problems with HOA (documents, foreclosures, sales, fees)

[xyz affair]

I live in a self managed condo community-24 town-homes- 22 are owner occupied- myself and the former President are looking into possible illegal activity by the present board and President. This includes possible embezzlement. When the current 'regime' and I call it that 'took over' 3 years ago we have seen our general account fall from 90K- to under 40K- we have had an assessment and our condo HOA fees have gone up 35%.

I have seen no large exterior projects completed to justify a huge depletion of funds, the need for assessments or a large increase in Condo Fee.

Due to other activity by this association- which I sought legal council on- and they have since left me alone- myself and the former President now Are demanding an independent full audit. If any monies are not accounted for- we intend to take legal action against the board for embezzlement, plus a law suite for the association failing to hold elections (they appointed themselves) which is illegal under CT law, plus harassment, breaking and entering and invasion of our civil liberties- wow!!http://city-data.com/forum/images/smilies/sad.gif (broken link)

Any people here have experience with this kind of situation??

[middle-aged mom]

Before I would jump to the worst case conclusions, I would compare and contrast income statements, cash flows and balance sheets for the last 4-5 years.

Do your state laws compel an annual audit by an independent accountant?

[MMichelle]

An audit will tell the tail. In Colorado any HOA with revenue in excess of $250K per year is required to have an annual audit. However, even before that law went into effect the HOA board I served on had an annual audit each year. It's just good business practice. Additionally, any time there was a change in management, we'd have an audit - just to be sure we were starting with the same base line.

The huge drop in funds, $50K, works out to $1,389.00 per month over the 3 year period you site. Embezzelment is a crime where by the money, you are claiming was diverted to one (or more) of the individuals on the board. ?? This is a serious accusation, if true a crime has been committed. If untrue, you and your HOA may be subject to a lawsuit. I trust have reviewed the HOA financial records for the past 3 years and you find entries that indicate money was diverted to the individuals you accuse. ?? Is this correct?

Please be careful not to make unfounded claims. An audit will lead the auditors where they need to go. But take care not to ruin someone's reputation without evidence. Aside from the legal ramifications to yourself, it's horrible if you are wrong.

All this said, self managed HOAs are a worry. Remember even you are subject to your neighbors distrust. An audit will clear the air. Your HOA is very small and an audit should be a very simple matter.

Regardless of your local laws, all you need do is hold a meeting, and vote in favor of an independent audit, by XX CPA Firm, costing in the amount of $XX - $XX. BTW - Get a couple of estimates from a few local CAP firms. Easy enough to do. Simply give them the size of your HOA (number of units) and a copy of your last financial statement.

Best wishes.

[xyz affair]

I do not want to 'jump to conclusions' but the past behavior of this association has been one of breaking the law' which means going way beyond the legal boundaries allowed.

We will first seek an independent Accountant who will compare cash flow over the past 4 years-
it seems thus far- this association has decided to elect themselves, make the laws, and try and enforce them.

My attorney has told me they have broken the law-as did A policemen by entering my home without my permission-also they have tried to entrap me (according to my attorney) and have made biased decisions against me- when I presented them this evidence- they let me alone.

Considering the President who 'nominated' and elected herself- and has moved to various locations in different parts of the county- I feel she has a shady background- and any behavior or decisions made by her are highly questionable to say the least.

An audit will be done- if there are any kind of monies being diverted for any reason not accounted for- then an attorney will advise us what action to be taken next.

[MMichelle]

So it sounds like you site a string of bylaws violations and perhaps violations of statue, i.e. Police entering your home.

Unless your by-laws state one can not self nominate herself (& I've never seen such a thing), she can. For a very small association, a nominating committee is usually not done simply because there are so few people. One can not elect one's self - she must have had votes from other homeowners in person or proxy. Again the by-laws of your HOA will outline how elecitons are done.

This all sounds very personal and very ugly. If you and other homeowners are unhappy with the current board, you have every right to elect those who are more to your liking. If your board president lives in different homes around the country it could mean she has more money than you do. $1,389 / month will hardly offer any board member a jet set lifestyle. With all due respect, I'm reading lots of accusations and no data that would lead a reasonable person to think money is missing.

Regardless of "who's right, who's wrong" or "who's nice and who's not", you have offered no evidence that money has been stolen. Revenge, hate and slander is hardly the way to win the trust and support of your neighbors. I strongly suggest you get an audit completed as soon as possible and take the high road. I understand there are hard feelings between you and the president of the board, but this is the ideal time for you to treat her as you would like to have been treated.
Best wishes.

[xyz affair]

Actually Michelle

the local policeman told me that the association violated state law when entering my home- the Policeman did not enter my home- I made the complaint to him.

The audit over the period of December 2006 to present done independently should provide the empirical information. If there is a steady stream out of money that is not justifiable then our accountant and attorney will advise us accordingly.

The President of the board is simply not qualified to be on the board- additional info from other Realtors I have gained is that our community has now a 'bad street reputation' no one talks to one another- there is mismanagement and a huge drop in our general fund- which is public knowledge.

This women is autocratic, a bully and a control freak- and she needs to go. By the way under Connecticut state law- she cannot elect herself.

[MMichelle]

Yes, as I've said, let the audit speak for it self. However accusing someone of a crime without evidence could cause you to be on the loosing end of a lawsuit. [Remember your homeowner's insurance will not defend you as a board member.]

No, it's not possible to elect one's self. (please read my post again.) To be elected there must be votes from other homeowers in person or proxy. You mentioned appointments - check your bylaws for proceedures of appointments. The bylaws of nearly all non-profit corps, HOA, etc., that I have read allow the current board to appoint replacements to vacancies. If you have not read your bylaws, do so. It's a wealth of information and will help you understand the proceedures that the board is compelled to follow. That said I've know of HOAs (& other non-profits) who failed to follow the proceedures outlined in the bylaws. Bylaw violations are usually not the basis of a lawsuit. Usually it's simply too costly for a infraction of parlemtary proceedure. However the infraction can be politically used at the next election.

A financial crime is a different story. Such would include civil and criminal action. In most cases I've seen, the HOA's insurance company will be evoked. Again, you need evidence - the audit will offer evidence or clear the air of wrong doing.

As I stated, you and your neighbors have every right to elect whom you wish. You need to study up on the proceedure. Again, I'll refer you to the bylaws.

If your governering documents are in electronic format, you are welcome to send me a PM and I'll be happy to review them. I'll be happy to offer whatever advise / help I can.
Best wishes.

[bentlebee]

Could the lost in funds have to do with the deadbeats not paying any fees at all...with so many foreclosures it is going fast...

[Rakin]

Side note - This same situation did occur to a local condo complex here. The residents had to almost double the dues to dig themselves out of a deep hole.

Doubling the HOA fees has almost killed the sales in that complex which led many owners to having to rent their units. It has been down hill for them and I'm not sure they will recover anytime soon with the high fees and high rentals.

[xyz affair]

The turn over in units here has been about 3 or 4 since late 2006- from my information condo dues are not behind-- Connecticut has not had the huge problems facing other parts of the nation- we did not overbuild- and therefore the economic downturn here has been strong- though it is not severe.

The Condo fee jumped from $120 a month in 2006 to $163.50-- there was a $250 assessment per unit earlier this year- my question is why with so much money in the general fund and increasing condo fees why would we need an assessment.??


We now have a very expensive landscape company- where is before it was much cheaper
it seems that money is being spent lavishly- or???

The Audit will show all- either gross incompetence- something more sinister or even both. I have the feeling once an audit does take place- the women who is president and her board will likely be forced to resign- the day to day activities and management will be handled by a management company.