Legal Advice
I’m looking for advice and possibly a lawyer recommendation.
I live in a 178-unit HOA community in Tucson. Our board is trying to push through a vote to amend the CC&Rs by next month so they can secure a $1 million loan for structural repairs. Even with the loan, homeowners would still be responsible for covering the remaining costs—about $12,000 per unit. If the loan isn’t approved, the board is proposing a $15,000 per unit special assessment.
Here are my concerns:
The vote has been left open indefinitely, and it seems like the board is collecting “yes” votes over time without a clear deadline.
The board has only obtained one quote for the entire scope of work—structural repairs, stucco, fascia, and painting—from a single contractor.
That same contractor previously did work on one of our buildings without a permit, and a city inspector confirmed the violation.
The board never sought a second opinion or competitive bids.
I have quotes from similar work obtained in 2020 that were never acted on.
There’s a history of questionable spending and poor planning, despite engineering reports from 2020–2021 warning of structural issues.
I believe this points to financial negligence and a breach of fiduciary duty, and I’m concerned they’re rushing this vote to avoid scrutiny.
Has anyone dealt with a similar situation? Do you recommend any HOA or property management lawyers in Arizona who offer consultations or specialize in challenging board actions?
Thanks so much for any guidance.
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Have you read your documents? Most have a deadline for voting, say whether or not the vote needs to be transparent, and most loans also have to be voted on. Our HOA took out a similar loan and it DESTROYED our community. The fixes were not made, and now we have a debt. This to me, is hokey, but that’s me.
While most CC&R’s address special assessments and require a super majority approval from the members, some associations (very few) have allowed the approval of less than a majority of all owners to approve a special assessment. This is very dangerous for your communities. Again, while most CC&Rs identify the association’s ability to take out a loan, very few, if any, actually apply the exact approval requirement for a loan as a special assessment. Most are silent on owner approval for loans.
Let me make this as clear as possible, the need for special assessments and loans is a direct result of the past Board of Directors failing in their fiduciary duty to the community to provide for the long-term maintenance or upkeep of the common property in reserve funds, or the lack of discipline of past boards to protect and preserve the reserve funds by using those funds for things other than the intended purpose for those funds. So when you need it, the funds are not there. It is my position and belief that both special assessments and loans should be treated equally and require a supermajority of all owners to approve them before they are applied.
As owners, you all have the obligation to provide the financial resources necessary to maintain the common property. You have no obligation to pay for visions of grander and new acquisitions the board might come up with, and you all should have the right to decide for yourselves if capital projects are being engaged in the best interest of the community as a whole. This is why a supermajority of the homeowners must obtain approval for special assessments and loans. The current supermajority number depends on individual CC&Rs. I’ll propose legislation this coming session that will codify in law the fiscal responsibility of association boards to their members, addressing budgets, ratification of annual budgets, expenditure of reserve accounts, contracting requirements, oversight, and financial account management. In that legislation, I’ll also establish a statewide standard of 55% of all homeowners required to approve either a special assessment or a loan for any reason.
There has to be some level of common sense in these communities, and the owners should have some say in how their money is spent. This is not association money; it is homeowner money that the association uses to manage the property and conduct its business. The years of the total unrestrained ability of these associations to levy assessments on homeowners without corresponding expectation of duty and fiscal responsibility must end.
Dennis