HOA Problem and then Lawsuit

Started by DavidA7 • 17 replies • 2691 views

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DavidA7 (California)
Posts: 179

Posted:

I belong to an HOA in Los Angeles that the Board of Directors has gone off the deep end. Our assocation formed in 2004 and there has been problems ever since. We have only 8 units.

Currently here is what is being faced

Our current Board has been in place for 1.5 years (09/10)

1) They first started off by conducting an election that put a homeowner who doesn't live on the property on the Board to prevent me from being on the Board.
2) They are not holding HOA meetings even though CC&R's state must be held every 3 months. They argue that when I was on board in 2004-2008 that we never held more than 2 meetings a year. I said no one complained or ever asked for a meeting but now I'm asking for the meetings to be conducted. I have asked for meeting at least 10 times over past year and half but they only conducted the annual meeting.
3) I requested a special meeting, I hold 12.5% of voting rights, and they are ignorning it. Law states need 5% to call meeting.
4) They have transferred money from Reserves twice without proper process. 1st time was to pay insurance and 2nd time I'm being told to pay for property repairs. Transfers from reserves to general fund have specific guidelines per Davis Sterling and they are ignoring it. Management company is telling me to basically mind my own business and stop telling them how to conduct their job when I told them that this was being done illegally and why they have not informed Board.
5) Ignorning my filing of complaint regarding dog feces on property
6) Ignoring my request to have meeting to discuss FHA requirements on property
7) Ignoring my request to repair my property (Every external wall of my unit (townhome) has excessive cracking.)
8) Ignoring my request to repair a catwalk owned by the HOA that is located on my roof. You can't even step on it without falling through
9) Ignoring my request for termite inspection and repairs on property. Excessive termite damage on fences bordering property.

I can't afford a lawyer at $300 an hour so am filing a small claims action against them.

Here is the other problems: We have 8 units, 4 are rentals, 1 is abandoned due to foreclosure, and there is only 3 homeowners living on the property. 2 of the Homeowners are on the Board and the 3rd is one of the rental unit owners. The first 2 basically have said if you don't stop trying to address the above issues and harassing us we will leave the Board only leaving you to be on the Board. All the Homeowners, except me, side with the Board because the Board gave in to them and removed rental restrictions on the property which I was severely against.

I'm against lawsuits but what else am I supposed to due?

GlenL (Ohio)
Posts: 5,491

Posted:

1. Sell and move.

2. Tell the BOD if they don't meet then you will ask the Court to appoint a receiver to do their job.

3. If they ignore you, ask the Court to appoint a receiver and expect your assessments to go up.

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

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By GlenL on 06/07/2010 12:02 PM
1.

2. Tell the BOD if they don't meet then you will ask the Court to appoint a receiver to do their job.

3. If they ignore you, ask the Court to appoint a receiver and expect your assessments to go up.

Sell and move.You're clearly not going to be happy by remaining here

TimB4 (Tennessee)
Posts: 21,047

Posted:

Quote:

Posted By DavidA7 on 06/07/2010 11:33 AM
I
3) I requested a special meeting, I hold 12.5% of voting rights, and they are ignorning it. Law states need 5% to call meeting.

Does this indicate that you own more than one unit?

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Does this indicate that you own more than one unit?

100% divided by 8 unit = 12.5 (my guess is he owns one unit which is equal to 12.5)

SusanW1 (Michigan)
Posts: 5,202

Posted:

Management company for 8 units? Wow.

Minutes of the meeting should support any action taken by the board.

You will have to prove damages AND willful neglect on the part of the board to reap anything from any court.

Clearly, you are not happy there. and you lack support from other members and the board for your concerns.

Suggestions to sell seem to be the best recourse.

DavidA7 (California)
Posts: 179

Posted:

RickW, this is everyones reply is to Sell and Move and I would in a heart beat if it wasn't for the fact that I have an upside down mortgage. I purchased in mid-2004 with 20% down and I'm still upside down by almost 100K.

DavidA7 (California)
Posts: 179

Posted:

1) Yea I agree but the meeting minutes are not even signed, have never been approved, and were finally given to me 45 days after a secret non-open board meeting was conducted. In fact, when I asked for the meeting minutes after I found out about the meeting I was told they don't exist but lo-and-behold they were delivered to me the next day in PDF format. The PDF showed they were created the night before. The minutes did not have a roll-call, were not signed, and have never been approved.

It is willful neglect on the part of the Board not to conduct open meetings per the Davis Sterling Act.
It is willful neglect on the part of the Board to conduct a closed, non-announced secretive Board Meeting and act on decisions in that meeting
It is willful neglect on the part of the Board to transfer reserve money to general operating account 2X (1X to pay for insurance, and 2x for who knows what) and not follow the guidelines for these transfers as indicated in the Davis Sterling act
It is willful neglect to defer property maintenance that has caused more damage to the property just because they don't want to assess or remove money from reserves

That is just some of the issues.

DavidA7 (California)
Posts: 179

Posted:

SusanW, Yea a Mgt. Co. for 8 units

Why,

One to supposedly guide the Board in decision making
Two to address various issues such as fines etc... so it doesn't become just a malicious board member dealing with it.

