First and foremost, every Board Member should be acquainted with Roberts Rules of Order and a copy should be present at every meeting. Roberts Rules of Order have been universally accepted as the standard of parliamentary procedure. It is a set of rules for conducting business at meetings and public gatherings and it can be adapted to fit the needs of any organization. Roberts Rules of Order establishes a procedure for making, amending, discussing and voting on motions presented by Members of the Board of Directors. It further establishes four different methods for voting on a motion. They are: 

1. Voice Vote (the Chair asks those in favor to say “aye” and those opposed to say “no” (for majority votes only).

2. Roll Call (if a record of each persons vote is needed, each member answers “yes” or “no” as his or her name is called). Certain states require that the minutes reflect how each Board Member voted on the specific agenda items.

3. Show of Hands (members raise their hands to verify a voice vote or as an alternative to it).

4. Ballot (members write their vote on a slip of paper. This is done where secrecy is desired).

The Chairperson should always ensure that the procedures adopted by the Board of Director’s are followed without variation and should never lose control of the meeting. Many times Board discussions can become heated and out of control. Board Members become passionate and forget the rules for proper conduct at a Board meeting. The Chairperson is vested with the responsibility of maintaining order and keeping the meeting focused and productive. A gavel is an absolute necessity.

Planning for a meeting begins with the establishment of an Agenda of topics to be discussed at the meeting. A posted agenda is necessary for holding an effective meeting. Some Associations require that agendas be mailed to each owner. The agenda puts the owners and residents of the community on notice as to what will be considered at the meeting. Customarily, it is the responsibility of the Chairperson to establish the agenda. Recommendations for agenda items are usually received from Board Members. Owners who wish to have an item placed on the agenda usually make the request through an elected official of the Association. The Chairperson should require that recommended agenda items be submitted by a certain date in advance of the meeting. This allows the Chairperson or whoever is responsible for compiling pertinent data for the agenda item ample time to have the information prepared and distributed to the other Board Members. A typical agenda for a Board of Directors meeting would include the following order of business:

1. Establish a Quorum (a quorum is the number or percent of members that must be present for business to be conducted legally. The actual number is usually found in the By Laws).

2. Call to Order (once the quorum is established, the Chairperson can open the meeting).

3. Reading and Disposal of Previous Meetings Minutes.

4. Officers Reports

5. Committee Reports

6. Unfinished Business

7. New Business

8. Adjournment

ONLY ITEMS SPECIFIED ON THE AGENDA SHOULD BE DISCUSSED AND ACTED ON BY THE BOARD OF DIRECTORS. The membership has the right to know what will be considered and acted on by the Board of Directors. They should also have the right to express their opinion regarding agenda item. The Board has a responsibility to properly advertise meetings and the meetings should be open to any owner wishing to attend.

There are several different ways that Board Members can hear owner comments on agenda items. The Board may require unit owners to provide a written request in advance of the meeting specifying the agenda item the owner wishes to address. This procedure is an excellent tool for estimating the amount of time which will be spent on each agenda item and it also prepares the Board for “hot items” on the agenda. Some Boards of Directors prefer to take comments from owners prior to the Board discussing the item. Advocates of this procedure feel the Board should hear owner comments first so that their discussion will consider the comments and concerns raised by the owner. Another alternative is to take owner comments after the Board has discussed the agenda item but prior to the actual vote by the Board. The strongest argument for this procedure is that owners are educated through Board discussion on the purpose and intent of the agenda item before they address the item. Personally, I support the second alternative because I believe that hearing Board discussion first may answer some of the owner’s questions or concerns reducing the time spent on the agenda item. The Board of Directors still has the opportunity to hear owner comments before acting on the motion. In either case, the Board of Directors should communicate their procedure to the membership and also set a time limit for owner comments. The Board can also establish time limits for the overall discussion on any agenda item. If a time limit is established, the Chairperson should have the authority to extend the discussion beyond the time limit if he or she feels that additional discussion is necessary for a proper vote on the item.

