Unauthorized Contracts
Adams Stirling PLC
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UNAUTHORIZED CONTRACTS

Contracts should not be entered into until they have been reviewed by legal counsel and approved by the board. Review and approval may be done in executive session.

Binding on Association
. If an officer/director approves a contract without authorization from the board, the association may be bound by the unauthorized agreement. This is especially true if the contract is signed by two officers.

Unauthorized Contracts
. If liability is created because of the unauthorized actions of a director, the board may take one or more of the following actions: (i) remove that director from his/her position as an officer, (ii) censure the director, (iii) schedule a membership vote to recall the director from the board, and/or (iv) take legal action against the director for damages. Before taking action, the board should seek legal counsel.

Exceptions
. Emergency repairs and nominal maintenance issues are an exception. If a director or manager needs to hire a plumber to stop a flood, and an emergency restoration company to clean up the water, they should have the authority to make such arrangements without getting bids, calling a board meeting, and deliberating on the merits of the various bids. The same is true for routine repairs that fall within a dollar limit set by the board. In other words, the board can authorize the president or manager to make expenditures up to $500 (or $1,000 or $2,000, etc.) without prior board approval, provided the expenditures are within budget and the expenses are reported to the board. The expenditure limit is set by the board and is normally related to the size of the association's budget.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC