Dear Shareholders and Residents,
The following is a FYI for all Carefree Shareholders:
Homeowners Associations must always act within the confines of their governing documents and the law especially when using Shareholders assessments. A Board Director is bound by a fiduciary duty to serve and honor all Shareholders. That means they have a legal obligation to the corporation, and must act in the best interests of all Shareholders.
If a Shareholder should suspect misuse of association funds, the first step to take is to speak with the Board. After addressing the Board and you are not satisfied and remain suspicious speak with your attorney. All Shareholders have the right to understand and question how the Board spends their money. All financial documents other than Shareholders personal accounts are available for any Shareholder to view. If you are interested in the facts, please contact the association office and request to see the records. The Board Secretary will respond to your request within 2 weeks of the date of your request.
The Board of Directors must always enforce the following:
Maintain the common areas, otherwise referred to as the "campus"
Fines/disputes- When Shareholders are not in compliance with the governing documents or applicable law, the Board will impose fines and sanctions for the violations.
Architectural changes to Shareholder property- All Shareholders must submit requests/permits for approval prior to work commencing. If a Shareholder ignores these requirements they may be faced with fines, sanctions and the Board can force removal of the unapproved changes or additions.
Lawsuits - the Board must at all times ensure that the Corporation is protected by adequate insurance which will help to avoid potential attorney fees and costs that are passed on to our Shareholders. The Board of Directors also carries a Director and Officer (D&O) policy which protects our volunteer Directors and volunteer Officers from potential liabilities and also our community.
The Most common claims against the Board of Directors of the Corporation are:
- The Board's failure to adhere to bylaws-Board members must take this serious.
- The Board's failure to properly notice elections.
- The Board's failure to properly count votes.
- Breach of fiduciary duty.
- Mismanagement and misuse of Shareholder's funds.
- Defamation by the Board or a Board Director of a Shareholder/Resident.
- Their failure to put emotions and personalities aside while conducting corporation business.
Ignorance is bliss, but failure to know and follow the governing documents and applicable law jeopardizes our entire corporation. The failure to know and follow the governing documents is the most common cause of problems within a corporation. The "unwritten rules" that were followed for years and contradicts the bylaws/law will be successfully defeated if challenged in a court of law.
IMPORTANT:
HOAs are budget driven and rely on collecting the cost of running the association from its Shareholders through dues and special assessments. If a Shareholder does not pay their dues or special assessments on time it affects the daily operation of our corporation. This forces the association office after a 30 day grace period to impose monthly late fees to your account. Once that amount exceeds $600 a lien will then be filed on your property by the association office and you are no longer considered a Shareholder in Good Standing which may affect your association activities. Any Shareholder experiencing a financial hardship must come to the Board of Directors to work out a payment plan.
Lawsuits Against the Association/Board Member - Two simple steps to mitigate the risk of individual board members being personally liable for damages.
1. Ensure that the HOA bylaws and CC&Rs indemnify board members.
2. Ensure that you have a good Directors and Officers (D&O) insurance policy in place. All board members must review these policies to ensure that they have complete understanding of the coverage and review the policy to ensure that the best coverage is in place for your corporation. D&O insurance will help protect board members from litigation and the associated legal fees.
Appropriate insurance will help to cover the cost of litigation and damages. Without the right insurance the Board may be forced to impose a special assessment on the Shareholders to cover the costs. Our governing documents have provisions in place that may restrict using funds from the Capital Reserve Account or our Operating Account to pay for litigation and/or lawsuits. Remember, the frequently and the severity of claims against the corporation can make reasonable insurance costs difficult and that cost is passed on to the Shareholders.
IGNORANCE OF THE LAW IS NO DEFENSE IN COURT!
HOAs are document critical. The corporation must maintain good records and ensure that the recorded minutes of all meetings are well documented, accurate and filed properly. When properly documented it provides the history of Board action, decisions, and shall protect the corporation of any legal action or questions occur. All corporation records must be maintained for at least 7 years, which includes financial records, budget, maintenance, etc.
All Board Directors are Shareholders and at times they may have difficulty separating themselves from their personal emotions, egos and relationships. However, they must never allow their emotionsto prevail when making decisions, especially ones that could lead to litigation. All 1614 Households in Carefree must always take precedence over their personal views or opinions.
If a Shareholder has any questions regarding the above, please call the association office and make an appointment to speak with the Board.
Written and submitted by Marie Persichilli, Secretary
Carefree Board of Directors, June 13, 2024