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Subject: Property Owners Association
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Author Messages
MagdaS
(Florida)

Posts:32


10/28/2009 6:18 PM  
I keep reading all the questions and answers in this site and have learned quite a bit. Thank you all for the education given to me.

We are a property owners association, Non-Profit incorporated and the bit - not the official HOA. Only income is membership dues of $20.00 per year. Expenses are
a seasonal newsletter and insignificant office expenses. The directors are of course all volunteers.

Presently we are trying to get the developer/declarant to rescind an amendment to our covenants that requires the homeowners to pay a certain amount per month to keep his restaurant and golf course functioning. Both are privately owned by the developer and open to the public at large. In other words, a bail-out.
Thanks to an e-mail campaign of our HOs he temporarely stopped trying to collect. However the amendment is still in the official records and he therefore can start it up at any time at any amount.

We are also after him to pay his part per unit of the montly maintenance fee. He has currently about 40 spec homes that are rented and his company is building another 40 or so, also for rent. He claims his spec homes are not part of the HOA but of course his renters use our facilities without any cost to him. The resnt are his.

Since our group does not own any property and has not employees we were told that the Group does not need insurance, such as liability etc.

Now, we the Board of the Group are afraid of the possibility of being sued by the developer/declarant. Can you advise if we do need insurance to protect the Directors?

Thanks in advance for your advise. Magda
SusanW1
(Michigan)

Posts:5202


10/28/2009 8:10 PM  
What do you mean you are NOT the official HOA?

Has there been a turnover from the declarent yet?

DonnaS
(Tennessee)

Posts:5671


10/29/2009 6:31 AM  

Magda,

Also, what does "our group" mean? Board, neighbors, group of rebels?
FrankN
(Texas)

Posts:15


10/29/2009 7:26 AM  
MagadaS

If in fact your “group” is a "Not for Profit Corporation" functioning as a HOA the BoD & any officers definitely need to be covered by an insurance policy. I think it’s called an Officers Errors & Omissions policy. I suggest you get covered immediately because if you get sued it’s too late, no insurance company will write coverage.

Since you don’t own any property or have any employees you most likely don’t need any liability coverage.

Hope this helps
MaryA1


Posts:0


10/29/2009 7:52 AM  
Magda,

The terms "HOA" and "POA" are usually interchangeable. POA = property owners assn and HOA = homeowners association -- as you can see, the same meaning.

Check your CCRs under the article entitled "termination, amendment" to determine what the procedure is to amend. Normally the members must vote on an amendment and usually a very high % of votes is required. However, while the developer is still in control he may have authority to amend the CCRs w/o a vote of the members.

Regarding your assessments: first you say you pay yearly "dues" of $20; then you say he developer is supposed to be paying a monthly maint fee. What is the difference between the "dues" and the "monthly maint fee". Normally the members have one assessment that is either paid monthly, quarterly or yearly. Some members refer to the assessment as dues or maintenance but it is really an assessment. What are your requirement?

You refer to your "group" and the "Board of the Group". Do you mean to say the members and the board of directors of the POA (the assn)? If so, then the assn does own property which may be only a few common areas or if you have amenities, other than the golf course and restaurant, they would also be owned by the assn. Was your BOD elected by the members? Of if your assn is still under declarant control, did he appoint the board members? Either way, the board members should be indemnified. Also any property owned by the assn should be insured against damage. The assn should also maintain a fidelity bond on any individual who handles assn funds, this would include the board treasurer and/or a property manager.

Why do you think the developer is going to sue the board members?

MagdaS
(Florida)

Posts:32


10/29/2009 8:46 AM  
Boy did I confuse the issue. Sorry about that. I'll give you our history.

Our community's incepetion was January 1998. The final count of untis is scheduled to be 974 of which close to 600 have been sold so far. We are still under developer/declarant control thanks to his amendment of covenants from 2/3 to 90%. We are a 55+ gated community of privately owned individual homes.

After 4 years of being totally ignored by the powers in charge, developer/declrant and his employee HOA board, a large group of residents in the community at that time got together and decided to form a private association to try to speak with one voice. In 2002 we incorporated as a Florida Non-Profit. Membership for THIS group is the $20.00 mentioned.

