north-carolina real-property hoa
HOA president using HOA funds for a French drain in his back yard
<p>I am the new treasurer of an HOA board. The president of the HOA has complained that his back yard is soggy when it rains and has arranged for the HOA to pay to have a french drain installed in his back yard. We're townhouses and our CCR's do not state the HOA is responsible for drainage, so we sought the advice of an attorney who advised that if we get this work done, it should be paid for via a special assessment. The attorney didn't <em>explicitly</em> say that HOA couldn't pay for it, so the president is still pushing the board to have the HOA pay. The president is more or less bullying the two other board members into approving this so I'll probably be outnumbered when it comes down to vote. What should I do?</p>

<p>Location: Durham, North Carolina</p>

<p>There are presumably bylaws for the HOA which say things like "we can charge dues" and "we can build up assets for the general benefit of the HOA" such as maintaining the common areas. The first question is whether it is proper for the association to fix problems on an individual member's property, i.e. is this a benefit generally available to all members? The board has a duty to the interests of the association, and not to specific individuals (especially not to the president). If everybody is entitled to this benefit, then you shouldn't discriminate against the president in this regard, and if nobody is entitled to the benefit, you should not discriminate in favor of the president. So the main question is whether the board is in fact authorized to spend money this way.</p>

<p>You engaged an attorney to advise the board on this issue (and he is in full possession of the relevant facts): but you don't exactly say what he did say (saying what he didn't say isn't enough information). However, it sounds like he believes that it is proper for the association to pay for the drain (presumably, for anyone in a similar circumstance), and the only question is whether the money should come from the reserve fund (the special assessment recommendation tells us it should not come from the reserve fund). Given that you seem not to be satisfied with this outcome, there are a number of further steps. The first is to clarify (ask bluntly and directly) whether his advice is that this is a proper use of funds. Have him explicitly say if that is the case "No, it would be a violation of the board's fiduciary duty to the association, and the board is not authorized to expend funds this way", and by "say" I mean put that in a letter. </p>

<p>If you still don't like the answer, you can ask for an explanation – why is is proper (just because the bylaws don't say "we're responsible for drainage", there could be some legally relevant facts that has that result); that would help you understand applicability of the legal principle to future cases, which could easily arise. Then if you're still not satisfied, you (personally) could engage an attorney for a second opinion. </p>

<p>Given the explication of the attorney's opinion in the comment, you should conclude that (a) the board <em>may</em> be authorized to do this, (b) that authorization probably does not include spreading the cost out among HOA members by paying from the reserve fund (hence the special assessment). I put in those "may" and "probably" hedges to reflect the fact that the attorney did not say "Don't do it, you will get sued by the other HOA members". Maybe you won't. </p>
