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Ask the HOA Expert
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Directors Serving on Committees Answer: While it’s great to involve other members, some committees shouldn't operate independently of the board because they require historical information and perspective that only the board can supply. This is particularly true of planning, architectural control and budgeting. For things like this, you have to know where you've been to know where you're going. This isn’t quite as critical with, say, the Social or Grounds Committees. So the answer to your question is "Yes" and "No" depending on the committee. BACK
Contacting the Attorney Answer: The board should use attorney input when appropriate but for budget reasons needs to limit who has the authority to do so. If the matter involves a phone call and a couple of hundred dollars in expense, the president or a designated director should be authorized to make the call. If the board is considering litigation that potentially involves a large legal cost of thousands of dollars or more, the issue should be presented to the membership for majority approval. Unless the HOA wins the case including attorney fees, the members will end up holding the bag which likely will require a special assessment. If a majority of members would rather not risk the loss, the board should honor that sentiment. Your attorney, of course, should be advised who has the authority to spin his meter. BACK
Garages for Parking Answer: You should have a clear parking policy that addresses these issues and the consequences for violation. However, be careful about towing unless you're prepared to patrol the neighborhood regularly and record all violators by location, make, model and license number. If you tow, tow consistently. But this is a very expensive and time consuming task. It would be better for the Board President to personally visit the offender(s) and explain the problem with having a few disregard the policy. If they choose to pick and choose which rules they want to follow, so can everyone else. Most people, when confronted with the problem, will conform. For the rest, you may need to resort to fines or towing. BACK
Intra-Unit Flooding Answer: Rather than getting involved in unit plumbing repairs, the HOA should adopt a policy of making unit owners responsible for damage to common area and other units caused by unit plumbing failure. This kind of policy puts all unit owners and their insurance carriers on notice of their responsibility and limits the financial exposure to the HOA for something it has no control over. While it seems reasonable for the HOA to install washer hoses, the HOA must be careful not to take on a unit owner’s responsibility. Damage caused by failures of the hoses could be construed to be the HOA's responsibility to pay for including, possibly, unit owners' personal property damage. It's better to advise unit owners periodically of maintenance like washer hose replacement and reminding of the financial implications for unit owners for plumbing failures that cause collateral damage. The Board should adopt an Areas of Responsibility Policy which clarifies for the unit owner and their insurance carrier which party, unit owner or HOA, is responsible. See a sample Areas of Responsibility Checklist in the Planning Tools section. BACK
Minute
Highlights Answer: Approving meeting minutes can only happen at a formal meeting. But under that requirement, most Boards meet quarterly and the Annual Meeting minutes would be approved a year later. To keep the members informed, the Board should either publish meeting highlights in a newsletter or draft minutes which carry the notice "Subject to revision upon formal approval at the next Board/Annual Meeting". The information should be distributed within a week to be timely. To wait longer will result in some Board or Manager actions to already have passed. Sometimes this is no big deal but sometimes it is if the action is new policy which all members should be given fair warning of. Distributing the draft minutes or newsletter through a flyer box and by email would be inexpensive and quick ways to get the word out. BACK
Members Approve Management Answer: Normally the Board has authority to hire professional management unless the cost must be approved by the members. For example, some governing documents limit the amount the Board may raise homeowner fees each year. The cost of professional management would often exceed that threshold. If there is no such restriction, the Board can make the decision. BACK
Renovating Landscaping Answer: Landscaping is one an HOA’s biggest assets. Renovation should be done thoughtfully since you will live with the results, good or bad, for many years, A landscape plan is something normally provided by a landscape construction and design consultant, not a landscape contractor. In designing the plan, there are several critical considerations:
The landscape design plan should strive to include hardy native species that are pest resistant and drought tolerant to reduce cost and ease maintenance. Reducing the turf area will significantly reduce water needs and cost. The landscape plan and execution will cost a fair amount of money but the end result will be increased home values and livability. Don’t chintz. Hire the best landscape designer you can and spend the money. If you have limited funds, after the basics like irrigation and drainage are covered, phase in the plan over several years starting with curb appeal first. BACK
Accepting Gratuities Answer: It's not uncommon for vendors to drop off gift baskets and the like at Christmas. These often get shared with office staff and there are no strings attached. Vendors view them as advertising. But a manager accepting things like gift certificates, money, free golf and airline tickets crosses the ethical line. If it's around contract renewal time or if there is a competitive bid process the vendor is participating in, any form of gratuity would easily be construed as a "kickback". Even worse is a manager that requires kickbacks from vendors. This is fraud in sheep's clothing since the manager has clearly breached the fiduciary duty owed to the client. BACK
