Unfeather Your Nest
When people are elected to positions of power, there is always the possibility that a conflict of interest will develop. As often as not, there is no intention to fall into one. However, anyone can find themselves in circumstances that lead to a conflict of interest. It’s almost impossible to avoid them. But how they are handled is critical. They come in several shapes and forms:

Imbalanced Reserve Repairs. Due to poor reserve planning, the Board is called on to make judgment calls based on inadequate money. Invariably someone gets service and others don’t. If the Board President approves painting his building instead of others, there is an conflict of interest, even if that building clearly needs it more than the others. So, while good reserve planning can help clear up the inequity, the question remains on which building gets painted today. Avoid the perception of self dealing by having an outside "expert" make the call. Rather than be exposed to criticism, why not ask a local paint company design consultant to make the call? This same principle can be used for many other kinds of repairs.

Voting. Another technique for avoiding conflict of interest is to abstain from voting when the outcome is self-benefiting. And make sure the secretary records in the meeting minutes that "(fill in blank) abstained due to a conflict of interest". That way, the written record will show no intent to sway the vote.

Disclosure. The idea behind disclosure is that any possible conflict is brought to the attention of the Board upfront. If the Board has no problem with it, it may be okay. But beware. Technically, if you advise the Board to hire your brother in law, the landscape contractor, you’ve provided disclosure. However, to an outside observer, there would still be a lingering suspicion of nepotism (hiring family members) or money kickbacks. The Board fiddles while everyone else burns. While disclosure may explain away a conflict, look at the situation with a critical eye. If the issue is significant or costly, it’s best to shy away from it rather than have to justify it again and again.

Deal Openly. One of the best ways for the Board to avoid self dealing is to hold open Board Meetings. Even if other members don’t attend, minutes should be completed in a timely fashion and distributed to all. Regular newsletters (at least four per year) should advise of significant Board business and upcoming events. Board business should be transparent...nothing to hide. If the Board knows the owners are watching and aware, it’s less likely to engage in self serving activity.

Ban Board Scofflaws. To have a director who is regularly violating the rules is unconscionable. And to allow this kind of conflict of interest to continue invites challenge from every community member accused of rule infraction. Habitual rule breakers should be gleaned from the board if they can’t mend their evil ways.

Developers. Many HOA developers are shortsighted when it comes to conflict of interest. The goal to make a profit causes them to set the operating and reserve budgets too low to attract (deceive) buyers. This strategy will invariably backfire shortly after the association is turned over to the homeowners since there won’t be enough money to properly cover HOA business. When the HOA runs out of money, guess who gets blamed? To avoid this problem, all HOA developers should use outside budget consultants to eliminate the conflict of interest. Using consultants keeps the developer "arm’s length", more credible to buyers and defensible if the homeowner board ever raises the question of the developer underbudgeting.

Conflicts of interest always feather someone’s nest and raise suspicion. And no matter how hard you try, one will appear. Ask yourself if something the Board is doing could be misconstrued by outsiders. Trust is a fragile thing so treat it like fine crystal. Find ways to "unfeather" your nest.   BACK 

Fiduciary Sensitivity
A "fiduciary" is someone that has been entrusted to act on behalf of another.  It is an ancient and noble calling to serve another's interest for no compensation.  The principle of fiduciary is central to the role of directors that serve on a homeowner association board.  The community members elect individuals they deem trustworthy to care for the HOA assets and that which is near and dear to all...their homes.   Being a fiduciary should never be taken lightly. In the pecking order of Board responsibilities, it's at the top. 

There are those that sidestep their fiduciary duty in route to the Board.  This becomes glaringly apparent when someone gets elected and comes packing a personal agenda (hidden or otherwise).  Playing out this agenda is totally contrary to the fiduciary principle.  It's a wolf in sheep's clothing. There's a fox in the henhouse. Do what you would do with any varmint. Run them off.

Another anti-fiduciary slant is the AI was elected to make decisions@ mentality.  While maybe well meaning, this attitude presupposes that the community is just fine with whatever this person decides.  By extension, this person believes that soliciting community input on important issues is a waste of time.  Wrong, wrong, (repeat) wrong.  Polling members on significant policy or rule changes is the height of fiduciary sensitivity.  If you have the community's general agreement on a rule, there will be less need for enforcement and fewer confrontations after it's adopted. Soliciting input also uncloaks Board meetings by casting hot topics directly in front of the electorate.  This promotes trust.  And trust overcomes the Board's need to explain each and every action. 

A fiduciary is a servant by definition. This means keeping others' interests above one's own.  This means keeping the "Big Picture" clearly in focus rather than squinting at the small print.  By filtering decisions through a fiduciary screen, the Board will remain sensitive to its highest calling. Fiduciary sensitivity makes sense.   BACK 

Art of HOA Leadership
As a homeowner association Board President, it can get lonely at the top. Here you are, just trying to do a good job and not even getting paid for it. Then, suddenly, you begin to feel like the bottom line for every horse’s rear end that’s having a bad day. You get cocktail inspired phone calls at dinnertime and maintenance emergencies always happen after midnight. And that loud music...do something about it! It’s hard enough pulling the HOA barge. Why should you have to put up with all this on top of it?

