Embedded Files
DON'T BE FOOLED: THERE'S NO HIERARCHY
DON'T BE FOOLED: THERE'S NO HIERARCHY
Confusion about how volunteer homeowner Boards function is one of the greatest challenges facing common interest communities (CICs) because they are uniquely situated as hyper-local governments AND nonprofit corporations. Don't be fooled: even if your Bylaws include a statement to the effect that your Board chair or president is the "CEO", community associations do not have a hierarchy of directors and officers.
The express purpose of homeowner members electing multiple independent directors is to provide representative (ideally diverse) governance. The entire Board -- and not any single director -- acts as THE executive decision-making body. Otherwise great governance turns sour when one volunteer attempts to exert unilateral authority to compel action based on their personal judgment. Directors of nonprofit common interest communities are peers with an equal voice, an equal vote, and an equal decision-making role. Our ethics page, the WA State Nonprofit Handbook and the CAI Board Member Toolkit summarize:
Only the board makes decisions!
No one person owns or controls a nonprofit. A nonprofit is governed by a board of directors.
Boards should understand that the president's authority is no more and no less than the other board members.
Heavy-handed or independent action by ANY director -- especially a Board chair or president -- can put the entire association at risk.
The entire board acts as a unit when fulfilling governance functions.
Board members generally act individually or through committees when fulfilling support functions.
To be a valid act of the corporation, the act must be approved by a majority of the directors at a board meeting in which a quorum is present.
Directors cannot appear or vote by proxy except in a handful of states such as Arizona and Colorado and potentially Virginia. Directors must be present to listen to the discussion, consider each motion, and vote based on their judgment.
COMPENSATION
COMPENSATION
Community Association Board members are almost always uncompensated for their service. WHY? Reference board compensation.
Bylaws almost always dictate that Board service be an uncompensated activity.
To the contrary, service to the Association in other capacities can be compensated. Reference Bylaws: Words of Wisdom.
While most community association D&O policies cover professional services from management companies and employees, they specifically exclude coverage for persons on the Board who are compensated. Compensated Board members require entirely different lines of D&O coverage.
DIRECTOR QUALIFICATIONS
DIRECTOR QUALIFICATIONS
Below are four basic qualifications for serving on the board of directors excerpted from The Real Qualifications Needed On Your Board Of Directors.
A passion for continuous learning
An aversion to resting on laurels
Independence of thought:
Board directors must be able to think for themselves to ensure they are carrying out their fiduciary duty of care and loyalty…
The ability to tactfully debate against the group and ask tough questions is an art-form...
Decision making:
The ability to make high quality decisions based on thoughtful deliberation and due diligence instead of impulsiveness…
See below: Who Can Serve as a Director and Officer?
GOVERNANCE & SUPPORT FUNCTIONS
GOVERNANCE & SUPPORT FUNCTIONS
The following are non-exhaustive examples of governance and support functions.
The following are non-exhaustive examples of governance and support functions.
As a practical matter, CIC Boards spend considerable energy and time voting to act on choices related to dollars allocated in their annual operating budget because they do not take the time to implement policies, procedures and resolutions that automate and delegate support functions. Support functions and governance functions are distinctly different. Support functions can easily cross the line into governance without appropriate self-restraint and supervision. Support functions must be surgically delegated, limited powers to facilitate operations and/or the execution of specific Board decisions.
Governing documents typically provide authority for the Board to delegate specific and limited support functions ("powers") to:
committees
employees / staff
individual directors
a managing agent and/or community manager (CAM)
Investing in policy-making pays long-term dividends. Associations that delegate support functions set a path for success. ANY committee or individual can fulfill a support function delegated by the Board.
