HOAleader.com - Tip of the Week - June 11, 2021
Published: Fri, 06/11/21
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Experts Disagree Over Whether HOA Board Member Has a Conflict
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In this week's tip, we answer an HOAleader.com reader's question about whether a board member can purchase an owner's delinquent property without tripping conflict of interest wires. Our experts have a range of opinions on whether this is a conflict.
Let's start with the thinking of Augustus H. Shaw IV, CCAL, founding partner of Shaw & Lines in Phoenix, who's licensed in Arizona and Nebraska and has been a community association lawyer for 20 years.
"The board should say, 'Great; cut us a check for the arrears,'" he says. "This is a state by state issue, and here's the misunderstanding of the law. The board has nothing to sell until it goes through a foreclosure.
"If this reader is saying the board is considering foreclosing this lien, and an owner says, 'I'll buy the unit,' the association has nothing to sell because it hasn't gone through the foreclosure process. The board's response would be: 'We have to go through the actual foreclosure first, so we have nothing to sell at this time.'
"The only interest of the board in this matter is to have the assessments paid," says Shaw. "All the states in which my firm is licensed—Arizona, Nebraska, and Utah—have the business judgment rule, hold that accounts receivable are common property, and require the board to protect association assets. That's how the board should be looking at this matter: How do we get these assessments paid?
"Also, nobody is putting a gun to the owner's head and saying, 'Give this board member a sweetheart deal,'" he adds. "Let's look at these facts. In states in which judicial foreclosure is required, the association would have to hire an attorney to handle the matter, and that's going to end up placing another $10,000 levy on the owner's account if the property goes through a foreclosure proceeding. Then the association is going to ask a judge to award the association all those fees.
"Instead, the board member says, 'Let me do this; let me talk to that owner to work a deal where I can get the assessments paid and keep this guy from having another $10,000 in attorney's fees added to his account. Maybe we can find a way to work this out.' I look at the board member as trying to help two sides of the coin."
But different facts could lead to different outcomes. Read three more experts' thoughts, along with the facts that change their analysis, in our new article:
https://www.hoaleader.com/members/4335.cfm
Best regards,
Matt Humphrey
President
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Click here to read full article:
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Click here to read full article:
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