HOAleader.com - Tip of the Week - May 7, 2021
Published: Fri, 05/07/21
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Why Expert says "Heck No" to HOA With a Bid from Noncompliant Homeowner
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In this week's tip, we tackle a double conundrum: Doing business with a homeowner and doing business with a homeowner who isn't following your documents. Awkward!
The discussion is based on a question from an HOAleader.com reader, who essentially asks whether state law would prohibit a board from considering a bid from a homeowner who has refused to correct a violation and pay fines associated with the violation.
Our experts raise a number of points in response to our reader's question. But let's start with the reader's question about whether state law would provide a road map on handling this issue.
1. State laws typically don't deal with this narrow issue. As a general rule, state laws don't get into this level of detail on bidding and owners' delinquencies. Our reader's governing documents don't either, but the rare governing document could have a provision that touches on this type of issue.
"Under Florida law, if you're delinquent, you can't run for a board position and you can have your right to vote in the election taken away," reports Matthew Zifrony, who advises homeowners and condo associations at Tripp Scott, a Ft. Lauderdale law firm, and who has also served as the president of a 3,000-home association. "But there's nothing that says the delinquent owner can't bid on projects, nor is there something that says the association can't accept such bids."
Ditto for Minnesota. "There's nothing that addresses someone's delinquency in relation to being able to submit a bid," explains Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn. "Of course, we have conflict of interest rules, but it doesn't appear this homeowner is a director, so those aren't directly related."
Whether the owner is a director was also a question raised by Edward Hoffman Jr., the founder of Hoffman Law LLC, a two-office law firm based in Pennsylvania, who has represented community associations for more than 18 years. "Whether the owner is a board member—that's the first question," he explains. "In that case, prohibitions wouldn't be statutory. But there may be provisions in the bylaws that allow or disallow this type of situation with what's called an interested board member."
California also doesn't address this issue in state statutes, notes Joan Lewis-Heard, a senior associate at SwedelsonGottlieb in Los Angeles, who at any given time represents hundreds of condos and HOAs throughout California. "This wouldn't be prohibited unless there's something in the governing documents," she states.
The law isn't the biggest concern our experts have. They've got all kinds of concerns about this potential conflict. Read them — including why one expert says, "Heck no!" — in our new article: https://www.hoaleader.com/members/4318.cfm
Best regards,
Matt Humphrey
President
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