Violations/Fractures of CCR's + NFP Charter

We have 3 new board members ( HOA in Texas) who have just received majority 3 yea 2 nay votes to store their respective boats at our HOA property at no charge. We currently have a $40 per space rental charge. I feel we are in full violation of our CCR's + our State Not For Profit Charter. Myself and other board member agree; but can not convince these 3 new board members that we are in jeopardy of fractured HOA (due to violated Declaration + By Laws) and with the State of Texas (NFP) because Board members are profiting from position. Has anyone had to deal with this type of arrogance and ignorance on the Board?

Here is some info for TX:

http://www.statutes.legis.state.tx.us/docs/BO/pdf/BO.22.pdf ... which states:

Sec.A22.221.GENERAL STANDARDS FOR DIRECTORS.

a)A director shall discharge the director ’s duties, including duties as
a committee member, in good faith, with ordinary care, and in a
manner the director reasonably believes to be in the best interest
of the corporation.

(b)A director is not liable to the corporation, a member,
or another person for an action taken or not taken as a director if
the director acted in compliance with this section. A person
seeking to establish liability of a director must prove that the
director did not act:

(1)in good faith;
(2)with ordinary care; and
(3)in a manner the director reasonably believed to be
in the best interest of the corporation.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

If you end up in a lawsuit and no money in HOA then it could be similar to CO where each owner will have a special assessment added to cover costs. You may want to print a copy of just the statute I noted and give a copy to all board members and officers. Just reading a small paragraph may open their eyes, as then they are not reading many pages of text and it hopefully will get the point across. Hopefully they will want to follow the rules ... also I believe in some states if you violate "obligation of good faith" then a director/officer could be personally liable. Read all your state statutes ... here is also a link for Property Codes: http://www.statutes.legis.state.tx.us/?link=PR If all else fails suggest the board and officers consult an attorney.

Thank you Janet and Glen. This proposal was first voted on by email when I was traveling out of the country. They KNEW it would not pass my litmus paper test. Since my return on 7/19 to property - I have repeatedly protested, objected and stated a minimum of 20 Declaration violations and 5 By Laws + confirmed to them our NFP Charter (via By Laws) which specifically STATES that a board member is voluntary (uncompensated) and can not profit from position. We have $2,500 in a "reserve fund" set aside for our property insurance deductible (which also covers Board members). We have $1,500 in the checking account - that is our sad state of financial affairs. I have 4 owners in the "wings" (who have voted "nay") waiting to sue...that is the truth - and they are counting on me (as what seems to be the only sane Board member) to resolve this issue. Obviously our reserve fund will be drained - and an all owner assessment is pending to cover legal expenses - so so Board members can save a menial $40 a month. I have tried everything in my power (as Board and owner) to nip this in the bud...if I could just get everyone to read. I'm dealing with arrogance, ignorance and illiteracy! My Secretarial notes are filled with objections and all of my noted references above. They know they have me over a barrel - due to lack of other owner (quorum) participation and vote.

Glen, I know I need to breathe - but this is tearing my guts out.

Linda,

While I am a strong advocate of board unity, when the other board members are violating the gov. docs and/or state law a line must be drawn. I would recommend taking steps to have these board members recalled or if there is an election coming up soon do all in your power to see that they are not reelected. The members must be told that they are violating the CCRs by not paying these rental fees. The members must be made to understand that a reduced assessment is the same as being paid. Actually there are two violations here: 1) receiving compensation and 2) paying a reduced assessment. I'm sure your CCRs state that EACH member of the assn is obligated to pay assessments and there is no provision to allow reductions for any reason.

Your board members are guilty of Conflict of Interest, since they OK'ed (by voting on a motion) to benefit themselves, monetarily or with exaggerated advantage over other members.

Perhaps they think this is a "perk" for serving on the board.

In any case, you are not in danger of being sanctioned by any government overseer. I doubt if they would even take note of this "violation".

Your power is going to have to comeout via the ballot box. Be sure all Members know that these board members are benefitting themselves by serving on the board.

Documents that particular motion and the vote, so you can share that with all members.

PS you don't mention how boat slips are awarded. Please explain how a member gets access to use them.

Thank you to all postings for your wisdom and support.

I have and am following all of your recommendations and leads. Everything I have tried or said HAS BEEN DOCUMENTED AND ARCHIVED (since I became aware of this issue on July 19th - I was traveling out of the country from late June)!

