Association board members are elected by the membership, typically at the association’s annual membership meeting. Following the election, an organizational meeting is required to establish the officers of the board. Boards generally have three or four officer positions: president, vice president, secretary and treasurer. Some governing documents allow for the combination of the secretary and treasurer or no vice president positions. The officers are tasked with specific duties and responsibilities related to the operation of the association and the board, as detailed in the association’s Bylaws. All directors need to maintain an active interest in the operation of the association, as it’s the entire board of directors, not just the officers, who have the responsibility for ensuring that the association operates in compliance with the governing documents and the law.

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

© Association Times
Permission to reprint any of the information contained in this article is granted provided Association Times is credited as the source.

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.

© Association Times
Permission to reprint any of the information contained in this article is granted provided Association Times is credited as the source.

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 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.

© Association Times
Permission to reprint any of the information contained in this article is granted provided Association Times is credited as the source.

1. Communicate, communicate, communicate!
2. Create a website so that the following information is available 24/7.
3. Provide easy access to Covenants & Restrictions prior to a buyer’s closing.
4. Begin preparing a neighborhood 12 months in advance to turning over the ownership to residents.  Communicate a plan of transition, how the election of directors will take place, have an effective form of communication already in place.
5. Provide access to the budget, info on how the dues are spent.
6. When turning over the Association to residents, have at least three months expenses in the Association checking account.
7. Create a list of FAQs with answers. This will cut down tremendously on the amount of calls to your office.
8. Create an e-newsletter, recruit homeowners to draft short articles.
9. Plan and organize one or two family events for the neighborhood.

“Effective communication helps to establish harmony in the community. The more effective the communication, the more successful will be the management of the association. A difficult aspect of communication is assuring that owners within a community have the opportunity to receive and/or access information.” ©Association Times

When developers anticipate turning over neighborhood associations to the homeowners, they need to prepare residents and communicate what the plan for transition will be, at least 6 months in advance. If preparation and communication does not take place, sooner or later, chaos will occur.

With the rising costs of postage, the internet provides a reasonable and timely way to communicate with each other. It is recommended that a developer create a website for the HOA as a part of its overall community plan. This is important for four reasons: (1) creates a stable link of communication during change and uncertainty, (2) creates an important depository of information for the HOA, meaning less calls to the developer; (3) HOA website creation promotes identity and neighborhood pride; (4) over time, members will habitally go to the website for important HOA information.
©2008 okhoa.org