Arizona HOA Owners Voice

A place where Arizona HOA board members & owners can voice opinions, solutions, recommendations, & seek advice on anything HOA related. Your voice is a powerful tool. You only hurt yourself by not using it. With no system of checks & balances within HOA Boards, pointing out how thier actions effect us is the only way to fix it. "We in America do not have a government by the majority. We have a government by the majority who participate." Thomas Jefferson

Wednesday, November 30, 2011

HOA Fraud Scheme Update

The link below is an update on the HOA elaborate fraud scheme that started in 2003 and lasted until 2009 in Vegas. I'm not real sure how the banks were defrauded. Did these "straw buyers" default on the loans? They lied to the banks maybe, but when the banks were handing out money to anyone who can sign their name on the dotted line and forging applications themselves. Plus, it's not like they banks were gonna deny the loan had these "straw buyers" told the truth anyway. Meaning the only people who were defrauded was the association.

When you've got one lawyer making 100 million dollars from HOA construction defect suits. These communities may be better off filing a civil suit against everyone of the people involved. The "straw buyers", lawyers, police, construction companies, management companies, managers, all of them. There is more than on way to skin a cat.

HOA scheme victims say plea deals ignore them - News - ReviewJournal.com

Monday, November 28, 2011

What is a Conflict of Interest?

With the recent scheme involving property managers, construction companies, HOA board members from several communities, lawyers, etc. It was a good time to define just what a conflict of interest is and some examples of situations. Because management companies have to disclose conflicts or potential conflicts to the associations yearly it's something the board should expect to get at the first meeting of the board. As an owner who makes up a portion of the entire association you also have a right to know of any conflicts board members have or anyone who is trusted to act in the communities best interest. If you think that a conflict exists seek legal advice.

My suggestion to any HOA is to retain independent legal counsel for the association so, the board has direct access to the attorney. For obvious reasons before the attorney is contacted it should be documented by a vote of the board specifying who will contact the attorney. The most important thing is to retain the attorney by paying a retainer fee.

CONFLICT OF INTEREST

Q.

Please define "conflict of interest."

A.

A conflict of interest exists where an individual's duty to one party leads to the disregard of a duty to another. It exists when an outside influence affects a person's ability to make an independent, unimpeded, objective decision or when a person owes duties to separate parties with conflicting interests.

Whether or not a conflict of interest exists depends on the facts of a particular situation which must be evaluated on a case-by-case basis.

KICKBACK?

Q.

The management company for our homeowners association has a website with links to various vendors that they use for various management clients. The vendors are required to pay the management company a fairly substantial fee in order to be listed. Is this a disguised form of kickback?

A.

Possibly. Without knowing the amount of money involved it is difficult to determine if the fee is reasonable given the cost of service provided or whether it's a means for the management company to generate income as a result of providing business to the vendors. In any event, at the minimum it creates the appearance of a conflict and, in my opinion, is evidence of poor judgment.

SUE YOUR MANAGEMENT COMPANY

Q.

We recently learned that the management company for our homeowners association owns a construction and maintenance company that they have utilized to provide services to our association. The management company did not disclose this relationship. The construction company completed a large renovation project exceeding $500,000 only few months ago and we're certain they made a significant profit. Can we sue them?

A.

Yes. You can sue them for breaching their fiduciary duty as your association's agent and for unfair business practices. In such a suit, your association would normally ask the court to require the defendant to reimburse all profits they made plus all legal fees and costs incurred. You should consult with an attorney immediately to protect your rights.

CONFLICT OF INTEREST

Q.

Our management company has been using the husband of an employee to provide maintenance services to our association for several years. We just learned of the relationship because it was not previously disclosed to us. Is this a conflict of interest for the management company?

A.

Absolutely. Whenever a management company uses a related party to provide services, it must be disclosed in writing, in advance. This type of conduct does not reflect positively on the management company to say the least.

CONFLICT OF INTEREST WITH LAW FIRM

Q.

Our homeowner association needed a referral to a law firm that would represent us on a contingency basis. Our management company made a referral and our board of directors subsequently signed an agreement with the law firm that was referred to us. The retainer agreement called for the law firm to receive 40% and the management company to receive 10%. The management company was required to provide some minor administrative assistance to the law firm. The case settled for millions of dollars and consequently the management company was paid several hundred thousand dollars for less than $2,000 worth of services! The members were never informed of the arrangement. As a member of the association, I am very concerned about this situation. What do you suggest?

A.

You should be concerned about your board, the law firm representing your association and your management company. The situation you described calls for a confidential consultation.

LEGAL ADVICE

Q.

The management company for our homeowner association is constantly calling an attorney for advice of a general nature. Our association is being billed for the advice, which is very expensive. Is this to be expected and what advice can you offer?

A.

Management companies should not have their association clients billed for general legal advice.

