. Once these practices that bring woe to these associations are founded, they just keep rolling on because that was the way is was always done. So you chipped away at the mountain and you brought about change and you molded a new mountain that will be twice as high and twice as strong as the one you tore down. And ten years from now someone will give your association a critical review and wonder who JonD was, and what motivated him to accomplish what he did, and he will fight to hold onto what you melded into the association as he knows it. I also appreciate the fact that even though, you didn't change all you wanted, you are still waiting to be given the opportunity to chip away some more. It is comfort that this OP has given enough thought to the problems to realize the goal is doing what is good for the association.........as that is what drives you......and I.

RobertR1
(South Carolina)

Posts:5164

03/21/2009 10:05 PM
Grace, So..................I think you have come a long way and have really answered your own questions. You don't need advice, you are doing fine on your own and you will win the battle. Just keep chipping away and you will start to see cracks in the wall that the Board and PM have built up. Be ready to stick a doubt in there and give them a poke. You are also blessed you have support and you are in luck if a couple of you stick together to fight the good fight. This may not apply to you but it does to us, work on your condo, I assume you are an entity, one step at a time, and stay inbounds. Work on the web site, send out e-mail blasts, request the e-mail list that the board has. Our Board didn't even recognize they were not hiding the owners names and addresses when they sent out e-mail stuff, and little by little we got the e-mail addresses of nearly all our members. I read recently that this list of e-mail addresses had been declared by some court to be "recoverable" with a request from an association member, and if they don't turn it over just keep building yours by word of mouth. Your enemies will also want to know what you are doing and will at times ask to be added to your address book. You all don't care, you have nothing to hide, be an open book and keep chipping away. The more noise you can make the more uncomfortable the other side. Remember, you want to tell some one something, they want to not tell someone something......bottom line. Let your battle continue and keep us posted and you will be adding to the solution as you march along. Your recognition that the association is prime, will see you through the tough spots and will also serve to allow you the high ground.

GraceH
(Virginia)

Posts:224

03/21/2009 10:44 PM
Thank you all for your help. It has been enlightening to say the least. Robert, If you are not already, you should become a writer. Jon, Your wisdom is immeasurable. Mary, You light the spark. Thank you all! Kind regards, Grace

MaryA1

Posts:0

03/22/2009 7:43 AM
Grace, As I mentioned earlier, the BOD should be in control not the PM. From what you have written it's definitely the other way around. You should definitely lobby the BOD to put out bids for a new mgmt co. In the meantime educate your fellow board members that it's their resp. to be running the assn, not the PM. Until they understand this, nothing is going to change.

JonD1
(New York)

