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Common Reasons Board Members Are Recalled From Their Positions

 

 

Article citation: https://cooperator.com/article/problem-boards/full

A board can error by doing something as seemingly minor as failing to notify owners of a rule change. “Sometimes a board will adopt or amend a house rule, and, rather than send a formal notice, they’ll send an email, or simply begin enacting the rule,” explains attorney Stewart E. Wurtzel, a partner with Tane Waterman & Wurtzel, P.C., in New York City. “Then, when down the road it comes time to enforce this rule, the fact that they didn’t follow the corporate documents can become a problem. Within VVL this has happened on several occasions, one of which was cumulative voting that cost our Associations a hefty dollar amount.

This exact thing happened in 2014 while the career board members were at the helm, this one lawsuit cost the association tens of thousands of dollars. While typically insurance is the one that pays out, in some instances it’s the community on the hook, and lawsuits WILL raise our insurance rates.

 

Social Calls

Other board transgressions manifest due to relationships – or lack thereof – within the community. Showing favoritism toward friends, aggression toward rivals, or letting those with whom one does not want to deal at all act out unchecked are examples of this. It’s the board’s responsibility to treat everyone in their association fairly, and it’s a slippery slope once a board starts straying from this basic tenet. I’ll quote a few of Marci’s social posts/emails here:

“So they are going to get rid of the events that Kelly (Marci’s friend who ran on the same election ticket as Marci) attends. We need to address the exclusivity of this group of B’s. Under VVL’s auspices. They should have to do them as private events, no association to WC.”

“you want to know why Jenifer R. is so involved in this fight, and has been all year long, you may want to Google the name of her husband, our Treasurer” then goes on to defame James you can find the full post and the email where she does it AGAIN here: https://savevvl.com/comments-from-bod-members-on-social-media/

A small group of resident is working to overturn our current board. One (Mike McMullen) is suing our HOA in an effort to overturn last year’s election” This email was from 2015, this (small group of people) is probably her favorite line to use towards other residents who disagree with her. She has used this line for years, and this is not a small group of people. There are HUNDREDS that do not agree with the actions she has taken, HUNDREDS that signed the petition knowing that certain members of the board have a history of retaliation.

The lawsuit she’s referencing was over cumulative voting. The board unilaterally decided to stop following the rules laid out in our bylaws regarding cumulative voting and VVL lost this case as a judge ruled what the HOA BOD did was illegal. In 2014 the HOA BOD lawyer advised the entire board to resign because they had not followed the rules.

Marci routinely shows bias and favoritism to one section of our community. While also routinely talking poorly of those who ever dare question her. Her clear bias exposes us and our community to litigation.

Keith Hales, a property manager, also warns against a recent trend he’s seen of conflict-averse boards. “Boards don’t want to pick up the phone or talk to a person,” he says. “Nobody wants to call someone to see what’s going on regarding a particular incident and maybe squash it. I’ve found that all you have to do a lot of times is reach out, and you can solve 90 percent of the problems – especially with things like noise issues. As a manager, I’ll get calls saying ‘We have noise; you guys need to do something about this,’ and my response is ‘Have you gone upstairs? Have you knocked on the door? Have you told them that the noise was somewhat bothersome, and asked them to turn it down?’ And they’ll reply that it isn’t their problem. But yes, it actually is. They’re adults, and they’re not in a rental building. They’re an owner in a condo property, just like all of their neighbors. You get people hiding behind a manager or an attorney, and that’s when fireworks start. It just fuels animosity between both parties, and then you escalate it to the board, and when they don’t want to deal with it, it spills over. Then you have people wasting time and money because someone didn’t want to turn off their music.”

This is exactly what we just saw. Except it wasn’t residents hiding behind the BOD it was the BOD hiding behind their lawyer at the community’s expense. Not a single letter recipient was reached out to prior to the C&D letters. James R. asked if he could do just that and was advised against it from the lawyer. If our community BOD won’t reach out to us as neighbors, then are they really a community-built BOD? You can find the written and audio transcript on the association site valvistlakes.org under Your Community > Stay Connected > BOD Transcript & Audio.