General legal advice should be paid for by the management company, if required. Specific legal advice that addresses a unique set of facts, concerning an association, should be billed to the association.

Many management companies retain attorneys for a flat monthly fee at their cost, to answer general legal questions. Other management companies have in-house legal counsel to provide the same service. Since legal fees can be one of an association's largest expenses, it makes sense to explore all of your options by comparing the services available.

LAW FIRM WON'T SUE MANAGEMENT COMPANY

Q.

The management company for our townhome association gave our board of directors some very bad advice which resulted in our association losing several thousand dollars. Our association law firm refuses to get involved in a suit against the management company. Our board is finding it difficult to find an association law firm that will sue any management company. Is this common?

A.

Yes. Most association law firms get the vast majority of their business from management companies and thus, most of these law firms refuse to represent associations against management companies. Your board should continue to interview association law firms. If they are diligent, they will find a competent firm.

NO CONFLICT OF INTEREST

Q.

The attorney that represents our homeowner association owns an interest in our association's management company. Is this a conflict of interest?

A.

No. The fact that your attorney owns an interest in your management company is not a conflict of interest. However, your attorney has the obligation to advise your board that he or she has such an interest. In addition, should a conflict or potential conflict ever arise between the attorney's representation of your association and the interests of the management company, he or she would be required to advise you of such a conflict or potential conflict. In the event of an actual conflict, the attorney would be required to advise your association to seek other legal counsel. In the event of a potential conflict, the attorney would be required to advise you to seek other legal counsel or explain under what circumstances a potential conflict can be waived.

Permission to reprint our HOA Questions and Answers is granted provided Michael T. Chulak & Associates (MTCLaw.com) is credited as the source.

Wednesday, November 23, 2011

Happy Turkey Day

Gobble Gobble

Skills Needed to be an Effective Board Member

Although you don't have to have any knowledge or experience to serve on an HOA board. It is obvious by the number of articles written by lawyers, property managers, and various organizations there is a need for certain skills. After all owners are going to be frustrated and maybe not so nice after holding in something they are unhappy about for 2 to 3 weeks waiting on the monthly meeting. It's something we can all relate to and don't want to escalate the feelings.

Board Candidate Form

This is a candidate profile form to be sent to the membership to allow those who want to run for board member positions to complete to have their name placed on the ballot. This profile will be attached to 2012 Board Member Election Ballot & sent to the entire ownership. Otherwise only those who attend the annual meeting will know your a candidate thus taking away the opportunity to vote for you from those not in attendance. Anyone who is elected and not on the ballot will still have to fill this form out and it will be sent to the membership. Making it easier and more cost effective to the community for all the information to be sent to out at one time. Every owner in the community has a right to know who is on the board and to be informed of any conflicts. By disclosing all potential conflicts that may exist before the elections or that may occur in the future may prevent any accusations of fraud resulting from those conflicts.

Candidate Name______________________________ Lot or unit #________________

Owner Since _________ Full or Part-time resident________ Months in town J F M A M J J A S O N D

Have you ever served on this or any other HOA Board______________

Number of terms___________ Positions Held ______________________________

Are you able to spend the hours nessasary to educate yourself to make informed decisions in the best interest in the community?________

What do you hope to achieve if elected to the board of directors?_________________________________________________

Employer _______________________________ if retired just write Retired

What kind of company is it? (construction new homes, construction residental, real estate, law firm (kind of law firm), consumer goods, residential service company, etc.) etc.)_______________________________________________________

List skills and experience (recent) that you feel that the community can benefit from?

What areas do you see that the board is lacking focus?_______________________

Have you read every page of the governing documents?_________

Do you believe that the board can do and spend whatever money it wants at any time and for any reason? Why or why not

Do you think board members are relying on electronic forms of communication too much?

Do you think that board members should be more active in the community and not just at board meeting?

Should the board be doing more to find out what the majority of the entire ownership wants the board to focus on for the year?

The following questions pertain to interest held other than stocks held as an employee or 401K. If you are married please indicate if the interest held is held jointly or by a spouse.

Do you hold any interest or investment held in any company that you do not work for? If so, list the names of each company and type?___________________________________________________________________________________________

_____________________________________________________________

Please name any company that you or your spouse hold the a controling interest in?_________________________________________________________________________

________________________________________________________________

Are you a member of a trust with any type of investment be it stocks and or bonds, etc. in a business?________ If so, are you the trustee for the trust?________________

Co. name & type of comapany_________________________________________

Does the investment give you or the trustee of the trust if ownership is held by the trust the ability or authority to make decision for the company?________________

Do you hold any affiliation with any business or corporation? Please list all affiliations and short description of each.

1.

2.

3.

4.

Candidate Signature________________________________________ Date____________________

Wednesday, November 16, 2011

Feds Investigate HOA Fraud! Yippie

Tuesday, November 8, 2011

Accountability - What Happened to It?

