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Business Judgement Rule

Can a homeowner file a complaint with the AZ Department of Real Estate regarding a Board decision that in the homeowner’s opinion violates the business judgement rule? I don’t want to get too specific, but...
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Audit

I asked my HOA for a copy of the audited financial statement. They said they do not need to do one, but did send me a copy of the Tax Compilation. Our CCRs state 14.4...
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  • From Dennis Legere on Is This a Right or a Preference?

    Nicholas;

    Let’s start with clarifying some of the points in your question. First of all the management company is not the HOA, the only organization that represents the HOA is the board of directors. The management company works for the board alone and has no duty to the homeowners in the community. The same way that you are bound to comply with the CC&R’s and rules for the association the board is equally bound to maintain and manage the community common property. Their failure to do so could be construed as a breech of contract between the association and the owners. It sounds to me like your board is absent in all this and have abdicated their responsibilities to the management company. You have every right to complain to the board about the incompetency of their management company and demand that they do something to correct the situation. If the management company does not respond to the boards direction they should be fired plain and simple. If the board fails to live up to their responsibility to ensure the adequate maintenance of the common area and the protections of all residents then they should be removed.

    Each individual board member risk personal liability for their failure to act to address these issue based on the breach of duty. The normal indemnification from liability for the board members does not extend to breach of duty issue.

    As homeowners you have two choices create a petition to remove the board and elect a new board that will take their responsibilities seriously or to file suit against the board in court on their failure to satisfy their duties to the association and its members.

    Relative to the management companies excuse that the landscapers were doing these action on their own was an absolutely ridiculous response. As the community managers they probably hired the landscapers for the community and they can fire them, or at the very least have the board fire them. Landscape companies are a dime a dozen and I’m sure there are some very good companies out their that would love to have your communities contract.

    The hole in the wall is the most serious issue. There is a significant appellate court decision in Arizona, Martinez v. Woodmar IV Condominiums where the association was held responsible for their failure to protect their residents and quest form foreseeable risk. That case involved a guest in the community that was shot by gang members in the area when the association failed to maintain street lights and the community gates.

    Dennis

    Go to comment
    2019/09/12 at 2:42 pm
  • From Dennis Legere on Arizona HOA Secret Ballot

    Mike
    Yes absolutely. That is contained in the law for both planned communities and Condominiums.

    Dennis

    Go to comment
    2019/09/12 at 2:05 pm
  • From Dennis Legere on HOA board policy

    Joseph;
    State law requires that all ballots be identified with the name and address or unit number of the voting member. This is to authenticate the ballot and to allow the association the means to prevent duplicate ballots from any homeowner. If the association thru it’s bylaws requires secret ballots that the state allows the signature and address to be identified on the envelop containing the ballot instead of the ballot itself. The voted ballot are to be retained for a minimum of one year and able to be reviewed by any unit owner during that time. Many homeowners are concerned about that fact and see it as a violation of their privacy. What your board is doing is not required by law and not prevented by law and in general the right thing to do for the homeowners with this privacy concern. If you want to see who voted the association most probably has a check off sheet where they validated the ballot signature against the official member list for the community. Ask for that record.

    I’ll be proposing legislation that will allow the authentication signatures and information to be separated from the actual ballot for all elections and votes of the community so that anyone after the fact can view the ballots cast and the record of who voted but not what anyone actually voted.

    Dennis

    Go to comment
    2019/09/12 at 5:34 am
  • From Dennis Legere on CCR renewal

    Jeri;
    While every set of CC&R’s are unique, they typically all address this particular situation. Typically CC&R’s automatically renew at the end of 10 year intervals. Some have up to 40 year initial periods with ten year interval after that. The renewal process is automatic with the expectation that if the community wishes to terminate the association and the CC&R’s they must do so within a specified amount of time prior to the current renewal date. In Arizona the statutes allow additional options. The community (and never just the board, other than to make the CC&R’s consistent with state and federal law) can alter any CC&R’s at any time including termination of the CC&R’s and the association altogether, irrespective of the renewal date.

    The part of your question as to, should the board notify the community prior to the renewal date that answer is easy and yes. Do they have to , no. I often comment on what boards are advised by their attorneys and their community manager, they are told what they can and cannot do along with what they can get away with, but very seldom advised what they should do.
    Boards should always consider the wishes and needs of the community first at all times.