Look, we now only have 3 owners living on the property the other 5 consists of 4 rentals and 1 unit in foreclosure. Without a Mgt. Co, regardless of how I feel about them, we need to have.

The issue of micro HOA needing to have the cost of a Mgt. Co is bad and it is too bad we can't group with other HOA's for Mgt. Services but that is the way it is.

JonD1
Posts: 2,350

Posted:

David:

Please allow me to cut to the chase.

Seems you have made your bed with the other unit owners and Board members on this property and now you are looking for some magic answer as to how you can gain control and have things your way. Without support from any other property owner that will be near impossible.

When you served there was no need or demand for monthly meetings. Now that you are no longer serving seems you feel that should change simply because YOU now want a meeting. To be honest I can understand why the remaining Board members and owners have no desire to meet with you. Along with their loss of value to their property you bring nothing more than issues they would rather not hear about or deal with.

To me dog crap on the property would be the least of your problems and their probelms too. Survival would be at the top of my list.

You question the amount of insurance coverage then you question when they use reserve money to pay the insurance bill. Would you rather that bill go unpaid?

Perhaps, like many properties there was a need to use reserve money just to cover the operating costs.

So if, as you say, some of the owners are $180,000 underwater on their mortgages why would you be against them renting their units IF they can? Perhaps, this is one of the only ways they can keep the property they own. Can't sell, can't live there, so what option would that leave them with in the event YOUR wish to restrict rentals was successful? Or doesn't it bother you other units might go into foreclosure? You live there therefore everyone else would be required to do so or leave their unit empty? Is that the rule?

David, with all due respect, seems you have alienated the Board and other owners to the point they would rather not deal with you. As to your legal action you might if fact be right and have the law on your side in some of these issues you have raised. So lets say you win. You are awarded money the property more than likely can't afford OR simply has a better more productive use for. Since you are $100,000 in the red and can't sell how do you think living on this property will go after your successful attempt to sue both your neighbors and Board members? Probably not so good.

In times like this IMO it owuld be best for all concerned to work together for everyone's benefit not attempt to force YOUR view of how things should have been done down the throats of the majority of the remaining unit owners.

You are either part of the solution or part of the problem. From what you have described IMO you would fall into the problem group.

IMO bringing a lawsuit will solve nothing.

DavidA7 (California)
Posts: 179

Posted:

JohnD1, I appreciate your well thought out and well articulated reply. I understand your point of view but I respectfully don't agree with them.

As I indicated in previous posts the current Board has, in my opinion, violated 8 Davis Sterling Act laws that govern it. At some point you have to sue to get action. It was not my first, second or even third choice of action. I waited over 1.5 years on some issues before moving forward with this lawsuit.

I'm not trying to enforce my will on the Assocation as I have offered to meet with them to discuss all the issues I feel are present and those requests have been unilaterally ignored. Your comment about paying insurance from reserves while admirable is illegal per the Davis Sterling Act. The transfer of the money from reserves to general fund to pay for insurance is illegal unless specific guidelines are met including repayment to the reserves of the money borrowed within 1 year of it being withdrawn. The Board did not inform the other HOA members about this as required by law and they may not even be aware of it. I'm not saying I'm against paying for insurance I'm just saying that the process that was done was illegal by not informing the Homeowners and not setting-up a repayment plan as required by law. I asked the HOA Board to have a meeting to discuss and to setup a repayment plan and I was ignored. I pay a portion of my HOA fees that go into reserves and those reserves are supposed to pay for specific repairs on the property. If the Board raids the reserves without repaying them maybe I will be stuck down the rode with a huge special assessment to pay for a building repair that could of been paid from reserves if they were not raided. This is unilateraly wrong.

Finally, I offered Alternative Dispute Resolution services through the Courts as an alternative to the lawsuit and again was ignored.

How would you proceed if your money was being misappropriated in this manner among other things.

Respectfully,

DavidA7 (California)
Posts: 179

Posted:

Your Comment:

So if, as you say, some of the owners are $180,000 underwater on their mortgages why would you be against them renting their units IF they can? Perhaps, this is one of the only ways they can keep the property they own. Can't sell, can't live there, so what option would that leave them with in the event YOUR wish to restrict rentals was successful? Or doesn't it bother you other units might go into foreclosure? You live there therefore everyone else would be required to do so or leave their unit empty? Is that the rule?

My reply:

My first responsibility is to my property not to other unit holders. I say this because if you have excessive rentals on the property then even if I could sell, say not underwater, I couldn't because a bank will not lend to my prospective buyer.

Our Association had a succesfull rental policy in place and we had only 2 rentals out of 8 units. Now that the rental restriction has been removed we have 4 rentals. I'm not sure but if I read the new FHA requirements correctly but at 50% rentals a buyer could not get FHA approved loan on our property. I know also after talking to the Executive office of my current bank they said they would not fund on over 30% rentals in a condominium complex.

Where does that leave me, should I now care about another homeowner or my ability to sell my unit if I could?