BOARD Governance Functions
BOARD Governance Functions
all decisions that typically occur during Board meetings
governing documents lifecycle management (including policies, procedures and resolutions)
setting meeting schedules for the Board, Committees and for annual and special meetings of members
setting the agenda for Board meeting and member meetings
most financial decisions such as approving a draft budget, investing reserve funds (within established financial controls), approving the annual audit, etc.
approving a reserve study (but NOT unreasonably delaying such approval or withholding a draft version of a reserve study from the members)
appointments to fill vacant Board member positions
electing officers
appointing qualified candidates to fill director (Board) vacancies subject to the limits of state law (e.g. until the next election and up to 1/3 of the seats, etc.)
approving vendor section and vendor contracts subject to written policies and procedures and state law
holding the management company and all vendors accountable
delegating governance and support functions based on your state statutes and governing documents
MEMBER Governance Functions
MEMBER Governance Functions
approving major alterations to the common elements
approving amendments and restatements of the declaration / CC&Rs and bylaws (including qualifications, powers, duties or terms of office of members of the Board of Directors)
approving capital improvements above a specific threshold
adopting the 70-604 accounting election to disposition surplus funds
adopting the option to file Form 1120 instead of Form 1120-H
electing and recalling directors (at an annual or special meeting of members)
electing to terminate the common interest community
holding the Board accountable
SUPPORT Functions
SUPPORT Functions
N.B. Support functions are often delegated to the community manager / CAM, committees, individual Directors, staff, etc.)
enforcing the governing documents
financial due diligence (e.g. keeping funds appropriately managed within government-insured limits, but NOT investing, etc.)
managing damage and loss restoration and related insurance claims
fulfilling the tasks required to execute specific Board decisions
hiring and firing employees (for specific roles and within certain limits)
liaising with vendors
BE CAREFUL! Never designate any subset (especially one volunteer) of the Board to be the sole communication with the association's legal counsel.
The Board (or their CAM) should put everything in writing and receive written legal advice in reply.
What cannot or should not be put in writing should be a Board discussion held during executive session (during a properly noticed open meeting) for the purpose of receiving legal advice.
recording meeting minutes
reviewing and approving ACC (alteration) requests
TYPICAL ROLES OF BOARD OFFICERS
TYPICAL ROLES OF BOARD OFFICERS
What's the purpose of officer positions if no individual can exercise unilateral executive authority?
The purpose of officer positions within a community association Board can be boiled down to the following four points:
to designate a person responsible for presiding at meetings according to a duly adopted parliamentary procedure (usually RONR)
to designate a de facto liaison (N.B. liaisons are not executives -- see Don't be Fooled above)
to designate two persons responsible for accepting notice and/or service on behalf of the association
to outline some general responsibilities such as the need to keep finances in order
Most states require every volunteer director to abide by a duty of care and some also require a fiduciary duty. Our example Bylaws include all of the Board officer information you see below.
Intriguingly, most bylaws never list roles or duties for at-large directors , but the truth is that every volunteer director has the same voice and vote. Pigeonholing volunteer directors is the fastest way to eliminate the team-oriented nature of responsibility that's incumbent on your Board. The Treasurer is not the only volunteer who should review your financials, nor is the President the only volunteer who leads the organization down the right path, nor is the Secretary the only volunteer who reviews and corrects meeting minutes.
It's easy to start "turf wars" about who is individually responsible and forget that the Board is required to function as a team that makes decisions together. Don't allow individual support roles for volunteer directors to get messy (see Governance & Support Functions above). Thousands of comments from CIC volunteers across the United States suggest that communities suffer because of unilateral decision-making driven by a fundamental misunderstanding of the shared nature and implied teamwork model required of volunteer community governance.
The CIC universe would be a better place if more statutes and governing documents emphasized the teamwork necessary to effectively govern. Nobody assigns duties to volunteer directors. Nobody is a "boss." Click here to learn more about amending and restating your governing documents.
PRESIDENT
WHAT: Chair (preside) at meetings (Board and Member meetings) and act as a primary liaison to communicate Board decisions.
EXAMPLE LANGUAGE: The President, subject to supervision by the Board of Directors, shall oversee rule and policy development and enforcement, conduct meetings, prepare agendas, and work with committees. The president is the official spokesperson for the board—to association Unit Owners, the Managing Agent (or management company), vendors, the press, and the greater community. The President shall preside at all meetings of the Board of Directors and the Members, shall be responsible for carrying out the plans and directives of the Board and shall report to and consult with the Board. The President shall have such other powers and duties as the Board may prescribe.
VICE-PRESIDENT
WHAT: Fill in when the President is unavailable.
