HOAleader.com - Tip of the Week - May 17, 2013
Published: Fri, 05/17/13
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HOA President Gambles HOA Funds--and Refuses to Resign. Now What?
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In this week's tip, we discuss whether all should
be forgiven if a board member improperly uses
HOA funds (to gamble, no less!) and then pays them back.
The first issue is the proper process for removal
of directors. States vary, but Florida provides
guidance.
"Relative to recall in Florida, it's with or without
cause by a majority of the people in the community,"
explains Dennis J. Eisinger, a partner at Eisinger,
Brown, Lewis & Frankel PA in Hollywood, Fla., who
represents more than 500 condo and HOA associations.
"If 50 percent plus 1 of the unit owners sign a
petition for that president to be removed, then
he's removed."
The president may also be in trouble if the
association requires the board to adhere to a code
of ethics. "Has this association adopted any code
of ethics for the board?" asks James R. McCormick Jr.,
a partner at Peters & Freedman LLP in Encinitas,
Calif., who represents associations. "If so, his
behavior would likely violate the code, and the
owners could rely on that even if there's nothing
in their governing documents."
The president refuses to resign. Is he right?
"He should probably step down," says McCormick.
"This person has demonstrated an inability to use
the association's resources in a manner conducive
with his fiduciary duties. What he did wasn't
appropriate. You have to put the association's
interests well above your own."
Lisa A. Magill, a shareholder and association
attorney at Becker &Poliakoff PA in Fort Lauderdale,
Fla., agrees. "It's inappropriate for the president,
or any officer, to use any association funds for
their own personal benefit," she says. "Everybody's
entitled to one free pass if there's been a mistake.
But in this case, withdrawing association cash for
personal purposes isn't something anyone can take
lightly, especially with what's happened with the
growth of embezzlement cases at associations in the
past few years. So paying the money back isn't
acceptable, in my opinion. There's been a violation
of trust, and there's been improper protocol. This
person is holding himself out on behalf of your
association; if there's been this violation of trust,
what other ones have occurred, and how will it damage
the association?"
There are other issues. The association's lawyer is
defending this wayward president in the recall against
him. Is that OK? And how can the HOA prevent improper
use of funds? Find out why in our new article:
http://www.hoaleader.com/members/850.cfm
Best regards,
Matt Humphrey
President
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