Board Members should come prepared to intelligently discuss and act on the items on the agenda. Advanced preparation is imperative to a productive meeting. Each Board Member should be presented with the agenda and pertinent information regarding each agenda item well in advance of the meeting date. The task of preparing this information is usually delegated to the Association’s Manager if one is employed by the Association. Otherwise, individual Board Members should be assigned specific agenda items to research and report their findings to the rest of the Board prior to the meeting. As an example: if the Board is considering a contract for services, each Board Member should receive a copy of the written specifications along with the actual bids and proposals prior to the Board meeting. Other pertinent information such as references and the Manager’s analysis should also be included. The bids and proposals should be thoroughly reviewed for consistency prior to the meeting unless the Board has requested sealed bids. Board Members have a responsibility to thoroughly review all of the material provided prior to the meeting and to submit any questions they may have to the Manager or the Chairperson. Dedicated Board Members will do independent research on complicated agenda items and share their findings with the rest of the Board. The Manager or the Chairperson should be prepared to answer questions at the meeting.

The Board of Directors has a responsibility to hold its meetings at times which are convenient for not only the Board Members but also the owners. Owner attendance and participation should be encouraged to assist the Board in making decisions that are truly representative of the majority. The Board meeting is an excellent vehicle for establishing communication between the membership and the Board of Directors.

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It is important that a committee know the parameters: its purpose, responsibilities and authority.

A pitfall to avoid, which many presidents and boards experience, is when the board chooses all of the members of the committee. It is usually more effective for the president or board to appoint the committee chair and allow the chairperson to choose their volunteers. In this manner, the committee has a better chance to be more productive and to work together as opposed to becoming a committee saddled with participants who may ultimately agree to disagree.

The success of the committee itself is dependant upon the quality of the leadership of the chairperson. It is the chairperson who sets the tone of committee meetings and keeps the committee members informed of the progress. In addition, the chairperson must ensure that the issues are thoroughly researched, all member ideas are considered, and any controversial issues are resolved prior to presentation to the association board of directors.

It may be helpful, depending on the nature of the committee, to have a board member serve as a liaison between the committee and board. The board member does not have to chair the committee.

The final requirement is for the committee to communicate its activity, recommendations in written form to the board of directors. Of course a verbal presentation supplemented with the written report is ideal, as board members will have an opportunity to study the written documentation, possibly request additional information, and then be in a position to make the best educated decisions for the community.

To help ensure that the board will focus on the result of the committees’ efforts (and not on the process by which they reached their conclusion) consider using a basic committee report form. Such a document is easily created and gives the board the information it needs to act on a committee recommendation without a prolonged discussion of the committee’s work.

The committee chairperson is usually charged with completing the report form so that any recommendations may be placed on the Board’s agenda.

With the proper use of the committee structure, not only does a board receive the immediate assistance of a support group to help with the current operations of an association, but it also lays the groundwork for potential, more experienced, future board members with knowledge of how the current board is structured. What better method to establish the training of future board members than to have volunteers who have worked together, have successfully participated with their ideas and plans being accepted by the current board, and who have seen their hard work and results placed into action?

A committee with proper direction is a powerful support mechanism to an often over burdened board of directors who will most certainly appreciate the added help. The results can be amazing to behold!

This article was edited and adapted, but most content came from:

Association Times’ Staff Writer

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Suggested Adaptations to Roberts Rules of Order:

Allow alternating debate on the issue. One speaker would present information in favor of the motion; then allow a presentation by a speaker opposed to the motion. When no one wishes to speak on a particular side, ask unanimous consent to end debate. “Is there any objection to closing discussion? Hearing no objection, discussion is closed.”

When seeking out discussion, encourage new discussion rather than permit repetition by the speakers.

Always provide an opportunity for those who have not spoken to address the motion on the floor.

On the agenda, record a start and end time for each discussion item. This will let speakers know in advance how much time is available.

Along those same lines, announce at the beginning of the meeting what time the meeting will adjourn. Board members often police themselves if they are aware of a deadline.

Ask for a motion to end discussion. (“Is there a motion to close debate?”).

