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06/24/11: What is the Board of Directors?

HOUSING COUNSEL

By: Benny L. Kass

Q: I want to run for election to our Community's Board of Directors. What exactly does the Board do? What can it not do? Please advise.
A: If you really want to be on your Board of Directors, you must first do your homework. You must read your State's statute dealing with community associations (whether you live in a condominium or a homeowner association), and you must read -- and understand -- your association's legal documents.

There is a power source recognized in community association law. This means that when you seek guidance as to what a board can -- and cannot do -- you must first look to the applicable state statute. If there is a specific prohibition contained in that law, that will usually be the end of the discussion.

However, state community associaton laws are general in nature; although there are a number of specific requirements, they usually defer to the documentation relating to your individual association.

The next level of this power source are your operational documents: first the declaration (in a condominium) or the Master Deed – also called Covenants, Conditions and Restrictions or CCandR's (in a HOA). Next, we turn to the Bylaws, and finally the rules and regulations.

I am often guided by a legal opinion issued years ago by the high Court in the State of Florida. In analyzing the role of a particular Board that was involved in litigation, the Court in effect said the following:

If something is in the Bylaws, the Board can be
unreasonable; if it is not in the Bylaws, the
Board must be reasonable.

Service on a Board of Directors is an unpaid, thankless task. Yet, a major investment -- your home -- is at stake, and that is why many owners make the difficult decision to serve their community.

Many community associations are big business -- with revenues which often exceed other businesses (and even local governments) -- although most unit owners and many Board members do not understand this. Budgets often exceed a Million Dollars annually. An Association Board must deal with a wide variety of issues -- such as pet and parking restrictions, crime on the common grounds, trash, tot lots, employment and tax issues.

Money issues:

Finance and budgetary matters are perhaps the most important function of a Board of Directors. The Board must establish an annual budget, so that the amount of the owner's assessments can be determined.

But it is important to remember that a Board of Directors establishes policies and procedures; the Board is not -- and should not -- be the manager. Many writers have likened community associations to a mini-government. In this context, consider the Board as the legislative arm of government, and your property manager as the executive branch.

Work closely with your property manager; don't fight him/her all the time. There has to be a team effort, and the team generally includes the property manager, the attorney, and the accountant. You probably do not have the expertise -- nor the experience -- to craft your own budget, but the buck stops with the Board of Directors. If next year's budget is too low -- or if there are unforseen emergency expenditures -- you will have to pass a special assessment. Go tell that to your friends and neighbors!

Rules and enforcement:

Another important function of the Board goes to the enforcement of the association documents, including but not limited to, architectural covenants. Boards in the past have often harshly and strictly attempted to enforce their rules; as the result, homeowners throughout this nation refer to their architectural control committees and Boards fondly as the "local KGB."

There is no question but that the rules and regulations must be enforced. The law is quite clear that arbitrary and selective enforcement will not stand the test of litigation. However, common sense -- and a bit of humanity and heart -- must be part of the enforcement process.

The Community Association Institute has published a publication entitled "Be Reasonable." Permit me to quote from this material -- which should be read by every Board member of every community association in America:

"It's time for associations to write responsible
rules and review existing restrictions. To eliminate
restrictions that are outdated and illogical, and to
address specific problems with clear, specific solutions.
To realize that overzealous, unreasonable boards of
directors can be more damaging to property values than
the violations they so vigorously try to prevent.
It's time to be reasonable."

And finally, let's get one thing straight: if you are on an ego trip, or merely want to be called "Mr/Madame President", forget it. This position is not for you. Good luck on your campaign!

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