Loans ... Principle, interest and collections

Loans ... everyone at ECMCA has had experience with this form of financing at one time or another.

What is a 'Loan'

A loan is the act of giving money, property or other material goods to another party in exchange for future repayment of the principal amount along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as an open-ended line of credit up to a specified limit or ceiling amount.

http://www.investopedia.com/terms/l/loan.asp#ixzz4by5AUYWu
Even the Association has a loan, taken out for express purpose of the Roads and Building Maintenance.

Let's examine loans and how they affect ECMCA...

In 2007 the BOD requested permission via a vote of the Association Members to acquire a loan by the association, for the purpose of installing roadways and drainage systems per a quotation given by contractors (110,000.00) and for Building Maintenance (painting $40,000.00), for a total amount to be borrowed as $150,000.00. The vote was for $150,000.00 yet the BOD borrowed $165,000.00 without consulting the members.   As of 2012, when the loan was last re-done, the collateral for this loan is all condominium fees and assessments. Our audits do not reflect this. As of October 2017, the Association will have paid approximately $1550.00/mo for 120 months totaling $186,000.00.  According to the AM Minutes of January 29,2017 there is $79,000.00 of principle left on the loan.

Now, this gets sticky when the Board of Directors 'borrow monies' from Association Members and 'lend monies' to Association Members.

No where, in any document, whether NH RSA356B, The Declaration of ECMCA, The Bylaws of ECMCA or the Articles of Incorporation filed at NH.Gov. is there any reference to ECMCA being a financial institution, a secured lender, or in the business of granting loans by the BOD.  The BOD did not get the approval of the Association Members to finance assessments or special assessments. How much interest is the Association  receiving for granting these loans? The bylaws consider any unpaid assessments 'delinquent' and the BOD act upon those delinquencies in 'some cases' but not others.  The monies that the BOD 'lend', is not their money, it belongs to all. The Association Members are entitled to collect interest on their money. The Association Members are entitled to encumber properties of units that owe the Association Members delinquent assessments, thereby securing the debt. Why is it that there is $80,000.00 in debts owed to this Association and only $15,000.00 in liens? Why is the BOD not protecting the Association Members best interests by charging interest on the monies loaned or placing liens on those units who have 'loans' to secure their position in the case of a foreclosure, death, or bankruptcy.  Why is the BOD not placing priority liens on those delinquent to assure that monies will be collected at some point in the future? What if Unit X has a loan for the roof special assessment from the association and then sells Unit X before it is paid off? The agreement is with the unit owner not the unit and cannot be passed to a new owner, without a lien there is no assurance that the Association Members will recover their money. 

Those owners that feel they are carrying those that are not paid in full or those that do not have the $4,500.00 for the roof special assessment and cannot make payments need to jump off their high horse, because YOUR BOD allowed this to happen:

1. By not maintaining the property.
2. By not appropriating funds as required by the governing documents.
3. By assessing for materials and labor then not providing as assessed.
4. By presenting plans for roof replacement, assessing for roof replacement in prior budgets and reneging.
5. Now, they are trying to change common area to limited common area in order to change the liability of elements that need repair and replacement that they have not maintained nor put in a capital plan that was promised in 2013.
6. The BOD are the determining factor in 'financing' as their is no equity in these units to obtain financing.

Now, in turn, there is no provision for the BOD to 'borrow monies, goods or services' from association members. Somehow, the BOD feel that they can 'take goods/service/monies' from owners with no future re-payment.  This is the subject of two of the 'collections' suits up for mediation in April.  So, the BOD refuse to pay what they have written in agreements to unit owners, then the repercussions of the BOD non-payment results in the unit owner actions. Unclean hands will not prevail. Unit owners will again pay the bill for legal fees un-necessarily. Judges frown on organizations who take others to court when others can prove they were owed money first. 14 Unit Owners are owed monies from the Association.

