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Subject: Special Assessment Found to be Not Valid
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Author Messages
CindyL4
(Arizona)

Posts:8


07/17/2021 8:08 AM  
In Arizona a special assessment was voted upon. The HOA Management company tallied the votes and made the decision the vote passed. The Board did not have any input or participation. The assessment was collected. Now, approximately 5 months later the new Board upon attorney consultation determined the vote actually did not pass. The funds are gone having been used for critical infrastructure repairs. Is the HOA Management Company liable and if so, what are the possible remediations.
AugustinD


Posts:1937


07/17/2021 8:21 AM  
One possible repercussion is that you will spend more money on fighting this legally than the original amount spent on "critical infrastructure repairs."

Especially since the repairs were critical, I would not fight this.

Blaming the management company is likely particularly inappropriate. Legally, the board has the final say. End of discussion, say the courts.

Down the road, if you are displeased with the board, elect a different one. And be ready to serve on the board yourself.
MelissaP1
(Alabama)

Posts:10595


07/17/2021 8:34 AM  
Did you all not need this infrastructure repaired? Sounds like another tactic of the owners to keep kicking stuff like this down the road because of money. Again look at how the collapse in Florida handled things like this. Sound famiiliar?

Plus special assessments can be made 2 ways. 1 by the board. 2 by the owners/members. This sounds like a special assessment made by the choice of majority of the owners. Which in my opinion is a much better approach than relying on a board to do it.

Former HOA President
CindyL4
(Arizona)

Posts:8


07/17/2021 8:38 AM  
Point of clarification. This issue is being brought up by a disgruntled homeowner. The prior Board intentionally stayed out of the vote count since the community was divided and the Board didn't want this group of owners to think there was falsification of records. The Management Company agreed and thereby counted the votes (in the presence of "witnesses" and recommended the yes decision to the Board. The Board relied on the expertise of the management company whom they pay for professional advise. The Board never even saw the votes again since there was concerns with a group of unhappy owners.
MaxB4
(California)

Posts:1614


07/17/2021 8:46 AM  
Posted By CindyL4 on 07/17/2021 8:38 AM
Point of clarification. This issue is being brought up by a disgruntled homeowner. The prior Board intentionally stayed out of the vote count since the community was divided and the Board didn't want this group of owners to think there was falsification of records. The Management Company agreed and thereby counted the votes (in the presence of "witnesses" and recommended the yes decision to the Board. The Board relied on the expertise of the management company whom they pay for professional advise. The Board never even saw the votes again since there was concerns with a group of unhappy owners.



How was the vote wrong?

We held a special assessment on Thursday for one of our communities doing a roofing project. The CCRs stated it had to pass with a majority of owners, in their case 49. State statues says it must pass with a majority of quorum, which is 49, so it needed a minimum of 25 to pass.

Boards should never be involved in the vote count, or handling of the election itself.
AugustinD


Posts:1937


07/17/2021 8:47 AM  
Posted By CindyL4 on 07/17/2021 8:38 AM
Point of clarification. This issue is being brought up by a disgruntled homeowner. The prior Board intentionally stayed out of the vote count since the community was divided and the Board didn't want this group of owners to think there was falsification of records. The Management Company agreed and thereby counted the votes (in the presence of "witnesses" and recommended the yes decision to the Board. The Board relied on the expertise of the management company whom they pay for professional advise. The Board never even saw the votes again since there was concerns with a group of unhappy owners.
Assuming a membership vote was required, legally it was still the Board that oversaw the vote. Even if the management acted as an intermediary, management did so under board direction.

Whoever is kvetching has no case against the management company, afaic.
MaxB4
(California)

Posts:1614


07/17/2021 8:56 AM  
Posted By AugustinD on 07/17/2021 8:47 AM
Posted By CindyL4 on 07/17/2021 8:38 AM
Point of clarification. This issue is being brought up by a disgruntled homeowner. The prior Board intentionally stayed out of the vote count since the community was divided and the Board didn't want this group of owners to think there was falsification of records. The Management Company agreed and thereby counted the votes (in the presence of "witnesses" and recommended the yes decision to the Board. The Board relied on the expertise of the management company whom they pay for professional advise. The Board never even saw the votes again since there was concerns with a group of unhappy owners.
Assuming a membership vote was required, legally it was still the Board that oversaw the vote. Even if the management acted as an intermediary, management did so under board direction.

Whoever is kvetching has no case against the management company, afaic.



Why would the Board be overseeing the vote?
KerryL1
(California)

Posts:8734


07/17/2021 9:27 AM  
The Board is responsible for seeing that elections are held legally and properly. They accept the advice of management, but it's the Board's job to know how to conduct it. It doesn't matter that the Board doesn't' understand these things (as someone might write), they are accountable. I agree with Augustin that the PM is off the hook. Often, the HOA attorney attends to make sure everything is done legally.

But if the PM did advise the Boards incorrectly, the board I might review this PM's performance in general.

