Treasurer has right to seek answers about loan

Question: As a director and treasurer of our homeowner association board, I have a duty to inquire about the association’s finances. Without my knowledge or consent, the other board directors committed our association to a loan with unfavorable terms. I have been asking a lot of questions regarding the loan agreement, but no one is giving me answers. The association’s attorney informed the board, and our president affirmed, that “the board will not be liable for this loan.” I again inquired about the loan and copied the attorney and loan officers on the correspondence. Almost immediately I received an e-mail from the president telling me my action constituted “malicious insubordination” and violated my fiduciary responsibility as a board member. He said he might pursue disciplinary action against me and that I must stop sending e-mails from the account established solely for association business. He concluded that I could cause a delay of the process and, if so, would be responsible for additional attorney fees. He also wants to remove me from board activities. Is the president preventing me from doing my job as a director?

Answer: As it relates to homeowner associations, there is no such thing as “malicious insubordination,” and the president has no authority to pursue disciplinary action against you personally. Aside from creating potential liability for the entire association, the president’s menacing behavior is unbecoming a board director.

The president has no authority to remove you from any board activities. As a board director, you have a duty to investigate all aspects of a board’s actions and to report those findings to the rest of the board and to the homeowners.

If a special assessment is levied, or if higher assessment fees are required in order to repay the loan, that information along with the terms of the loan should have been reported to the homeowners before a commitment for the loan was made. Each board director had a duty to perform due diligence before signing any loan documents.

Despite the attorney’s representation that “the board will not be liable for this loan,” only a court can make that determination. If certain directors breached their fiduciary duty to other board members or to the titleholders, they may be liable for the consequences of their actions and may also be subject to individual damages.

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Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or e-mail [email protected].