Finally, would you want to walk out of your unit everyday and smell dog crap or when walking to your car have to walk through a gaggle of flies?

Sincerely,

JonD1
Posts: 2,350

Posted:

David:

As I suggested you MAY be right in regards to some of your issues with the Board.

But in the end what will that accomplish? Being right would seem to be valueless is this case.

As I don't know the details as to your property's finances I cannot explain why they would take from the reserves to pay for insurance. Perhaps it became necessary perhaps not.

And while your lawsuit might with time prove the Board violated the Davis-Sterling requirements in the end what will that change? You might then have a meeting? Will the value of your real estate rise as a result?

On my property the discussion was brought up about restricting rentals. To do so cuts both ways. It could force more units into foreclosure, it could put more units for sale as their owners no longer can rent them, it could result in a legal fight with a current owner who continues to rent in violation of these new restrictions. Some of our unit owners have long term tenants of 15-20 years do you now tell them they can no longer rent them out. And with rental restrictions you eliminate any person looking to rent their property as a potential buyer. So as to your concern, you might qualify for a FHA mortgage but the remainder of the property will be in foreclosure, broke, worthless or up for sale. Not my first choice.

To give them the ability to rent their units MIGHT give them an option other then walking away or going into foreclosure. Neither method is perfect and neither is right in all cases but I would think giving the owners a chance would be my frist choice.

No doubt from what you have described your property has issues, like many today.
I hope your legal case will move quickly. Probably not. And in the end I hope the outcome gives you whatever you are looking for. I just don't know what that might be that would make this action worth it in the end. Will it solve the issues you have mentioned? Hardly.

Good luck.

DonnaS (Tennessee)
Posts: 5,671

Posted:

What is hard to believe is that 8 people, who jointly own a property, cannot get along or at least consider everyone in decision making. If you cannot sell, then you better get into the loop and forget all the lawsuit B.S because that will cost you more than just biting the bullet and taking financial responsibility for your own unit on matters that the Board has failed to.

DavidA7 (California)
Posts: 179

Posted:

Donna, sorry for the lag on response but I don't understand why you say why not take financial responsibility for my unit if the Board is not. Well, I pay a good sum of money each month for my HOA dues and part of that money goes toward the reserve fund. The reserve fund, as we all know, pays for repairs of HOA owned portion of the property. In my case my exterior walls, as well as other unit owners, is owned by the HOA so repairs of them falls to the HOA. Thus, would it be logical to assume the HOA should pay for the repairs and not me. If I'm responsible for the repairs or have to do them on my own why then why don't I get an option of not paying my HOA dues and then I can put that money toward these repairs. Well that is not going to happen.

I agree with all responses that a lawsuit is not going to solve the problem and creates more hassle than not. I'm not a person who takes filing a lawsuit easily but when you have a slew of issues including possibly 8 violations of the law, including removal of a significant amount of money from reserves without accounting for it, then you are sometimes forced to go down a road that you or others are not comfortable with.

Thanks everyone for participating in this thread.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

removal of a significant amount of money from reserves without accounting for it,

What was the reason for the expenses from the reserve fund?

Sometimes homeowners don't keep things in perspective.....sometimes..... if you don't use the reserve fund, you must do a special assessment on each homeowner.

The money must come from somewhere, people often forget this.

DavidA7 (California)
Posts: 179

Posted:

So far don't know what 7K was spent on as it hasn't shown in the financials yet. I was just told for building repairs. But that is not the point. Davis-Sterling (California Civil Code) law, a law that governs our Assocation, prohibits the transfer of moeny from reserve to general budet without a Board following specific guidelines such as holding a meeting, announcing transfer through notification to the membership, and repayment plan for the borrowing. The alternative which should of been followed is that building repairs be paid directly from reserves with the two board directors signing the check. This was not done by our Board in two cases this one and once last year. I'm definately not against building repairs but I'm against not following the laws that govern our Assocation and even worse I still can't tell where the money has exactly gone.

Thanks,

David

GlenL (Ohio)
Posts: 5,491

Posted:

David when an association is improperly operated or the members are non-responsive, any member or creditor can petition the court to appoint a receiver to operate the association. If proof is made to the satisfaction of the Court, the judge will appoint a receiver to take control of association assets and give them the power to impose emergency special assessments if necessary. While a Board may stagger needed repairs to spread the costs out, a receiver would have the power to enter into contracts for all of the necessary work. The Association must pay all the resulting expenses, including the receiver's hourly fees. The receiver has broader powers than the board and will strictly enforce the rules and finances. Members lose their right to vote and have no input into the operation of the HOA. With the receiver's fees and the court costs, it could add thousands of dollars each month to the association's normal operating costs. All of which must be paid by the homeowners.

The receiver will likely be an attorney, a bankruptcy trustee, an accountant, or a similar professional who has expertise in property management. The Court will usually require the receiver to be bonded to guard against misappropriation of Association assets with the cost of the bond passed along to the Association. The court will require periodic reports from the receiver and the receiver most likely will stay in place until the problems that prompted his or her appointment have been solved. There is no set period of time for a receiver to stay in place; it is not a permanent fix but can last for several years.

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

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