EXAMPLE LANGUAGE: The Vice–President shall have all powers and duties of the President when the President is not available, and shall have such other powers and duties as the Board may prescribe.
SECRETARY
WHAT: Facilitate accurate and timely meeting minutes (not necessarily capturing them directly) and certain official requests and notices.
EXAMPLE LANGUAGE: The Secretary, personally or with the assistance of others, shall keep minutes of the meetings of the Board of Directors and the Members and shall arrange for Notice of such meetings; maintain other corporate records; attest all contracts and other obligations or instruments in the name of the corporation, when necessary or appropriate; and perform such other duties as the Board of Directors may from time to time designate.
TREASURER
WHAT: Facilitate accurate and timely financials by reviewing information, asking questions and insisting on reasonable answers.
EXAMPLE LANGUAGE: The Treasurer shall provide overall superintendence of Association funds and shall advise the Board of Directors. The Treasurer shall oversee the care and custody, and be responsible for, all funds and securities of the corporation, and shall cause to be kept regular books of account and shall provide periodic financial reports to the Board of Directors. The Treasurer shall cause to be deposited all funds and other valuable effects in the name of the corporation in such depositories as may be designated by the Board of Directors. In general, the Treasurer shall perform all of the duties incident to the office of the Treasurer, and such other duties as from time to time may be assigned by the Board of Directors.
AT-LARGE
WHAT: Duties as agreed. At-large directors have an equal voice and vote with every director and officer.
READ: Always Ask "WHY?": Are Empathy and Reason YOUR Stars and Stripes?
WHO CAN SERVE AS A DIRECTOR AND OFFICER?
WHO CAN SERVE AS A DIRECTOR AND OFFICER?
Members elect volunteers to serve on the Board. The Board elects officers and appoints directors to fill vacancies.
Members elect volunteers to serve on the Board. The Board elects officers and appoints directors to fill vacancies.
Except during the period of declarant (developer) control, homeowner members elect their peer volunteers to serve on the Board.
Unless your governing documents state otherwise, the Board elects officers from amongst the directors and also fills vacancies due to director resignations which remain filled either until the next annual meeting (election) or until the end of the term of the vacancy (per statute or your governing documents). See Bylaws: Words of Wisdom for example vacancy language.
Homeowner members typically fill vacancies due to director recalls.
State statutes and your own governing documents (specifically your bylaws) may include restrictions about who can serve. Examples below.
Can a trustee serve on the Board?
If the grantor is the trustee then the grantor can participate, but further look to your declaration / CC&Rs and bylaws (the answer is less likely to be found in your state CIC statutes). Here's an example definition that's particularly relevant:
"Unit Owner" includes any Board Member, officer, Member, partner, or trustee of any person, who is, either alone or in conjunction with another person or persons, a Unit Owner.
ADDITIONAL READING: Can A Grantor Be Trustee of His Irrevocable Trust? | Irrevocable Trusts Explained: How They Work, Types, and Uses
Homeowner associations, trustees and who can vote on what
If the grantor is the trustee then the grantor can participate, but further look to your declaration / CC&Rs and bylaws (the answer is less likely to be found in your state CIC statutes). RCW 64.90.410(2)(d) is a particularly relevant example:
(d) In determining the qualifications of any officer or board member of the association, "unit owner" includes, unless the declaration or organizational documents provide otherwise, any board member, officer, member, partner, or trustee of any person, who is, either alone or in conjunction with another person or persons, a unit owner.
Florida Qualifications
Florida Qualifications
Unless the bylaws provide otherwise, a vacancy on the board caused by the expiration of a director’s term must be filled by electing a new board member, and the election must be by secret ballot. An election is not required if the number of vacancies equals or exceeds the number of candidates. For purposes of this paragraph, the term “candidate” means an eligible person who has timely submitted the written notice, as described in sub-subparagraph 4.a., of his or her intention to become a candidate.
Except in a timeshare or nonresidential condominium, or if the staggered term of a board member does not expire until a later annual meeting, or if all members’ terms would otherwise expire but there are no candidates, the terms of all board members expire at the annual meeting, and such members may stand for reelection unless prohibited by the bylaws.