Posts:782

03/22/2009 8:02 AM
RobertR1: My question for me can be seen in two different ways, as to whether my efforts were worth it. #1 for the property and the other unit owners YES my time and effort have served them well. (While most live under the illusion that everything falls into place by magic!) My more serious concern is now whether my efforts have been worth it for ME. I have served this property for 22 years. Secretary, Treasurer, now President. For the last 5 years it has become nearly a full time job. In my opinion you simply cannot do this properly at a meeting once a month. I have been seen as the trouble maker. I have been called in the early morning hours with hang up calls. 100s I have had people sent to "visit" me in the late hours hoping to influence my actions. I have been physically assaulted. I have had my un-listed phone numbers made public. I have had people I cared for threatened. I have been sued PERSONALLY not as a member of the Board. There is a difference. I have had criminal charges filed against me. (Long story!) When we have needed to appear in court it was ME there, none of the other Board members and forget about any of the unit owners. I have been the point man for this property. Over 5 years we have increased our assets more than 5X. Saved and spent nearly $300,000 on projects to improve and maintain the property. Seen a 50% increase in the property values. So back to my question was it worth it? For the property YES. In hindsight for me NO. As Grace suggested I too know right from wrong. Whether that is a blessing or a curse up to each of us to decide. I don't walk away nor do I allow others to change my direction. Just not my make-up. But there is no doubt a price to be paid. "And ten years from now someone will give your association a critical review and wonder who JonD was, and what motivated him to accomplish what he did," Robert, with all due respect I couldn't disagree more. To be brief, my time on the Board is nearing an end. There simply is more to life than holding things together. Looking down the road and being a realist,I have concluded that within 6 months after my departure this property will sink into the hole I have held it out of for 22 years. No one will continue to make the effort or give it the time I have. They will let things go and slowly or quickly things will fall through the cracks. This will become a once a month Board. You can't do your job with a once a month effort. They will support you while you carry the load but they would never carry the load themselves. Monday night we have a special meeting to discuss common charges. In today's economy and looking forward this area requires much thought and consideration. We are ( or should I say I am) involved in a lawsuit with one unit owner that will soon be going to trial. It is me who reads the court papers ( all of them) it is me who speaks with the attorney, it is ME who will be in court each and every day. No one else Board member or owner bothers. Most unit owners and several Board members have no clue what effort I put into this property on a daily basis. Whether it involves speaking with our attorney, the management company, some contractor, or so many other items that need to be addressed. "Nobody watches your property like you do." When you allow others to oversee your biggest investment you open yourselves up to problems. The reality is not many people are capable or willing to make this sort of effort. They take the easy way out. And for Grace: Three things. 1) Even though you might have right on your side, with time the other side comes to believe they are entitled to the "benefits" of their actions. It is possible they might not go quietly into the night. As Ross Perot used to say "we're going to have to get dirty on this one." 2) If you are seeking legal advice make sure it is with someone with knowledge of condo/HOA laws. All lawyers are NOT the same. You don't use a real estate lawyer for a criminal defense. But many lawyers will tell you they are familiar with condo law when in fact they don't work in the area. 3) Finally, GOOD LUCK AND YOU HAVE MY BEST WISHES. Funny thing as a kid many years ago I used to watch the Lone Ranger, Sky King and Roy Rogers. The simple message was there is a clear right and wrong to everything and in the end by the conclusion of the show RIGHT always wins. I just have my doubts that in today's world you can wrap it all up with the good guys winning in 1/2 hours time. Judging from my expierence it just might take a little longer and perhaps there may be no end in sight.....

RobertR1
(South Carolina)

Posts:5164

03/22/2009 9:46 AM
JonD, Well Jon, you are old enough to know who Red Ryder was so you are old enough to know past is past. Your advice to Grace was on the money and not clouded with a lot of experiences (arguable). You absolutely know the association business but you can't predict the future and we go through life thinking we don't make a difference but we do.............bad and good, and never one or the other. But your antiforce can not, today, walk out their door and look around and see the difference.......you can, be glad in it. If you want to throw in the towel, you know you have one person to serve..........you, so do it, sit back relax a little and post some more on this site. You will enjoy it and it is not near the trouble, there is something uniquely satisfying helping someone you don't know. and that goes both ways.

MaryA1

Posts:0

03/22/2009 9:58 AM
Jon, After reading your last message,I have to ask: was it worth 22 yrs of your life? As you said: "Looking down the road and being a realist,I have concluded that within 6 months after my departure this property will sink into the hole I have held it out of for 22 years." Was it really worth 22 yrs of your blood, sweat and tears to keep this assn "out of the hole" when no one but you cares? IMO, let 'em sink; it's not worth the effort if I'm the only one making it!! Both my husband and I have been there, done that. Now I sit on my HOA's advisory board; I don't have the resp. of a board member but I'm privy to everything that goes on. I have a voice that is listened to, but I don't have a vote and I don't have all the headaches that go with being a conscientious board member. When fingers are pointed, they're not pointed at me.

DonaldM3
(South Carolina)

Posts:132

03/22/2009 11:05 AM
“IMO, let 'em sink; it's not worth the effort if I'm the only one making it!!” The trouble with your logic Mary is when they “sink”, it’s going to cost you! Not sure exactly what you mean by “sink” but when the HOA sled goes down the hill, all the owners are on board and when it hits the tree you and the other owners are going to get bruised. Whether that means an increase in your regular assessment, a special assessment(s) or a decrease in home values, it’s gonna somehow hurt.