 

Abuse of Power

Sometimes board members can just get way out into the weeds, blatantly ignoring clearly stated rules. While these transgressions may arguably provide the most engaging anecdotes, they’re also the most destructive to the fabric of an association community.

“You’ll see with some frequency instances where an officer or president runs the board as if it’s a one-man show,” says Wurtzel. “They’ll refuse to approve an applicant solely because they don’t like them, dismissing a board vote. Or they’ll approve contracts without proper bidding or full documentation; without backup. And of course, if they’re hiring someone’s friend as a contractor who’s not as independent as they should be, things can get even worse.”

This is exactly what we are seeing through the nominating committee please see documentation for that here: https://savevvl.com/nominating-committee/

The nominating committee and how it functions making their own rules and qualifications for who will be on the ballot, dismissing the clearly set rules on who can be on the BOD in our CC&Rs.

We have asked multiple times to see the contracts they have approved over the past two years they have not been produced. See unanswered request for docs here: https://savevvl.com/questions-asked-no-response/

This opens us up to lawsuits and we have been sued in the past for this exact same reason, spending the associations money because they cannot follow the clearly defined rules. You can see our litigation over the past 10 years here: https://savevvl.com/litigation-since-2010/

 

Citizens on Patrol

So what authority does the owner or shareholder have to check a board that has violated its trust and neglected its duty?

“The owners’ or shareholders’ power relies on the association’s transparency,” says Stern. “To the extent that it’s possible, the shareholders should be reading minutes and developing a relationship with the managing agent. An absence of transparency is often considered a red flag. To an extent, these organizations are representative democracies, and there is a limit to how much an individual shareholder or unit-owner can supervise their board’s activity. Needless to say, in almost all of these organizations, audited financials are distributed to owners and shareholders annually, and to the extent that they’re able, they should be reviewing these documents. Should money start to disappear, that’s another red flag.”

We do not get audited financials, in fact at the top of every financial statement it says unaudited. We have recently discovered that the event side reported a loss in 2015, we requested to see the books (in Jan 2020) or even just a P&L. This was the response:

“The profit analysis of the banquet rental operations is not an existing document or ‘record of the association’ of the category which is subject to the 10 day record request requirement…”

In this email she continues to go on that she would sit down with the individual requesting these documents and review what she had. That person responded that they would like to meet, and never received a response.

You can find all the ignored requests and questions here: 

Chapnick urges residents to consistently attend board meetings. “Listen up, and understand what’s happening,” he says. “If you don’t follow something, ask questions. Understand what the law is, and how it applies to your community. That starts with the declaration, the articles, the bylaws, whatever the relevant statute is.”

 

Truth and Consequence

Of course, it doesn’t fall entirely on the owners or shareholders to police their board. Should a board willfully disregard the rules for long enough, it can face serious personal, financial and legal consequences.

“There’s a mechanism that allows a unit ownership to remove a member from serving on a board,” says Hartwell. “The board itself can’t do it; it has to go to a vote of the unit membership. Board members can also be held personally liable, without indemnification coverage from association or coverage from the directors and [officers] insurance policy. And sometimes the mistakes can leave them on the hook for hundreds of thousands of dollars.”

Some offenses, like misappropriation of association funds, can result in criminal charges, depending on local statutes. “The best way to handle this type of financial issue is to begin with a records request,” suggests Chapnick. “Examine the association’s official record, get copies of the budget, get copies of the check registers; just follow the money. Understand who is using what, and by what right they’re doing it. Once you’ve compiled that, if you believe that there’s evidence of fraud, theft, self-dealing, etc., take your account to the police department’s economic crimes division.”

“Being on a board is about administering a multimillion-dollar asset, and members need to have that mindset when they agree to serve,” Hartwell summarizes.  “Because it’s serious stuff. When you start doing things that could materially affect a unit owner’s property value, they’re going to come at you with pitchforks and spears. So you better make sure that you’re doing it correctly.”  

 

We urge you to lay down your allegiances and really look at all the rules they have broken and how much litigation they have opened us up to, most recently sending the C&D letters followed by releasing the executive session, and the history these members have of opening us up to litigation.

VOTE YES TO RECALL!