An HOA is a Non-Profit Organization for Many Reasons

The following emailed letter has many valid points that need to be addressed while the ArrowCreek Home Owners Association (ACHOA) is considering the path forward for the golf course.

Hi All,
50%+1 or even a Super Majority vote is not satisfactory for this fundamental change of our home owners’ association – in my opinion this requires 100% of all eligible votes to approve or not approve the purchase of the Golf Course.

The reason is very simple : to avoid the risk of multiple lawsuits. If the HOA is sued, each homeowner is being sued.

You cannot force any single resident of ArrowCreek to own or engage in a Joint Venture without his/her consent (vote).

Also:
The voting ballot should state the following:
– I understand that HOA proposes the purchase of a “bottomless money pit” : the Golf Course
– I understand that my fee can be increased by the HOA Board without any vote by the home owners to cover the costs of the Golf Course
– I understand that I, as part owner, will be responsible for any and all costs necessary to maintain the Golf Course and the Club House
– I understand that, as part owner, I will be liable for any debt accrued by Golf Course
– I understand that the increase of the HOA fee does allow me to eat at the Club House and participate in social events, but does not include the right to play golf
– I understand that Golf Course Joint Venture most likely will be losing money because the Golf Course has never been profitable
– I understand that any lawsuit against the Golf Course and the HOA will directly affect my lifestyle, because all legal fees will be paid by all ArrowCreek residents in some way
– I understand that I, as part owner, will be paying salaries for all people working at Golf Course and I will be liable for any workers’ comp suits and disputes
– I understand that I , as part owner, will be liable for any injury of any person on the Golf Course property, for any theft or damage of property on the Golf Course property
– I understand that high, uncapped HOA dues may make it difficult to sell my house.

Please add as many other points as you want.

Without such a disclaimer any voting should be forbidden as six month later there is going to be chaos: people will stop paying HOA fees (most likely the ones who vote “NO”) and challenge everything in court over and over again.

I will not be surprised if members of the HOA Board of Directors get sued for bringing this disaster to a very nice community.

Each lawsuit against the board is a lawsuit for which all homeowners as members are liable. When the assets of the HOA are exceeded by such litigation, the members have to make up the difference.

There is a very good (important) reason why a HOA is a non-profit organization and we want to keep this way.

Just my 2 cents.
Alex D.

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6 Responses to An HOA is a Non-Profit Organization for Many Reasons

  1. Ronald Duncan says:

    As stated by the leader of the FOA, this is an awful lot of assumptions. I’m very familiar with mathematics and probability theory as an engineer. However, a key piece is the need to change the Articles of Incorporation via a two thirds vote – a simple majority does not apply, AND that the parties, should the proposition pass, cannot make a profit from the change.

    To date the ‘legal opinions’ cited above have not been made available to the ArrowCreek community. There isn’t any issue with using a simple majority to change the By-Laws and the CC&Rs, but that ruling does not apply to changing the Articles of Incorporation. Two or three votes may be needed to ensure the total community and stake holders concur with this alteration of our fundamental contract. We all need to avoid a lawsuit as that would be the greatest detriment to property values and sales of property that one could imagine.

    Let’s abide by all the governing documents.
    Ron Duncan

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    • Paul Burkett says:

      The Nevada Revised Statute is very precise in its direction for ballots by any HOA. “Majority”, means the owners of more than fifty percent (50%) in the aggregate in interest of the undivided ownership in the common elements. Therefore pursuant to applicable Nevada law, at least fifty percent (50%), plus one (1) of the owners with voting power must be in favor of the ballot issue. The ACHOA Governing Documents Artilce XIII Section 4 of the CC&R and Article V, Section 5.04 of the Bylaws state that majority vote will govern the vote within the community.

      In the ACHOA Ballot issue, it would require 544 “Yes” or “No” votes for (1) the purchase of the 544.6 acres and (2) operation of “The Club At ArrowCreek”. Reading your current position, there will be “No” and “Yes” votes for the proposition when the ballots are forwarded.

      As such, there will be a need for the ACHOA Board to determine the number of Ballots that will be required to validate the vote and a timing deadline for receipt of the ballots. I doubt that your call for 100% participation of all ACHOA voting members will be the validation total. I suspect, like the Somersett ballot, the total amount of counted ballots will be less than 100% in the ACHOA proposition.

      If and when the Board follows this procedure they will have fulfilled the “Business Judgment” rule and the ACHOA Board will not have breached its fiduciary duty and all alleged lawsuits in your post become moot. Everyone can sue but the ACHOA Board in conducting its disclosed due diligence and allowing full disclosure of all facts will not be found to be breaching its duty in my opinion.

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      • REreno says:

        Paul, I agree with you on the 50% +1 vote required to amend the CCRs – required to purchase the golf assets from FOA. I disagree that 544 “yes or no votes” are required to determine the outcome in the real world. If the vote is anything less that 544 For, the amendment fails. Just a technicality. Getting people to actually vote will be a problem.

