– By Susan K. Stewart, Esq. (originally published in January 1999)
Homeowners who serve on their association’s board of directors typically do so for the best of all reasons: they want to participate in their community and make a meaningful contribution. Unfortunately, new board members are often not sure what is expected of them. The solution to this problem is a good board orientation session or documentation that explains what directors are required to do, what they are allowed to do, and how to do it. Here are a few pointers:
Start by learning the “language” of the business. Confusion among new directors is frequently a result of simply being unfamiliar with new terms and titles.
1. Association: The organization that we use to manage the community. It’s an exclusive club because members must be owners. Associations are usually non-profit cor-porations, but they don’t have to be incorporated to operate as an association.
2. Board of Directors: The policy-making committee for the corporation. The board is simply a group of owners who make policies and decisions for the association.
3. Directors: The individual people (usually owners), who are on the board. They are the members of the policy-making committee.
4. Officers: The “executives” who carry out the policies set by the board; a president, one or more vice presidents, a secretary and a treasurer or chief financial officer.
The distinction between officers and directors can be confusing, particularly since in homeowners associations the directors are virtually always also the officers. There is nothing wrong with being both an officer and a director, but they are distinct roles. There is no such thing as “president of the board”, for example. The president is president of the association, but is simply a director on the board. All board directors have exactly the same vote when it comes to making policies.
This distinction is more important in a traditional business setting than in a homeowners association because in a typical business corporation, officer positions are hierarchical, while director positions are not. The president might instruct the vice president how to carry out a particular policy set by the board. However, in a homeowners association, the officer positions are usually used simply to designate responsibilities.
5. Parliamentary Procedure: This is the process; the steps that are followed for the board to make policies. It is simply a way for a committee to make sure everyone has a chance to voice their opinion, and to cast a vote.
There is no particular parliamentary procedure that is required by law. Robert’s Rules of Order is NOT the law, and often doesn’t work very well for a board of directors because it was designed for a legislative body (a parlia-ment). A series of steps as simple as asking each director for comments and then asking if any director wants to make a motion — that is, call for a vote on an issue — can be adequate and effective “parliamentary procedure”.
6. Board Meetings: Sounds simple? It is. These are the meetings that the directors attend where they discuss issues and make decisions. Legally, owners are allowed to attend!
7. Annual Meetings: Perhaps it is most important to understand what annual meetings are not: they are NOT board meetings! They are meetings of all the owners. Directors who attend annual meetings do so as individual owners; they have no extra authority or voting power (except to vote on proxies that have been assigned to the Board to vote). Typically, the president presides at annual meetings, but he or she is really just a master of ceremonies.
Of course, there are various rules about how to run a board meeting and an annual meeting, such as who can participate in discussions, when discussions can be held in private, etc. Unless these basic definitions are clear, the other rules don’t make much sense.
What Is the Board Required to Do?
Think about why homeowners associations exist. Associations exist to protect the property values of all of the owners. That’s it.
Now consider how homeowners associations work. All the owners pool money to maintain the property that everybody uses — what we call the “common area”, and to regulate how owners use their individual property (at least to some extent). The money is paid into the pool in the form of assessments. The money doesn’t really belong to the association, though. It’s not “income” to the association. Instead, it is essentially entrusted to the association to spend wisely, to maintain the common area, to regulate use of individual property, to protect property values. The board is required to make decisions about how to spend the association’s money, and the decisions have to be in the best interests of the entire community. No personal agendas!
What Is the Board Allowed to Do?
The board is allowed to do anything that is in the best interests of the entire community. (Notice the similarity between what’s required and what’s allowed!) Encouraging owners to attend meetings and participate is in the best interests of the entire community. So is interviewing vendors, checking references, and getting advice from consultants about technical issues. Lobbying for an architectural variance for a room addition on your house may not be in the best interests of the community. What the board is allowed to do is much more dynamic than what the board is required to do. The board is always required to hire contractors to maintain the landscaping, paint the fences, maintain the streets, or whatever the case may be. Spending the money entrusted to the association to set up a Web site might not be okay, for example, if there is already an effective newsletter. If the person who produces the newsletter moves or stops providing a newsletter, then spending money on a Web site might become beneficial.
How Does the Board Realize It’s Objectives?
After doing what the board is required to do (see above), encouraging owner participation is the best way to accomplish objectives. Obtaining comments from other owners tends to shake out personal agenda items — even those you didn’t realize were part of a personal agenda.
Additionally, owner participation creates communication. A lot of great ideas are never implemented because they come as a surprise, and the reasons behind the ideas are not clear. People don’t like surprises, and we tend to be skeptical about the motives for changes. But if owners are familiar with the objectives, are given the opportunity to make sug-gestions, and understand the consequences, hopefully things will go more smoothly.
Is That It?
No. There are a lot of other things that directors need to know and do. But all that will fall into place much more easily if you understand the fundamentals. Homeowners association directors have the terrific advantage of having a property manager, and usually several other consultants who are experienced with these types of communities. To a large extent, the policies set by the board are ultimately carried out by the professional manager, association attorney, landscaper, etc. But directors who understand what they’re supposed to do, what they are allowed to do, and how to achieve their objectives, will get the most accomplished — and, perhaps, even have fun doing it.