This is the first of five HOA Homefront columns addressing boards, homeowners, managers, vendors and HOA lawyers.
Governance
1. HOA governance is a team sport. It’s different from our career jobs because the board legally controls the HOA, not the president. The president is not the boss but mainly is the Chair and spokesperson, and only has what power the board grants. The president’s vote counts the same as the newest director.
2. An attitude of service is less stressful than an attitude of control. Directors mindful that they serve their neighbors will receive suggestions or criticism with more grace.
3. It is impossible to communicate too much with the HOA membership.
4. You’re not on duty 24/7, so strive to confine your governance work to board meetings and let the manager handle things between meetings.
5. Don’t just ask CAN we, but SHOULD we do something? I’m often asked if the board has the power to do something when the bigger issue is whether it is a good idea.
6. Our present culture unfortunately doesn’t handle disagreement very well. Patience and civility are more important than ever.
7. Town hall informational meetings are essential on major projects or issues, regardless of whether the board legally can proceed without membership support.
Finances
8. Good financial stewardship requires planning and budgeting for actual costs, not hope-for costs. Don’t give the manager a budget target, budgeting on wishes instead of reality. Expect the manager to provide real numbers based on reasonable expectations of costs in the coming year. Artificially budgeting for a specific desired assessment increase may be appealing to members, but it’s not telling them the truth about the costs of running the HOA. Typically, common area maintenance levels and reserve fund accumulation will be the first victims of such short-sightedness.
9. The HOA’s legal obligations are not excused by the lack of funds. The HOA’s basic duty to preserve, protect, and maintain the common areas is not conditional on funding. Would you tell a neighbor that their roof must continue to leak or that an unsafe balcony must stay that way until the HOA can pay for repairs?
10. It may seem unfair to pursue delinquent members going through hard times, but not requiring certain members to pay their share of the expenses is unfair to the other members and violates the board’s duties.
11. Failing to faithfully accumulate money in the HOA’s capital asset reserve account means the HOA is quietly falling into insolvency, as money is not set aside to offset the ongoing deterioration of major assets that is a fact of life. Accumulating those funds prepares the HOA for major repairs when they become necessary, avoiding potentially ruinous special assessments or long-term bank loans.
Legal protections
12. Compliance with all three Business Judgment Rule requirements (acting in good faith, in the HOA’s best interests, and with reasonable diligence/inquiry) is an essential protection for volunteer leaders. Heed your manager’s advice, or the expert they recommend because they are part of your reasonable diligence on most decisions.
13. The corporate process can seem frustrating, but it protects HOA leaders. By documenting the commitments the board makes, you are making them legally bound by the HOA and not the leaders. Decisions must be documented in the minutes. Avoid making individual commitments, promises, or instructions to vendors or homeowners.
Kelly G. Richardson CCAL is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association advice. Send column questions to Kelly@roattorneys.com.
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