Governing the Association
Q. I reside in a large homeowners association with a Board of Directors that are questionable at best. Our Bylaws and resolution documents state that we are to have a Board of no less than 5 people. At this time there are 3. There have been people that have volunteered to the Board but were not chosen because they ask too many questions, or they were not liked by the current Board. They have hired a manager that has no management experience. We are self-managed and we were supposed to receive a copy of the budget by mail by November 1, and we are hearing that the HOA’s finances are in a mess and we have not passed our budget because of the mess. There is no response to our calls or emails to the management or the Board. Our community newsletter has stopped, so we know nothing about what is happening. If you start to ask questions at meetings, you are asked to leave or they will call the police. I am concerned about the legality of their actions and do not know where to turn. Who can we call to help our community?
A. You have certainly presented a myriad of problems that would virtually bring any progress in your association to a standstill. We will try to break down the issues and make a few suggestions that might be helpful.
First, let’s address the Board of Directors issues. You say you have a shortage of directors in that there should be five but there are only three. We realize that there must be more to the matter than meets the eye; however, it is likely that you have elections each year. Your present shortage seems to be due to the fact that the current directors will not allow anyone they don’t find appropriate to become a member of the Board by appointment so we urge you to focus on the next election. Surely there must be others in the community that share your concerns, including those who have volunteered to serve as directors but have been rejected. Perhaps if you organize others in the community who share your concerns, you can, at the time of the election, through persons present in person or by proxies, elect a Board which will be responsive to some of the needs of the community which you have identified. If you and those who are in agreement with you do not feel sufficiently comfortable with interpreting the Association’s documents and determining correct procedures, you may need to seek legal counsel to advise you about these matters so that you can be effective in your efforts to obtain seats on the Board of Directors.
You state that the Board has hired a manager that has no association management experience. Perhaps you are suggesting that the person has no formal training as an association manager and an insufficient breadth of experience with finances, insurance, elections and so forth, to bring the necessary skills to the table. The Board does have a fiduciary duty to all of the owners to hire competent contractors, including management, to perform their duties in a competent manner based on the needs and size of the particular community. It is a fact that there is not an abundance of community association managers available to fill the needs of the various community associations in the area. A new community association is created almost weekly in southeastern Virginia. Many of them are managed by professional management companies who have managers with portfolios of communities. We cannot tell from your description whether you are utilizing a management company or whether your Board has hired a person who is serving only your community on a full or part-time basis. We suggest you consider interviewing one or more of the local management companies, who can offer qualified managers. The names of these companies can be obtained from the local chapter of the Community Associations Institute by calling its executive director at 757-588-8128.
You also suggest that the Association’s finances “are in a mess” and it sounds as if no budget has been passed for this reason. This is indeed a very serious problem and requires immediate attention. Hopefully, your Association has utilized the services of a Certified Public Accountant to prepare tax returns in the past. CPAs familiar with Associations are also aware of the reserve requirements of the Virginia law. You should attend a board meeting and urge your Board of Directors to hire an accountant to examine your financial situation immediately. If your concern persists, you can obtain the financial records of the Association by requesting them under the provisions of the Virginia Property Owners Association Act (VPOAA) and you could seek your own advice from an accountant concerning the state of the finances of the Association.
We will assume at this point that your current Directors have volunteered their time to be on the Board of Directors because they are genuinely interested in the welfare of the Association and, perhaps, have a different view of what is needed to accomplish their duties than you do. At the time of each Board of Directors meeting time must be allotted for an owners’ forum as it is required by the VPOAA. During that time period you should express your concerns about how matters are being handled; however, you are not entitled to a response from the Board at that time. Any legitimate questions should be responded to in due course after the Board has had a chance to consider your point or your request. If, after taking some of these steps, your concerns persist and you do you not believe you are getting an appropriate response, you would need to consult with legal counsel to consider your options at that point.
We hope that we have provided some suggestions that will help you achieve the results that you seek.
I own a condo in Northern VA in a building of 102 units. At our monthly BOD meeting last night the Board approved a $500,000 special assessment with a due date of 3/1/07. Obviously, that doesn't give owners a lot of time to come up with the money. The Board stated that the full amount per unit ($3500 - $7,100) was due by 3/1. If payment was not received in full by that deadline then each "delinquent" owner would have to sign a Deed of Trust and either pay within four months & be charged 6% interest, or pay within twelve months and be charged 8% interest on the amount they owe. To add insult to injury, they also stated that each owner who paid in installments & sign the deed of trust would have to pay an additional $300 for legal fees connected to the paperwork. Is this legal?? We had another special assessment back in 2004 and as an incentive to get owners to pay up front we offered a 5% discount to those who paid in full. We also offered an installment plan where you could pay quarterly (no discount nor interest charged), and a monthly plan with a nominal 2% fee charged to pay for administrative costs. That seems a lot more reasonable than what they are proposing now, especially since there are a lot of retirees on fixed incomes in our building. Do we owners who object to this have any recourse, and if so, what is it? Thanks!!
RESPONSE: Generally speaking, the Board of Directors has the power to levy special assessments, and any particular restrictions on that right would be found in your Declaration or Bylaws, which we would have to review before providing a complete analysis. Notwithstanding that, the Virginia Condominium Act (Section 55-79.83(E)) says that if the special assessment is to be paid in a lump sum, each owner must be given at least 90 days from the date of notice of the assessment in which to pay.
Section 55-79.83(E) of the Condominium Act goes on to say that a group of owners may have the assessment reduced or rescinded by "a majority of votes cast, in person or by proxy, at a meeting of the unit owners' association [convened in accordance with the provisions of the condominium instruments] within 60 days of the delivery or mailing of the notice" of the assessment. [sue-please put the bracketed language above in italics and then add "(italics added)" to the end of the paragraph, followed by a separate statement in brackets that says [Editor's Note: a similar provision for Homeowners' Associations is found in Section 514(A) of the Virginia Property Owners' Association Act].
Gregory J. Montero, Esquire