Our "rebel" group has had some success such as getting the books open which is required by Florida 720 anyway. An we finally get the construction gate closed when they think about. He have had quite a few break-ins.

Our monthly HOA maintenance fee is presently $265.08 which includes aside from the normal expenses a $57.00 p.m. CLUB FEE that entitles us to use the facilities.
WE, THE HOMEOWNERS, HAVE NO STAKE IN THE CLUB. We, the homeowners, pay the facilities' expenses but have no claim on any income from the public restaurant and golf course. The club is privately owned by the Declarant and the above $57.00 fee is not used to offset any club expenses.

The developer pays a guaranty only which gets smaller and smaller every year as homes are sold. This guaranty was rescinded, by letter, by the developer in January of 2005 and he paid one month per maintenance fees per lot. Then he reverted back to the less expensive (for him) guaranty.

According to our own covenants once the guaranty is invalidated by usage he has to keep paying per individual unit.

He is currently renting 40 spec homes and is building 40 more due the excellent rental market around here. This is wwhere I came in with the remark that he is not paying his fair share. His renters use our facilities at the homeowners cost.

One of the latest amendments eliminated the 15 year turn-over date which leaves that open. The other, and that's the one the broke the camels back, is an additional fee for the club. And I quote:

"At the discretion of the Club Owner, the Club may implement a policy that requires each Owner to purchase at least a minimum of food, beverages, merchandise or services from the Club, or be billed for the minimum amount. The amount shall be determined by the Club Owner from time to time".

According to our covenants the DECLARANT/DEVELOPER IS THE SOLE OWNER of the facilities and the HOA (us homeowners) has no claims on any income. Now we wants $40.00 per month per household on top of the %57.00 we are already paying.

Thanks to our residents' e-mail campaign that was temporarely suspended but is still recorded as an amendment to our covenants.

That is why we hired an attorney and with his help hope to convince the declarant to remove these 2 amendments from the records. By convincing I mean we will try to negotiate in good faith but if this doesn't work we will go further.

Our private group board is worried about being sued in return. Tha is why we are trying to find out if and what kind of insurance we need to protect us. I personally think like Frank from Texas that we should get on the ball immediately and get E & O insurance.

Any other thoughts from anyone? Please advise. Thanks, Magda



DonnaS
(Tennessee)

Posts:5671


10/29/2009 9:57 AM  


Magda,

How the heck were you able to do this?--"In 2002 we incorporated as a Florida Non-Profit. Membership for THIS group is the $20.00 mentioned."

What documents do you have such as Articles of Inc? Are they different than what you have from the Developer? I don't understand how you can break away from a Developer within an already exhisting association.
I think that having a lawyer working on this is a very excellent idea.
RobertR1
(South Carolina)

Posts:5164


10/29/2009 10:49 AM  
Donna,
Why can't a group of people from any state living any where form a corporation for a mutual benefit. I doubt their group is connected to the Club/developer at all.

What I would be asking a good HOA lawyer is, can the developer do what he is doing. I can't imagine this kind of thing passing a court test. It sounds life these people are signing up for servitude or something. I doubt very much in SC, a non equity club can require the folks living in the confines of the development to belong to the club or pay dues unless they elect to. In fact I am almost absolutely sure of this. Another thing, as the developer developes property and the owners of the property become members of the POA (HOA), the developer loses and the HOA gains with each new owner paying dues to the HOA. I know it is legal for a platted development to be required to join and pay dues to the HOA. Then this business of the developer renting out his property and not paying unit dues to the HOA is certainly suspect. Then he comes along and locks you all into years of the same kind of treatment.

Have I got all this right?

Is it possible each owner knowingly signed up for something like this. You need a good proactive lawyer to study your documents and report back to your entire membership what is goping on, why, and what you all can do about it.

