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Subject: HOA lobbying
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CraigL3
(Maryland)

Posts:16


03/03/2020 12:13 PM  
My HOA has recently sent a letter to our state legislators, opposing a proposed legislation that would introduce a tax on services, which would likely result in increased HOA dues. However, the legislation also includes a reduction of the general sales tax, which could more than offset the dues increase. The HOA did not collect any data from its members about their spending on goods and services, so it did not present a cost-benefit analysis. Instead, the board followed the recommendation from an association of HOAs and the management company to oppose the legislation. It also told its members to oppose the legislation.

I think the HOA did not make a fully informed decision and most likely misrepresented economic interests of its members (this is a relatively well-off community, where people spend on luxury cars and other big-ticket purchases). Also, I cannot find anything in the HOA charter or bylaws that authorizes such lobbying. Finally, there is a potential issue with maintaining a non-profit status by an HOA that engages in such activities (there is no hard rule of what the IRS considers a "substantial" activity).

Is this HOA action legit? Did the HOA properly represent its members? Does this and other similar actions put its non-profit status at risk?
GeorgeS21
(Florida)

Posts:2299


03/03/2020 12:24 PM  
Probably.
I don’t know.
Probably not.
DeidreB
(Virginia)

Posts:76


03/03/2020 12:30 PM  
Craig, I have a similar issue with my HOA and our county in general.

Different specifics but our county has directed significant attention toward engaging HOA's for various proposals regarding land use and other genral proposals. Most if not all have no direct impact on the HOA's themselves. It also creates "HOA governors" who see themselves as the next higher person in the chain of government for all in the HOA. Same with our By Laws and Declaration: no mention of it unless you skip to the last Board duty which says something like "anything not inconsistent with HOA documents or laws."

As to your questions about it being legit etc.... ,my question is, is it proper and appropriate for an HOA to become involved in matters of local or state or federal governance? or anything not HOA specific for that matter?

I think the greatest risk is that HOAs become a "rung in the ladder" of elected governance without all the protections and checks and balances.

My view is that the HOA's addresses "the commons:" the common areas, common goods, services and amenities, covenants and restrictions, association By Laws and association finances. Government employees cannot endorse a political position or candidate or policy in the performance of their duties, I imagine it is an issue for not for profit HOA's as well.

But I'm not a lawyer.
CathyA3
(Ohio)

Posts:827


03/03/2020 3:01 PM  
I've been going back and forth on this, and I hope some more of our regular posters chime in.

I think this is one of those things where the specifics matter. As long as the board is mindful of IRS and other regulations about lobbying, and they are concentrating on things that are truly the HOA's concern, and they aren't using unreasonable amounts of HOA money to support their lobbying careers, I don't know that I'd have a problem with it.

In fact, I think that it is the board's duty to speak up when they see something that will have a negative impact on their association. For example, some years ago there was a bill in committee in the Ohio legislature that would have made community association board members personally liable if the association were sued. Fortunately many board members spoke up and pointed out that no one would volunteer to serve on boards at all if this became law, and the law died in committee. A second example: the board (and homeowners) of an HOA in my town lobbied hard against the proposed construction of a Menard's across from the community's main entrance - they cited increased noise and traffic, falling property values, and such. In both of these instances I believe the board had a right and a duty to speak up.

Whether or not Craig's example is similar to these two situations, I can't tell without more information about the proposed legislation.

So I am firmly on the fence about lobbying in general.
JohnC46
(South Carolina)

Posts:9299


03/03/2020 3:19 PM  
One of the obligations of an "ELECTED" BOD is to protect their association. If you disagree about what they are doing such as lobbying against a Menards, lobbying against a bill, etc. then either unelect them or take their a$$ to court but bytching on this chat will get you nowhere. Lead, fight or follow but do not get in the way.
AugustinD


Posts:2906


03/03/2020 3:47 PM  
Posted By CraigL3 on 03/03/2020 12:13 PM
Finally, there is a potential issue with maintaining a non-profit status by an HOA that engages in such activities (there is no hard rule of what the IRS considers a "substantial" activity).