If it is perceived that discussion on an issue may become quite lengthy, set a specific discussion time. (“Is there a motion to limit total debate to (20) minutes?”).

Establish speaking rules for all meetings:
      Limit the speaker’s time to no more than (3) minutes.
      Limit the speaker to one opportunity to verbalize on the issue.
      Ask speakers to direct their comments to the chair.

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Customer service for Owners in a Community Association should be as reliable as McDonalds. Every caller should be treated with respect and a friendly and cooperative manner. Board members sometimes need to be reminded that personal differences with a neighbor should not affect the outcome of an architectural change request. Managers need to keep in mind that “even a broken clock is right twice a day”. They should listen to the frequent caller as they would a first-time caller. They should not assume they are wrong or just complaining…again.

Decisions based on personality or “who you know” are dangerous. If statues are not permitted in the front beds, don’t overlook the statue in front of a committee member’s home because “she does so much for the community”. You will have a difficult time defending and enforcing the rule elsewhere. Deviation from the adopted rules creates inconsistency that cannot be upheld.

The Board’s decision should be supported by the documents, current laws, best practices and opinions from their community manager, attorney, accountant, engineer and other professionals. Personal feelings should not enter into the discussion.

Owners should expect, and receive consistent treatment when they deal with any representative of the Association. Prompt and efficient responses to maintenance service requests, accounting questions or reports of violations should be routine. Committee and Board meetings should be scheduled to ensure reasonable response time to owner requests. Pushing a friend’s request through without the normal process will anger other Owners who have to wait for their decisions.

We know we will never please everyone but we can avoid appeals based upon the way they were treated rather than the decision that was made. The rules and architectural guidelines are in place to ensure a uniform appearance throughout the community. Don’t fall into the trap of straying from uniform enforcement. Inconsistent treatment of Owners opens the Association up to possible legal action and negative publicity for the community. The Board and management must do everything they can to create an atmosphere of community and fair treatment that will enhance the lifestyle of the Association.

Gail VanDyke, PCAM

Mid-Atlantic Management, Plymouth Meeting, PA

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One of the most significant personal issues for association directors is the personal liability they may face for the improper performance of their duties. While most professions have professional codes which govern their conduct, boards of directors have less guidance in determining by what standards their actions are judged.

The law recognizes that directors are unpaid volunteers and so provides personal immunity from prosecution for their actions. However, directors do have legal responsibilities. A director owes a duty to the association to act in “good-faith” which basically means the director attempted to honestly and faithfully uphold his or her obligations in the association’s best interests. A second duty requires the director to discharge his or her duties with the same degree of care that an “ordinarily prudent” person would exercise under similar circumstances. And third, a director has a duty to act in a manner the director “reasonably” believes to be in the best interest of the association.

A director must not make any decisions or take any action against the interests of the association and its members for his or her own benefit. This duty of loyalty to the association and its members requires the director to place loyalty to the association above personal loyalties to avoid or minimize conflicts of interest. Conflicts of interest can involve personal financial benefit at the expense of the association, but it also can involve other situations as outlined below.

TYPES OF CONFLICTS OF INTEREST

Self-Dealing/Contracts with the association.
The most obvious form of conflict of interest involves self dealing such as when a director or a director’s close relative has an interest in a business which contracts with the association. Under proper circumstances, a director can contract with the association, or recommend friends and close relatives for contracts. Courts generally uphold transactions between an association and a director if the director discloses the interest before the transaction is entered into, if the directors in good faith and with ordinary care authorize the contract by the affirmative vote of a majority of the disinterested directors, and if the transaction is fair to the association. Thus, disclosure and fairness will usually protect a director from potential liability for breach of loyalty in transactions with the association. However, when a director transacts with the association for personal gain without disclosure or in a manner unfair to the association, the director may be liable to the association for all profits received by the director from the breach of loyalty and all damages caused by the breach of loyalty. Furthermore, some courts have even held the director liable for punitive damages for this type of breach of fiduciary duty.