Front Door Color Answer: Common wall communities usually derive value from consistent design and look. Glaring variations detract from market appeal and value. But, as time passes, so do consumer tastes. That all-the-rage chocolate brown paint color of the 70s is now a sales detriment. Rather than have the Board or Architectural Design Committee play political football with exterior colors, why not hire a color consultant to update the HOA color schemes and offer some compatible choices? Most paint supply companies offer this service free of charge in anticipation of selling their product. The consultant will provide options while maintaining a unified curb appeal. Have the consultant put together color boards with a number of trim and body color options which the members can vote on. That makes them part of a democratic process on a highly volatile subject. Punt this issue to the professionals and members. BACK
Maintaining Windows Answer: It is common for replacement responsibility for these components to fall on the owner. The HOA can and should dictate the standard for window and door style to maintain a consistent look and insist that replacements only be done by licensed, bonded and insured contractors. However, in rainy climates like the Pacific Northwest and the Southeastern seaboard, keeping buildings weather tight can be a real challenge. If windows or doors leak, resulting dryrot, structural damage and mold can be very expensive to repair or remediate. Owners are seldom prepared to deal with this level of maintenance. To properly secure "building envelope" integrity, it may make sense for the HOA to assume this responsibility. BACK
Unit Remodeling Standards Answer: There are many examples of owners and their contractors who have unwitting compromised bearing walls and supports or extended utilities in an illegal manner. Anytime there is major structural work, utility renovation or demolition going on, a permit is required and the owner or contractor is responsible for getting them. If the proposed remodel includes utility or structural work, the plans and permits should be reviewed by the HOA’s architect or structural engineer to ensure the work is in compliance with code and accepted construction procedures. The owner should pay the reasonable cost and no work should take place until the architect or engineer approves the plans. BACK
Car Leaking Oil Answer: Cars leak oil from time to time. But if the leaking is considerable and the owner refuses to fix it, banning the vehicle is reasonable. However, charging the owner for cleanup costs may be enough to make the point and get her to get it fixed. Try the latter tactic first. BACK
President
Abstaining Answer: The President is entitled to vote but doesn't need to unless there is a tie. If there is a tie, you'll need to vote to break the tie unless you have a real conflict of interest or fear of personal legal consequences. These reasons should be stated at the meeting and included in the meeting minutes should the vote be questioned later on. Of course, as the head officer, your opinion (vote) may have a strong influence on other board members and how they vote so if the issue is important to you and the HOA, consider voting so others know where you stand. BACK
Board Turnover Audit Answer: Since it has been some years and there is a new board, it is entirely appropriate to have an audit done by a CPA who is knowledgeable about HOA accounting. An audit will not only expose improprieties and mistakes but offer advice for better practices and updates on tax law. Audits should be done at least every three to five years and should be reserved for since they are fairly expensive. Don't hesitate to get quotes since audit costs can vary a lot. BACK
Charging
Impact Fees Answer: Yes. If there are documented costs for repair of roads which can be attributable to construction, the HOA has every right to be reimbursed. BACK
Removing Directors for Just
Cause Answer: Here are a few situations that could be considered to be "just cause" for removal of a board director:
Being aware of these conditions and catching them early is best for all. BACK
Granting Use of Common Areas Answer: Common elements available to one or several members (instead of all) are referred to as "limited common elements". This means they are common but limited to exclusive use of one member (as in the case of a unit deck) or designated members (as in the case of a private street). These limited common elements are typically identified on the legal plat and cannot be expanded without encroaching on common areas which belong to all owners in an undivided interest. So, the board has no authority to allow such requests. Changing this requires a vote of members which may be up to 100%. BACK
Non-Agenda Motion Answer: The vote was illegal due to lack of quorum even if it had appeared on the Meeting Agenda. Without a legal quorum, no business may be transacted or elections held. You might have a lively discussion but nothing official can take place. Lack of quorum is an all too common scenario than can be cured by proxies. A proxy is the written authorization by one member given to someone to act on their behalf at the Annual Meeting. Proxies must be distributed well in advance of the meeting and collected before the meeting to ensure a legal quorum. Getting folks to return their proxies can be challenging and multiple requests may have to be made, including going door to door to collect them if necessary. There is a sample Proxy in the Meetings section of www.Regenesis.net BACK
Dealing with Human Pack Rats Should the board get involved in this situation? No neighbors have complained of any noxious smell. The area outside her condo is tidy. She keeps to herself, is pleasant to the staff and not a smoker. Answer: Turning a blind eye to a hazardous situation is not the way to go. A letter to the resident (and landlord if applicable) is in order. When garbage isn’t being disposed of regularly, it is only a matter of time before there is vermin problem. The fire hazard potential sounds great as well so the letter should include a request to remove or store flammables. BACK
Discounts for Prepayment Answer: No discounts should be offered since they would cause a shortfall. It is appropriate, however, to charge late fees to those that don’t pay as agreed. However, it is a bad idea for HOAs to finance special assessments at all because of the increased administrative costs and the likelihood of dealing with delinquent payments. For example, If you have a 30 unit condo and allow 24 monthly special payments, you have 720 payments to track and 720 potential collection problems. Instead, require each member to provide special assessment funds from whatever source they have available. Some have cash, some has an equity line of credit. The HOA should not finance the special assessment or borrow the money. BACK
Unit Owners Doing Repairs Answer: It’s a very bad idea to allow individual unit owners to do or pay for this kind of work directly because of: 1. Quality Control. Is the person doing the work
experienced? Is the material being used of good or superior quality?
