Q: Our householders affiliation on Lengthy Island has determined unilaterally to take out a seven-figure mortgage to revamp the leisure services. To repay it, the board is diverting our annual assessments away from their meant goal of funding reserves to restore crumbling roads and curbs. We haven’t requested for these tasks, and didn’t obtain something in writing about them. Our governing paperwork don’t require the board to hunt approval earlier than borrowing, and don’t put limits on how a lot the board can borrow. What can we do?
A: In a householders’ affiliation, the board of administrators is elected to make choices for the group, and this usually consists of borrowing for renovations. No matter the advantages of the HOA association, there’s little you are able to do in a scenario like this.
“Once you transfer into an affiliation, you quit sure rights and are submitting to sure powers of the board as set forth within the governing paperwork,” mentioned Marc H. Schneider, an actual property lawyer on Lengthy Island.
If board members are appearing in accordance along with your governing paperwork, and they’re making choices in good religion, then they’re protected against legal responsibility by a authorized precept referred to as the enterprise judgment rule. Borrowing to renovate the group’s leisure services is often permissible in associations’ governing paperwork, and can be an motion thought of in good religion.
In case you had been in a rental, it might be a distinct story. Condominiums in New York are ruled by a regulation requiring that unit homeowners vote on all borrowing. Boards can’t borrow unilaterally, except the bylaws comprise that proper.
There are two elements of your HOA’s challenge that would doubtlessly contravene the governing paperwork, providing you with a authorized declare: First, whether or not the board is including new facilities that didn’t exist earlier than. And second, whether or not the paperwork permit the usage of annual assessments for the mortgage reimbursement to fund the renovations (which isn’t an uncommon observe).
“The governing paperwork needs to be rigorously reviewed to find out if the board is exceeding its powers,” Mr. Schneider mentioned.
As at all times, collective motion along with your neighbors can change the route of your group. “Why not simply run for the board in opposition to these board members in case you disagree with the allocation of funds, and use that as your platform?” mentioned Andrew Lieb, an actual property lawyer on Lengthy Island.
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