    Dennis

    Go to comment
    2019/09/10 at 4:59 am
  • From KATHY HARRISON on Pet Restrictions

    My community has specifically targeted street parking by hiring a parking enforcement provider. It seems we also target leaving trash bins out since it is by far the most common violation notice issued. We once had a Manager who would occasionally do a compliance tour at night in order to notify homeowners of a carriage light that needed bulb replacement. In the case of a homeowner complaint about aggressive dogs running loose, no action was taken. :-/

    Go to comment
    2019/09/04 at 4:15 pm
  • From KATHY HARRISON on Pet Restrictions

    Thanks for clarifying. Enforcing the rule seems like a sticking point. Is the Board itself responsible for identifying the violations? Does the Board assign that task to a Community Manager–to patrol the streets and follow people home until each and every overweight dog is identified? Do you know how other communities enforce pet restrictions? It seems the Board needs to begin uniform enforcement once they receive a complaint–otherwise enforcement of the CC&Rs becomes arbitrary (i.e. some CC&Rs are enforced, others are not).

    Go to comment
    2019/09/04 at 12:47 pm
    • From Dennis Legere on Pet Restrictions

      Kathy;
      Only slightly more than 50% of the common interest communities are professionally managed in this state all the rest are self managed. With most professionally managed association the responsibility of day to day enforcement is relegated to the community manager. I’ve never heard of any association tasking the manager to specifically target one provision of the CC&R’s or regulations. The manager typically does community driveways and sees what he/she sees. It’s usually any violation noted at that time and date. There clearly have been situations where the board has directed that the manager or the manager on their own focuses their attention on only certain homes based on retaliation tactics, for the homeowner criticizing the association or the manager. This is not only to punish the homeowner for getting involved but primarily to send the message to the community that if anyone else dares to question the association board or the community manager they too will be targeted.
      Your closing point is also directly on target the courts have repeatedly decided cases where without documented and clear rules and restrictions and consistency in the enforcement action of the associations were found to be acting in an arbitrary and capricious manner and those actions were struck down by the courts.
      Dennis

      Dennis

      Go to comment
      2019/09/04 at 1:17 pm
  • From KATHY HARRISON on Pet Restrictions

    Yes, but…how to “prove” that a homeowner is housing an overweight pup? Do neighbors rat on neighbors? Does the Community Manager follow people home and notice them? Seriously. BTW my dog weighs 12 lbs so I don’t have a dog in this game.

    Homeowners actually do have recourse, don’t they? CCR’s can be amended, and there is a process in place to do that (it has been done in my community with parking regulations). I’ve lived in the community 9 years. Pet restrictions have not been enforced once during that time (I asked). A precedent has been set. How does that fact play into enforcement.

    What I see in beginning enforcement now is lots of legal fees the homeowner will end up paying to basically bust the balls of their neighbors. IMO as long as the dog is on a leash what’s the difference how much it weighs.

    Go to comment
    2019/09/04 at 11:01 am
    • From Dennis Legere on Pet Restrictions

      Kathy;
      Again you are absolutely right, remember I do not have the luxury of seeing exactly what your CC&R’s say. Nor do I have the long term story of what your association did or did not do in the past. My response is based on what the association is within it’s rights to do. Your restriction could be size or weight based or even breed based. The fact are that if you are in violation of the restriction you could be cited for that violation at any time. This is simply Russian roulette, sooner or later you will be caught. Remember the board has enforcement discretion and the community has the power to amend the CC&R’s to reflect the consensus of what the community truly wants in these restrictions. As I often explain the attorneys and community managers will gladly give the board their opinion of what they can and cannot do, but they will not provide any guidance on how to do it or what they should do.
      As for the precedent issue again that depends on what is included in the CC&R’s. In recent years attorneys have been dealing with this by placing in the CC&R’s what is called a non-waiver provision. What this provision does is basically state that no matter if the board failed to enforce the provision of the CC&R’s in the past they do not waive those provision and can decide to enforce them or enforce them differently in the future. If your CC&R’s have this provision whatever the board did in the past becomes irrelevant. If however you do not have this provision than lack of enforcement in the past will prevent reinforcement in the future. This will not stop an association for doing it but if challenged in court the case law will support the provision being void. Association often do not care about the law because they know that homeowners are not likely to challenge them in court based on the cost, so they get away with what ever they want no matter what the law says.
      Dennis

