In 2018, when the HOA had financed the clubhouse renovation—the same project that had eventually led to the drainage installation that flooded my yard—they had taken out a commercial property improvement loan from a regional bank. The loan was secured by a lien on the HOA's common area assets, including the clubhouse building and the surrounding grounds.
Now, HOAs can legally borrow money and encumber common assets with board approval. The issue was the vote.
Under Millbrook Pines' own governing documents—the CC&Rs that Constance knew chapter and verse—any debt obligation exceeding $50,000 required approval by a two-thirds supermajority of the entire HOA membership, not just the board.
The 2018 loan was for $127,000.
Shepherd pulled the meeting minutes from 2018. There had been a board vote: five members, unanimous. No membership vote. No notice of a membership vote. No record that any such vote had ever been scheduled.
The loan had been approved in violation of the community's own governing documents, which meant, technically, that the lien securing it was improperly authorized. Which meant that if anyone ever wanted to challenge the validity of the HOA board's authority over those assets—say, in the context of a civil lawsuit over drainage negligence—there was a cloud on the title of the very property the board was using as leverage.
This is a legal concept called ultra vires, Latin for "beyond the powers." When a governing body acts outside the scope of its legal authority, those actions can be challenged or voided. The board had taken out a loan they didn't have the authority to take out without membership approval, and they'd been quietly paying it down for six years, hoping nobody noticed.
Takeaway: HOA boards operate under their own governing documents, which function like a private constitution. When boards act outside those documents, especially on financial matters, those actions can be legally challenged. Always request and read your HOA's CC&Rs and meeting minutes; they're public record for members.
I sat in Shepherd's office reading the summary he'd prepared, three pages single-spaced with highlighted passages, and I felt something shift. Not excitement, exactly, more like the feeling you get when you've been chasing a short in a circuit for two hours and you finally find the loose wire—that quiet click of things coming clear.
Constance knew the neighborhood's governing documents cold. She'd used that knowledge like a weapon for years: to fine, to threaten, to run people off. But she'd either forgotten or never known about the 2018 vote irregularity, because it had happened before she took over the presidency. She'd inherited the loan, the lien, and the liability without realizing what she'd inherited.
Theo, when I told him, set down his coffee cup very deliberately. "You're telling me the whole time she's been threatening you with legal action, she's been sitting on an improperly authorized loan?"