In fact, isn't it quite possible that 24 Unit Owners are owed money from the Corporation? The Corporation was the controlling authority in charge of budgeting, collecting, and disbursing of monies as well as following the governing documents as they are obligated to do. The Corporation failed to abide by the governing documents in budgeting, collecting and disbursing of monies and continues to do so.  
The Corporation has collected monies outside of the budgeted items as 'special assessments' without the votes of the members as required by the governing documents, and used the monies on items other than the 'special assessments' were purported to be for, by intermingling funds. The Corporation has intermingled insurance funds (also against our governing documents).  The financial practices of the Corporation have caused the members 2012 to present to 'loan' through 'special assessments' the corporation monies for items that are the responsibility of the Corporation to provide, for which the Corporation was deemed to have been obligated to provide, and the Corporation failed to do so as required by the governing documents.  
All this while informing the Association Members that they were saving reserves for future repair and replacements, did a Capital Plan in 2007, and reporting to mortgage companies, insurance companies and accountants(2003-2013 documents);
"The Board of Directors is collecting Funds for future major repairs and replacements in conformity with Eastside at Crotched Mountain Condominium Association, Inc.'s policy to fund for those needs based on a study conducted in November 2007. The Board of Directors believes the funds will adequately provide for future major repairs and replacements." Yet our audits state: 

"Reserve Fund - This fund is used to accumulate financial resources designated by the Board of Directors for future major repairs and replacements. The Association has not established a reserve fund."

Based on the corporations own disclosures they should not have had to 'special assess' (and the validity of those assessments still are questioned today) by the disclosure that Feniger and Uliasz have advised them not to try to collect the unpaid assessments. Does that also preclude them not being able to collect late fees, legal fees and interest fees on those special assessments as well?


9/26/2015 BOD Meeting Minutes

"Board accepts recommendations of FU not to try to collect on

contested special assessments (2012 (2), 2013 (4 +) at this time."

1/23/2016 BOD Meeting Minutes 

"Board discussed recommendations of legal counsel that to avoid future lawsuits owners should be allowed to vote on assessments." 

At the end of the day, The Association Members vote for those who hold the power to  budget, collect and disburse monies, all while obligated to abide by the governing documents. 

We find it disheartening that 24 Unit Owners vote for BOD that continue to not subscribe to the documents that govern our association. Recent infractions include but are not limited to:

At the January 29, 2017 Annual Meeting:
1) Votes for changes to the bylaws - 15 units represented by attendance or proxy, 2 proxies declared invalid, at least 1 attending is not eligible to vote = 12 units eligible to vote, quorum met(13 units, 9 req'd), voting requirements for a change to the governing documents is 66% or  16 units ( even if 51% were required - only 12 units on votes at meeting ... 13 needed.):
"All owners present allowed to vote on ratifying budget; requires 2/3 vote to decline

budget, Vote on other items require owners to be up to date with fees (3 days before meeting), Special Assessment – Owners on payment plan are eligible to vote if up to date with monthly assessments" ... The bylaws say 'fully paid, not up to date on payments.

2) Votes to decline the budget - all eligible to vote, requires 16 votes to decline the budget (RSA 356B:40c - "2/3 of all unit owners): "Motion made to accept 2017 fiscal year budget at $400 per month condo fee per unit as proposed", "-Vote on Motion (Hand vote): 11 owners voted in favor of motion; 0 against; proposed 2017 budget and condo fee schedule  ratified  by owners." - a) the budget as sent totaled $176,720.00 or $617.00/mo.

b) a new budget was not presented that shows exactly what $400.00/mo would cover, certainly not the expenses listed.

3) "Vote taken on motion  to change by-laws regarding changing "audit" to "financial

review"; All voted for; None opposed  – Motion carried for board to submit for legal opinion, and they will review the loan document to ensure that audit is not required.(seriously, shouldn't this have been done prior?)

Approve verbiage – Are there any owners averse to verbiage? No owners opposed

Owners will be allowed to review any recommendations from lawyers; motion  carries unanimously"  a) 'all' ... is that all attending, is that with proxies? or less those not eligible to vote ... what is the number since this requires 2/3 of the Association (16 votes and only 12 eligible votes at meeting, 13 needed for 51%).

4) "Second By-law change – Proposal to strike “return receipt requested” from notice

requirement , Motion to change "return receipt requested  " to notice will be given “If sent

electronically and accompanied by US mail”  – Unanimous vote; all accept": Again 2/3 of all owners required or 16 votes and only 12 eligible votes at meeting, this would not even meet a 51% requirement.