Is this HOA action legit? Did the HOA properly represent its members? Does this and other similar actions put its non-profit status at risk?
I wonder if you might be confused about when a nonprofit, such as a HOA, is tax exempt. Not all nonprofits are tax exempt. For example, nearly all HOAs are nonprofit but are not tax exempt.

For a nonprofit to be tax exempt, it has to comply with Internal Revenue Code 501(c). Rarely do HOAs seek 501(c) (and so tax exempt) status. Like 99.9% of HOAs are nonprofit and not (sic) tax exempt.

In the unlikely event that your HOA is a 501(c) organization (and so tax exempt), then lobbying might very well violate IRS regulations.

My only other interest would be whether the HOA contributed any of members' funds to the lobbying effort. Did it?
SheliaH
(Indiana)

Posts:3048


03/03/2020 6:30 PM  
Our documents prohibit endorsing political candidates of any stripe, but it doesn't address opposing or supporting HOA legislation. Since your documents don't say anything about this either, you may end up With a circular argument - the documents may not say they can't but don't say they can, either.

You might not like the stance the board took, but that's your opinion and some of your neighbors might be perfect fine with what the board did. That said, I think it would be better if the association worked with a lobbying group of some sort to give them a voice. After all, land!ords, realtors and builders do it all the time, so why not HOAs?

This is the part where one could debate the merits of CAI and their political activity on the local or state level - they aren't that active in my state because they don't have the money to hire a lobbyist to advocate full timee, so I don't have an opinion. It may be different in your state.

The only risk I see in your HOA is if the board used HOA money to lobby directly. I think the primary use for assessments is maintaining the property, so this type of expense would be inappropriate in my opinion. It doesn't cost anything to write a letter,but the board should vote on that and explain to homeowners why they took the stance. If homeowners feel otherwise, they can write their own letter, and if they've really pissed, vote those folks out or a resolution that would specifically prohibit political activity.

Interesting, ain't it? People on this board are always talking about what the legislature should do about HOAs, and when builders, landlords and whatnot talk to these guys and gals about what they like to see, sometimes (most times really), homeowners and renters just stand there or no one listens because they don't have enough money. Politics is a tacky business.....
JohnC46
(South Carolina)

Posts:9299


03/04/2020 8:12 AM  
I personally lobbied a SC Senator on a bill to regulate non-high rise associations. SC has a Horizontal Property Act but it is for high rise (two stories or more with units on all floors) associations only. One bill died but another made in through. The one that made it through was a result of owners saying they were given false or no information during the sales from developer/association when buying a home and any dues increases.

It has little to do with once the sale is made as in it does not tell a BOD how to run their association. It does say any dues increase must be given by written notice 30 days prior to the increase. is a Bill that I can live with.

An aside. Our Covenants allow the BOD to increase dues only once a year at the beginning of the new year. The BOD must present the coming year's Budget to our owners on or before 12/01 and it becomes effective on 01/01. The BOD can raise the dues any amount they wish to and do not need owner approval. 10% of owners can call for a Special Meeting in December and vote to not accept the new budget but 2/3rds of ALL OWNERS (I repeat ALL OWNERS) must disapprove the new budget. If that happens, then the prior years budget stays in effect and a 5% dues increase is automatic.

CraigL3
(Maryland)

Posts:16


03/04/2020 10:06 AM  
AugustinD: My HOA is registered as a 501(c)(4), as most HOAs (being "social welfare organizations") are. So, it is tax-exempt, but it has to account for lobbying on Schedule C of its annual Form 990 filing.
Although 501(c)(4)'s are not as restricted from lobbying as 501(c)(3)'s, they cannot, for example, publicly (as opposed to only their members) endorse a particular political candidate in an election.
AugustinD


Posts:2906


03/04/2020 11:53 AM  
Posted By CraigL3 on 03/04/2020 10:06 AM
AugustinD: My HOA is registered as a 501(c)(4), as most HOAs (being "social welfare organizations") are.
The requirements for a HOA to be a 501(c)(4) go far beyond the phrase you quoted. In fact, few HOAs (and certainly not "most") are 501(c)(4). If you took a minute to google on this, you would see this.

