HOAleader.com - Tip of the Week - September 21, 2013
Published: Sat, 09/21/13
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Whose HOA Audit Is This, Anyway?
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In this week's tip, we answer a reader's question about whether
its developer and management company can be trusted in hiring and
directing an auditor:
"I'm on the board of 65-unit building that has transitioned from
sponsor-controlled board to majority-owners board...the sponsor was
also the property management company...We selected a new management
company July 1, 2013, and are extremely excited about the change.
The previous management company is having the financials audited
as our fiscal year ended in June. Sounds good, right? The current
board [members]...were to be a part of the selection process... We
then found out the management company chose an auditor without
our knowledge and the audit is currently going on. The board
submitted a letter to the management company...to postpone the
audit until the board/subcommittee members had a chance to review
the engagement letter and proposals. We are very suspicious of
this decision...."
Who should call the shots?
"When it comes to choosing an auditor, I'd think the board drives
the bus exclusively," explains Nathaniel Abbate Jr., a partner at
Makower Abbate & Associates PLLC in Farmington Hills, Mich., who
represents associations. "There may be some things the board
delegates to the property manager, but to have the manager pick
the auditor may be a violation of the express terms of the
management contract.
"It also doesn't sit well with me in terms of the agent's duty to
the principal," adds Abbate, referring to agency law, which
governs agents' actions on behalf of the person for whom they're
working. "Technically, a manager shouldn't be doing anything but
at the direction of association's directors. When they take it
upon themselves to sue someone, they're probably acting within
parameters set out by the board over time. But on something like
an audit, you'd better make sure the board is completely on board
with who you're picking. That's especially true with an outgoing
property manager. It's almost like the fox guarding the chicken
coop.
"The bottom line is that the board should be the only entity
picking the auditor," says Abbate.
That said, this management company--which the reader notes was
the sponsor, or developer--may be doing exactly what it's
required to do, depending on the state law governing its actions.
Find out why in our new article:
http://www.hoaleader.com/members/898.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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California Court Reinforces Law Requiring HOAs to Give Dissidents Equal
Time
In this week's tip, we discuss a recent California appellate court ruling
that offers lessons for HOAs throughout the country.
Click here to read full article:
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California Court Interprets Broadly Law Requiring Equal Access to HOA
Board Opponents
In June, a California court held in Wittenberg v. Beachwalk Homeowners
Association that an HOA election can be invalidated if a board fails to
follow the state law requiring that it give its opponents equal access to
media, like websites and e-newsletters, and common areas. Here we explain
the California case and discuss what associations in other states should
take away from it.
Click here to read full article:
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When HOA Owners Speak Up, Respond Wisely
In this week's tip, we offer tips on when and how to respond to owners'
communications. Generally, boards aren't compelled to respond to owners'
every communication. "The board may not wish to require itself to respond to
every issue a home owner raises, and I don't think legally they are,"
Click here to read full article:
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Is Successful FHA Certification a Fiduciary Duty? Discussion Forum
Follow-up
An HOAleader.com reader asks a question with an interesting twist on FHA
certification for condos. After making it harder and harder for condo
associations to get FHA certification, the FHA recently tightened its
rules again. Our reader's question, however, isn't about the details of the
new FHA cert rules: "Our condo FHA project approval expired after 27 years.
The condo was established in 1984 and has no new construction.
Click here to read full article:
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