Manager-Board Relationship Answer: The board should: 1. Support the manager's decisions unless a clear
mistake has been made.
Changing Registered Agent Answer: The states have different requirements for registered agents. Typically, the agent must be a legal resident of the state in question or, in states that allow entities to serve as registered agents, an entity authorized to do business in the state. All states allow a corporate officer of the corporation to serve and all allow the corporation's lawyer to serve. Most allow business entities to serve as registered agents. Because most states permit one business entity to serve as a registered agent for others, some businesses exist to serve that exact function, charging a fee to act as the registered agent for hundreds or thousands of businesses in a given state. (Information from Wikipedia) Usually the board president or secretary acts as the registered agent since the state directs the annual report renewal information to that person. This is the recommended so that the corporation files timely annual reports. If you don’t submit and pay for your annual report, your corporate status will lapse and the board will no longer have the corporate shield to protect it. To change registered agent, contact the state agency that handles corporate records (often the Secretary of State’s office) and change your Registered Agent name and contact information to the president or some other board member. This can often be done over the internet. The HOA has just purchased a ladder and a power washer for our residents to use in and around their units. One of our residents has suggested that the HOA is liable if residents hurt themselves while using this equipment. Do we need to include something in our insurance to cover this or is there a simpler way? Answer: It’s not advisable to provide things like HOA owned ladders and power washing equipment to owners. Either one of these could result in serious injury if misused. Owners should rent their own equipment or hire a contractor to do the work. BACK
Board Voting by Email Answer: Board vacancies are typically done by the board at a board meeting. That board meeting should be open to the owners. BACK
Borrowing Money for Reserves Answer: A homeowner association borrowing money, particularly for discretionary spending like this, is a bad idea. The costs associated with this kind of borrowing are high since it is considered a commercial loan which carries a higher interest rate, shorter term and high closing costs. And the loan must still be repaid by the owners just like any loan but with the added liability of the HOA being responsible to collect the payments. If this project is desirable, the funds to do it should come from the members themselves by whatever means they may have available - cash in savings, home equity loan or Uncle Ralph. That way, the HOA stays out of the loan business and the repayment issue does not impact the fee structure or increase the HOA’s administrative duties. BACK
Enforcing Unenforceable Rules Answer: A resolution process is great for mediating disputes. But unless the majority of the HOA members would like to rescind certain rules, they are charged to obey them and the board to enforce them. A resolution process is not appropriate for this kind of enforcement. Apparently, the fines being charged are not a big enough incentive to correct the violations. Usually, an escalating per day fine eventually gets attention. If the fines are ignored, the HOA can use the services of an attorney to file a lien against the offender’s home. Usually the threat of filing a lien will get payment and future compliance from most. For the cases where a member is willing to squander money in court to defend his actions, the board should consider a compromise. Spending thousands of HOA dollars in court to enforce a rule makes little sense. BACK
Satellite Dish Policy Answer: Federal Communications Commission (FCC) Regulations require that homeowner associations allow satellite dishes but allow the HOA to control where they are placed as long as the location(s) afford adequate signal. Those approved locations should take into consideration curb appeal and maintenance concerns like damage done by screwing hardware to siding or roofs. Sometimes the best solution is to erect a pole to which multiple dishes can be attached on the roof or a shielded-from-the-street location of common area. While this still would be unsightly, at least it would centralize the issue and maintain the HOA’s control over it. BACK
Sign Policy Answer: The main purpose of sign, decoration and flag restrictions is to limit the number, size, number, theme and longevity of them. Yard decorations are not signs but can be garish, tasteless and long lasting. Holiday decorations can certainly be garish as well but are short lived like political signs (usually). Flags can come in many forms but the US flag has federal protections. Others are subject to board rules. It’s best to have a sign, flag and decoration philosophy rather than an extensive list of acceptable or unacceptable items. The philosophy should stress curb appeal and good taste. Since we all know that some lack good taste, the board may need to intercede on a case by case basis and may need to compromise when confronted by an intractable resident rather than squander precious emotional and financial resources trying to enforce the rules. One thing is clear, the HOA has the right to control what is placed in the common area which includes the building exterior surface which includes most common wall communities. These issues can produce volatile responses so the board needs to be willing to be flexible. BACK