It will be worth the investment to pay for this information. Then, this group can decide what to do.
DonnaS
(Tennessee)

Posts:5671


10/29/2009 11:05 AM  

Robert,

You asked why can't a group of people form a corporation for a mutual benefit? I don't know if they can, that is why I asked "How the heck can you do this?" I surely want to know how it was done knowing that they are deed restricted to follow other documents for the same property. I am not being a smart butt but I really am interested.
JohnO6
(Georgia)

Posts:424


10/29/2009 11:20 AM  
Donna -

I liken this to a "club" deciding to formalize itself with the creation of a business entity. Nothing prohibits, it, but there's undoubtedly no legal stake this entity has in the properties/areas/functioning of the community.

In fact, the "real" HOA likely doesn't have to acknowledge/respond/deal with this other association at all.

The idea that this group actually accomplished anything is merely testament to the power of many individuals speaking together with one voice .. .. ..
DonnaS
(Tennessee)

Posts:5671


10/29/2009 12:28 PM  

John,

Without seeing how the developement is set up, Magda has not given us enough information on some of these areas.

This I cannot figure out and really question what she has written.---"Presently we are trying to get the developer/declarant to rescind an amendment to our covenants that requires the homeowners to pay a certain amount per month to keep his restaurant and golf course functioning. Both are privately owned by the developer and open to the public at large. "

If that is indeed true, then the members of the association either have part ownership in the club,or they have membership to the club . If they are part owner, then they should share the profits and expenses. It would be nice to see the amendment that Magda states they are trying to have the developer rescind.

I lived in a community like this but we members did not pay anything towards the club, therefore we were not responsible for any dues nor had any ownership or say-so in the operations of the club.
RobertR1
(South Carolina)

Posts:5164


10/29/2009 12:41 PM  
John, You are "exactomundo" again, what ever Donna said in the post about e-mail addresses.

Two for two today John. If I ever got two people to agree with me in one day, I would take a week off and go walk the beach somewhere. But wait, I'm wrong most of the time and I live where I can walk out the door and walk the beach. Life is just not fair John.
SusanW1
(Michigan)

Posts:5202


10/29/2009 12:47 PM  
Well, the articles of Incorporation for her non-profit would spell out its Mission. I suspect its social in nature and has nothing to do with the governance of the HOA - which sounds like its still under control of the declarent.

As a non-profit corporation, you have some liability coverage, but you must act within your mission. So perhaps the actions that you want to take are not covered as a part of the reason why it was created.

You need to see if your corporation has the power to tangle with the entity that is really running the HOA.
If not, then just get some like-minded couples together and get a lawyer.

But don't jeopordize the non profit status of your group.
MicheleD
(Kentucky)

Posts:4491


10/29/2009 12:50 PM  
Donna:

It sounds to me they have simply created a VOLUNTARY organization that has as one of its missions to speak as one voice to the developer.

Like John said, anyone can incorporate and create a board and have members, if one pays the correct fees.

The (apparently) voluntary group obviously lobbies the developer (on behalf of the development residents) to obtain certain compromises, but in the end, the developer only works with them as he wishes and isn't compelled or restrained by their by-laws in any way.

He should, however, be following his own development's formal and official governing documents.

I'd be interested to know if this Club Fee has always been a part of the documents. If so, fair or not, if the people purchased into the development with that as part of their contract, I don't know what they can legally do about it to stop him.

However, the (apparently) voluntary group might still work to lobby for a change. Without knowing any other details, I would suggest they take the actual legality of the Club Fee to an attorney to look over.
RobertR1
(South Carolina)

Posts:5164


10/29/2009 12:57 PM  
All,
As I said: we did it in SC, went before the Master in equity and settled.

We fought the Law (developer),
and we won.

That's a song, almost. We were incorporated, took donations are had a members list, had a mission and none of this had anything to do with the developer, in fact we may have gotten a donation from someone not even an owner of the HOA.

I think folks don't realize what power a well formed and directed citizen's group can yield. It is double hard work and as always a few will end up doing the most work by far.
DonnaS
(Tennessee)

Posts:5671


10/29/2009 4:08 PM  

Michelle,

I understand them being able to form their own non profit corp because anyone can do that. If they have seperated some of the members to be a voluntary POA, how could they accomplish that. That requires a super majority of members to pass the seperation from the established HOA and they certainly do not have that either.

