May 2, 2017 — If you live in an established 55+ community or an active adult community there is a Homeowners Association (often called Community Associations) in charge. While often maligned, these boards are necessary – somebody has to run the place. Boards need interested and capable people to fulfill that responsibility – and maybe that person is you. This article is based on an association board member orientation provided by David Rogel, Chair of Community Association Litigation for the Miami law firm Becker & Poliakoff (www.bplegal.com). He is the General Counsel for over 200 community associations. Our hope is that our notes of his presentation will help you understand how you and your association can avoid legal trouble, and provide a positive experience for your fellow residents. Note that this article was based on notes taken along with a few minor additions made by your editor; we apologize for any errors we might have introduced.
If you a board member of an HOA the first thing you need to know is that you have a fiduciary duty to the Association and its members (residents). That means that you have a legal and ethical relationship of trust to the organization and its members. You are in essence responsible for their money and assets, and you must hold their interests above your own.
One of the easiest ways for an association to find itself in a lawsuit is to make important decisions with no clear trail as to how it arrived at them. Attorney Rogel covered a number of potential problem areas along with the steps associations can take to avoid them. He pointed out that your underlying condo/association documents control most activities in your association. As a board member you must read and follow those.
– Proper notice needs to be given of meetings so residents have a chance to attend – 14 days notice is optimum but 48 hours at a minimum. Meetings by phone are OK as long as all members have an opportunity to call-in.
– The more frequent your board holds meetings the better the potential communication. Rogel recommends holding at least monthly meetings.
– Decisions need to be made at official meetings, not anywhere else. Otherwise the board is opened up to potential liabilities, such as: “When did the board decide that?”
– For almost anything that affects the experience of living in the community and its finances, notice should be communicated to members and then voted upon at an official meeting. For example, a decision to change the color of the buildings should be voted on. Aesthetic decisions generally lead to more controversy than anything else.
– Minutes. Minutes need to be taken at Board meetings and then quickly published and approved. Minutes should be limited to who was there, what was voted on, who made the motion and who seconded it, and whether the motion was approved or not. Including commentary about who said what in the minutes can lead to problems and is not necessary.
– Voting. Every director is obligated to vote on issues at Board meetings, including the President.
– Powers of the Association President. The question came up about what actions the President can take by him or herself. She can take any action the board gives “present authority” to without the rest of the board voting. The president should have the ability to hire and fire. BUT, if the rest of the board does not like what is being done, new officers can be elected at any properly called meeting.
– Meeting dates. As a policy Attorney Rogel recommends setting a fixed date for regular meetings (e.g.; first Tuesday of every month at 4:00 PM).
– Sunshine law. Boards, particularly small ones, need to be careful not to have unofficial meetings that are not open to the residents. For example, if your board has 5 members and 3 of them are sitting by the pool or on the phone together discussing and deciding matters pertaining to the association – that could be construed as conducting a meeting without allowing public input. For the same reason Attorney Rogel does not like boards voting by email.
– Votes by residents. Your association documents and some state laws require all residents to approve certain things, such as insurance deductibles, frequency of audits, and changes to the association documents themselves. Rogel believes that notice of such votes should be made by mail and posted on the property. E-voting can help improve participation (important since some association documents require approval by a majority of residents, not just those voting).
Other Problem Issues
Attorney Rogel covered a number of other issues during the orientation session, as well as addressing multiple questions from the association board members present. Not all of the questions were strictly about legal matters.
– Association documents. The law affecting Community Associations is always changing. The problem is that your existing association documents might potentially be in conflict with new legal changes. Rogel recommends approving new language in your documents to auto-accept new procedural changes in the law so as to eliminate potential conflicts in the future. Other documents that might need to be updated are those having to do with mortgage liability and insurance docs.
– Changing association docs. The form, alteration, and function of the community is probably covered in your association documents. Changing those documents requires a vote. Because it is difficult to get participation from all owners, getting enough votes (75% of owners in some cases) to change anything is very hard.
– Enforcement. What to do when people don’t follow the rules is always tricky. Liens and lawsuits are not what you want. The best way to handle violations is to appoint a special committee that could impose actions such as fines and/or suspension from community facilities. These committees must follow the same rules as the board itself. You can’t be selective about enforcement – letting one owner do something you punish another one for. Sometimes you will discover that an owner has been violating the rules for years. You probably can’t penalize them for prior violations, but you can put them on notice that in the future the rules will be enforced
– Records. Residents have the right to see association documents, minutes, policies, etc. The association has 5 days to provide such documents, but Rogel recommends putting everything on the website as soon as possible. More communication is always better than less.
– Rentals. One of the top problem areas for associations is the issue of renting. Owners who rent to outsiders like the revenue they get, but other owners don’t like the problems that often come with renters intent on having a good time while on vacation. Another issue is significant insurance increases that can surprise associations that go over a certain threshold for owners who rent. With the advent of services like Airbnb the issue is going to get even worse, particularly when it comes to short term renters. In buildings where there are a lot of renters one of the big problems is the front desk – even if there is one its staff will generally not be enthusiastic about becoming the renters’ concierge or neighborhood cop. Legal issues can ensue.
– Smoking, cooking, and other activities These are some other issues that cause headaches for associations. Things like smoking can be controlled by votes without having to amend your documents.
– Pets. This is another area where emotions and problems can run high. The issue has gotten even more complicated with the increased use of service and support animals (not just dogs; but horses, pigs, and birds!). A service animal must be trained, but a support animal does not. A board can ask to see the animal’s service support card or certificate. You can also require all animals to be on a leash, not violent, and stay out of swimming pools and other facilities.
– Term limits. Rogel was asked what he thought about imposing term limits on board members. He does not like them, citing the problems they can cause in a small association where there simply aren’t enough members willing and capable of serving.
– Reserves.. Your organization should have reserves on hand that it can tap – both for emergencies such as a hurricane and for planned major maintenance items like elevators and roofs. A common reserve level is 10% of the current operating budget. If there are inadequate reserves painful assessments have to be levied, and no one likes those.
– Insurance. Particularly in Florida and in states exposed to natural disasters, insurance is a huge and volatile expense for homeowner associations. During the orientation meeting several ideas to contain costs were discussed, including the necessity of shopping around, comparing coverages, wind buy-back policies (covering some of a high deductible on your primary policy with a separate wind damage policy), and deductible limits. Boards should consider comparing insurance bids from admitted vs. surplus lines. The former are in reserve pools, but surplus lines from stronger companies can be an option.
If you are board member you must keep uppermost that you and your fellow board members have a fiduciary duty to uphold. Don’t make any decisions without giving resident members a chance for input.
Thanks to David for an enlightening presentation – we really appreciate your wisdom on these important issues!
Comments? Have you served on the Board of a community association or HOA? Tell us about your experiences – pluses, minuses, problems, successes.