      Go to comment
      2019/09/04 at 11:50 am
  • From Dennis Legere on Pet Restrictions

    Kathy;
    As long as the CC&R’s clearly identify a restriction on size or number of pets the rules adopted by the association are valid and enforceable, but they must be authorized in the CC&R’s. Your board is correct at least in-part. Pet issues are difficult and are often subjective. Its sounds to me like you are talking about two separate issues. The number and size of pets and pets off leash. Leash laws are enforceable by the police in all public streets and parks. But if the association owns your streets or all your common areas than the police will not enforce those laws on private property.
    As to the original issue of number and size of pets. if the CC&R restrictions are clear and valid than the association has the right and in fact obligation to enforce those restrictions and make the homeowner get rid of their pets. Yes i know that this is harsh, but it is why no one should ever buy into a common interest community without knowing and understanding the CC&R’s. You are required by law to be provided a copy of those documents prior to closing and you have 5 days after you receive the documents, to either accept or reject the home based on those documents without penalty. But once you close on the home you are contractually bound to their restrictions. If you have a 50 pound dog and the CC&R’s restrict all dogs to 40 pounds or less that the association has a duty to make you remove that dog from the community. If you decided to take the chance when you bought your house that the association would not make you get rid of your long term family pet, that was a gamble that you can never win if you are challenged.
    The arguments that it is too hard id nothing but crap. Associations do it every day. What is hard is enforcing the CC&R’s fairly and equally across the community. The board also has enforcement discretion but that discretion must be applied equally across the community and not selectively for the friends and not for others. The board has a duty to treat all homeowners fairly and to act reasonably in their enforcement discretion.

    I absolutely hate hearing that boards simply reject offers for help from community members. This simply reflects that the board does not want to encourage community involvement, they want all the power and are not willing to share that power with the community. This attitude will spell nothing but trouble for your community and it is time that new board members be put in position that will be willing to work with the community to address their issues.

    Dennis

    Go to comment
    2019/09/04 at 10:47 am
  • From Steve Schumacher on Board Member Misses Meetings

    Hi Dennis – thank you so much for your reply. I certainly appreciate the input of a totally objective person on this issue. Here is what the bylaw specifically says:

    “Except for members of the Board of Directors appointed by the declarant, declare the office of a member of the Board to be vacant in the event such member shall be absent from three(3) consecutive regular meetings of the Board of Directors”.

    I really do not want to go on a witch hunt regarding rules and bylaws that have not been enforced like this, but I do want to raise awareness of a Board member who is not living up to the spirit of the Bylaw.

    Go to comment
    2019/09/02 at 4:15 pm
    • From Dennis Legere on Board Member Misses Meetings

      Steve;
      Reasonable approach. Your bylaws are clear there is no wiggle room in that language. Miss three consecutive meetings for whatever the reasons and you effectively resign you position on the board. The board need not take any action other than to appoint someone else to fill the vacancy. This is not only the spirit of the bylaws it is the letters of the bylaws. The association is bound to comply and operate the corporation in accordance with their bylaws. if the board does not like them they can change them via the process described in the bylaws.
      Dennis

      Go to comment
      2019/09/03 at 6:20 am
  • From Dennis Legere on Board Member Misses Meetings

    Steve;
    For once your community manager is at least partially correct. The only way a board member can be removed is via a petition for that action by the members. While I’ve not read your specific bylaws, what most say on this matter is that if a board member misses three consecutive meeting without advance authorization he/she is considered to have resigned. A resignation is not a removal. Like everything the board president gets to decide what he or she does in this matter. If he likes the other board member he will simply claim that all the absences were authorized and do noting if he does not like the board member he simply claims that the board member resigned. Even if the board member resigned via his absences he could still run for reelecting and the homeowners get to decide if his level of commitment to the community is what they want from their board members. If you have a concern don’t vote him or her back in.

    Dennis

    Go to comment
    2019/09/02 at 10:34 am