What evidence have you that your HOA is a 501(c)(4) organization. I would be especially surprised to learn that a HOA with high end homes et cetera was a 501(c)(4).
AugustinD


Posts:2906


03/04/2020 11:59 AM  
From https://www.irs.gov/charities-non-profits/other-non-profits/social-welfare-organizations:
"a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status. An organization that has lost its section 501(c)(3) status due to substantial attempts to influence legislation may not thereafter qualify as a section 501(c)(4) organization. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax. For more information, see Lobbying Issues [https://www.irs.gov/pub/irs-tege/eotopicp97.pdf]."

Would you please consider first googling for two minutes every time you have an issue you want to raise here?
CraigL3
(Maryland)

Posts:16


03/04/2020 12:14 PM  
AugustinD: From its Form 990 filings.
I would not call our homes "high-end" (as in $ multi-million), but I would say their market values are generally higher than the average in our area. I see quite a few late-model luxury-brand cars parked on the streets and in the garages, as well as trucks delivering appliances, furniture and other high-ticket items. That is why I think a reduction in the state sales tax (which is part of the proposed legislation) would be of significant interest to the HOA members. As would the main purpose of this legislation, which is to fund an education reform plan. In its stance to legislators, the HOA did not take those two aspects into account.
SheliaH
(Indiana)

Posts:3048


03/04/2020 1:14 PM  
You said the board “most likely misrepresented the economic interests of its members”, but didn’t offer proof – do you have any? And have you discussed ANY of this with the board? If so, what was the response?

You may be correct that the members would appreciate a reduction in the general sales tax, so what’s wrong with THEM writing their own letters to their state representatives? Or asking more questions as you’re doing (a good idea, by the way)? It may be they haven’t because they don’t understand all the underlying issues or don’t care about them.

I'm not saying you're right and they're wrong or vice versa, but since some of this is based on YOUR opinion, maybe you should talk to your neighbors and see how much they know – hopefully, they’ll do their own research or at least attend the next board meeting with you to get more information. If the responses indicate the board members didn’t do a lot of thinking on this matter, you can have more discussion about that.
CathyA3
(Ohio)

Posts:827


03/04/2020 1:34 PM  
Posted By CraigL3 on 03/04/2020 12:14 PM
AugustinD: From its Form 990 filings.
I would not call our homes "high-end" (as in $ multi-million), but I would say their market values are generally higher than the average in our area. I see quite a few late-model luxury-brand cars parked on the streets and in the garages, as well as trucks delivering appliances, furniture and other high-ticket items. That is why I think a reduction in the state sales tax (which is part of the proposed legislation) would be of significant interest to the HOA members. As would the main purpose of this legislation, which is to fund an education reform plan. In its stance to legislators, the HOA did not take those two aspects into account.




Personal opinion: regardless of what the laws say and regardless of what the board may feel is in the interests of homeowners, this is not the HOA's business, and claiming that it affects homeowner's finances to justify butting in is specious. The state sales tax affects everyone in the state; HOA residents are not uniquely burdened. And individuals are perfectly capable of lobbying their representatives on their own behalf - the HOA doesn't bring any unique perspective or authority to the issue.

As I'd said earlier, the particulars matter, and this in one case where the HOA, or rather the board, should stay in their own lane.
MelissaP1
(Alabama)

Posts:9127


03/04/2020 4:28 PM  
May I add that each and every HOA is separate entities from each other. If they are not, then they may still be under a developer control. Otherwise HOA's are NOT connected. HOA is NOT an "industry" as many may think. They are each separate incorporated entities. So if a HOA has membership that wants to lobby something, then that is their own group.

Former HOA President
GenoS
(Florida)

Posts:3664


03/05/2020 12:29 PM  
Posted By CathyA3 on 03/04/2020 1:34 PM
Personal opinion: regardless of what the laws say and regardless of what the board may feel is in the interests of homeowners, this is not the HOA's business, and claiming that it affects homeowner's finances to justify butting in is specious.