I got the original 7/19 (3 yea 2 nay) vote revoked because one of these 3 yahoos did not pay his dues in July - so I got his "yea" vote disqualified. The one board member did bring his boat on property at no charge during this time frame. I applied a 24 hours "tow notice" (as an authorized officer) because of lapsed "authorization and accommodations by board" to store at no charge for a month. He voluntarily removed it before I called the wrecker - he absolutely HATES ME NOW - and is persistent with this proposal with pure retaliation to me!

I am and have been the only female on this Board since it's inception in 1982.

Regarding our boat storage spaces: We actually have only 2 storage spaces left on property (designated as "extra" spaces not allocated for resident or visitor parking spaces). They are established at $40 per space (as of 2006)- Board approved with requests. 2 storage spaces are occupied and resident owners (non board) are paying $40 each. <(I do have the support of these 2 currently paying owners). These spaces are neat and nested (protecting our required property aesthetics) in the far southeast corner of our property - not visible from main street or anyone's living space view.

The intent of these rogue Board members is to expand our number of "available" spaces to 5 (adding 3 random spaces with storage on the very front row of our property and at our main entry near the units that they occupy). They do not want to store their boats (one is a behemoth boat!) "back in the corner" from their view - they want to see/protect their boats from their entries or balconies.

I just do not not see a way around this without a lawsuit.

The Ripley's Believe It Or Not of this scenario: one of the "yea" Board members serves on 2 other Boards (where he owns property in this community). HE KNOWS BETTER! The other 2 are just plain selfish and stupid - clueless in Dallas on what they are doing.

I'll keep plodding along and praying - that the all owner quorum ballot box prevails - or one of these 3 Board members rescinds.

If there are any other suggestions out there - please send them my way. I am all effort, eyes and ears to resolve this issue -and to save this HOA.

Janet: You are a wizard, a wonder woman and my new best friend! I did not consider City Ordinances investigations! I am on that like a bear on honey first thing Monday morning!! I'm hoping there is something that will PROHIBIT/RESTRICT main street or main entry (negative view or impediment) storage. I LOVE YOU!

We have to abide not only by our CCR's but City and State laws. Outstanding recommendation!

Our CCR's also state that we must protect property "aesthetics" without nuisance of any vehicle - but of course I can not get them to read or heed.

Also - our current boat storage (2 boats) are being paid $40 a month each to our Discretionary account (we utilize these funds primarily for maintenance). There are no current violations with the existing storage.

Our CCR's specifically state that dues/assessments CAN ONLY BE UTILIZED for common element expenses or maintenance. "Storage" can not be free or part of our dues. Our CCR's specifically state that we can charge a reasonable storage rate- which we have done since 2006 @ $40 which is way below current market value.

I do not believe that this will change the HOA's status to a for profit corporation but I would make sure the members wanting this perk know that the HOA will issue them 1099's for their "wages" and they will need to pay taxes on the amount. Granted it will not increase their tax burden by a lot but it will complicate their returns a little more and who knows the $480.00 might just push them into a higher bracket.

Yes, I know that 1099's are not required for amounts under $600.00, that does not mean they cannot be issued.

Linda,

Just out of curiosity, what tax penalties are you talking about. I know of no tax penalties, but these board members would certainly have to claim this as income, although they probably won't. You could get back at them by making certain your CPA prepares 1099s for them, that is if you can.

Linda,
Does your association have a fairy godmother to provide maintenance to the HOA property the boats are using? It costs money to maintain a boat dock and from what you have stated, you have very little. Those who won't band with you to stop this should be digging in their pockets to go ahead and pay it. I assume the dues are to cover the cost of maintaining the boat storage as well. Those who are not paying for use are essentially making all other members pay for their use.
With the lack of money your association has, there is no way to consider a lawsuit unless it comes out of your own pocket. You would be cheaper off paying it yourself.
At our public lake, owners of docks have to pay a fee to the Brazos River Authority just to have a dock. (average of $200 per year I think)
Your board members should be leading by example. The example they are setting is to take what you want, and don't pay your fees. How long are thier terms?
Good luck.

Mary, Excess Benefit transactions are covered on the IRS website under non profits corporation rules. You can do a search on this term and it will lead to the topics regarding them and all the relating issues..the IRS has alot to say regarding this issue.

I agree that if you are not taking advantage of the tax benefits specifically set up for tax exempt organizations, the fact the board is getting added benefits is really a community issue, however if you are taking advantage of these tax exempt rules..you would want to be very careful and stay in compliance with the IRS rules.