January 2012

Proper Board Meeting Procedure

by Richard Thompson

Q If the board is meeting and agrees to an action, but does not follow Robert’s Rules of Order (motion, second, and vote) but instead all simply agree, is that action legal?

A If state statute or your governing documents require use of Robert's Rules, the board needs to use them in the board and member meetings. Otherwise agreeing to something as you describe is okay as long as the minutes clearly describe what the board agreed to. However a simplified version of Robert's Rules is highly recommended to keep the meeting organized and to ensure a balanced and meaningful discussion with a purposeful outcome. Without it meetings can easily become bull sessions with little accomplished.

Q Our governing documents describe allowable signs as either for sale or for rent. Since no other types of signs are described, some interpret this to mean no others are allowed. This seems overly restrictive. What about open house, garage sale, and political signs? How about holiday decorations and flags?

A The main purpose of sign restrictions is to limit their number, size, theme, and longevity. There should be provision for the other types of signs you mention since they are common activities. Holiday decorations and political signs should also be allowed as time-honored traditions. Simply control the number, size, location, and time limit. Flags can come in many forms, but the US flag has federal protections. It’s best to have a sign, flag, and decoration philosophy rather than an extensive list of acceptable or unacceptable items. The philosophy should stress curb appeal and good taste. Since we all know that some lack taste, the board may need to intercede on a case-by-case basis. The board may need to compromise when confronted by an intractable resident rather than squander precious emotional and financial resources trying to enforce the rules. There is a sample Sign Policy available to Gold Subscribers of www.Regenesis.net.

Q The board is authorizing one of our condominium unit owners to install a sprinkler system at his own expense. Is there any special paperwork that needs to be made up for him to be liable for it?

A Anytime the board authorizes an owner installation, a legal document should be written that describes what is being done and that the owner is responsible for maintenance, repair, and replacement of that installation. That document should be recorded against the owner’s title so that the obligation transfers to subsequent owners of the property.

But in the case you describe, the board would be allowing a unit owner to irrigate common real estate. In a condominium all unit owners own all real estate in an undivided interest. The board has no authority to grant any unit owner exclusive use to any of the real estate.

Q We are holding our annual meeting soon and will be electing two directors. The board decided several years ago that nominees must submit a “Request for Nomination” two weeks in advance of the Annual Meeting endorsed by two other unit owners. We don’t accept nominations from the floor of the meeting. This has eliminated single-issue candidates and grandstanders.

But what if only two nominations are submitted? Does the president declare their election by default or does someone need to make a motion to elect the two by acclamation?

A Your nomination procedure is illegal unless it is described in your governing documents (doubtful). Even single issue, self-serving members have a right to run for the board. The nomination procedure could easily be interpreted as an attempt to suppress dissent. (You pretty much admit that already). The election process should follow normal procedures, which includes being nominated at the meeting and no requirement to be endorsed by others. If there are two positions and only two candidates, the president may ask for a motion to elect the candidates by acclamation. If he receives the motion, a second, and a unanimous vote, there is no need to distribute ballots. However, if there is dissent, ballots should be distributed and counted.

Q Our governing documents prohibit the use of the clubhouse for any for-profit event. Many of our residents would like to have classes such as aerobics, art, etc. However the instructors would charge, and the board says that these types of functions are not allowed. Are there any guidelines to permit this type of use but still prohibit use for events where the primary intention is to sell something or other commercial uses?

A If many owners support classes in the clubhouse and are willing to pay the cost, the board should create a policy, which does monopolize the clubhouse.

The Myth of Self-Management

There is a myth that has survived for decades that the business of a homeowner association (HOA) should be handled entirely by the board without assistance from professional management. That myth is anchored in the belief that money is saved and that there is better control.

Curiously the myth was hatched by HOA developers who had a clear conflict of interest and profit motive: If the board does the work for free, monthly fees can be reduced. If the fees are lower, the developer can command higher prices. So developers profited from the myth and there was nothing in the law to stop them from doing it.

The myth of self-management is just that...a myth. The reality is that managing an HOA demands a high degree of expertise. Property management is very difficult even under ideal circumstances when there is an ironclad lease with strong enforcement provisions to control the tenants. But HOAs are populated with owners, not tenants. Owners can’t be evicted for breaking the rules or nonpayment. Owner standards and demands are much higher than the typical tenant’s. And an HOA manager needs the diplomacy skills of Henry Kissinger and the skin thickness of a rhino.

Sooner or later self-managing boards discover that they’ve been bamboozled by the myth and that self-management is neither easy nor fun. But changing to professional management seems next to impossible as the non-board members chant, "We’ve never done it that way" and "Professional management will cost money!" The longer an HOA practices self-management, the harder it is to go pro. It's like turning an oil tanker...but turn you should.

Consider that the board is entrusted with most members’ biggest asset, their home. To properly maintain this cherished possession requires effective long-range planning and broad knowledge of construction and building maintenance. This expertise is rarely found on a volunteer board. Lack of planning inevitably leads to lack of money, which leads to lack of maintenance, which leads to eroding market value and livability. Yikes!

Consider the two most emotional reasons that even the smallest HOAs should be professionally managed: money and rules. No neighbor should have to collect money from or enforce rules on another neighbor since the actions are predictably confrontational. Yet in every HOA, both of those situations will eventually become a reality. What then?

When it comes to professional HOA managers, the list is usually short. So it’s important to carefully pre-screen the candidates. The kinds of tasks they perform are numerous so prepare your task list (Request for Proposal) before you interview. The scope of work directly drives the cost.

While professional HOA management clearly costs money, it will reduce internal conflicts and improve maintenance, which will be returned in increased market value. Many HOA management companies offer different levels and costs of management to allow all HOAs to participate at some level. Equally important the HOA board will come closer to that "carefree living" the developers marketed. Look into it and make self-management a thing of the past. There is a sample Request for Proposal available to Gold Subscribers of www.Regenesis.net.

Richard L. Thompson PRA, is the Owner of Regenesis, Inc. For more information, visit www.regenesis.net.