Maintenance and Repairs.
This can occur in a condominium development where the association is responsible for the exterior of the buildings and other structures other than the units. Often, financial and time limitations require the board to postpone one item of repair until another item of repair is performed. This can create a conflict of interest if the board purposefully decides to fix or paint their units before the rest of the community or before others who may be more deserving of the repairs or maintenance. By doing so, the board may be placing its own interests above that of the association. Again, the directors must set aside personal interest and act in the best interest of the association.

Other Types of Financial Gain.
A conflict of interest also may arise when a director, with knowledge acquired as a result of serving on the board, takes a business opportunity which is available to the association. These types of conflicts of interest, although rare, arise in many different forms. For example, an owner in financial trouble could approach a director and offer to sell the owner’s unit to the association. The director would be creating a conflict of interest by personally purchasing the unit without disclosing the owner’s offer to the board and permitting the association the opportunity to purchase the unit. A similar conflict may arise where the association has decided to foreclose on a unit or lot to collect past due assessments and to bid to acquire the unit or lot at the foreclosure sale. A director, with knowledge of the financial situation, would create a conflict of interest by personally bidding against the association to acquire the unit or lot. The safest protection for the director in these situations is to disclose to the board the opportunity and the director’s interest, and to permit the board to make a decision whether the association should take advantage of the opportunity.

Covenants, Compliance and Enforcement.
Conflicts of interest may also arise in the area of compliance and enforcement of the association’s covenants and rules and regulations. The basic principle is that directors are not above the law. Like all other owners, directors must be held accountable for violations of the association’s covenants and rules and regulations, such as being charged late charges for delinquent payment of assessments. Selective enforcement (which is legally outlawed in some states) of the covenants against directors would result in the association waiving its right to enforce the covenants against other owners.

Budgeting and Assessments.
Directors may decide not to assess for capital reserves to keep their individual assessments low under the assumption that special assessments can be imposed at a later time if capital repairs are necessary. There have been several judicial decisions on this matter, and courts have not been reluctant to impose liability on the directors for this action. The courts have reasoned that this conduct is not in the best interest of the association, but rather in the interest of the directors at the expense of the association.

The underlying concepts in addressing conflicts of interest are simple. Directors owe the highest loyalty to the association and may not improperly benefit at the expense or to the detriment of the association in any way. Any such benefit constitutes a breach of duty. However, a breach of duty will not occur solely because a director engages in transactions with the association or is otherwise interested in the outcome of board actions or decisions so long as that director discloses any conflicts of interest and the action or decision is fair to the association.

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If the association has a managing agent, the board president should act as the main point of contact with management regarding the operation of the association and be the person who provides the association manager with instructions. A single point of contact prevents the confusion that can sometimes result from mixed messages from individual board members being relayed to the manager regarding the same subject. This makes the most sense as the individual holding the office of president guides the board throughout the decision making process, establishes the board’s meeting agendas and ensures that the conduct of business follows the agenda as well as basic principles of Robert’s Rules of Order.

The vice president assumes the duties and responsibilities of the president in his/her absence; the secretary is responsible for the meeting minutes and for validating association documents and correspondence when necessary; and the treasurer is responsible for ensuring that the financial records of the association are properly kept. The treasurer must also review the monthly financial statements for accuracy, but the association’s CPA is responsible for validation of the accounting through a mandatory annual audit, review or compilation. The actual completion of these duties may be delegated to the management company, but the board and its officers are not relieved of their responsibility by such delegation.

The treasurer, other board members, and management’s authority to approve expenditures should be granted and approved by a vote of the board and recorded in the association’s minutes.

Each new board member should be given a workbook containing the association governing documents, a copy of the most current meeting minutes, financial, and other pertinent information that new directors need to know. New directors have the responsibility to educate themselves about the association. They should make it a priority to become familiar with the items in the board book.

An association is a business–a not-for-profit corporation. In the state of Arizona (true for OK too), all association business must be conducted at open board meetings. Meeting packets should be provided to each director several days prior to the meeting. Members should review the contents and come to the meeting prepared to conduct the business of the association and to vote on items placed before the board on the meeting agenda. After the meeting, board members should add relevant items from the board packet to their board book.

