Q: Our homeowners' association on Long Island has one -sided to record a seven -digit loan for revising the leisure facilities. In order to repay it, the board of directors derives our annual assessments from their intended purpose to finance reserves in order to repair crumbling roads and curbs. We did not ask about these projects and have not received anything about them in writing. In our administrative documents, the Board of Directors does not have to obtain approval before the loan and do not make any restrictions on the borrowing of the Board of Directors. What can we do?
A: In a home ownership association, the board of directors is elected to make decisions for the municipality, and this usually includes borrowing for renovation work. Regardless of the advantages of the HOA arrangement, you can do little in a situation like this.
“When you switch to an association, you give up certain rights and submit certain powers of the board of directors, as stated in the government documents,” said Marc H. Schneider, a real estate lawyer in Long Island.
If the board members act in accordance with their government documents and make decisions in good faith, they are protected from liability by a legal principle called Business judgment rule. The loan to renovate the community's leisure facilities is usually permitted in the government documents of the associations and would be a complaint taken into account in good faith.
If you were in an apartment, it would be a different story. Condominiums in New York are subject to a law according to which the owners of the department agree on all borrowings. Boards cannot borrow one -sidedly unless the statutes contain this right.
There are two aspects of the project of their HOA, which may violate the management documents and raise a legal claim to them: First, whether the board adds new amenities that do not yet exist. And secondly, whether the documents enable the use of annual ratings to repay the loan repayment to finance the renovation work (which is not an unusual practice).
“The management documents should be carefully checked to determine whether the board of directors exceeds its powers,” said Schneider.
As always, collective actions with their neighbors can change the direction of their community. “Why not just run for the board against these board members if they do not agree with the assignment of funds and use this as their platform?” Andrew Lieb, a real estate lawyer on Long Island.
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