Veiled threat of a lawsuit from the board...

After months of arguing with our board to accept the fact that they can't do what they think
they can (based on our governing documents), I wrote an email to one of the people on the board
(because the primary person who initially made the comment refused to reply to any of our emails).

I told this person that if he and the other person still believed the board has powers it doesn't have that they should both step down, as they're showing an unwillingness to uphold the law, and therefore are a threat to our community.

At a recent meeting, this same person said that the things I said could be considered inflammatory and suggested they could be grounds for a lawsuit (and left it at that). The things they were saying could have easily gotten the board sued (if they had carried them out), so therefore, they are a threat to our community. How can that be considered inflammatory?

Steve

Steve...As Tim mentioned if we know more about the issues we could give better advice. The problem with HOA's is you are dealing with people's most important investment, their home, and that alone tends to escalate and bring in a lot of emotion which makes things worse.

It's a long story, but here's the gist. We live in a mixed community of single-family homes and townhomes. Our covenants clearly state that the townhome reserves are solely for the use of the townhome owners. It's very clear. Despite being shown this evidence, the borrow refuses to retract their statement, and out of months of frustration, I made that comment (because they do post a financial threat by saying they have these powers. There is no doubt in my mind that if they ever DID borrow from the townhome reserves, they would be sued. Hope that helps.

So, now they've made the comment that my remarks could be considered inflammatory and could be grounds for a lawsuit (but left it at that. They didn't come out and say "we're going to sue you"). The whole statement they made is ridiculous to me. It's nothing short of intimidation to get me to shut up about the issue they created.

Steve

Steve,

If the HOA is the keeper of the Reserves, they do have the right to "borrow". However, when they do, they must show a clear plan on how the funds will be paid back.

Are you saying that there are two separate Reserve funds and the board borrowed from one to fund the needs of the other?

Steve:

sounds like an intimidation tactic to me...in reality they would have to show that your statements were false, that you knew they were false and then show the damages those statements caused other than hurt feelings.

Steve,

An incorporated Association is a legal entity under the law. As a legal entity they are allowed to lend and borrow money. Therefore, an argument could easily be made (and I believe that this is what your BOD is doing) that as the legal entity responsible for those funds, they may lend or invest those funds as they see fit. Doing so would not, in my opinion, be a violation of the section you cited.

Now, do I think it's a good idea? - No.
Would I do it? - I don't think so, but I don't know all the specifics
Should the money be paid back? - Absolutely. There should also be documents drawn up showing how much was borrowed and what the repayment rate would be and if any interest would be charged.

Note: The authority for your Association, a nonprofit corporation, to borrow this money would come from
TN 48-53-102 which says, in part:

(a) Unless its charter provides otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its affairs, including, without limitation, power to:

(8) Lend money, invest and reinvest its funds, and receive and hold real and
personal property as security for repayment;

(19) Do all things necessary or convenient, not inconsistent with law, to further
the activities and affairs of the corporation.

Tim

Tom,

Because the Association also has the legal right to lend money, I do believe that they can lend it from one exclusive fund to another exclusive fund. Therefore, yes, I do believe that the argument can be made that they have the right to lend the funds within that reserve to anyone they wish (including themselves), providing proper paperwork is drawn up to show it as a loan with repayment requirements and penalties for failure to repay.

As we all know, having the legal right to do something is not the same thing as doing what is moral or ethical.
I would not do it. Instead, I would raise the assessments or issue a special assessment to address what is needed.

Larry, that's a good question. Given how they've fought us for months to resolve this issue, I doubt they'd even be willing to provide that info to us. They've stonewalled us all along. We can ask, but I won't be holding my breath

Steve