The board of directors of a homeowners association is responsible for properly managing the association’s business. In the real world, the people who are vested with the responsibility for making the decisions on behalf of a homeowners association are a diversified group of people with vastly different backgrounds and levels of experience which may or may not be beneficial to their job as a director. Those who volunteer their time as directors are often placed in a position where they need input from professionals such as property managers, accountants, and lawyers. Frequently, in an effort to keep costs down, board members will avoid incurring the expense that is associated with consulting a professional and they will make short-sighted decisions that end up costing the association far more money than the fees that would have been incurred for the consultation that never took place. Good business judgment (a requirement for all board members) necessitates knowing when to reach out to an attorney for advice.
Frequently, HOA directors wait until “the horse is out of the barn” to consult an attorney about a problem that they knew about long before. This is often the case with a situation that starts with a conflict that could (and should) have been resolved, but rather than compromise an issue, the board took a non-negotiable position that exacerbated the conflict and resulted in a lawsuit being filed. A five minute phone conference with the Association’s lawyer in the early stages of the conflict might have resulted in the HOA taking a different course of action that resulted in a resolution before the problem escalated into a lawsuit.
It is also common for HOA boards to enter into contracts with vendors and service providers without proper documentation and investigation of who they are dealing with. This frequently occurs with construction and repair work. HOA directors should know how to check out the background of those they are dealing with (verify license, insurance, etc.) and know what should be covered in written contracts. If they don’t know this information, they should pay an attorney or other appropriate professional to assist them. The investment in the cost of the professional will be a small fraction of the ultimate cost to the HOA if there are problems with the vendor or service provider.
HOA directors should also be familiar with the content of their Association’s governing documents and make sure that they are up to date and being followed. Provisions that are outdated should not be disregarded (unless they are unenforceable due to state or federal laws), they should be updated by amendments or restated documents. Investing in clearly stated and complete governing documents will help to prevent costly future issues.
Running the business of an HOA is in many respects much more difficult than running another business because the decision makers are volunteers with limited time and expertise, and who serve for short periods of time. Making uninformed decisions will result in costly mistakes, a dysfunctional board, and a lack of future volunteers who are willing to serve.
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