Board members may serve terms longer than 1 year if permitted by the bylaws or articles of incorporation.
A board member may not serve more than 8 consecutive years unless approved by an affirmative vote of unit owners representing two-thirds of all votes cast in the election or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy. Only board service that occurs on or after July 1, 2018, may be used when calculating a board member’s term limit.
If the number of board members whose terms expire at the annual meeting equals or exceeds the number of candidates, the candidates become members of the board effective upon the adjournment of the annual meeting.
Unless the bylaws provide otherwise, any remaining vacancies shall be filled by the affirmative vote of the majority of the directors making up the newly constituted board even if the directors constitute less than a quorum or there is only one director. In a residential condominium association of more than 10 units or in a residential condominium association that does not include timeshare units or timeshare interests, co-owners of a unit may not serve as members of the board of directors at the same time unless they own more than one unit or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.
A unit owner in a residential condominium desiring to be a candidate for board membership must comply with sub-subparagraph 4.a. and must be eligible to be a candidate to serve on the board of directors at the time of the deadline for submitting a notice of intent to run in order to have his or her name listed as a proper candidate on the ballot or to serve on the board.
A person who has been suspended or removed by the division under this chapter, or who is delinquent in the payment of any assessment due to the association, is not eligible to be a candidate for board membership and may not be listed on the ballot. For purposes of this paragraph, a person is delinquent if a payment is not made by the due date as specifically identified in the declaration of condominium, bylaws, or articles of incorporation. If a due date is not specifically identified in the declaration of condominium, bylaws, or articles of incorporation, the due date is the first day of the assessment period.
A person who has been convicted of any felony in this state or in a United States District or Territorial Court, or who has been convicted of any offense in another jurisdiction which would be considered a felony if committed in this state, is not eligible for board membership unless such felon’s civil rights have been restored for at least 5 years as of the date such person seeks election to the board.
The validity of an action by the board is not affected if it is later determined that a board member is ineligible for board membership due to having been convicted of a felony. This subparagraph does not limit the term of a member of the board of a nonresidential or timeshare condominium.
California Qualifications
California Qualifications
California Civ. Code § 5105(c)
(c) Through its bylaws or election operating rules adopted pursuant to subdivision (a) of Section 5105 only, an association may disqualify a person from nomination as a candidate pursuant to any of the following:
(1) Subject to paragraph (2) of subdivision (d), an association may require a nominee for a board seat, and a director during their board tenure, to be current in the payment of regular and special assessments, which are consumer debts subject to validation. If an association requires a nominee to be current in the payment of regular and special assessments, it shall also require a director to be current in the payment of regular and special assessments.
(2) An association may disqualify a person from nomination as a candidate if the person, if elected, would be serving on the board at the same time as another person who holds a joint ownership interest in the same separate interest parcel as the person and the other person is either properly nominated for the current election or an incumbent director.
(3) An association may disqualify a nominee if that person has been a member of the association for less than one year.
(4) An association may disqualify a nominee if that person discloses, or if the association is aware or becomes aware of, a past criminal conviction that would, if the person was elected, either prevent the association from purchasing the insurance required by Section 5806 or terminate the association’s existing insurance coverage required by Section 5806 as to that person should the person be elected.
(d) An association may disqualify a person from nomination for nonpayment of regular and special assessments, but may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. The person shall not be disqualified for failure to be current in payment of regular and special assessments if either of the following circumstances is true:
(1) The person has paid the regular or special assessment under protest pursuant to Section 5658.
(2) The person has entered into and is in compliance with a payment plan pursuant to Section 5665.
(e) An association shall not disqualify a person from nomination if the person has not been provided the opportunity to engage in internal dispute resolution pursuant to Article 2 (commencing with Section 5900) of Chapter 10.
(f) If an association disqualifies a nominee pursuant to this section, an association in its election rules shall also require a director to comply with the same requirements.
(g) Notwithstanding any other law, the rules adopted pursuant to this section may provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner. Those rules may permit write-in candidates for ballots.
Illinois Qualifications
Illinois Qualifications
Illinois Condominiums
"Unit Owner" means the person or persons whose estates or interests, individually or collectively, aggregate fee simple absolute ownership of a unit, or, in the case of a leasehold condominium, the lessee or lessees of a unit whose leasehold ownership of the unit expires simultaneously with the lease described in item (x) of this Section.
