Terminating Our HOA Management Company & ACC Annual report
Our HOA Management contract requires a 30-day notice. Our concern is getting all the documents from them prior to that 30th day and avoid finding ourselves without access to the bank account and necessary information (EIN number) to file our annual AZ Corporate Commission Report by July 28, 2022. The management has not been forthcoming with financial reports. Does the state have any rules in place governing this transfer of documents?
We are a nonprofit corporation. The management company bills for preparing a Tax return $660.00. While searching for ACC “forms” I stumbled on “fill-out-online” forms which look like a tax return and seems to be straight forward, BUT I am not a CPA. We expect to pay for tax preparation service, but I am confused as to which form we use for the ACC Annual Report. When I called the ACC I was told it’s simple since this was established in July 2017 and we’re changing address and removing the management co. The Annual Reports I pulled off ACC’s website are 1 page, but it’s unclear if this one page is an output of a 4-8 page online form.
We’re excited about self-governing due to over 1 and 1/2 years of misinformation and neglect and would greatly appreciate your knowledge of how this part of it works.
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Brenda,
The termination clauses in your contract would dictate this transaction as there are no relevant state laws to the issue. The officers of your board can go to the bank directly and with proof of election have their names established as signature authority over all accounts and remove any names from the management company. Do not trust them to take care of this for you. Hopefully at least two of your current board members already have signature authority over your accounts. While I do not know exactly what your contract states relative to the transfer of all association records, they are still required to provide you that information as you cannot operate without those records and have obligations to have those records available to view by any homeowner. If they refuse to hand over the records sue them in superior court, they will be forced to do so by the court and also be forced to pay for your legal expenses in that civil action.
Your accounting and financial records management are very important and i strongly suggest using a CPA with experience in HOA tax law. HOA’s are one of the very few organizations where the IRS allows the association to determine what section of the IRS code they want to files their taxes with. Either 1020 or 1020H. Monet is handled very differently between the processes especially how reserve money and operating money is handled. Each has specific advantages and drawback for your community and one will be best for your specific community over the other. Which one is only you should decide.
The ACC annual reporting requirement are very simple who is the agent for the corporation and who are the members of the board of directors, that is about all that is required. Definitely not something that you have to worry about too much, as long as the commission is updated on an annual basis. The agent will be the primary contact for the corporation and can be anyone on the board or not.
Good luck, While a little harder on the board, self management can save you a lot of money. You can use me anytime if you have any questions for free.
Dennis
Dennis
Dennis, thank you so much! This is so helpful! I’ve been crunching numbers for the board to show them the savings in an annual budget.
Hi again,
As I am researching I stumbled on a 2010 Forum:
https://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/96214/view/topic/Default.aspx
This exchange caught me eye (we are a nonprofit):
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MaryA1 6/10/201
The definition of a board meeting per the AZ OML is: a meeting occurs when a quorum of the board gathers to discuss assn business, whether action or a vote is taken or not. The members don’t have to be physically present to meet thus meaning “meeting” thru email communicatons also applies. The requirements for taking an action without a meeting contains some gray areas. But, I do believe any qualified HOA attorney would tell you that this method of conducting assn business is NOT designed to take the place of holding a noticed board meeting. In states that do not have an OML, it may not make a difference, but in AZ, CA, FL, etc. it certainly may. As stated earlier, regardless of how the law is written it should not be used unless an action must be taken but a quorum of the board cannot be obtained.
SureshD 6/10/2010
So you’re saying it’s allowed but YOU wouldn’t do it… correct?
MaryA1 6/10/2010
Yes, in a way. In AZ that particular statute is contained in the nonprofit corp statutes. This is not addressed in the HOA specific statutes. So, although HOAs also look to the nonprofit statutes for guidance, because of the HOA OML laws, this particular nonprofit corp statute is a bit iffy. Of course that’s my opinion. I could be wrong. However, HOA BOD’s should always err on the side of caution, right?
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Our Board meetings since Jan 2021 have been controlled by the management co. I read AZ State Planned Communities Laws 33-1804. Open Meetings; exceptions section.
Doesn’t “Notwithstanding” mean the HOAs By-Laws are the final say? Or is this saying every meeting of the Board must be open to all Members?
From our By-Laws:
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ARTICLE II
MEETINGS OF MEMBERS
2.1 Annual Meeting. An annual meeting of the Members shall be held at least once every twelve (12) months at such time and place as is determined by the Board.
2.2 Special Meetings. Except as otherwise prescribed by applicable law, special meetings of the Members may be called at any time by the president or by the Board or upon written request signed by Members having at least one-tenth (1/10) of the total authorized votes in the Association.