What I don't get is where Magda says that they(who are they) follow 720 Statutes. Does she mean her group or the HOA/ developers group. If it is her group, they need Articles of Inc to file in becoming a non profit POA corp.. How can they have Articles of Inc on properties that are UNDER LAW, already incorporated under different Articles?

As for the club house, she said that they have the right to use the clubhouse under the current documents and they pay a fee for it's use, probably maintenance and staff. She wants to know why the owners do not share in the profit. Lot's of luck with that one. They don't own it, the developer does. Just because it is part of the developement, does not give them ownership. Boy, this is exhausting when we don't know what all of the documents say.
MicheleD
(Kentucky)

Posts:4491


10/29/2009 5:39 PM  
Donna:

I think you are really taking this too literally.

You are aware they are able to form any corporation they like.

They just happen to call it a POA.

It has absolutely NO formal authority over anything in the actual HOA, and they know that.

It's "voluntary," in that if a resident also wants to join, if he pays the $20, he can.

It's an advocacy group, more than anything, if that helps clear it up for you.

They are not claiming any administrative function in the HOA whatsoever, only using their numbers to organize and lobby the developer.

It's probably what they decided to call themselves that is tripping you up.

But it's clear (at least to me) that they are "in name only" and their function is purely for an organized front.
DonnaS
(Tennessee)

Posts:5671


10/29/2009 6:37 PM  

Okay Michelle,

I'll happily go with your explaination. I still think that Magda needs to answer some questions just for clearing things up as I have an inquiring mind.
MaryA1


Posts:0


10/30/2009 8:23 AM  
Michele & Donna,

Magda did not say what her nonprofit is called.

Frankly I think it was a waste of money to form the nonprofit. Just banding together and confronting the developer with their concerns would work just as good, IMO. Forming the nonprofit just means spending more money just to stay in business, so to speak. Isn't there a state agency in FL that they could contact for some help?

But, I do agree we need more info from Magda.
MagdaS
(Florida)

Posts:32


10/30/2009 8:32 AM  
Thank you Michelle for disecting this so well and Thank You Donna for asking such pertinent questions.

Here are some excerpts from our covenants:

Under Art.6 CLub Ownership and Use: "The Club is pravately owned by the Declarant, is not part of the common areas and is not owner by the Association"

There is a provision in our covenants that Owners (us) pay a fee for using the Club. Except for the excessive amount of $57.00 per month (increasing by $5.00 per year) we have no problem with this provision.

What bothers the residents is that fact of the latest amendment (shown in my prior letter) to "subsidize" this privately owned Club's restaurant and golf course as stated by a letter we, the homeowners received management of the restaurant and golf course. Any resident of this community pays the same golf course membership fees as any outside person, no discount. The fees are not mandatory for non-golfers but everything points that to be expected in the not too far distance.

As to the Florida 720 rule, the declarant had to be forced to follow them. One small victory for our group is the opening of the HOA books.

Now, if we can go back to my initial question of whether the board of OUR group needs to get E&O or any other kind of insurance. And no, we do not know if and why the declarant might sue us. His attorney threatened us with a "frivulous lawsuit" kind of thing. But at this point we are leaning to better safe than sorry.

Thanks again to all of you. Magda
MaryA1


Posts:0


10/30/2009 9:02 AM  
Magda,

In answer to your question, because you are an nonprofit corp, yes, you should have insurance coverage for your BOD.

Out of curiousity, what is the name of your nonprofit corp?
MagdaS
(Florida)

Posts:32


10/30/2009 9:35 AM  
Mary, Thanks for asking but for our own peace of mind I would rather not disclose our group name. I will once we have something to say. Thanks again
MicheleD
(Kentucky)

Posts:4491


10/30/2009 10:25 AM  
Well, this is where I got the impression she "called" her organization a POA:

"We are a property owners association, Non-Profit incorporated and the bit - not the official HOA."
MaryA1


Posts:0


10/30/2009 3:38 PM  
Michele,

Gotcha!!
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