Are property managers in AZ allowed to actually tally the votes? What was incorrect about the vote count, Cindy? Are you on the Board? What role do you think the Board should have played. Here in CA, they're basically just observers of elections although the Board president often presides at such meetings.

Say, Cindy was this a board meeting or meeting of the members? The latter, right?
JohnC46
(South Carolina)

Posts:11667


07/17/2021 9:30 AM  
Cindy

What did the BOD cite as being wrong?
CindyL4
(Arizona)

Posts:8


07/17/2021 10:54 AM  
The primary issue is the different interpretations of how many votes were required to pass a special (capital improvement) assessment.One group is saying: reach quorum, then 2/3 of eligible votes received. Other group is saying it's a super majority which would be 2/3 of all units. Prior capital improvement assessment was approved using the 2/3 of eligible votes after quorum as was this. This money has already been collected and spent on the intended purpose (roofs). Interesting is that the same HOA management company did both votes calculations the same way. Now, this single homeowner is claiming the vote calculation was not correct and the management company consulted there internal attorney who agrees. How can the management company not be liable?
AugustinD


Posts:1937


07/17/2021 11:06 AM  
Posted By CindyL4 on 07/17/2021 10:54 AM
The primary issue is the different interpretations of how many votes were required to pass a special (capital improvement) assessment.One group is saying: reach quorum, then 2/3 of eligible votes received. Other group is saying it's a super majority which would be 2/3 of all units. Prior capital improvement assessment was approved using the 2/3 of eligible votes after quorum as was this. This money has already been collected and spent on the intended purpose (roofs). Interesting is that the same HOA management company did both votes calculations the same way. Now, this single homeowner is claiming the vote calculation was not correct and the management company consulted there internal attorney who agrees. How can the management company not be liable?
How can you not understand that the HOA/COA's governing documents place ultimate responsibility on the Board?

Besides, what does this single homeowner want? Does he want the management company to pay money to the HOA, thus giving the HOA new roofs at no costs? Because if said single homeowner feels this way, then he lacks basic reasoning skills.

How can this single homeowner not understand that, even if a court did declare, using some weird reasoning, that the management company is "liable" for ____ (who knows what?), making the management company pay for the new roofs already installed is fundamentally unfair? The HOA reaped a benefit when it got the new roofs. As much as said single homeowner wants the HOA to have new roofs at no charge, it is not fair for the HOA to enjoy this benefit at no charge.




BenA2
(Texas)

Posts:1114


07/17/2021 11:22 AM  
If the management company made a mistake or, worse, did it on purpose, then they should be held liable. If they are a professional company they have insurance for that. Of course, you should consult with an attorney before filing suit.


I think many of you are missing the point. It doesn't matter how much the repairs are needed or how badly you need the money, you are required to follow procedures when collecting a special assessment. If you do not follow the proper procedures then you will likely have to give the money back. Taking someone's money without legal authority is tantamount to theft.
BillH10
(Texas)

Posts:786


07/17/2021 11:27 AM  
Cindy

Can you post the precise language found in your documents which describes the approval process for special assessments for "capital improvements". Please also post any language regarding approval required for a special assessment for "repairs".

I ask as a community we formerly managed required owner approval (I do not recall the percentage) for new capital improvements; the Board was empowered to establish a Special Assessment for repairs to existing infrastructure, including common elements defined which would be defined as capital improvements if they were not already in place.

There were a number of owners who attempted to claim owner approval for a special assessment was required under any circumstances, the attorney for the association stopped that argument dead in the water when he put the language regarding special assessments, capital improvements, and repairs, and their definitions up on the screen.
AugustinD


Posts:1937


07/17/2021 11:37 AM  
Posted By BenA2 on 07/17/2021 11:22 AM
If the management company made a mistake or, worse, did it on purpose, then they should be held liable. If they are a professional company they have insurance for that. Of course, you should consult with an attorney before filing suit.
Let's say the management (abetted by a negligent board) did mess up with the voting. What damage did the HOA/COA incur on account of the management's mistake?

I guess maybe one could argue the roofs were replaced several months to a year or so early. But this cannot really be pinned down, can it?

I think you are missing the point.

Let's all lawyer up and see if a court can separate the wheat from the chaff and establish what the "points" really are.
AugustinD


Posts:1937


07/17/2021 11:38 AM  
Posted By BillH10 on 07/17/2021 11:27 AM

There were a number of owners who attempted to claim owner approval for a special assessment was required under any circumstances, the attorney for the association stopped that argument dead in the water when he put the language regarding special assessments, capital improvements, and repairs, and their definitions up on the screen.
I am betting these owners who read the screen still did not "know answer when told." (That's navy talk for: Study, people.]
BenA2
(Texas)

Posts:1114


07/17/2021 11:57 AM  
Posted By AugustinD on 07/17/2021 11:37 AM
Posted By BenA2 on 07/17/2021 11:22 AM
If the management company made a mistake or, worse, did it on purpose, then they should be held liable. If they are a professional company they have insurance for that. Of course, you should consult with an attorney before filing suit.
Let's say the management (abetted by a negligent board) did mess up with the voting. What damage did the HOA/COA incur on account of the management's mistake?