RobertR1
(South Carolina)

Posts:5164

03/22/2009 11:32 AM
DonaldM3, Right you are Donald, it's one bus you can't just step out of. But maybe you misread Mary a tad. She hasn't jumped off the bus, she is just working at the problem from a more comfortable spot. Certainly for her association to just suddenly not have her expertise would be a great loss indeed, but one day it will happen and you, and I and Jon will be gone.........somewhere. I like to also keep in mind, and we all have been through it; how very difficult it is to change some ingrained bad habit that associations pick up along the way. I expect they also pick up good habits and maybe we had something to do with that and ten years down the line a little change we made is still bearing fruit. I suppose it is possible, as Jon says, that one person can hold up the association, apathy could do that, and down you go. Chances are that when this person bows out there is momentum that will keep the ship righted for a while anyhow. I think Jon believes we think that he is exaggerating, but in reality, we are just trying to do the best we can here on this site.

MaryA1

Posts:0

03/22/2009 12:07 PM
Donald, Why should only one person be concerned about the assn? If it "sinks" -- goes under, assessments need to be raised, etc, etc, who's fault is it? The one person who tried to keep it afloat for so many years or all the other members who couldn't have cared less? I know I will also have to pay, but, frankly I've been paying all along -- it's the rest of you (you plural) who haven't!! One person cannot do it alone and at some point that one person is going to say "I've had it!". Frankly, IMO, the people who stay on year after year because they know (or think they know) no one else will step up to the plate or think no one else can do the job -- whatever the reason, are really helping to create the problem. The members get used to them being there and doing the work and adopt the attitude -- "as long as Joe is willing to do the work, I don't need to be involved". In most instances when "Joe" no longer wants the job, someone will step up to the plate. Whether they do the job as well as Joe did or not, doesn't matter; the point is that Joes is NOT indespensible, no matter what he thinks. There may not be a better qualified board member than him, but he is not indespensible.

DonaldM3
(South Carolina)

Posts:132

03/22/2009 2:02 PM
Sorry Mary if it appeared I was attacking you as it sounds like you’ve been a valuable asset to your community. The words “let’em sink”, however, almost sounds like you’re turning you back on them but I know you’re not. I’m pretty much in agreement with what you are saying. Sometimes you have to turn up the heat a little and then step back and let a bubble or two rise to the top – then just stir the pot on occasion to keep things cooking smoothly. (I’m not starting to sound like Robert now am I? It might be something in the water down here!)

RobertR1
(South Carolina)

Posts:5164

03/22/2009 3:27 PM
Donald, You are beginning to sound a little like me. It is probably not the water as much as my theory that at some time in life we all degrade to the point we all have the same number of brain cells. I think it starts when our butts begin to get skinny.

DonaldM3
(South Carolina)

Posts:132

03/22/2009 5:50 PM
Thanks for the ‘heads-up’ Robert; I checked a mirror and I don’t think I’ve started yet. On the other hand, my wife has me convinced that my cell count is already dangerously low. Do you have any other indicators I could use?

RobertR1
(South Carolina)

Posts:5164

03/22/2009 6:14 PM
Donald, Yes, but if your wife's only concern is low brain function, count your blessings and keep your mouth shut.

DonaldM3
(South Carolina)

Posts:132

03/23/2009 5:20 AM
As usual, Robert, excellent advice! My problems are dissipating as I write.

MaryA1

Posts:0

03/23/2009 10:40 AM
Donald & Roberts, You guys just made my morning! Thx!!! :-) And, Donald, I did not think you were attacking me! But, I am glad to know that you understand what I was trying to get across. The bottom line is that, in many instances, after awhile you realize that your efforts are really not appreciated and you start to wonder exactly why you continue on. After you step down either someone else will come along and do just as good a job, or maybe even better and everything will be rosy. Or, on the flip side, the BOD will go to pot along with the assn and hopefully that will be a wake-up call to the members and they will have gotten exactly what they deserve. HOAs are volunteer assn's which means everyone should realize that at some time it may be their turn to either be a board or committee member. One person, or just a few, cannot do the job for ever and ever.

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