An opinion I share wholeheartedly.
KellyM3
(North Carolina)

Posts:1485


03/06/2020 7:46 AM  
The HOA board could certainly approach legislators w/ feedback on these issues. The HOA board, under its leadership, only needs to represent the HOA operation as it views it and not need to seek personal opinions of HOA members. Sending a letter of opposition to legislators should certainly not risk any non-profit status. Non-profit organizations often hire lobbyists to represent their interests.
GenoS
(Florida)

Posts:3664


03/06/2020 11:44 AM  
Legalized bribery.
CraigL3
(Maryland)

Posts:16


03/06/2020 1:57 PM  
Posted By KellyM3 on 03/06/2020 7:46 AM
The HOA board could certainly approach legislators w/ feedback on these issues. The HOA board, under its leadership, only needs to represent the HOA operation as it views it and not need to seek personal opinions of HOA members. Sending a letter of opposition to legislators should certainly not risk any non-profit status. Non-profit organizations often hire lobbyists to represent their interests.




Per the charter, my HOA is a corporation whose assets are owned by its members. So, it does not have a life of its own. When it is communicating with external parties, including legislators, it is representing the views and interests of its members, not some "HOA operation" (whatever that means).
The board is of can-do-no-wrong type and led by political activists who cannot imagine their lives without such actions. Yeah, yeah, if you are not happy with the board, run for it, yada yada (to borrow from AugustinD).
GeorgeS21
(Florida)

Posts:2299


03/06/2020 2:29 PM  
Actually, like most corporate entities it does have a life of its own. The life is provided by the Board, until such time as that Board changes.

I have no issue with a Board lobbying on behalf of my community - about HOAs. Not about unrelated political stuff, though.
DeidreB
(Virginia)

Posts:76


03/06/2020 2:57 PM  
Whatever happened to the days when HOA's just maintained the common areas and send notices to move the unauthorized RV or paint the badly faded house?
GeorgeS21
(Florida)

Posts:2299


03/06/2020 3:15 PM  
They still do that.
DeidreB
(Virginia)

Posts:76


03/06/2020 3:18 PM  
I know they still do that George It seems there is a tendency for "mission creep" in some HOA's nowadays. We have board members who want to get involved in everything as an Association. I don't care what they do as individuals. But I like to see my HOA stick to their day job.
JohnC46
(South Carolina)

Posts:9299


03/06/2020 3:50 PM  
Posted By DeidreB on 03/06/2020 3:18 PM
I know they still do that George It seems there is a tendency for "mission creep" in some HOA's nowadays. We have board members who want to get involved in everything as an Association. I don't care what they do as individuals. But I like to see my HOA stick to their day job.




I see "mission creep" out here all the time.
CraigL3
(Maryland)

Posts:16


03/06/2020 4:03 PM  
Posted By GeorgeS21 on 03/06/2020 2:29 PM
Actually, like most corporate entities it does have a life of its own. The life is provided by the Board, until such time as that Board changes.

I have no issue with a Board lobbying on behalf of my community - about HOAs. Not about unrelated political stuff, though.




Read up on the duty of care of the directors of a corporation (HOA trustees), and in particular: "A director, however, is in a fiduciary relationship to the corporation and therefore serves the interests of the shareholders (homeowners) as a whole." If the HOA has not collected all relevant data and yet, with the board's assent, made a representation on behalf of the members to an external party, then the board is potentially in breach of its fiduciary responsibility.
GeorgeS21
(Florida)

Posts:2299


03/06/2020 4:09 PM  
Can you cite the excerpted quote, please.

And, sure, always potential.

What about an HOA Board rep to an association of HOAs that lobbies the county to take better care of roads, or signage, or to increase/decrease the number of type of lighting, or to decrease speed limits in neighborhoods ... long list.

KellyM3
(North Carolina)

Posts:1485


03/08/2020 5:38 PM  
Posted By CraigL3 on 03/06/2020 4:03 PM
Posted By GeorgeS21 on 03/06/2020 2:29 PM
Actually, like most corporate entities it does have a life of its own. The life is provided by the Board, until such time as that Board changes.