I guess maybe one could argue the roofs were replaced several months to a year or so early. But this cannot really be pinned down, can it?

I think you are missing the point.

Let's all lawyer up and see if a court can separate the wheat from the chaff and establish what the "points" really are.



If you collect a special assessment without legal authority then you would be required to return the money. My guess is there would be an expense to that. At minimum, legal fees to sort it out and determine the proper way to proceed.

If every owner agreed to donate the money collected because it is for a good cause, then I suppose there would be no damages but you and I know that is not going to happen.
MaxB4
(California)

Posts:1614


07/17/2021 12:01 PM  
I've read two different CCRs in two HOA's in Arizona. Both have the exact same language in regards to passage of a special assessment for a capital improvement.

The approval process is 2/3 of the votes entitled to be cast by Members who are voting in person or by proxy at a meeting duly called for such purpose. Quorum is 60 percent for a first meeting and 30% at a second meeting if so adjourned.

First, proxies are no longer allowed in Arizona.

Second, and the way I see it, if you have 100 units, quorum is 60 and 41 would be needed to pass on the first meeting. But, if a second meeting is called, quorum is 30 and passage would be 21.

In California, for the purpose of passing a special assessment, quorum is automatically set at a majority of Members. I see nothing about Special Assessments in Arizona statues or Corporation Code.
CindyL4
(Arizona)

Posts:8


07/17/2021 12:05 PM  
To AugistineD...I totally understand your statement that a Board is ultimately responsible. However, Boards hire property managers for advise and guidance. As lay people, how would a Board member have any idea that a property manager was giving incorrect advise. As a side note, this situation is addressed way after the fact. This issue was brought to light after the vote, after the payments and ultimately the after the repairs have been completed. I don't know what the person wants. But there is this contingent at the complex who are unreasonable and unwilling to pay for repairs. We shall see what advise the management company and hopefully the Boards attorney gives the Board. I suspect the person causing all this simply doesn't want to pay for the repairs.
MaxB4
(California)

Posts:1614


07/17/2021 12:15 PM  
Posted By CindyL4 on 07/17/2021 12:05 PM
To AugistineD...I totally understand your statement that a Board is ultimately responsible. However, Boards hire property managers for advise and guidance. As lay people, how would a Board member have any idea that a property manager was giving incorrect advise. As a side note, this situation is addressed way after the fact. This issue was brought to light after the vote, after the payments and ultimately the after the repairs have been completed. I don't know what the person wants. But there is this contingent at the complex who are unreasonable and unwilling to pay for repairs. We shall see what advise the management company and hopefully the Boards attorney gives the Board. I suspect the person causing all this simply doesn't want to pay for the repairs.



What does this person think the vote should have been in their opinion?
AugustinD


Posts:1937


07/17/2021 12:20 PM  
Posted By CindyL4 on 07/17/2021 12:05 PM
As lay people, how would a Board member have any idea that a property manager was giving incorrect advise.
The courts expect boards to know enough to consult their own attorney.

I will say I am impressed the management company so far appears to be freely admitting its mistake. This is one reason why, if I were this Board, I in fact might be inclined to keep the management company.

As a side note, this situation is addressed way after the fact. This issue was brought to light after the vote, after the payments and ultimately the after the repairs have been completed.
This certainly hurts the chances of the member(s) who is (are) objecting. "Delay" is a big deal in the courts and even has a name: Laches.

I think these objecting members need a come-to-jesus meeting with their own attorney (that they sought out and hired), tasked with telling them whether they can get what they want and how much it will cost them.

Boards make mistakes. Managers make mistakes. I think HOA/COA members are generally a covenant-illiterate and HOA/COA statute-illiterate lot and make the most mistakes.

I don't know what the person wants. But there is this contingent at the complex who are unreasonable and unwilling to pay for repairs. We shall see what advise the management company and hopefully the Boards attorney gives the Board. I suspect the person causing all this simply doesn't want to pay for the repairs.
If you are saying that the board imposed a special assessment and some are refusing to pay, on account of illegality of the vote (and, pffft, after the work was done), well then you all as a community do have a huge conundrum. In my experience, the quickest way to resolve this is for all to keep a close eye on how the attorney's fees will add up.

I do advise liens and not foreclosing on anyone who refuses to pay. This might minimize the damage (meaning the attorney bills, which will eat all alive).

Of course, the most important thing is for the Board to do as the HOA/COA attorney directs. Do not under any circumstances take advise from the management company's attorney. Though the board can and maybe should share what the MC attorney says with the HOA/COA attorney and then see what the HOA/COA attorney says in response.
CathyA3
(Ohio)

Posts:2607


07/17/2021 12:25 PM  
Assuming that this person "wins", that the special assessment was not done properly, and the HOA has to return the money to the homeowners...

... where do they think the money will come from if the insurer won't cough up or the management company says "see you in court"?

What do you think will happen to assessments if the HOA has to pay lawyers or deal with the results of a settlement that makes insuring your HOA a higher-risk proposition?