You don’t. You were not elected to do it yourself. You were elected to administrate the HOA’s business, not to replace lightbulbs and pick up dog doo doo. As CEO (sounds impressive doesn’t it?), you are empowered to execute decisions made by the Board and to hold members (including yourself) accountable to provisions of the governing documents. You have the authority to make decisions between Board Meetings. You can sign contracts and checks. You wear the Ring of Power! You da MAN (or WOman)! There, feel better?

There is an art to HOA leadership. Recognizing your scope of authority is essential. The Board President is granted much authority and responsibility. Appreciating what you are responsible for is critical. You have been entrusted with the care of millions of dollars in real estate...the members’ homes. Take this trust very seriously. (They do). Besides all the warm fuzzies folks get when they think of home, it’s usually the largest investment most people have. It requires nurturing to maintain and grow its value. That’s where you come in.

Managing other people’s assets requires care and forethought. You need thoughtful planning and good advice. For this, turn to the experts. For legal issues, use only attorneys that specialize in HOA law. For management, use only companies that specialize in HOA management. This all costs money but it’s an investment in success. Spend money wisely but spend it.

A good leader doesn’t need to know how everything works. A good leader just needs to know the people that know how everything works. Big difference. While experts don’t work for free, they will help you navigate through the many traps and pitfalls that befall HOAs that do without them. Good leaders use good people.

Manage board business wisely. By that, I mean do it systematically, not on the fly. The vast majority of HOA business can and should be handled at Board Meetings. If presented with an issue, unless it’s an emergency, save it for the next meeting. Don’t encourage people to come to you for decisions. Let them know, the board must discuss it.

Board meetings are designed to examine issues and get various perspectives in the decision making process. Use your Board to arrive at better decisions. The President is there to guide the meeting, not to dictate outcomes. So, promoting discussion and ideas will get directors involved and invested in the outcome. A good leader gives credit when credit’s due to encourage volunteers.

The art of HOA leadership is that a leader leads and doesn’t follow. But the wise leader leads by allowing others to perform key parts of the whole. At year end, all those minor parts have added up to an impressive amount of work accomplished. So to become a true homeowner association artist, paint your HOA canvas using the techniques mentioned in this "art"icle.   BACK 

Solving Conundrums
HOA Boards are presented from time to time with a conundrum...a puzzling question that must be solved. These are situations that require the wisdom of Solomon because ramifications are far reaching and complex. In other words, a simple answer just won’t do. Take this real life scenario:

A condo owner had a roof leak several years ago and notified the Board President who, in turn, called the manager who, in turn, contacted a roofer who, in turn, contacted the condo owner to arrange a repair. Are you with me so far? While all seemed to have been handled correctly, the roofer never actually did the work, so the condo owner stopped paying the monthly assessment several months later when the rains returned and the roof started leaking again.

Late notices were sent by the management and eventually the HOA attorney stepped in. The owner made a few payments then stopped, claiming the leak still wasn’t fixed and moreover, the lawyer had treated her rudely. (How cheeky!) Since it was now summer and the rains had passed, trying to repair a leaky roof was problematic. The owner was told it would be handled when the rains started again.

A new Board was elected later that year and soon became aware of the conundrum, now over a year old. The Board made a personal visit to inspect the leak which was in a bedroom closet. A fish tank was catching the rain water, the ceiling was covered in mold and falling apart. A roofer immediately remedied the problem and the owner was charged for drywall repair.

By now, the condo owner owed $1200 in monthly assessments, $405 in late fees and $870 in legal fees. The owner made partial payment but refused to pay any legal or late fees. The Board agreed to waive late fees but wants legal costs reimbursed which were already paid by the HOA. The Board is in a conundrum: go to court or compromise?

Withholding assessments is a common, but illegal, tactic some members use to make a point with their HOA. It's easy to see how quickly things would get out of hand if every member stopped paying because things weren't going his or her way. But in this situation, there seems to be a huge disconnect between the owner, Board and management. The manager clearly failed to see that the repair was completed. Now, the owner could make a good case that all interior damage should be paid by the association due to failure to repair the roof in a timely manner. Further, the mold issue could escalate into a legitimate health issue. Mold litigation is a growing cottage industry for lawyers.

While this owner's methods aren’t exactly kosher, under the circumstances, the Board should compromise by waiving late charges and attorney fees if the owner brings the delinquency current immediately. The chances are pretty good a judge (if it got that far) would slap the Board and management for how this situation was handled and might even grant the owner punitive damages.

This is a case when the Board needs to settle the matter amicably before it goes any further (read "lawyers"). While the Board should never back off too quickly, there are cases, and this is one of them, where the association has clear liability in the events. When that’s the case, swallow your pride, cut your losses and review the maintenance procedures to make sure it doesn't happen again.

Oh, that all problems put before the Board were cut and dried. But, now and again, a conundrum will present itself. Conundrum solving requires thinking "outside the box" so the HOA doesn’t get itself boxed in.  BACK