The election from among the unit owners of a board of managers, the number of persons constituting such board, and that the terms of at least one-third of the members of the board shall expire annually and that all members of the board shall be elected at large;
if there are multiple owners of a single unit, only one of the multiple owners shall be eligible to serve as a member of the board at any one time.
A declaration first submitting property to the provisions of this Act, in accordance with Section 3 after the effective date of this amendatory Act of the 102nd General Assembly, or an amendment to the condominium instruments adopted in accordance with Section 27 after the effective date of this amendatory Act of the 102nd General Assembly, may provide that a majority of the board of managers, or such lesser number as may be specified in the declaration, must be comprised of unit owners occupying their unit as their primary residence; provided that the condominium instruments may not require that more than a majority of the board shall be comprised of unit owners who occupy their unit as their principal residence;
Nevada Qualifications
Nevada Qualifications
10. Except as otherwise provided in subsections 11 and 12, unless a person is appointed by the declarant:
(a) A person may not be a candidate for or member of the executive board or an officer of the association if:
(1) The person resides in a unit with, is married to, is domestic partners with, or is related by blood, adoption or marriage within the third degree of consanguinity or affinity to another person who is also a member of the executive board or is an officer of the association;
(2) The person stands to gain any personal profit or compensation of any kind from a matter before the executive board of the association; or
(3) The person, the person’s spouse or the person’s parent or child, by blood, marriage or adoption, performs the duties of a community manager for that association.
(b) A person may not be a candidate for or member of the executive board of a master association or an officer of that master association if the person, the person’s spouse or the person’s parent or child, by blood, marriage or adoption, performs the duties of a community manager for:
(1) That master association; or
(2) Any association that is subject to the governing documents of that master association.
11. A person, other than a person appointed by the declarant, who owns 75 percent or more of the units in an association may:
(a) Be a candidate for or member of the executive board or an officer of the association; and
(b) Reside in a unit with, be married to, be domestic partners with, or be related by blood, adoption or marriage within the third degree of consanguinity or affinity to another person who is also a member of the executive board or is an officer of the association, unless the person owning 75 percent or more of the units in the association and the other person would constitute a majority of the total number of seats on the executive board.
12. A person, other than a person appointed by the declarant, may:
(a) Be a candidate for or member of the executive board; and
(b) Reside in a unit with, be married to, be domestic partners with, or be related by blood, adoption or marriage within the third degree of consanguinity or affinity to another person who is also a member of the executive board or is an officer of the association, if the number of candidates nominated for membership on the executive board is less than or equal to the number of members to be elected to the executive board.
13. If a person is not eligible to be a candidate for or member of the executive board or an officer of the association pursuant to any provision of this chapter, the association:
(a) Must not place his or her name on the ballot; and
(b) Must prohibit such a person from serving as a member of the executive board or an officer of the association.
Texas Qualifications
Texas Qualifications
TPC 209.00591 — BOARD MEMBERSHIP
(a) Except as provided by this section, a provision in a dedicatory instrument that restricts a property owner's right to run for a position on the board of the property owners' association is void.
(a-1) Notwithstanding any other provision of this chapter, a property owners' association's bylaws may require one or more board members to reside in the subdivision subject to the dedicatory instruments but may not require all board members to reside in that subdivision. A requirement described by this subsection is not applicable during the development period.
(a-2) Notwithstanding any other provision of this chapter, a property owners' association that governs a subdivision comprised of multiple sections may designate in an association instrument governing the administration or operation of the association a specified number of positions on the board, each of which must be elected from a designated section of the subdivision. The instrument may require each board member representing a section to reside in that section.
(a-3) A person may not serve on the board of a property owners' association if the person cohabits at the same primary residence with another board member of the association. This subsection does not apply:
(1) to an association with fewer than 10 residences; or
(2) during a subdivision's development period to affect the eligibility to serve on the board of:
(A) a person who cohabits with a developer of the subdivision regulated by the association; or
(B) the developer.
