What Do You Do When Your HOA is a Sinking Ship? To Bail or Not to Bail.

It is time again to bring up some real problems that people coming to me for help are experiencing. I am doing a series of blogs on real life issues. First one, an owner or owners come to find out that a board is either (1) seriously deferring maintenance that needs to be done, or (2) spending wildly without regard for the future.

Often this comes to light when a new owner gets on the board. They ran for the board because they became increasingly alarmed about the HOA board actions. They either got appointed (because the board needed to fill the table) or elected (because they convinced some other owners to cumulate their votes and get them on the board). In any event, they find themselves in the minority on decision after decision.

And reality bites. The HOA is a sinking ship. The leaks started out small but are growing at an alarming rate as the “influx” of money (assessments) fails to keep up with the “outflux” of cash (expenses, necessary or frivolous expenditures) or the growing deficiency in reserves coupled with deferred maintenance. Use of a “dixie cup” to bail may slow the process but won’t prevent sinking. If the new board member is able to convince the board to turn the tide, and take some drastic action that will patch up the holes, there is hope. But all too often there is a stubborn majority “bloc” in place (on the Board) that can’t be dislodged. What a lot of frustration.

Recently I counseled an owner in this situation. He sent me an email after our consultation my email confirming his options in this scenario. He followed up inquiring: “I didn’t ask what personal risk there was for me to remain a homeowner in this Association.”

We had talked on the call about his ineffectiveness on the Board, his frustration, things he might do to try and turn things around, and his potential liability as a director If things didn’t change, and whether he should resign. Now the $64,000 question. “What is the risk in staying in the Association?”  He loves his home and doesn’t really want to leave.

This was my answer” “If the things that are going on are bothersome to the point they detract from your home-life, you should consider all options. If you aren’t planning to try to get others involved in serving on the board and try to rally support for a different course, the same course will continue, and it will continue to bother you even more.  Pretty soon it will begin to affect your health. You can get off the board and turn a blind eye to the problems you have uncovered. And that may reduce the stress over trying to effect change. However, the deeper the HOA sinks, the harder it will be to relocate or recover.”

That’s about all I could say.

You might say, “Well, you are a lawyer, why can’t this person sue the board?” My answer to that –  talk to a litigation attorney. Find out what is involved in litigation, cost-wise, energy-wise, and proof-wise. Understand what it would take to prove up a case that would have any return. It probably is not the answer, but you need all the facts to know for sure.

You might say, “Why not recall the board?” In order to recall a board you need support of other owners, enough support not only to recall but to defeat the board members who are recalled when they run in the followup election (yes, they can do that).

Generally, homeowners who remain uninformed are generally unconcerned. And, if you try to wake the sleeping beast it could lead to higher assessments, or lawsuits, and the silent majority may end up resenting you for it.

I have seen people take different paths at this point, based on their own stamina and tolerance level. Some want to stay badly enough to rally their neighbors and work toward positive change. There are always positive options but they often require digging in and taking some flack or remaining very pragmatic and patient as the tide is turned by paddling upstream.  If you lack the stamina or resources or time, or gumption, it is not defeat to choose another course, meaning (literally) move on. I know this from personal experience. Some battles are not worth fighting. Life is too short.

I always hope I can provide real solutions for owners who contact me for consultations. I certainly can discuss options, and solutions, and but without an absorbent mind, it’s hard for people to imagine there might be benefit in “bailing”, whether that means strategizing to keep afloat while plugging the leaks … or literally escaping before drowning.   In life, we may come up against situations where we don’t really like any of the options. If that is the case, it comes down to considering “the lesser of evils”.

 

 

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2 Responses to What Do You Do When Your HOA is a Sinking Ship? To Bail or Not to Bail.
  1. Holland Marshall
    February 6, 2016 | 1:25 pm

    Another great article. I added a link to this column on my Condo News e-mail listing (300 readers) and on my website.

    You are doing condo/HOA owners throughout North America a great service by hosting this website. I hope you have a successful law practice and can continue to give minority directors and individual owners such great advice.

    • Beth Grimm
      February 6, 2016 | 4:58 pm

      It is this kind of positive feedback that keeps me writing. Thank you.