Every once in a while I come across something that is not HOA related but that I feel the need to share. This is one of those things. Between the discovering homes prices in my community have fallen on average 35% for homes that were bought in 2005 to 2007 then sold 2010 and 2011. Then to have the HOA board more concerned with redesigning land owned by the city but maintained by the HOA and located outside the community. Instead of doing things to improve the common area directly in front of the homes to help increase the values. In my opinion this kind of waste should be punishable. But, for some reason the law has protected board members as if they were politicians or Wall Street.

It is what makes this bit of information a real victory for everyone.

Project Propsal and Committee Instructions

Project Proposal Form

Project Name                                            Location :

Submitted By:                                            Lot #:

Phone Number:                                         Address:

Email:                                                       Submission Date: /          /          /

Summary of Project

Project Objective

Overall Benefits of Project

Steps to Completion - For example removing grass, digging holes to be filled with cement, stacking concrete blocks to create wall, etc. just general work involved.

Time Frame Estimate/Schedule

Responsibilities for Implementation

Description of Project Budget Estimate

Sources of Information

Print Name: Position / Lot #:

Signature: Date:

For Board Use

Assembling a committee of no less than 5 owners to research project _____________

Project not desired at this time for the following _________________________________________.

Board Signatures (at least 3)

1. Position

2. Position

3. Position

Committee Instructions

Provide answers to questions on page 2. Schedule for reporting can be added to keep things timely and get project completed within the current year if approved.

The committee shall meet no less than once a week to discuss and prepare to present and answer questions at the monthly board meeting. The first committee report will be presented at the next board meeting. Using the information submitted in the project proposal and any directives from the ownership to complete the project details below. The first report from the committee will contain ideas for designs, options available, suggestions from contractors, and the pros and cons of each design, and the versatility of each.

The second report will be provided at the board meeting 2 months from now and shall contain detailed information pertaining to constructions, modifications to the landscaping, sprinklers, etc. as well as any problems that could come up, and any effect on the owners during the project. This shall answer questions 1-3 in detail for each design suggested.

The third presentation will be presented 3 months from now and will contain specific details on each of at least 3 designs. The remaining quesitons from below shall be answered and presented.

The forth presentation the committee shall present the board with the project details completed as a committee for each design including photos, bids, diagrams (as best as you can do), and supporting information.

Once reviewed the fifth meeting the board will make it's decision either approving it one, denying it, or kick it back for more questions or changes. If approved the board shall sign the proposal and the committee can award the job the next day.

If kicked back the finals decision will be made at the sixth and final presentation by the committee. Once approved and project completed the committee will cease to exist.

Project Details

Will this project cause any inconvience to the ownership in any way?

Will the project require changes to or modification of the sprinkler system, landscaping, planters, plant location, the land, etc.? How?

Can the finished product be easily and inexpensively changed or have multiple uses?

Please detail out the approx. costs involved for plants, parts, labor, grass, paint and color, materials (kind), etc. that the project would require?

What is the manufacturers warranty on all componets used?

What are the terms of contractors warranty?

What is the required maintenance to keep all warranties valid?

What is the estimated cost for every maintenance occurance and yearly total?

If this project is intended to reduce expenses, please state which expense and gallons used, KWH, etc. multiplied by the current rate to get the savings per month and per year? Gallons, KWH, or units used and estimated savings should be for only the area where the project will take place not the entire community or all common areas or zone.

How much is spent on the expense per owner monthly and yearly?

How many years will it take for the estimated yearly savings minus the yearly maintenance costs to equal the total cost of the project?

Committee Comments

Submitted by ______________________ Committee Members with attached photos, drawings, bids, and research materials.

Signatures of Committee Members & Lot Numbers

1.                                                              6.

2.                                                              7.

3.                                                              8.

4.                                                              9.

5.                                                              10.

For Board Use

Send back to committee for changes, additional bids, more research, or other reason. Please explain in detail and provide detailed committee instructions.

Approved no conditions _______ Approval pending conditions ________ Denied_________

Please explain or satisfy conditions listed then resubmit:

Board Member Signature

Signature:                                            Position:

Signature:                                            Position:

Signature:                                            Position:
Minimum of three board members must sign for approval to be valid.

Measuring Success & How to Achieve It

Unlike every other organization doing business a non-profit condo. HOA does not measure success by the amount of profit/surplus/bottom line at the end of the year. For a non-profit condo. HOA the goal is to be flat at the end of the year. Depending on how your financials are set-up the amount left at the end of the year should equal the amount of contributions or zero.

HOA Management Fees: Beware These Questionable Fees; How Your Association Can Address Them

It's even worse when the board signs a contract that agrees to be charged on a per letter or envelope or check or per copy fee. This article tells exactly what to look for because some of these fees are only seen by the homeowner and not the board. HOA Management Fees: Beware These Questionable Fees; How Your Association Can Address Them