Tow truck owner has conflict of interest

Q: We have a board member that owns a towing company; he does all the towing for our homeowners association. We do not pay him.

The owners of the cars and trucks, which are towed off the property, pay his company. He does make money as a result of our need for his services. He is the only towing company with a license in our area.

I feel this is a conflict of interest, and that he should not be on the board. Am I right or wrong?

A: According to Nevada Revised Statutes 116.31084, a member of the board who stands to gain any personal profit or compensation of any kind from a matter before the board shall disclose that matter and shall abstain from voting on it. In considering the contract with the member's towing company, this board member cannot vote on accepting, modifying or terminating the towing contract.

He should not be involved in any discussions about his towing company or engaging in any actions the board wants to make pertaining to towing policies that would affect his company.

Q: I love your column! I am writing today to ask for your assistance and direction in locating some information.

It is my understanding that reserve funds are to be spent on only items listed in the HOA reserve study.

Last summer a barbecue pavilion, which includes a structure with a roof and seating area, was constructed at the south end of the community.

I have evidence from the HOA accounting records that this structure was paid for with reserve funds. This structure is not listed anywhere in the reserve study.

I also recall reading somewhere that if a new structure was to be erected in a common-interest community and it was not listed in the original plans, all owners within so many feet (300 to 500) of the proposed structure would need to grant permission.

I need to be directed to legal material that I can cite to the board members and the auditors who are in the process of doing an audit for 2011.

The board is spending funds on these types of items and not addressing items in the reserve study, such as resurfacing the parking lot and painting the buildings.

A: Yes, that is correct.

The reserve funds may not be used for daily maintenance.

It is explicitly to be used for the repair, replacement and restoration of the major components of the common elements and any other portion of the common-interest community that the association is obligated to maintain, repair, restore or replace per NRS 116.3115 subsection 2b.

There is no requirement that the funds need to be returned to the reserve study via a special assessment. If you are following the recommendations of the reserve study, the mechanics of the study is formulated to replace funds as funds are used for the various components. A special assessment would not be necessary, unless you did not have adequate funding in the first place. The law states the executive board may impose any necessary and reasonable assessments against the unit owners without seeking or obtaining approval from the unit owners as long as the assessments are based on the reserve study per NRS 116.31152.

It would appear, based on your information, that reserve fund was used for the construction of the barbecue pavilion contrary to state law. As to approval of the structure, you would need to review your community's covenants, conditions and restrictions.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.