Can HOA board members profit from insider deals? How do we deal with secretive HOA boards?

newsQ: The president of our homeowners’ association tells us it’s illegal to disclose names of HOA owners who are delinquent in payment of assessments. Is this correct? He and others have profited from their knowledge of delinquencies by buying lots for low prices without notice to other HOA members who might buy them.

A: The answer to the first part is yes, it is unlawful for homeowners’ associations (HOAs) or Condominium Associations (COAs) and their debt collectors to publicize information concerning a person’s consumer debt without the person’s consent.

There are state laws (North Carolina General Statutes, Chapter 75, Article 2) and federal laws (the Fair Debt Collection Practices Act, 15 U.S.C. 1692) that regulate creditors, collection agencies and others who regularly engage in the collection of debts owed to others. The federal laws are not considered to apply to the HOA itself, since the federal law applies only to “debt collectors” and not the actual creditor to which the debt is owed.

However, the North Carolina laws apply to both creditors and debt collectors and prohibit the communication of any information regarding a consumer’s debt with a third person without the debtor’s written consent. See N.C.G.S. § 75-53, which can be found on this page: http://www.ncga.state.nc.us/gascripts/statutes/statutelookup.pl?statute=75 

The second part of your question is whether it is proper for the HOA president to profit from other owners’ delinquencies.

If the homes are going into foreclosure, either by the HOA or a mortgage lender, it is not improper for him to bid at the foreclosure sales and purchase the lots in this manner. Such proceedings are public record and anyone may bid.

If the HOA president is using the delinquencies to coerce homeowners to sell to him at reduced prices, this may not be technically illegal, but it certainly smacks of self-dealing and profiting on “inside information.” If this is the case, you should consider whether the members should call a special meeting to discuss having him removed from the board.

“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer and Mike Hunter.

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