        Here’s a short course in the powers of any HOA regarding fees from an acting HOA President (also embroiled in law suits). The BOD has the unilateral authority to raise your annual dues up to 20% unless opposed by 50% of the owners at the Annual meeting. This a sucker deal – no one attends or pays attention to the Annual Meeting or budget. The HOA can impose a “special” assessment of up to 20% of the annual HOA dues by a simple majority vote without owner input. If they do this in the right order, this would result in a 44% increase to HOA dues over one year. Rinse and repeat next year. And also in 2016. And 2017.

        Just so food for thought.

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      • Ron Duncan says:

        Mr. Burkett apparently is unfamiliar with the Articles of incorporation of the ArrowCreek development. Article IV.d does not include anything pertaining to a ‘Golf Course.’ Furthermore, Article IX states “…This corporation reserves the right to amend, alter, change or repeal any provisions contained in these Articles of Incorporation in the manner now or hereafter provided by statute, upon the affirmative vote of two thirds of the members of the corporation and all rights conferred upon officers, directors and members herein are grated subject to this reservation, provided no such amendment shall permit this corporation to engage in business for profit or permit the net-earnings of the corporation to inure to the direct financial benefit of any officer, director or member of the corporation, or the Declarant.”
        These articles of incorporation seem to have been over looked by the golf enthusiasts in their rush to shift risk to property owners. It would appear we need to have a Two Thirds majority to purchase the golf assets! It should also be noted that the last sentence of Article IX says that the FOA members, who are Members of the HOA, CANNOT profit through this acquisition.

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        • Paul Burkett says:

          Mr. Duncan is correct that the Articles of Incorporation Article IV paragraphs “a” through “d” do not mention anything concerning the operation of a golf course because the developer (Southwest Point Associates, LLC) wanted the golf course to be a marketing tool to sell lots. This was clearly stated in early Board meetings of the AHCOA. However, this Article does not forbide or disallow the ACHOA members from considering the purchase and/or operation of “The Club At ArrowCreek”.

          It is anticipated that the Ballot Question or Proposition that the ACHOA Members will be asked to vote on concerning “The Club At ArrowCreek” will be an encompassing question that includes the purchase, operation and amendments to all governing documents. It will recognize that the ArrowCreek Declaration of Covenants and Conditions under Article XIII Section 4 will require a majority of the Owners with voting power to terminate the Declaration. It will recognize that the Bylaws for the ArrowCreek Homeowners Association under Article V. Section 5.04 which states that “These bylaws may be amended or repealed by approval of majority of the regular members, provided any amendment of a provision of the Declaration incorporated herein shall be made under the procedure specified in the Declaration and such an amendment shall be deemed to also be an amendment of these Bylaws.”

          The ACHOA Board Counsel has reviewed the Articles of Incorporation, the Bylaws and the Declarations, and has determined that the amendment sections of the Bylaws and Declaration are more specific and apply as to the Ballot Issue. Board legal counsel in applying NRS 116.2117 stated to the Board that ” . . . the declaration, including any plats, may be amended only by a vote or agreement of units’ owners to which at least a majority of the votes in the association are allocated, unless the declaration specifies a different percentage for all amendments or for specified subjects of amendment.” Board counsel has stated that the ACHOA Board can go forward with fifty percent (50%) plus one (1) of the Owners with voting power to approve any amendments to the governing documents even though Article IX in the Articles of Incorporation is in conflict with the NRS, ArrowCreek Bylaws and ArrowCreek Declaration of Covenants and Conditions.

          However, this is a moot issue when you apply the simple math concerning a vote of the 1,086 ACHOA voting members. Assume that at this moment the ACHOA has 10% committed “Opposition Votes” and 10% committed “Affirming Votes”. That would mean that there are 109 Yes and 109 No votes totaling 218 Ballots. That would mean that an additional 435 ballots must be received as a minimum to determine if the amendments are approved to reach the 544 threshold (1,086/2 +1). As a minimum, there would be 653 Ballots received which would be 60% of the eligible ACHOA voting members, (653/1,086). This assumes that all 435 received ballots are 100% Yes or 100% No.

          The probability that 435 votes would be 100% Yes or No vote is an impossibility based upon my past experience as an HOA president, treasurer and secretary for their operating Boards, Therefore, as stated in my first post, the ACHOA Board will need to determine the number of Ballots that will be required to validate the vote and a timing deadline for receipt of the ballots. As the validation count approaches 700 to 750 Ballots, the ACHOA voting member participation rate increases to 64% (700 Ballots) and 69% (750 Ballots). If the Board selects 750 Ballots then the affirmative vote of 67% may be reached and the Articles of Incorporation Article IX is no longer applicable. The need for 100% participation of all ACHOA voting members and/or a super majority are not required. The math sets the path for the ACHOA Board. This is very similar to the Somersett ballot and if you recall the total amount of counted ballots was significantly less than 100%.

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