Board only approved expense in email
Dear Dennis,
I am a member of my HOA board. In 2022 the HOA spent $51,000 on an expense. The problem is none of the HOA’s meeting notes show the board approved this expense. One meeting note says “quote will be provided to board in email”. That’s it. I think the board never approved this.
Unfortunately one person from the board in 2022 is dead, and another board member left the community, so I cannot talk to them. The other 3 board members I do not trust.
If a HOA board unanimously approves something by email, I assume those emails would become part of the assocation records and therefore would have to be provided if a homeowner requested the emails. If I request these emails from the HOA management company that shows the board approved this expense in email, and they refuse to provide them, can I open a dispute with the AZDR? If so what law would I cite as being violated?
Thanks
About Post Author
7 Responses
Leave a Reply
You must be logged in to post a comment.
Sunny,
First of all the board cannot approve anything by unanimous consent by email other than emergency matters, as this would violate the open meeting law ARS 33-1804. That requires that the board conducts their business openly and allow any member to speak prior to the board vote on any issue.
It is issues like this that is why all board business must be conducted openly and accurate meeting minutes are maintained. To spend $51,000 without a record of board approval of that expenditure is simply ridiculous and systematic of a totally disfunctionsl organization. This is not a game . You are entrusted to spend the communities money wisely and for the proper reasons the community deserves total transparency on all those expenditures.
As for your specific question. Even if the board conducted the vote illegally via email the record of that business must be retained as a permanent record of the association. Any request for record review of the emails involved in the illegal approval of that expenditure must be provided under the records request statute. ARS 33-1805.
Dennis
Thank you Dennis, you are an invaluable resource. Since joining the HOA board I have found many disturbing things. For example, out of that $51,000 spent there was $7k spent for an irrigation controller upgrade. I have since learned the HOA doesnt own the irrigation controller and the HOA management company has admitted to me in writing they removed it from the work order at some point, but the $7k was still spent by the HOA for a irrigation controller the HOA doesnt own and nothing was done to it. So I’m going to keep fighting them until I get the full truth of what has really been going on.
Sunny,
Thanks for the update. This is simply another example of an incompetent community manager and a board that failed its fundamental fiduciary responsibility to the members of the association. If the work was not done where did the money go? Who illegally pocketed association funds? $7,000 exceeds the threshold for criminal grand theft. If the board fails to investigate and correct this issue it should be referred to the county prosecutor and local police for investigation and criminal charges.
Dennis
Dennis,
This is more than incompetance. On the same day the parts were ordered for the irrigation controllers a homeowner probably paid the HOA management company $50,050 to pay off debt they owed for violation fines. They sold their house and owed this money to the HOA and probably paid it off in escrow. But I cannot find this money looking at the financial statements. As far as I can tell the HOA board – at least most members of the HOA board – did not know about this expense and did not approve it. It appears to be possibly made up to take the $50,050 out. The $51,000 irrigation controller expense was paid to the landscaping company. I have talked to the police I am not sure what they are doing, I need to talk to them.
Sunny,
Interesting twist to the whole saga, this whole issue continues to have a very foul smell to it. One thing most people don’t know is that if the association never sued for an actual lien based on fines, penalties and fees other than assessment, the association has absolutely no right to collect on those fines and penalties at closing. An actual judicial lien must be made by the association to collect those fees at closing. Additionally, even if a lien is established for those charges those judgment liens are protected by the homestead exemption that protects $400,000 of equity from liens. So, the judgment lien can be satisfied only to the extent that the equity in the home is greater than $400,000. Fines penalties and fees cannot be added to the statutory lien for common expense assessments which is what most association try to claim. Total lie and a direct violation of state law.
Dennis
The homeowner sold their house at the peak of the pandemic for a lot of money. At the last minute the person at the HOA management company told the law firm to only collect on assessments and legal fees. Then she told the HOA’s other law firm to only collect on the $50,050 in violation fines. When the homeowner paid law firm #1 the money she owed for assessment and legal fees, that firm released the lien. The second law firm – that only collected on violation fines – never added a lien. Anyone looking at this would see the lien was released and it says the homeowner paid the total amount owed to the HOA, so no one would think anything else was owed. Since law firm #2 never added a lien there was no lien to release. This was very well thought out. It fooled every one.
Sunny,
What the association did was absolutely a violation of the existing law for Arizona and the Attorney participated in that violation. This was exactly the reason for my HB-2648 that was passed into law this session to end these predatory collection practices of HOA attorneys. These are two types of lien an association can place on a home the first is based on delinquency in the payment of common expense assessments. This lien is statutory and does not need a court ruling to establish the lien and is foreclosable. The second lien is for fines, penalties and any other fees. This lien must be awarded by a judge and is not foreclosable. No fee or charge by an association can become a burden on title of a home unless a lien is duly recorded. Without a separate and distinct lien for the “50,000 it was uncollectable at closing.
While I believe that we were successful at ending all of these violation from associations and their attorneys in the future with this legislation only time will tell. People still need to be aware of the law because there is no limit to the extent that some attorneys will use to try and circumvent the law.
Dennis