5) IX. Election  of Board Member(s)

-The current Secretary's term is expiring this year. Discussion on length remaining on the current Treasurer's and the current President's terms. After discussion the President Pro-Tem has 1 year remaining and the actual President has 2 years remaining on their terms (post meeting review of past owner meetings revealed that the Treasurer and the President have 1 more year – recommend correcting at next ‘open’ board meeting - but not on schedule - go figure!).-Motion to elect a Board Member for a 3 year term:

a) The bylaws provide for a new director every year - so no matter how FU they have made the elections over the years and continue to do so, by not voting in 2016 for a new director the Board continues to be "unduly authorized". 

b) All actions taken by the Board are "unduly authorized".
P.S. The terms are 3 years... if the current president has 2 years remaining than that person would have served Jan 2015 -Jan 2016 (year 1), Jan 2016-Jan 2017 (year 2), Jan 2017-Jan 2018 (year 3) ... a fourth year ... no...no...NO! The real answer is this:
In January of 2015, 3 members were elected to the Board of Directors, one to fill an expired term to be replaced by a 3 year term, one to fill a vacancy of a resigned Director with two years remaining on their term and one to fill a vacancy of a resigned director with one year remaining on their term. The BOD of Jan 2015-Jan 2016 refused to hold an election for the position whose term expired as of January 2016. Therefore, one so-called member of the BOD was not duly authorized for all of 2016 until Jan, 29, 2017.  In January of 2017, one member was was newly elected to the BOD for a 3 yr. term (assumably, to replace the term expiring Jan 2017) Therefore, there is still at least one and perhaps two that are 'unduly' authorized. Where in the governing documents does it say 'unduly' authorized? Since either the treasurer or the president are definitely unduly authorized ... can any 'legal' documents concerning assessments, changes to bylaws, liens ,etc be challenged?  Guess we have to wait for the court cliffhanger! At what point in time do the Unit Owners deserve to have a 'duly authorized' Board of Directors?  Would it not help diminish lawsuits and validate actions taken?

6) "III. Summary of Changes to RSA 356-B Governing HOA's

-Reviewed changes to HB 353 Amended Condo By-Laws – Substantially changes

condo docs and our by-laws

-State that notice to owners can be delivered by electronic address

-If no electronic address can be hand delivered or mailed; self-managed assoc. exempt"

No, actually, it says:

356-B:37-a Notice to Unit Owners. – An association shall deliver any notice required to be given by the association under this chapter to any mailing or electronic mail address a unit owner designates. If the unit owner does not designate an address, the association shall deliver notices by hand delivery, United States mail postage paid, or commercially reasonable delivery service to the mailing address of each unit.

Source. 2016, 311:2, eff. Aug. 1, 2016.

"-Board has to convene at least quarterly and notify owners of meeting"

Unit owners must be notified of all BOD meetings

-Closed meetings permitted if recorded"

The RSA for Board Meetings:

 356-B:37-c Meetings of the Board of Directors and Committees of the Association. – The following requirements apply to meetings of the board of directors and committees of the association authorized to act for the association:
    I. For purposes of this section, a gathering of board members at which the board members do not conduct association business is not a meeting of the board of directors. The board of directors and its members may not use incidental or social gatherings of board members or any other method to evade the open meeting requirements of this section.
    II. Not less than once each quarter, and at such additional times as may be specified in the condominium bylaws, the board of directors shall, subject to the provisions of RSA 356-B:37-d, hold an open regular meeting during which unit owners shall be afforded a reasonable opportunity to comment on any matter affecting the association. At its discretion, the board of directors may meet in a meeting not open to unit owners provided the meeting is recorded and the recording is made available to unit owners for up to 30 days upon request.
    III. Unless the meeting is included in a schedule given to the unit owners or the meeting is called to deal with an emergency, the secretary or other officer specified in the bylaws shall give notice of each meeting of the board of directors to each board member and to the unit owners. The notice shall be given at least 10 days before the meeting and shall state the time, date, place, and agenda of the meeting. 
    IV. If any materials are distributed to the board of directors before the meeting, the board of directors at the same time shall make copies of those materials reasonably available to unit owners, except that the board of directors need not make available copies of unapproved minutes or matters that are to be considered in executive session.
    V. In the case of self-managed community associations, meetings of the board of directors or committees expressly for purposes of implementation of decisions made in open meetings shall be exempt from the requirements of RSA 356-B:37, 356-B:37-a, and this section.

Source. 2016, 311:2, eff. Aug. 1, 2016.