How many management companies do you think will want to work for your HOA when word of this gets out (people do talk)? And if one company does bid on the contract, do you think you'll get the pricing that a long-term, valued client would get or the pricing charged to the PITA client who may try to sue them as well?

Nobody ever thinks about the long-term consequences of their decisions....
CindyL4
(Arizona)

Posts:8


07/17/2021 12:26 PM  
Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.
AugustinD


Posts:1937


07/17/2021 12:29 PM  
Posted By BenA2 on 07/17/2021 11:57 AM

If you collect a special assessment without legal authority then you would be required to return the money.
Okay, this rings true most (or all) of the time.


My guess is there would be an expense to that. At minimum, legal fees to sort it out and determine the proper way to proceed.

If every owner agreed to donate the money collected because it is for a good cause, then I suppose there would be no damages but you and I know that is not going to happen.
All I feel comfortable saying is that some owners, who now have a new roof, but who also believe the vote was illegal (and they may be right), are mad. I am sure they are expressing their rage verbally, early and often. Will they lawyer up? Maybe. Will they legally fight a board who has directed liens placed on their homes for refusing to pay the special assessment? Maybe. Should the board try to foreclose on these liens? If it's pretty clear the vote was messed up, then I advise not doing so, unless of course we have a Champlain Towers South type situation, and more repairs are coming up.

I think there are some creative solutions to all this. Some of the others here are going down paths for imposing assessments in general. I am not keen on reading up on Az law at the moment when the OP appears to still be absorbing the fact that the MC works for the Board and not the other way around. Being a HOA/COA director is difficult. Ya gotta understand financial management. Ya gotta understand infrastructure management. Ya gotta work to try and understand a lot of real property law. You and I know this well. The OP should encourage the board to proceed to an attorney. This thread might help the OP to prepare for a meeting with the attorney and ask intelligent questions.
AugustinD


Posts:1937


07/17/2021 12:29 PM  
Posted By BenA2 on 07/17/2021 11:57 AM

If you collect a special assessment without legal authority then you would be required to return the money.
Okay, this rings true most (or all) of the time.


My guess is there would be an expense to that. At minimum, legal fees to sort it out and determine the proper way to proceed.

If every owner agreed to donate the money collected because it is for a good cause, then I suppose there would be no damages but you and I know that is not going to happen.
All I feel comfortable saying is that some owners, who now have a new roof, but who also believe the vote was illegal (and they may be right), are mad. I am sure they are expressing their rage verbally, early and often. Will they lawyer up? Maybe. Will they legally fight a board who has directed liens placed on their homes for refusing to pay the special assessment? Maybe. Should the board try to foreclose on these liens? If it's pretty clear the vote was messed up, then I advise not doing so, unless of course we have a Champlain Towers South type situation, and more repairs are coming up.

I think there are some creative solutions to all this. Some of the others here are going down paths for imposing assessments in general. I am not keen on reading up on Az law at the moment when the OP appears to still be absorbing the fact that the MC works for the Board and not the other way around. Being a HOA/COA director is difficult. Ya gotta understand financial management. Ya gotta understand infrastructure management. Ya gotta work to try and understand a lot of real property law. You and I know this well. The OP should encourage the board to proceed to an attorney. This thread might help the OP to prepare for a meeting with the attorney and ask intelligent questions.
AugustinD


Posts:1937


07/17/2021 12:39 PM  
Posted By BenA2 on 07/17/2021 11:57 AM

If you collect a special assessment without legal authority then you would be required to return the money.
Further note:

Easier said than done. In other words, the members feeling robbed might very well have to lawyer up.

I just figure sometimes stuff happens; there is no perfect solution; justice can be evasive; folks (boards, managers and HOA/COA members alike) do the best they can. All sides messed up here. Those members complaining now should have done so shortly after the vote. But they did not, did they? Why? Because they do not take their responsibilities, as HOA/COA members subject to covenants, seriously.
MaxB4
(California)

Posts:1614


07/17/2021 12:51 PM  
Posted By CindyL4 on 07/17/2021 12:26 PM
Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.



To gather further proof of how the vote should have been done, look at the requirement for amending your CCRs. It will have language stating 2/3 of unit owners to amend, so the approval would need 67 votes out of the 100 units.

I am guessing the attorney said that 67 votes per 100 were needed and I am afraid they would be wrong. Your association needs to get it right. Five months is not a lot of time to challenge an election.
CathyA3
(Ohio)

Posts:2607


07/17/2021 12:54 PM  
Posted By CindyL4 on 07/17/2021 12:26 PM
Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.



We've talked about this before in other threads on this website. I'm reading it at 2/3 of all eligible members.

The reason I'm reading it the way I am is that the super-majority is usually reserved for more important items and issues such as amending the CC&Rs. A special assessment affects the entire membership and every member should have a voice, not just those who show up at a meeting. If it were the latter, it would allow a small minority to affect the association in big ways, and I doubt that's the intent of the lawyers and/or lawmakers who draft these things. Finally, limiting it to those who attend meetings can disenfranchise absentee owners, which I also doubt is the intent of the governing documents.