The board must make decisions as a group at duly called and noticed board meetings. No one board member makes any decision alone – - the board votes and the majority rules. Typically, the board president does not vote and serves as the tiebreaker should a split decision result. A president (as well as the other officers and directors) should avoid making decisions without a vote of the board. If circumstances force a president or a director acting in his/her absence to make emergency decisions without board approval, the president should have the board ratify (confirm) the decision at the next board meeting and that action should be documented in the minutes.

The board’s legal authority to act on the owners’ behalf is found in the association’s governing documents (CCRs, Bylaws and Articles of Incorporation) and in state statutes that provide for the general authority and responsibilities of all corporate boards of directors.

The board’s role is to govern the association and set the policies, standards, procedures, programs and budgets for the association. The board is ultimately responsible for the operation of the association. Boards may delegate implementation of their decisions to their association manager, committees or to independent contractors. Although the board can direct or empower the manager to take certain actions on behalf of the community association, the board is still responsible to the owners.

The Board of Directors’ responsibilities include:

• Care, maintenance and enhancement of the physical property, common areas, and facilities
• Management of community finances
• Risk management, including obtaining insurance and developing reserve funds
• Establishment, enforcement and interpretation of rules and regulations
• Preservation and promotion of community harmony

Board members have the responsibility of balancing the needs and obligations of the community as a whole with those of individual owners. They have the duty to be careful with the association’s assets that are placed in the board’s trust. Board members have a ‘fiduciary duty’ that requires directors to act within their authority, to exercise due care, and to act in good faith and with ordinary care that they believe to be in the best interest of the association. Board members are required to avoid conflicts of interest and acting out of self-interest. They are also required to act as reasonable people in managing the association’s affairs and must exercise reasonable ‘business judgment’ in making decisions.

The business judgment rule imposes on boards the responsibility for understanding association operations and researching the business decisions they make before acting. Essentially the business judgment rules says that if the board acts in what they believe to be in the best interests of the association—in an ordinarily prudent manner, after reasonable inquiry—then they’re not liable even if the decision turns out to have been a poor one. The business judgment rule also requires board members to exercise duty of care and the duty of undivided loyalty.

Duty of care requires boards to act in accordance with the law and the association’s governing documents, and to use the care and skill that a prudent person would use in similar circumstances. Boards can rely on information, opinions, reports, and statements prepared by their committees, the management company, legal counsel, CPA, and other advisers, provided that they use the input to act in good faith and with no knowledge that their actions are inappropriate.

Undivided loyalty is the most stringent duty that the law imposes on board members. As a fiduciary, a board member cannot in any sense be in conflict. He or she must act for the sole good of the association at all times. That means avoiding conflicts of interest and not allowing self-interest to interfere with their duty to the association.

Board decisions that comply with the governing documents and the law will usually be upheld as long as the board acted reasonably and in good faith. However, directors who act outside the scope of their authority are generally not protected by the association’s director and officer insurance and may be held personally liable.

Leslie Freed, AMS, CMCA, VP of Operations, Lewis Management Resources, Tuscon, AZ

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• 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.

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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 are 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.

Board of Directors
The association has responsibility for its common elements as well as the management and operation of the association’s business affairs – - all in accordance with standards established by the governing documents created when the community was first developed. To the extent that an association (typically a non-profit corporation) has such authority and control, it is its board of directors that carries out these duties and responsibilities.

Members of the board of directors of an association serve without compensation unless the bylaws of the association provide to the contrary. The board’s authority includes all of the powers and duties enumerated in general law, as long as these powers are not inconsistent with the provisions of the documents governing the association.

Officers of the Association
The association acts through its officers and agents. The board of directors makes the policies for the association, but the officers and agents carry out these policies and administrative functions for the community. Some of the officers are clerical while others carry out substantive functions based on policies established by the board of directors. All of the officers have an affirmative obligation to act with utmost good faith towards the association and cannot deal in the funds or the property of the association to their own self advantage. Each association typically has a president, secretary, and treasurer and may have one or more vice presidents. However, an association may officially conduct its business with fewer officers than these, depending upon the laws of a given state.

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