"-Materials available to board has to be available to owners" - SEE DIRECTLY ABOVE

"-Notice will be emailed, mailed or hand delivered" - SHOULD BE AFTER THE BOD ASKS YOUR DESIGNATED METHOD ACCORDING TO RSA RSA356B:37a

"-Executive Sessions are permitted – Pending or current litigation, commercial business, consult attorneys; no official votes

-Quorum – 1/3 of owners; if no quorum must reschedule the meeting within 60 days;

-Proxies – must be notarized and use form (per our by-laws); retained for 3 years

-Voting without a meeting – Permits paper or electronic ballots; has to state position; provide opportunity to vote for or against; declares the number representing the quorum; need 10 day notice; not revocable; approval valid only if quorum satisfied - ALSO REQUIRES TO PUBLISH # OF VOTES NEEDED TO PASS.

"-Directors and officers - Allowed to fill vacancies; may not receive compensation unless

2/3 of owners vote annually

-Removal of officers with or without cause; at any meeting; requires majority; afforded opportunity to speak"

"-Insurance - Must maintain master casualty and master liability;

 356-B:43 Insurance. – 
    I. The condominium instruments shall require the unit owners' association, or the board of directors or managing agent on behalf of such association, to obtain:
       (a) A master casualty policy affording fire and extended coverage in an amount equal to the full replacement value of the structures within the condominium, or of such structures that in whole or in part comprise portions of the common areas;
       (b) A master liability policy, in an amount specified by the condominium instruments, covering the unit owners' association, the board of directors, if any, the managing agent, if any, all persons acting or who may come to act as agents or employees of any of the foregoing with respect to the condominium, and all unit owners and other persons entitled to occupy any unit or other portion of the condominium; and
       (c) Such other policies as may be required by the condominium instruments, including, without limitation, workers' compensation insurance, liability insurance on motor vehicles owned by the association, and specialized policies covering lands or improvements in which the unit owners' association has or shares ownership or other rights. 
    II. When any policy of insurance has been obtained by or on behalf of the unit owners' association, written notice of the obtainment thereof and of any subsequent changes therein or termination thereof shall be promptly furnished to each unit owner by the officer required to send notices of meetings of the unit owners' association. Such notices shall be sent in accordance with RSA 356-B:37-a.
    III. Unless the unit owners vote to terminate the condominium under RSA 356-B:34, the proceeds of the master casualty policy shall be used to repair, replace or restore the structure or common area damaged by casualty.

Source. 1977, 468:1, eff. Sept. 10, 1977. 2016, 311:3, eff. Aug. 1, 2016.

"-Adoption of Budgets & Special Assessments - Board must provide summary to owners within 30 days of the meeting; this year we sent out mid December 2015; Ratify – Requires 2/3 of owners to reject; if rejected, owners must follow previous year’s budget and fee schedule; Adoption of Special Assessment requires 2/3 owners unless there is an emergency

-Maintain master policies – Notice of change in policies was noted in certified mailing to owners (Notice dated 5/10/2016); liability has been raised to 10k from 5k; encourage owners to raise liability limits on their home insurance to match master policy

-In the event of conflict between by-laws and RSA – RSA 356-B supersedes; we can

amend our by-laws to reflect RSA; no notification required"

All this malfeasance in one day!

Here is an especially amusing portion from the Annual Meeting:

"X. New Business:

1.  Propose that bylaws be amended to include vetting future buyers of units before they purchase the unit; looking at financial responsibility of the owners; ask that attorneys draft proposal will be brought to owners for approval

-Vote to explore this proposal carries unanimously"

Don't you think it is far more important and prudent to start vetting our Board Of Directors? 

After all, they hold the power to interpret the governing documents as they wish, spend your money as they wish with no accountability(where is the 2015 and 2016 Audits!), decide who and when repairs are done or not, and if any member can vote or not despite very clear instructions from our governing documents.

Our current President:

Book 8337 Page 1658 - Hillsborough County Registry of Deeds

Our Current Treasurer:

Book 2834 Page 514 Hillsborough County Registry of Deeds

And you don't even want to see the documents of past BOD - it will make your hair curl!

