Best Community Financial Practices or Narrow Self Interests?

Best Community Financial Practices or Narrow Self-Interests?

The Covenant of our HOA, as with so many others, directs the Board of Directors to uphold a fiduciary responsibility to safeguard the financial well-being of the whole community. Really? Consider the following story about our HOA:

• Since the completion of its’ building in1982 only 2 Reserve Fund Studies have been conducted; both studies rated the Reserve Fund as being 17% sufficiently funded to avoid risking a Special Assessment.
• There have been no increases in HOA fees in 13 of the past 15 years. This record, despite growing evidence of infrastructure deterioration, neglected services, and poor repair decision making, e.g., roof replacements without replacing the draining systems at the same time, or to replace failing staircases.
• There were three fires over the course of 2 years in which the HOA used Reserve Funds to repair damages immediately;’ some of which were the owner’s responsibility. During the protracted process to recuperate funds from insurance carriers and owners, the HOA lost its’ ability to meet operating expenses.
• The Board of Directors secured a 15-year $2.4 million dollar loan, removed the live-in Grounds keeper position, and sold the HOA owned housing unit, to stabilize its’ financial position and conduct some safety hazard construction replacements.
• The Community has lost its’ financial independence; at present 23% of its’ income goes to debt management.
• The Board of Directors did not file for FHA re-certification knowing the 51% owner-occupied requirement could not be met. Yet the management company continued to describe the community on its’ website as well beyond the minimum level of owner-occupancy*.

Over the course of the past two years there have been significant changes in the Members of the Board, most recently there has been a change of Management Company, and a significant increase in HOA fees for next year will be up for discussion at the next Board Meeting.

What has not changed, and is unlikely to change, is the exclusivity of financial decision making and practices being implemented effectively by 3 members of the Board of Directors**.

Notes:

• *Westwind Management Website - Meadow Hills 1 Community Description: 252 Total units; 82 Rental units; 170 Owner-Occupied units.
• **5-member Board, with quorum vote of 3 to decide any financial decision via the Covenant. This became an issue when the $2.4 million dollar loan was introduced; a 62% vote of the 252-member community was required to override the Board’s decision.