putting condo in LLC? protection from crazy HOA board (documents, investment, fees)
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First of all, I'm a board member for my HOA trying to work to improve things. I feel our board has a long history of overstepping boundaries (due to an overzealous, unhappy, retiree who happens to be the board president and self-appointed 'king of the realm').
We have been given council by our lawyers to change some items in our rules and regulations because they are not in agreement with the by laws, could result in litigation, and/or are against constitutional rights.
....ah, the condo life.
So my question is, would it be a wise move to put my condo into some kind of LLC so that if the association were sued I wouldn't lose my home? Should I be worried about all other assets I have as well (like retirement accounts)?
I think as a board member we are insured. But wondering if I should protect myself as an HOA member.
Who are you concerned about suing the HOA? And do you (the board) carry a Directors and Officers policy?
If a homeowner sues, then it will most likely be against the board of directors not the HOA. Once a lawsuit is officially filed, then the D&O policy will kick in and pay legal fees (and the policy is very cheap). However, there are usually extensive legal fees leading up to that which the HOA will be responsible for.
You can have a lawsuit against the HOA/Board that the legal fees are then special assessed against the Owners, but I've never seen it go against the members personal property.
Read your documents. There should be a way to remove a board member, sometimes there's even a way for the board to vote to remove someone from their position (say President) but they are still on the Board and someone else is appointed in their place, and there are sometimes a way to remove them completely.
If there's enough outcry, then I would imagine the president would be voted out at the next annual meeting. If there's a number of owners that are oblivious and don't care...some discrete phone calls may be warranted. Beware of emails which identify yourself and are then forwarded to the Management Company or the President which can then lead to issues for you.
This is a legal question and you really need to consult an attorney that specializes in real estate.
There are several factors that come into play here. First of all is it an investment property or a primary residence? What are the laws in your state regarding HOA/COA member liabilities? How will the LLC be structured?
Many people believe that an LLC always shields them from personal liability, and in many cases it does. But I have seen cases where in a lawsuit the plaintiff proved that LLC was formed with the owners personal funds (co-mingled) and the ONLY reason the LLC was formed was to shield liability and found the owner of LLC as liable for the actions of the LLC.
I've been there about 3 years (primary residence) and seems the other owners (58 unit HOA) are either apathetic or just have given up. We're lucky to get 15 at the annual meeting. We just wouldn't get the votes. Unless maybe going door-to-door, but even then....people might not be responsive.
I make him sound worse than he probably is...it's true he is a bully, but he is also not very smart and isn't a good judge of character.
Things have gotten better. I think our management person who is pretty good overall, is sympathetic to the situation.
I have no clue on how the LLC would be structured and also no clue about HOA member liabilities in Massachusetts. Stuff I need to research...
I hear ya, if I didn't live in Massachusetts and could afford a SF in a good location with equivalent standard of living (our condos are gorgeous, beautiful grounds, private, quiet, etc.) I would. Plus I spend about 3 months or more out of state travelling. Maybe find a different condo in a different HOA? ...heck, might move into something worse. And it could be worse.
Who are you concerned about suing the HOA? And do you (the board) carry a Directors and Officers policy?
I'm most concerned about a unit owner suing due to enforcing bogus rules that are against the constitution or the bylaws, for example.
The board is insured. I don't know the name of the policy ...if it's a "directors and officers policy", but asked management early on in my term about that and was assured in writing we were insured.
We have been given council by our lawyers to change some items in our rules and regulations because they are not in agreement with the by laws, could result in litigation, and/or are against constitutional rights.
....ah, the condo life.
This is somewhat off-topic, but given that your HOA isn't a governmental entity, exactly what "Constitutional rights" do you and your lawyers believe are being violated?
I'm most concerned about a unit owner suing due to enforcing bogus rules that are against the constitution or the bylaws, for example.
The board is insured. I don't know the name of the policy ...if it's a "directors and officers policy", but asked management early on in my term about that and was assured in writing we were insured.
I would confirm you have a D&O Policy. If an owner sues, then its going to be against the board for unlawful decisions, not against the HOA.
Usually a suit against a HOA is due to negligence or something affecting someone outside of the HOA which would be covered by your liability policy.
This is somewhat off-topic, but given that your HOA isn't a governmental entity, exactly what "Constitutional rights" do you and your lawyers believe are being violated?
He probably means the covenants or the declaration. Or the state General Statutes.
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