I have no issue with a Board lobbying on behalf of my community - about HOAs. Not about unrelated political stuff, though.




Read up on the duty of care of the directors of a corporation (HOA trustees), and in particular: "A director, however, is in a fiduciary relationship to the corporation and therefore serves the interests of the shareholders (homeowners) as a whole." If the HOA has not collected all relevant data and yet, with the board's assent, made a representation on behalf of the members to an external party, then the board is potentially in breach of its fiduciary responsibility.





You simply have a personal opinion that's in disagreement w/ the board's decision to make the HOA's stance on a potential state issue known. Now that your own opinion is known, we all can say "OK, then."
JanetB2
(Colorado)

Posts:4211


03/09/2020 12:13 AM  
Posted By CraigL3 on 03/03/2020 12:13 PM

Is this HOA action legit? We are not attorneys and if you want attorney advice you need to hire one.
Did the HOA properly represent its members? Personally I would have asked my HOA in such a situation how they felt and whether or not they felt we should or should not be involved as an HOA. This would follow actions taken by other entities such as your local City Council. However, keep in mind each individual can have their own personal opinion and right to voice. Whether or not your HOA properly represented members would be up to each and every HOA member to determine.
Does this and other similar actions put its non-profit status at risk? Most likely NO ... non-profit is $$$ the association takes in and spends. Did the association spend money regarding the action? Similar actions would depend on the circumstances surrounding any such action and potential HOA money spent.

BarbaraT1
(Texas)

Posts:297


03/09/2020 9:43 AM  
Personally, I would not advise a board to take a position on a political matter on behalf of the association at all and if they absolutely insisted, I would recommend that they consult the membership first.

I've worked for a few boards that took a stance on zoning issues. In one case, it causes a lot of community distress, as the board wrote a letter on behalf of the association in favor of new construction that several residents actually opposed. When those residents spoke at a city council meeting, the council waved this letter and dismissed their concerns. That led to a fun annual meeting.

CAI (the professional organization for HOA managers and attendant industries) has a lobbying arm and they will ask board members to call state representatives regarding legislation they are concerned about. But what is bad legislation for management companies and lawyers isn't necessarily bad for homeowners so take those requests with a grain of salt.


MarkW18
(Florida)

Posts:706


03/09/2020 9:51 AM  
If the membership approves, why shouldn't an Association have a say in legislation being brought down on them, good or bad?
GeorgeS21
(Florida)

Posts:2299


03/09/2020 4:13 PM  
Barbara,

Boards do a lot of things on behalf of their broad constituency that some members of that constituency find objectionable.

I don’t think this is a disqualifying action - it’s what Boards do.
CraigL3
(Maryland)

Posts:16


03/10/2020 3:23 PM  
Posted By KellyM3 on 03/08/2020 5:38 PM
Posted By CraigL3 on 03/06/2020 4:03 PM
Posted By GeorgeS21 on 03/06/2020 2:29 PM
Actually, like most corporate entities it does have a life of its own. The life is provided by the Board, until such time as that Board changes.

I have no issue with a Board lobbying on behalf of my community - about HOAs. Not about unrelated political stuff, though.




Read up on the duty of care of the directors of a corporation (HOA trustees), and in particular: "A director, however, is in a fiduciary relationship to the corporation and therefore serves the interests of the shareholders (homeowners) as a whole." If the HOA has not collected all relevant data and yet, with the board's assent, made a representation on behalf of the members to an external party, then the board is potentially in breach of its fiduciary responsibility.





You simply have a personal opinion that's in disagreement w/ the board's decision to make the HOA's stance on a potential state issue known. Now that your own opinion is known, we all can say "OK, then."




Nope. The point here is that before a board takes a public stance on any issue with external authorities, it should first collect data from a representative sample of its membership to make a substantiated and informed decision.
GeorgeS21
(Florida)

Posts:2299


03/10/2020 8:57 PM  
Sorry. No.