But IAMNAL (I am not a lawyer), which is why savvy board members run questions like this past the association's attorney.






CathyA3
(Ohio)

Posts:2607


07/17/2021 1:00 PM  
Posted By CathyA3 on 07/17/2021 12:54 PM
Posted By CindyL4 on 07/17/2021 12:26 PM
Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.



We've talked about this before in other threads on this website. I'm reading it at 2/3 of all eligible members.

The reason I'm reading it the way I am is that the super-majority is usually reserved for more important items and issues such as amending the CC&Rs. A special assessment affects the entire membership and every member should have a voice, not just those who show up at a meeting. If it were the latter, it would allow a small minority to affect the association in big ways, and I doubt that's the intent of the lawyers and/or lawmakers who draft these things. Finally, limiting it to those who attend meetings can disenfranchise absentee owners, which I also doubt is the intent of the governing documents.

But IAMNAL (I am not a lawyer), which is why savvy board members run questions like this past the association's attorney.




Final thought:

Language dealing with assessments form part of the contract on people's homes, and as with amendments to the CC&Rs, anything affecting assessments should be voted on by the entire membership, not just those who show up at a meeting. It's a high bar and it should be: - so 2/3 of the entire membership.

That's my story and I'm stickin' wii' it.

JohnC46
(South Carolina)

Posts:11667


07/17/2021 1:06 PM  
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.

I say this read 2/3rds of those entitled to vote, not simply 2/3rds of those at the meeting.
MaxB4
(California)

Posts:1614


07/17/2021 1:06 PM  
Posted By CathyA3 on 07/17/2021 1:00 PM
Posted By CathyA3 on 07/17/2021 12:54 PM
Posted By CindyL4 on 07/17/2021 12:26 PM
Here is the exact language in the CC&R's. One camp is stating it's 2/3 of members voting (after quoram). Other camp is 2/3 of all eligible members.

...approval of the
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.



We've talked about this before in other threads on this website. I'm reading it at 2/3 of all eligible members.

The reason I'm reading it the way I am is that the super-majority is usually reserved for more important items and issues such as amending the CC&Rs. A special assessment affects the entire membership and every member should have a voice, not just those who show up at a meeting. If it were the latter, it would allow a small minority to affect the association in big ways, and I doubt that's the intent of the lawyers and/or lawmakers who draft these things. Finally, limiting it to those who attend meetings can disenfranchise absentee owners, which I also doubt is the intent of the governing documents.

But IAMNAL (I am not a lawyer), which is why savvy board members run questions like this past the association's attorney.




Final thought:

Language dealing with assessments form part of the contract on people's homes, and as with amendments to the CC&Rs, anything affecting assessments should be voted on by the entire membership, not just those who show up at a meeting. It's a high bar and it should be: - so 2/3 of the entire membership.

That's my story and I'm stickin' wii' it.




In the Chapter dealing with special assessments in Arizona and this was also truen in my association, their is language further down that identifies the meeting in which the meeting is called and what the quorum requirements are.

In the OP's case it is 2/3 of the votes cast at a duly noticed meeting where a quorum of 60% is present. That's for a special assessment. If the requirement was 67%, you would never get funding for projects when needed.

For the CCRs, that will have the higher threshold of 2/3 of all units or lot.
MaxB4
(California)

Posts:1614


07/17/2021 1:11 PM  
Posted By JohnC46 on 07/17/2021 1:06 PM
Unit Owners representing two-thirds (2/3) of the votes entitled to
be cast by Unit Owners who are voting in person or by proxy at a
meeting duly called for such purpose, or at an annual meeting with
notice such Assessment will be considered.

I say this read 2/3rds of those entitled to vote, not simply 2/3rds of those at the meeting.



It not 2/3 at a meeting, it 2/3 of the votes cast WHERE quorum is present.

How then would you interpret 2/3 of all units or lot in the same CCRs?

In California, to pass a special assessment it was 51% of the Voting Power, now it is a majority of quorum, quorum for this instance is a majority of owners, or 50% plus 1.
JohnC46
(South Carolina)

Posts:11667


07/17/2021 1:36 PM  
Cindy

Am I reading your posts properly? You say this change began with one owner complaining some 5 months later? Seems to me that one owner had more "power" then just being one complaining owner. Like the power behind the throne.

Max

Where was quorum mentioned? My response was to what Cindy posted, which did not mention quorum.

With a quorum requirement of 60% then 2/3rds of the 60% needed would be 40% of all owners. I think........LOL

JohnC46
(South Carolina)

Posts:11667


07/17/2021 1:39 PM  
There all kinds of ways to skin a cat but typically it is 51% of all owners to approve a Bylaw change and 2/3rds of all owners to change a Covenant or establish a Special Assessment. All of which I personally consider reasonable/fair.
MaxB4
(California)

Posts:1614


07/17/2021 1:58 PM  
Posted By JohnC46 on 07/17/2021 1:36 PM
Cindy

Am I reading your posts properly? You say this change began with one owner complaining some 5 months later? Seems to me that one owner had more "power" then just being one complaining owner. Like the power behind the throne.