Can Owners
Override Board? Answer: The answer is a definite qualified "maybe". Generally speaking, the board is authorized to interpret the governing documents and enact rules and resolutions that are in keeping with them. However, if there is a clear majority of owners that disagrees with a board policy, the annual meeting is the place to discuss, vote and resolve the matter. The issue should be included in the agenda and noticed to all the owners so that all are allowed to participate in the discussion. BACK
President
Responding to Emails Answer: It is appropriate for the president to respond to emails on behalf of the board. But the response should be run by the board first to keep them in the loop. The president should put a deadline of 24-48 hours for directors to give input. An important consideration in responding to emails at all is whether it is request for board action, constructive criticism or outright intimidation. Constructive criticism may not be accurate, but it is heartfelt so should be acknowledged with grace. There is no need to respond to intimidation. Bullies love resistance. Special requests should be handled at board meetings unless there is an emergency. Non-emergency maintenance requests should be addressed within one to two weeks. BACK
Responding to
Email Bombs Answer: It's appropriate to circulate an email expressing concern of the "rumor mill" that is spreading misinformation to nip it in the bud. Waiting weeks to respond at a board meeting will give the unchallenged misinformation the appearance of legitimacy. But do not respond to "email bombs". Continue the practice of encouraging open communication at meetings. Maintain the high road. BACK
Board President's
Role Answer: The president has the responsibility to supervise HOA business between meetings. This means making decisions that are in keeping with the governing documents, board policy and the approved budget. The president does not have authority to approve matters outside this framework unless there is an emergency. If there is a property manager, the president is responsible to oversee the manager’s activity. BACK
Sharing Expert
Reports Answer: Generally speaking, if the information is being used for contract negotiations or for litigation against the builder or developer, it should not be shared with the owners. Also, some kinds of technical reports can only be understood with proper explanation, background and context. If this is that kind of report, issuing copies to owners could create problems for the board by owners that misunderstand or misuse the information. However, if there is no reasonable reason to withhold it, the board should either make the report available or hold a special meeting to discuss it and its implications. BACK
Borrowing
Without Owner Approval Answer: It’s unlikely that the board would spend 40% more for a project since the board members have pay their fair share too. But the board should get at least three apples to apples proposals on large projects from qualified contractors. Getting three bids doesn’t necessarily mean the board should pick the cheapest one. Contractor reputation and references need to seriously considered as well. There is a saying in the contractor business, "The profit is in the change orders." This means that unless the proposal is very specific on the scope of work, a less than scrupulous contractor could low ball his bid to get the work and then go about requiring a series of change orders and extra charges to actually get the job done. Reputable contractors do not operate this way and often charge somewhat more to cover unforeseen details. Paying more up front for a reputable contractor can often be much cheaper in the long run than engaging a low bidder with weak or no references. So when checking references, always ask about cost overruns and change orders. When borrowing money is being considered, it's crucial that the board address the reasons at a special meeting. When HOAs borrow money, it is a commercial loan with higher interest rate and loan fees than the typical home loan. Maybe some owners would rather pay their share in cash or borrow from a home equity line of credit rather than pay high interest and bank fees. In other words, the HOA should only borrow as a last resort. And before any money is borrowed, the board should have a comprehensive reserve study done to know what other future expenses need to be considered. After all is said and done, if you're still convinced that the board is spending money like a drunken sailor, I strongly suggest that you run for the board at the next election along with like minded owners and start making a change for the better. BACK
Owner Work Parties Answer: Work parties are fine although should be totally optional so the few that volunteer don't resent those that don't. (It happens). Limit the tasks to those that require no particular expertise and don't involve climbing, roofs, heavy lifting and other high risk activity. Touch up painting, changing light bulbs, renailing siding and fences and planting flowers are all great low impact activities that will get folks involved that want to and save the HOA money at the same time. BACK |
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