The Board was elected to represent the members of the association.

In this situation I believe the Board can represent the constituents without a polling process.
CathyA3
(Ohio)

Posts:827


03/11/2020 7:57 AM  
If there is an issue that the board feels strongly about, they can also fulfill their fiduciary obligations by sending an informational letter about the issue to the homeowners and explaining how it can affect their community, then let individual homeowners lobby their elected officials as they see fit.

On the other hand, unless the board is supporting a particular party or candidate - which I think they absolutely should not do - I don't know that this falls under the heading of malfeasance or that it is something to get too upset about. Business judgement, bigger fish to fry, and all that. Owners who feel that the board should not lobby at all can run for a seat on the board and hopefully change policy in the future.
AugustinD


Posts:2906


03/11/2020 8:15 AM  
Posted By CraigL3 on 03/10/2020 3:23 PM
The point here is that before a board takes a public stance on any issue with external authorities, it should first collect data from a representative sample of its membership to make a substantiated and informed decision.
As far as I am concerned, if the governing documents do not require a survey of the members, then the Board should not spend money or time on such a survey.
Posted By GeorgeS21 on 03/10/2020 8:57 PM
The Board was elected to represent the members of the association.
I think this interpretation of what a Declaration, Articles of Incorporation, and Bylaws say is not unreasonable. It's kind of like saying that a federal or state prosecutor represents 'the people.' As in "The People of the State of California vs. Orenthal James Simpson."
Posted By CathyA3 on 03/03/2020 3:01 PM
In fact, I think that it is the board's duty to speak up when they see something that will have a negative impact on their association. For example, some years ago there was a bill in committee in the Ohio legislature that would have made community association board members personally liable if the association were sued. Fortunately many board members spoke up and pointed out that no one would volunteer to serve on boards at all if this became law, and the law died in committee. A second example: the board (and homeowners) of an HOA in my town lobbied hard against the proposed construction of a Menard's across from the community's main entrance - they cited increased noise and traffic, falling property values, and such. In both of these instances I believe the board had a right and a duty to speak up.
I think Cathy's real-life examples of when a board should seriously consider taking a "political stance" are excellent. For the Maryland issue that the OP cited, and taking the OP at his word, I do not think a board should be lobbying in any way on this issue. I am picturing, say, the HOA president attending a session of the state legislature and speaking about how the proposed new tax on services would adversely affect her or his (HOA) corporation. Hopefully legislators on the other side of the issue would question the HOA president about the proposed law's other half: Lowering the general sales tax on the HOA's members and all citizens. If my HOA board did what the OP's board is doing, I would vote against them in the next election. Especially if this "association of HOAs" of which the OP spoke was CAI. Especially if any meaningful time and money were spent lobbying.

What an entertaining thread.
GenoS
(Florida)

Posts:3664


03/11/2020 12:48 PM  
Posted By GeorgeS21 on 03/10/2020 8:57 PM
Sorry. No.

The Board was elected to represent the members of the association.

In this situation I believe the Board can represent the constituents without a polling process.

I sort of disagree with this. Directors are elected to manage the association. "Representing the people" is something civil government officials do, but the purposes for which public officials are elected vs the purposes for which corporate directors are elected are not one and the same.

Only foolish directors would not take their members' opinions and wishes into account, of course, but...

"The officers and directors of an association have a fiduciary relationship to the members who are served by the association."

A fiduciary duty goes far above and beyond "representing the membership". The two purposes may well be at odds from time to time.
GeorgeS21
(Florida)

Posts:2299


03/11/2020 1:52 PM  
Geno - agreed.

I don't want my comments to sound aggressive - I would never lobby for something that had not been at least discussed at a Board meeting - and had been aired. Frankly, anything like this, to me, requires the Board to agree on what was going to occur.

I would have no issue with lobbying when it makes broad sense for our community - i.e. roads, traffic, public safety issues (ex: mosquito control). Never for politics or goofy stuff that would have a political context - like increases in taxes, etc.
GenoS
(Florida)

Posts:3664


03/11/2020 2:38 PM  
We're good.
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