Max

Where was quorum mentioned? My response was to what Cindy posted, which did not mention quorum.

With a quorum requirement of 60% then 2/3rds of the 60% needed would be 40% of all owners. I think........LOL




I also run a HOA election company in addition to the management company, and I know how CCRs are written and what to look for. As with special assessments, there is a notice of meeting and quorum requirement.

Here is a link to a HOA in Arizona, https://www.sevillehoa.org/resourcecenter/15790/documents. On page 13 is the requirement for the special assessment, Section 4.4 and Section 4.5 deals with Notice of Meeting and Quorum. On pages 33-34 is the requirements for amending the CCRs.
MaxB4
(California)

Posts:1614


07/17/2021 2:19 PM  
Posted By JohnC46 on 07/17/2021 1:39 PM
There all kinds of ways to skin a cat but typically it is 51% of all owners to approve a Bylaw change and 2/3rds of all owners to change a Covenant or establish a Special Assessment. All of which I personally consider reasonable/fair.



Let's say the Board wants to spruce up the park and add tables and BBQ stands. The total project is $10,000.00. The threshold before it goes to a membership vote is $5000.00.

A minimum of two board members could spilt the project in half, half this year and the other half next year. Two votes for a $10,000.00 projects. For the OP, 30% would be required and not 2% or less.
KerryL1
(California)

Posts:8734


07/17/2021 2:32 PM  
It's not clear to me what this snippet refers to. Please tell us the title of this section of your CC&Rs and cite it completely. "...approval of the Unit Owners representing two-thirds (2/3) of the votes entitled to be cast by Unit Owners who are voting in person or by proxy at a meeting duly called for such purpose, or at an annual meeting with notice such Assessment will be considered."

Was about your Bylaws? Are there any sections about special assessments or voting on them there? Are there any sections in the CC&Rs or ByLaws about "capital improvements" or "capital expenditures?" Aren't roofs in your reserve study? And if so, how is replacing them a capital expenditure? (which generally is for new stuff, unless the materials to replace the roofs was a big upgrade)

With a few others here, your board needs to consult with the association's legal counsel for an opinion. This is a legal issue and beyond the expertise of any MC. I agree to ignore the MC's legal counsel. Are you on the Board, Cindy?


AugustinD


Posts:1937


07/17/2021 3:18 PM  
After reading a couple of Arizona CC&Rs. I am not sure what the OP's CC&Rs say exactly, but if they are like the two sets of Arizona CC&Rs I just read, then increasing the regular assessment and imposing special assessments are both ungodly ordeals. The way the two sets of covenants are written, an Arizona HOA/COA Board had darn well better routinely increase the regular assessment by at least COLA. Because large changes in the regular assessment cannot happen (at these two Az HOAs) without ownership approval. With Champlain Towers South in mind, these covenants are a recipe for disaster unlike any I have seen.
MaxB4
(California)

Posts:1614


07/17/2021 3:27 PM  
Posted By AugustinD on 07/17/2021 3:18 PM
After reading a couple of Arizona CC&Rs. I am not sure what the OP's CC&Rs say exactly, but if they are like the two sets of Arizona CC&Rs I just read, then increasing the regular assessment and imposing special assessments are both ungodly ordeals. The way the two sets of covenants are written, an Arizona HOA/COA Board had darn well better routinely increase the regular assessment by at least COLA. Because large changes in the regular assessment cannot happen (at these two Az HOAs) without ownership approval. With Champlain Towers South in mind, these covenants are a recipe for disaster unlike any I have seen.



Getting 30% of the membership's approval is an ungodly ordeal?
CindyL4
(Arizona)

Posts:8


07/17/2021 3:40 PM  
Thank you all for the feedback. It's clear that the HOA and Board has some very serious considerations. Historically the Board has been hesitant to raise dues however this association has experienced a number of situations including prior legal actions costing hundreds of thousands of dollars. Reserve funds are stressed. Assessment increases (outside of any increases permitted w/o a vote) are simply not going to pass. I hope this is a wake-up call to action for the current Board to act responsibly to protect the financial interest of all owners. The old guard contingency has caused some serious issues and it's clear they are going to continue to cause issues for this association. I hope it does not result in receivership but unless there are serious changes, it appears headed in that direction.
AugustinD


Posts:1937


07/17/2021 4:47 PM  
Posted By CindyL4 on 07/17/2021 3:40 PM
I hope it does not result in receivership but unless there are serious changes, it appears headed in that direction.
Do dangle this sword (of receivership) over the heads of those owners objecting to the special assessment. Because I expect a receiver will have the legal right to disregard all the rules on special assessments. Plus HOA/COA members get to pay the receiver's salary. It will not be cheap.