(b) If a board is presented with written, documented evidence from a database or other record maintained by a governmental law enforcement authority that a board member was convicted of a felony or crime involving moral turpitude not more than 20 years before the date the board is presented with the evidence, the board member is immediately ineligible to serve on the board of the property owners' association, automatically considered removed from the board, and prohibited from future service on the board.
(c) The declaration may provide for a period of declarant control of the association during which a declarant, or persons designated by the declarant, may appoint and remove board members and the officers of the association, other than board members or officers elected by members of the property owners' association. Regardless of the period of declarant control provided by the declaration, on or before the 120th day after the date 75 percent of the lots that may be created and made subject to the declaration are conveyed to owners other than a declarant or a builder in the business of constructing homes who purchased the lots from the declarant for the purpose of selling completed homes built on the lots, at least one-third of the board members must be elected by owners other than the declarant. If the declaration does not include the number of lots that may be created and made subject to the declaration, at least one-third of the board members must be elected by owners other than the declarant not later than the 10th anniversary of the date the declaration was recorded.
Utah Qualifications
Utah Qualifications
Utah Code 57-8a-501 and 57-8-59:
(1) A director shall be:
(a) a natural person; and
(b) 18 years old or older.
(2) An association's bylaws may prescribe other qualifications for directors in addition to the requirements described in Subsection (1).
(3) Without limiting the qualifications an association prescribes under Subsection (2), an association may, through governing documents or the board's internal procedures, disqualify an individual from serving as a director because the individual:
(a) has been convicted of a felony; or
(b) is a sex offender.
(4) A director need not be a resident of this state or a unit owner in the association unless required by the association's bylaws.
(5) Except as limited in a declaration, the association bylaws, or other provisions of this chapter, a board acts in all instances on behalf of the association.
Some CIC bylaws dictate Model A:
ONLY Owners can serve as Volunteer Directors
ONLY Volunteer Directors can serve as Board Officers
N.B. Relatively few state statutes limit the creativity of volunteer director qualifications. For example, Texas bars felons from serving. Your association's bylaws may employ a blended model not displayed here.
REMEMBER: Owners vote to elect and remove directors. Directors vote to elect and remove officers.
Some CIC bylaws dictate Model B:
Residents -OR- Owners can serve as Volunteer Directors
ONLY Volunteer Directors can serve as Board Officers
REMEMBER: Owners vote to elect and remove directors. Directors vote to elect and remove officers.
Some CIC bylaws dictate Model C:
The Public -OR- Residents -OR- Owners can serve as Volunteer Directors & Board Officers
REMEMBER: Owners vote to elect and remove directors. Directors vote to elect and remove officers.
A NOTE ABOUT BOARD MEMBER EDUCATION
A NOTE ABOUT BOARD MEMBER EDUCATION
PLEASE DON'T PAY FOR BASIC EDUCATION.
Revenue-based credentials for CIC volunteer leaders are not aspirational. These credentials do not hold value in organizations where there are no standards for shared competence and compliance. The real challenge, of course, is convincing three or more unique individuals to understand and abide by all of your CIC's statutory and governance requirements, including the thorny items like ethical codes of conduct.
Aside from CIC common expenses for services from vendors and staff (including the counsel of competent professionals), substantially all of the resources homeowner leaders need to successfully navigate their tenure guiding their community are absolutely free, EXCEPT for their time. Many people forget to mention or properly value their own time and the time of others. The amount of wisdom available from the greater CIC community is immense and quite a lot has been published -- for free -- to provide exactly the kind of examples and information individuals need to faithfully execute the duties of a nonprofit Director.
There is a great amount of quality homeowner leader education available for free. No organization -- especially business trade organizations like CAI -- are qualified to certify volunteer leadership for CICs by charging $99 to $199 for 4 hours of self-study material. No amount of educational material will address core deficiencies in volunteer leadership. The fix? Motivated volunteer leaders who are willing to sacrifice their own time to learn and to improve their communities.
Given a tendency of many CICs to under-spend and avoid spending altogether for superlative results from competent third party resources combined with overtaxing volunteer leader time, it's a non-sequitur to conclude that CICs will benefit when their individual volunteer leaders pay for basic education.
Google Sites
Report abuse