What is an effective Homeowners
Association?
To be effective, a homeowners association needs a strong board of
directors that understands its role and pursues it with passion and a concise
mission in mind. The following outline provides an overview of board roles and
responsibilities.
To form an effective board, directors must have a clear understanding of
the strengths and weaknesses of the association, its history and what is to be
accomplished. Every homeowner association should have responsibility for its
assets as well as its operation in accordance with standards established by
state and federal law, local ordinances, and the governing documents upon which
the entity itself was created. To the extent that the association has such
authority and control, it is the board of directors that makes certain these
responsibilities is fulfilled.
Understanding the homeowners
association concept:
The homeowners association is the cornerstone of a planned residential
community. It brings continuity and order to the community, it preserves the
architectural integrity and it maintains the common elements. Properly run, the
association promotes the concept of “community” and protects the neighborhood's
property values. In many cases, it collectively makes available recreational and
other facilities that might not otherwise be affordable or available to
homeowners and residents on an individual basis.
Deed-initiated homeowners associations have become an essential part of
the overall concept of residential property ownership in today's marketplace.
Purchase of a home or lot often brings with it mandatory membership in an
association which then provides the structure for operation and management of
the residential development. With membership comes certain maintenance
obligations, financial responsibilities, and a commitment to abide by use
restrictions and other rules of the association. To a degree, it necessitates
individual conformity for the good of the whole.
The association's responsibilities may be limited to basic maintenance
functions or they may be expanded to include sophisticated and extensive upkeep
of the property as well as delivery of special services to individual homes
(e.g. back door trash pickup). To be successful, its officers and directors must
uniformly and fairly govern the community, and it must have a reasonable level
of participation by each of its members over time.
Fiduciary Relationship and Responsibility
The members of the board of directors and each officer of the association
have a fiduciary relationship with the members of the association. This
fiduciary relationship imposes obligations of trust and confidence in favor of
the corporation and its members. It requires the members of the board to act in
good faith and in the best interests of the members of the association. It means
that board members must exercise due care and diligence when acting for the
community, and it requires them to act within the scope of their authority.
The fact that the association is a not-for-profit corporation, or that the
members of the board are volunteers and unpaid, does not relieve them from the
high standards of trust and responsibility that the fiduciary relationship
requires. When a member accepts a position on the board of directors, he or she
is presumed to have knowledge of the duties and responsibilities of a board
member. Board members cannot be excused from improper action on the grounds of
ignorance or inexperience and liability of board members for negligence and
mismanagement exists in favor of the association and the property owners.
Each board member must recognize the fiduciary relationship and the
responsibilities that the board has to the association and each of its members.
The board's duties must be performed with the care and responsibility that an
ordinary prudent person would exercise under similar circumstances, and the
ultimate responsibilities of these unique positions cannot be delegated to a
manager, a management company or other third party.
A Recap of the Board Member's Role:
Acting through the board as a whole, a board member should:
-
Enforce
the documents
-
Establish sound fiscal policies and maintain accurate records
-
Develop
a workable budget, keeping in mind the needs, requirements and expectations of
the community
-
Establish reserve funds
-
Act on
budget items and determine assessment rates
-
Collect
assessments
-
Establish, publicize, and enforce rules and penalties
-
Authorize legal action against owners who do not comply with the rules
-
Review
local laws before passing rules or sending bylaws to membership for approval
-
Appoint
committees and delegate authority to them
-
Select
an attorney, an auditor, insurance agent and other professionals for the
association
-
Provide
adequate insurance coverage, as required by the bylaws and local governmental
agencies
-
Inform
board members of all business items that require their vote
-
Inform
members of important board decisions and transactions
-
See
that the association is protected for the acts of all parties with fiscal
responsibilities
-
Attend
and participate at meetings
Operating a homeowner association carries with it many of the very same
duties and responsibilities as overseeing any other business. Serving as a board
member is a valuable and rewarding experience that should be undertaken by those
who see it as an opportunity to serve their fellow neighbors while protecting
and enhancing the assets of the community. It is serious business, but also a
task worth doing well in order to safeguard the investments of all.
