Complaint:
no annual audit; falsified annual reports; failure to provide financial records; others
Source of Law: Title 10, corporate law; ARS 33-1805; CC&Rs, bylaws
Discussion:
Holding:
Comments: Complaint about false financial reports violates title 10, not title 33, Ch 16, and not OAH jurisdiction, but was allowed to be admitted for OAH jurisdiction.
Typical small HOA run by the directors as a social club, without knowledge or skills to properly run the HOA under their legal requirements and obligations.
Exhibits for annual report with Corporate Commission and corporate records were presented showing different amounts. HOA responded that an error with an un-reconciled report was the reason for the difference, and the errors were subsequently corrected.
HOA was unresponsive to questions regarding expenditures, and that stated expected expenditures never materialized. HOA did not provide corporate records on request. Plaintiff could not support HOA requirements to provide un-requested annual reports if not attending the annual meeting. HOA offered current “practice” and did not reply with governing documents. Where does the money go? Homeowners get no answers and no records.
As to claim of failing to obtain an annual audit, if required by CC&Rs, Plaintiff stated, “I understand why they don’t do it, too costly.” HOA stated, “It was common practice not to do it. Small HOAs just do a compilation as common practice. Too costly to do” [Is the fairly common wording placed into CC&Rs as a misleading assurance to induce a buyer to purchase the property in the HOA?]
Plaintiff filed suit in spite of the fact that she did not have current copy of governing documents. A claim of “falsified” requires proof of intentional and deliberate actions by HOA to deceive, and not mere error.
