why shouldn’t HOA directors be held for criminal activities if the shoe fits?

The latest AZ-CAI chapter’s Call to Action, Apr. 5, 2012, objects to the AZ bill, HB 2160, that would make violations of the HOA elections procedure a Class 1 Misdemeanor. No reason s offered as to why not. The bill clearly states that only if the violation is an intentional violation, which is only fair considering the importance of fair and just elections in a democratic society. And aren’t we told by CAI that HOAs are the model of democracy?

Again, CAI resorts to scare tactics by focusing on the penalties under a class 1 misdemeanor. And that the fines, that can be as high as $20,000 for the HOA corporation, would be passed on to the homeowners. What an excellent approach to get member involvement, don’t you think, CAI? BTW, the Call does point out that the bill is to stop “electioneering,” you know, to stop the political machine interference so the people can “throw the bums out.”

The “we are poor volunteers” doing community good argument appears, but the presumption is that they are indeed doing good by opposing elections reforms. It ignores the fact that the bill addresses intentional acts by the political machine running the HOA for its own personal agenda. And the “death of the HOA” argument if we hold directors accountable for their acts is there, too. Well, should we support corrupt and incompetent entities used by a few for their personal agendas, entities that can ruin a member through fines and cruel foreclosure?

Finally, in an admission that not all actions by directors are covered by insurance — surprise, surprise – the fear of no insurance coverage is used. You know, it is not the acts of the directors themselves that is the precipitating cause of such refusals by insurers. No, not the directors, us poor volunteers.

I can hear those directors saying, “Damn! And we had it so good not being held accountable. Gee, I don’t think HOA life is such a good idea now that the “free ride” is over.”

I am well aware of the frequently used techniques that amount to legalized extortion by the HOA or its agent, the management firm. The 2 common instances are forcing the member to talk to the HOA attorney, and to sue on unsubstantiated and frivolous allegations. In the first instance, the member who is given notice of unpaid assessments but does not receive a detailed accounting of the alleged debt. So he rightfully asks the HOA for a statement of his account, not provided by the attorney, but is told to talk to the attorney. Why?

If the manager of president is not sure, he should contact the attorney on his dime and not the member’s dime – attorneys costs are charged back to the member. This is a legitimate request for corporate records and not attorney-privilege concern. And the HOA attorney knows this.

The second instance is the notice of a violation by the  attorney on HOA statements that would fail “reasonable cause” tests.  These allegations are acted upon without any attempt to “check out” the HOA charges, as it must necessarily be concluded, violating R. Civ. P. 11(a), “that to the best of the [attorney’s] knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law.”

The attorneys know that in the vast majority of these cases the homeowner will not go to court and either pay, if he can, or take the default judgment by the court. One JP Court judge told a homeowner in such a case that, “Normally, these type of HOA cases are default decisions . . . “ I would say that that amounts to legalized extortion with the attorney cooperating and looking the other way. See Code of Professional Conduct below).

(Sadly, Arizona bills with meaningful penalties against the HOA failed: SB 1240 would have awarded triple damages against HOA for selective enforcement actions; HB 2455, would have held the directors directly personably liable for member attorney fees; and HB 2731, would have held directors personally liable for lawsuits not made in good faith. They will be back next year, and the year after until put into law.)

HB 2160, elections reforms with meaningful penalties, gives the member a solid footing to take away control of the HOA by political machines and rogue boards. It awaits final votes.

Rules of the Arizona Supreme Court, Part V, Regulation of the Practice of Law, D, Lawyer Obligations, Rule 42.

1.2 (d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent

1.13 (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act . . . that is a violation of a legal obligation to the organization, or a violation of law . . . .

Published in: on April 6, 2012 at 8:31 am  Comments (2)  
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  1. Manager/Board making false accusations,with NO attempt to check their validity, a blitz-krieg of false accusations and false fines. Then ‘guilty until proven innocent’, many false charges left for a Judge to decide, on the Homeowner’s dime, 5 years later – and the fact that NO evidence to support the charges was provided, even in court, not one picture or the testimony of anyone other than the Manager and the Board President for numerous allegations – ‘Oh well your Honor, let’s look at whether the plans for that flower bed border were provided in excruciating detail – because we’re getting them for SOMETHING, we might be exposed as the nasty crooks we really are if we walk away empty- handed after 5 years of harrassment’…
    Oh yes, there should be harsh criminal penalties for those ‘poor old volunteers’ who behave like being a Board member is a license to steal, flaunt, condescend, break every rule while kicking others on trumped- up charges, and using the HOAs as a means to enrich themselves. As long as there’s no penalty HOAs aren’t fit to live in…Even with a penalty I’d live somewhere else – ain’t never going back to HOA Hell.

    • We need our government to create laws that will hold all AZ HOAs responsible and liable. I strongly believe that while there are some Board members who have integrity and are fair minded. The types that abuse the power which they think they have are bullies out to make themselves feel important because they simply lack real power and prestige in the real world. In order to attract the honest nice owners who are running for the right reasons and have nothing to fear if they are open and forced to follow a Board Code of Ethics or resign I suggest that we aim for strong laws that will govern all HOA Boards. #1 All HOA Board members should be required to pass a thorough background check and fingerprint clearance with the results to be sent to all owners at the HOA. Think about it: HOA Board members have access to confidential information and financials including HOA funds. Does it make any sense to trust anyone that has not cleared a background and fingerprint clearance check? #2 No Board member should be insured by the insurance company until they have submitted to background and fingerprint clearance. #3 There should be a strict Code of Conduct for all AZ HOA Board members and if they violate confidentiality or the fairness test, they must resign. #4 All HOA rules should be required to be submitted to the Attorney General once a year to verify compliance with laws. Any Board member who approved or signed off on the rules should be held responsible and liable if the rules violate the laws. This is just the start to enforcing honesty to all homeowners and we need laws that will protect homeowners from unfair HOA Boards.

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