MaxB4
(California)

Posts:1614


07/17/2021 6:11 PM  
So the thread went from figuring out how to legally do a special assessment to receivership. That's quite an accomplishment.
MaxB4
(California)

Posts:1614


07/17/2021 8:55 PM  
Posted By CindyL4 on 07/17/2021 10:54 AM
The primary issue is the different interpretations of how many votes were required to pass a special (capital improvement) assessment.One group is saying: reach quorum, then 2/3 of eligible votes received. Other group is saying it's a super majority which would be 2/3 of all units. Prior capital improvement assessment was approved using the 2/3 of eligible votes after quorum as was this. This money has already been collected and spent on the intended purpose (roofs). Interesting is that the same HOA management company did both votes calculations the same way. Now, this single homeowner is claiming the vote calculation was not correct and the management company consulted there internal attorney who agrees. How can the management company not be liable?



Which calculation did the management company's attorney agree with? As I mention, I run an election company conducting all sorts of elections for HOA's I am not under contract with. When I do a special assessment vote, it is a no brainer, I disregard the CCRs and go with state statues. When ballots are sent out, all owners know what type of election it is, what if any quorum there is, how many votes are needed to achieve quorum and how many votes to pass. If there were to be an adjournment, what the rules are.

For example, the same HOA we did the special assessment for and passed, is having their annual meeting. I know that not enough ballots will be received and that the presiding officer will ask if the members present want to adjourn to collect more ballots. I know that they will have enough people attending the meeting to vote down the adjournment and the election will stop and the 5 member board will remain the same. Some know how the game is played and more need to learn.
CathyA3
(Ohio)

Posts:2607


07/18/2021 5:05 AM  
Posted By MaxB4 on 07/17/2021 8:55 PM
Posted By CindyL4 on 07/17/2021 10:54 AM
The primary issue is the different interpretations of how many votes were required to pass a special (capital improvement) assessment.One group is saying: reach quorum, then 2/3 of eligible votes received. Other group is saying it's a super majority which would be 2/3 of all units. Prior capital improvement assessment was approved using the 2/3 of eligible votes after quorum as was this. This money has already been collected and spent on the intended purpose (roofs). Interesting is that the same HOA management company did both votes calculations the same way. Now, this single homeowner is claiming the vote calculation was not correct and the management company consulted there internal attorney who agrees. How can the management company not be liable?



Which calculation did the management company's attorney agree with? As I mention, I run an election company conducting all sorts of elections for HOA's I am not under contract with. When I do a special assessment vote, it is a no brainer, I disregard the CCRs and go with state statues. When ballots are sent out, all owners know what type of election it is, what if any quorum there is, how many votes are needed to achieve quorum and how many votes to pass. If there were to be an adjournment, what the rules are.

For example, the same HOA we did the special assessment for and passed, is having their annual meeting. I know that not enough ballots will be received and that the presiding officer will ask if the members present want to adjourn to collect more ballots. I know that they will have enough people attending the meeting to vote down the adjournment and the election will stop and the 5 member board will remain the same. Some know how the game is played and more need to learn.



Quote: "I disregard the CCRs..."

Ohhh??? :-)

Serious question:

Does the part in bold not imply that it's the entire membership that's given the right to vote and not just the ones who show up at a meeting (in person or by proxy)? Which suggests that "2/3 of the entire membership" would be the correct reading.

On the other hand, I can sort of see the reasoning behind going with a percentage of people at the meeting if quorum continues to be an issue and the association's governing documents and/or state law ties their hands. The lesser of two evils and al that...

In any case, for the OP's question, regardless of who actually conducted the election, the PM is the agent of the association, the board is ultimately responsible for supervising the PM, and the board can't just transfer their responsibility onto another party. At the very least the board members should have understood the requirements for conducting a legal vote and, if they didn't, asked the HOA attorney to verify. PM may have some liability - and should also have understood the requirements - but bottom line it's up to the board to ensure things are done properly.
MaxB4
(California)

Posts:1614


07/18/2021 8:27 AM  
I know. what a shock.

Here is state statue, which in the hierarchy of documents supersedes the CCRs.

Civil Code §5605. Assessment Approval Requirements.

(a) Annual increases in regular assessments for any fiscal year shall not be imposed unless the board has complied with paragraphs (1), (2), (4), (5), (6), (7), and (8) of subdivision (b) of Section 5300 with respect to that fiscal year, or has obtained the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.

(b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association’s preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.

(c) For the purposes of this section, “quorum” means more than 50 percent of the members.

In the instance of the OP, you have to read the CCRs backwards. I'm not a lawyer and would have written the language so a layperson could understand. You have to have a meeting where quorum is present, in their case 60%, whereby 2/3 of the votes cast by the membership will be needed to pass the special assessment.

