HOA Answer Man

I’ve found a few articles by the HOA Answer Man, Tom Hindman, which I thought would be worth sharing. Here’s one of them.

Living in a homeowner or condominium association has become the norm for an ever-growing number of homeowners. Relationships between community associations and owners can become strained, but it doesn’t have to be that way.

Tom Hindman, a leading Colorado authority on HOA law, provides both legal and common sense solutions to the sometimes-contentious issues that arise form community association living. Below are questions followed by Hindman’s answers.

Q. My board has announced its decision to re-side our units this summer at the cost of $5000 per owner. They have stated that owners who do not have available funds are expected to obtain personal loans! Is this lawful?
A. Your association’s declaration should state who has the obligation for maintaining, repairing and replacing siding. This obligation typically falls on the association in townhome and condominium communities. However, associations often don’t have the necessary funds to pay for such expensive projects. Your declaration should be reviewed to determine what options are available to fund the project. Often associations may impose special assessments, take out bank loans, or a combination of the two to pay for these types of ‘capital improvement’ projects. Many declarations also require associations to obtain owner approval prior to taking any of these actions.
Assuming your declaration grants your board the authority  impose special assessments and all requirements to do so were met, you board may legally impose one to pay for the siding project. However, it is unlikely that the board has the authority to require owner to obtain personal loans to pay for any levied assessments. How and from what funds each owner chooses to meet their obligation should be up to each owner.
Q. My association just hired a new landscaper who happens to be a brother of a board member. At the board meeting where the vote on who to hire was taken, this board member voted in favor of hiring his brother. Isn’t this improper?
A. The Colorado Common Interest Ownership Act. (CCIOA) states that boards are governed by the conflict of interest section of the Colorado Revised Nonprofit Act. The act defines a conflicting interest transaction as “a contract, transaction or other financial  relationship,” between 1) an association an a board member, 2)between the association and a party related to the board member or 3) between the association and an entity in which a board member is an director or officer or has a financial interest. Therefore, a conflict of interest does exist when a board member is a director or officer or has a financial interest. Therefore, a conflict of interest does exist when a board member’s brother owns the landscaping company the association is considering hiring. However, the Act does allow a conflicted board member to vote on the issue at hand after disclosing his or her conflict of interest. If a conflicted board member does choose to vote, the conflicting interest transaction must also be authorized, approved or ratified by an affirmative vote of majority of non-conflicted board members. Therefore, if the above conditions were met, the board member’s actions were proper.
Associations may decide to treat board member conflicts of interests more strictly than state law by adopting a broader definition of conflict of interest and/or prohibiting conflicted board members from voting. In many cases, I advise conflicted board members not to vote to avoid the appearance of self-dealing and to build confidence in the board’s integrity.

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