Complaint: Reallocation of Common Elements

Allegation: In violation of Chapter 4.2 (55-79.56) of Title 55 of the Code of Virginia, Reallocation of interests in common elements, the Association has allowed several unit owners to commandeer adjacent grounds for personal use. Neither an owner nor the Board has the authority to reallocate common area unless 100% of the members agree to it by amending the governing documents. Jim and Terry, former Board members and Gary, a current Board member are individual members who have been allowed to commandeer common elements for personal use, specifically for plantings and landscaping.

Sent: Friday, May 16, 2014 12:50 PM
To: Kim M. O’Halloran-Perez (kohalloran-perez@reesbroome.com) (kohalloran-perez@reesbroome.com)
Subject: Abuses of Power Constituting Breaches of Fiduciary Duties

Dear Mrs. O’Halloran-Perez:

As attorney to the Association, you should be concerned and advise appropriately regarding abuses of power constituting breaches of fiduciary duties and the potential consequences.

Gary, Terry and Jim current and former Board members abused their powers by reallocating Heatherlea common elements without the approval of the membership in violation of the Virginia Condo Act. [There should be a record of the steps the Association took against Jim to enforce the law but failing to follow through; another breach of fiduciary duty. Ms. Spellman was involved with the efforts.] What may make matters worse, the Board may have approved the reallocations using variances despite the violations. These individuals have gotten away with these violations because they were on the Board. Otherwise, they would have been fined like everyone else.

The consequences of a finding of breach of fiduciary duty can be severe. First, the offending board members will be held personally liable in money damages for all pecuniary losses sustained as a result of their misconduct. Such judgments (and the attendant legal fees) are rarely, if ever, covered by directors and officer’s liability insurance. In addition, courts do assess punitive damages against those board members who breach this moral obligation. Finally, the Business Judgment Rule does not inoculate board action from judicial review when there has been a finding of breach of fiduciary duty. Thus, board action which may in fact be highly beneficial to the community is vulnerable to being struck down by a court when it is implemented in such a fashion that it breaches the fiduciary duty.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s