In the same CCRs, under Amendments, it states that in order to amend these CCRs, 2/3 of the unit owners must approve. There is no quorum requirement for a meeting,
CindyL4
(Arizona)

Posts:8


07/18/2021 8:48 AM  
MaxB4
The civil code you are citing is for the state of CA. This property is in the state of AZ. I think it is clear from all the comments that the property manager counted the votes correctly (after removing ineligible votes/i.e.past due etc) but incorrectly told the Board that according to the CC&R's the vote passed. Now the conundrum. The money is already gone. Should the association have to return the funds, the HOA doesn't have the financial resources to continue with the other critical infrastructure repairs. I am confident the Board is seeking legal advise outside the property manager. So, we shall see how it plays out.
MaxB4
(California)

Posts:1614


07/18/2021 9:20 AM  
Posted By CindyL4 on 07/18/2021 8:48 AM
MaxB4
The civil code you are citing is for the state of CA. This property is in the state of AZ. I think it is clear from all the comments that the property manager counted the votes correctly (after removing ineligible votes/i.e.past due etc) but incorrectly told the Board that according to the CC&R's the vote passed. Now the conundrum. The money is already gone. Should the association have to return the funds, the HOA doesn't have the financial resources to continue with the other critical infrastructure repairs. I am confident the Board is seeking legal advise outside the property manager. So, we shall see how it plays out.



Yes, it is from California, and it was to answer the post from Cathy.

Arizona has no statue for Special Assessments, so you defer to the CCRs. Proxies are no longer allowed in your state.

I am unclear by your statement, I think it is clear from all the comments that the property manager counted the votes correctly (after removing ineligible votes/i.e.past due etc) but incorrectly told the Board that according to the CC&R's the vote passed. The rules should have been known and addresses before one ballot was sent out. If the Board has no clues as to what the rues are, how did the PM incorrectly tell the Board the vote passed.

Here are the two sections I was referring to about a HOA in Arizona, one for Special Assessments, the other for Amending the CCRs.

Section 4.4. Special Assessments. In addition to the annual assessments authorized above, the Association may levy, in any fiscal year, a special assessment applicable to that fiscal year only for the purpose of defraying, in whole or in part, the cost of any construction, reconstruction, repair or replacement of a capital improvement of the Common Area, including fixtures and personal Property related thereto, or for any other lawful Association purpose, provided that any such special assessment shall have the assent of Members having at least two-thirds (2/3) of the votes entitled to be cast by Members who are voting in person or by proxy at a meeting duly called for such purpose. Special Assessments shall be allocated among the Owners on the same basis as Annual Assessments.
Section

4.5. Notice and Quorum for Any Action Authorized Under Sections 4.3 or 4.4. Written notice of any meeting called for the purpose of obtaining the consent of the Members for any action for which the consent of the Members is required under Sections 4.3 and 4.4 shall be sent to all Members no less than thirty (30) days nor more than sixty (60) days in advance of the meeting. At the first such meeting called, the presence of Members or of proxies entitled to cast sixty percent (60%) of all the votes of each class of Members shall constitute a quorum. If the required quorum is not present, another meeting may be called subject to the same notice requirement, and the required quorum at the subsequent meeting shall be one-half (1/2) of the required quorum at the preceding meeting. No such subsequent meeting shall be held more than sixty (60) days following the preceding meeting.

Section 12.3. Amendment. The Declaration may be amended at any time by (a) an instrument signed by the Owner(s) of at least two thirds of the Lots or (b) a certification by the President of the Association that the Owners of at least two thirds of the Lots have voted in favor of the amendment at a duly called election. Any such amendment shall be recorded with the Maricopa County Recorder and shall take effect immediately upon recordation regardless of the status of the then current term of the Declaration under section 12.2 above. A properly executed and recorded amendment may alter the restrictions in whole or in part applicable to all or any portion of the Property and need not be uniform in application to the Property. Any amendment made at a time when Declarant owns any Lots shall require the approval of the Declarant.
KerryL1
(California)

Posts:8734


07/18/2021 9:58 AM  
So....if Cindy would completely cite the same kinds of sections in HER HOA's docs, I'd feel much more comfortable giving my 2 cents. I do now think she's not on the Board.
CindyL4
(Arizona)

Posts:8


07/18/2021 10:20 AM  
Kerry...
I find your comment inappropriate. I know the applicable ARS title 33 but you wouldn't know that since you are in CA which operates under different statues. Additionally, I cites an excerpt from the actual CC&R's which follows requirements of state statue which of course I had already checked before even posting my first comment.
KellyM3
(North Carolina)

Posts:1811


07/18/2021 7:33 PM  
Posted By CindyL4 on 07/17/2021 8:08 AM
In Arizona a special assessment was voted upon. The HOA Management company tallied the votes and made the decision the vote passed. The Board did not have any input or participation. The assessment was collected. Now, approximately 5 months later the new Board upon attorney consultation determined the vote actually did not pass. The funds are gone having been used for critical infrastructure repairs. Is the HOA Management Company liable and if so, what are the possible remediations.




What the "New Board of Directors" determined is a subjective opinion subject to HUGE amounts of debate...which scale beyond a single angry homeowner's beef. By the way, the board is still the face of the HOA and is attached to both special assessment election and confirmation of the vote. The property manager was the mechanism for counting votes and collecting as a proxy for the board of directors.

You will be suing yourself for a special assessment that you needed.
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