2.3 Notice of Meetings. Except as otherwise prescribed by applicable law, written notice of each meeting of the Members shall be given by, or at the direction of, the secretary or person authorized to call the meeting by mailing a copy of each notice, at least fifteen (15) days before such meeting to each Member entitled to vote thereat addressed to the Member’s address last appearing on the books of the Association or supplied by such Member to the Association for the purpose of notice. Such notice shall specify the place, day and hour of the meeting, and, in the case of a special meeting, the purpose of the meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place of the meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Association may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each Member entitled to vote at the meeting. By attending a meeting, a Member waives any right he may have had to object to the meeting on the basis that the proper notice of the meeting was not given in accordance with these By-Laws or the statutes of the State of Arizona.
2.4 Quorum. Except as otherwise provided in the Project Documents or by applicable law, the presence of the Declarant at the meeting during any period that the Class B Membership exists, or the presence of Members entitled to cast, or of absentee ballots or proxies (during the period that the Class B Membership exists) entitled to cast, ten percent (10%) of all of the total authorized votes in the Association (exclusive of those Members whose voting rights are suspended) shall constitute a quorum for any action. If a quorum shall not be present at any meeting, the Members entitled to vote thereat shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
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The Management has scheduled a meeting in 5 days. Do we have to put “Termination” on the Agenda?
Thank you-again.
Brenda,
While some of the provision of ARS-33-1804 apply to meetings of the members the majority of it applies to meetings of the board. All meetings of the board must be open and noticed 48 hours prior to the meeting except for any meeting dealing with the discussion of 5 very limited and specific subject matter. Those closed meeting must still be noticed. All e-mail meeting or informal meeting and discussion ( or the use of Action without a meeting in any way) of community business violate the open meeting law unless they constitute an emergency that cannot wait the 48 hours required for notice. Anything else is illegal.
Whenever the statutes use the term “notwithstanding” it means that the statute supersedes anything in the governing documents to the contrary. Never use anything from the non-profit corporation act relative to meetings of the members or meetings of the board. The specific statutes always supersede the more general statutes and non-profits do not have any open meeting laws at all. Action without a meeting can only be used for “emergency issue”.
All the language you provided from your bylaws represent discussion of meeting of the members, what is your specific question relative to those provisions?
Dennis
Hi Dennis,
Our By-Laws give the board the right to hire/fire. Our board 2-1 is ready to give 30 day notice to our management. One board member alerted the management. Is there anything the management can Lord over us in proceeding to terminate their contract (which states 30 days written notice)? I ask because the Board approved 2-1 a bid for landscaping work and requested the Down payment and 2nd Final balance checks be mailed to the Board President. The management said they can’t do this without an Action in Writing unanimously signing off on this. This verbiage is not in our By-Laws. They have done this regarding “weed-notices” including infractions which are not stated in our By-Laws. Their practice of “making things up” has a history, thus whatever they tell us is open to suspicion. I would appreciate your thoughts.
Brenda,
Your board has the power to terminate the management contract with or without cause within the terms of that contract. The management company must also comply. The landscaping contract is a totally separate issue and once again the board does not need a community manager to hire anyone that they want. I can only assume that the decision to fire the management company and hire the new landscaper were made in open meeting of the board consistent with Arizona law. If not that is a totally separate issue. What is confusing to me as to why the board president is asking for the management company to send him money for the landscaper, why is the landscaper not being paid directly? It looks very fishey, to me as well, and if I was in the shoes of the community manager I would also refuse to do so. There is no need for unanimous consent of the board if the action was taken in an open meeting. If the action was taken outside of an open meeting it is illegal under Arizona open meeting law anyway, because hiring a landscaper cannot be an emergency that cannot wait 48hrs for the meeting to be noticed. I’ve no idea what the issue is relative to weed notices? If you have weeds in violation of established rules and restrictions you can receive a notice of violation without board vote on the issue.
Dennis
Hi Dennis,
You have provided the clarity I’ve been seeking. Thank you! Fortunately, the Board has not violated the open meeting law.
The reason the board wants to directly pay the landscaper directly is due to the Management company paying a landscaper monthly for well over a year with no accountability – no work was being done, no date of service or photos could be provided, but the state of the weeds was telling. Members offered to meet with the workers on their scheduled work days, but our requests went unanswered. (In a year and 1/2 we’ve on our 4th “manager”. We now have a big cleanup and would like to pay the down payment directly to the vendor and then look it over after he is done; then pay him the balance. The board wants to be involved since this has been a struggle for so long to get the work done.
On a separate note I was encouraged by your newsletter “Final HOA bill signed into law” and hope you will send a newsletter when bills are before the legislature so I can reach out to my representatives.
Again, my thanks for all you do for so many.
Hi Dennis,
Our board of 3 will be designating a Sec/Treasurer since we’ve terminated our management company to self-govern. Is an HOA member able to assist the board in getting the accounting set-up without being a board member? The board needs assistance with the QuickBooks transfer.
Thank you!
Brenda,
Absolutely. You are fully capable of hiring anyone to assist you in accomplishing any task that you need. including bookkeeping and accounting services. If someone volunteers that is even better. Because they do the books does not give them any authority to act as a board member.
Dennis
Dennis-again–thank you! I do not want to be on the board but I am willing to volunteer for the bookkeeping and any mailings they need.