While NH RSA 356B states:

356-B:40 Members of the Board of Directors and Officers. –

   I. Except as provided in the declaration, the bylaws, paragraph II, or other provisions of this chapter, the board of directors acts on behalf of the association. In the performance of their duties, officers and members of the board of directors appointed by the declarant shall exercise the degree of care and loyalty to the association required of a trustee. Officers and members of the board of directors not appointed by the declarant shall exercise the degree of care and loyalty to the association required of an officer or director of a corporation organized under RSA 292, and are subject to the conflict of interest rules governing directors and officers under RSA 292. The standards of care and loyalty described in this paragraph apply regardless of the form in which the association is organized.

    II. The board of directors shall not:
       (a) Amend the declaration except as otherwise provided in this chapter.
       (b) Amend the bylaws.
       (c) Terminate the unit owners' association.
       (d) Elect members of the board of directors but may fill vacancies in its membership for the unexpired portion of any term or, if earlier, until the next regularly scheduled election of executive board members.
       (e) Determine the qualifications, powers, and duties, or terms of office of members of the board of directors.

The Association may determine the qualifications of members on the BOD!

And the good news is ... we finally have a BOD member that is reputable! Perhaps, he can straighten out the infractions that have occurred during the Annual Meeting to date ... after all, he has a fiduciary duty, duty of care and a duty of loyalty to the members and is quite possibly the only 'duly authorized' BOD member. So, quite possibly, he will shoulder all responsibility.

So, expectations are:

1) There are no changes to the bylaws as there were not 16 unit owner votes(nor 13 votes for a majority of the association) to amend the bylaws on January 29, 2017.

2) A new balanced budget is given to the Unit Owners reflecting all actual budget items in  the proposed $400.00/month condo fee and that a new vote be taken giving the Unit Owners an opportunity reject the budget for which they are paying fees for according to NH RSA 356B:40c and this must also include a statement of the basis on which any reserves are calculated and funded on the budget ratified on January 29, 2017, as sent to the owners for review totaled $176,720.00 not $115,200.00. Where is the Capital Plan promised since 2013?

3) The BOD will revoke the ballots for a change to the Declaration proposed, with the vote to be tallied on March 25th @ 4pm for the following reasons:

a) Indicated the number of responses needed to meet the quorum requirements incorrectly, as it is 331/3%.

b)"Ballots returned by two-thirds of owners will constitute a quorum.  Ratification will be effective upon a simple majority of owners voting ‘for’ the action." - is incorrect, the Declaration states 2/3rd needed to pass and 331/3% is the required quorum (9 units).

c) the declaration further states:

Subsequent Assignment of Common Area as Limited Common Area. No Common Area may be subsequently assigned as Limited Common Area.

d) The NH RSA356B:34 states:

 V. Except to the extent expressly permitted or expressly required by other provisions of this chapter, no amendment to the condominium instruments shall change the boundaries of any unit, the undivided interest in the common areas appertaining thereto, the liability for common expenses or rights to common profits appertaining thereto, or the number of votes in the unit owners' association appertaining thereto. The Boundary in question is above the unfinished interior surface at the uppermost ceiling.

e) The BOD have not put forth all changes necessary to all documents for this to be ratified and have not put forth verbiage required to vote on.

f) There are not 16 eligible voters in this Association as our Bylaws state: Article II, Unit Owner's Association: 

7.  Voting Requirements.  An owner shall be deemed to be in good standing  and entitled to vote  at any annual meeting or at any special meeting of the Unit Owners' Association if,  and only if, he  shall have  fully paid all assessments made or levied and due against him and his Condominium Unit by  the Board of Direc­ tors as hereinafter provided, together with all interest, costs, attorney's fees, penalities and other expenses, if any, properly chargeable to him and  against his  Condominium Unit,  at  least three (3) days prior to the date fixed for such annual or special meeting.

4) Last but certainly not least ... get a duly authorized BOD where members were duly voted by the Association Members for correct terms.

Since this blog has been read over 1000 times, has been read by attorneys representing unit owners and also read by the Attorney General's office ... we do not need to contact the BOD for anything as they are doing a stellar job all by themselves in providing all the information on their actions that are not in accordance to the governing documents, and their recitations(incorrectly) of the governing documents' requirements as provided to us (and  attorneys) by them! 

We smell lawsuits ... and the first two went so well!

Are they going to claim ignorance, stupidity or lack of judgement? Doesn't matter if it is the corporation being sued! So, really, at the end of the day ... this association is going to have to weather more lawsuits until their BODs smarten up! Or members vet potential BOD members!

Respectfully,

ECF