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07/07/09: Housing Counsel Should Board Members Be Paid?

HOUSING COUNSEL

By: Benny L. Kass

Q: I am an old lady (80) that lives in a townhouse condominium. There are 95 units, and my condo fee is $325 a month. It was recently raised by $25 and it appears that the Board plans to raise it again.. Our officers decided they should be paid a monthly fee. There are several other complexes in our area where the condominium fee is lower, and their officers do not get paid. Our President is awarded gift certificates from the board for anything he does. In all of my life I have yet to hear of a volunteer given a salary. Have times changed that much?

A: No, times have not changed; greed and incompetence has been with us forever.

This is a common complaint raised by elected board members. “We work hard, the hours are long and the pay is zero. Why not pay us for our dedicated service?”

The first thing you should do is review your legal documents. In a condominium, those documents include The Declaration and the Bylaws. Oversimplified, the Declaration creates the association, and explains what constitutes the common elements and the units. The Bylaws are the Constitution of the Association. It covers such issues as how many Board members there should be, what constitutes a quorum to hold a legal meeting, and how assessments are to be determined. The Bylaws also spell out the rights and responsibilities of the unit owners.

The following language is often found in the Bylaws: “A Director shall not receive compensation from the Association for serving on the Board of Directors, but a Director may be reimbursed for actual out-of-pocket expenses incurred by him or her in the proper performance of his or her duties.”

If your Bylaws contain this prohibition, the Board cannot unilaterally decide to pay themselves. Condominium law is very clear: if something is in the Bylaws, it can only be changed by a vote of all of the unit owners. Typically, a super-majority vote – usually either 66 2/3 or even as high as 75 percent – is required to amend the Bylaws. There is a valid reason behind this requirement. Unit owners want the security that their legal documents cannot be changed by a small cabal of owners – or even by the Board of Directors. It is difficult – often impossible – to amend those documents.

Accordingly, if your legal documents contain such a prohibition, your Board is acting improperly. What can you do about it?

There are many options. First, you should send each board member a letter, and attach a copy of the relevant section of the bylaws. Tell the board they do not have the authority to pay themselves – or even receive gift certificates – and if this does not stop (and the board does not reimburse the association for moneys already received) you reserve the right to take further action.
Next, you should contact other owners, and see if they will join you in protesting the board’s decision. They can send similar letters to the board. They can also initiate a recall petition, whereby the unit owners will seek to throw those board members out of office. Your Bylaws will contain language as to the procedure for such a recall.

Finally, if the board is not willing to abide by your legal documents, you have the right to complain to a governmental agency or file a lawsuit. For example, in Montgomery County, you can file a complaint with the Commission on Common Ownership Communities (www.montgomerycountymd.gov/ccoc). In other Maryland counties, you would have to file with the State’s Attorney General’s office.

In Virginia, the newly created Common Interest Community Board and Ombudsman should be contacted. (www.dpor.virginia.gov). And although there is limited enforcement in the District of Columbia – for example if a developer materially misrepresented something to a potential buyer – you may be able to get some assistance or guidance from the D.C. Department of Housing and Community Development, Housing Regulation Administration Rental Conversion and Sale Division (www.dhcd.dc.gov).

Even if there is no such prohibition in your legal documents, I do not believe that the Board has the legal authority to pay themselves without taking a vote of the membership. The board members were initially elected by all of you on the basis that they would serve without pay. Their decision now will cost all of you more money – and this can be painful in today’s economy.

While I appreciate the concerns of board members who work hard, they serve on the board because they want to do the right things for all of the unit owners. They also want to protect their own investment. In my opinion, to allow board members to be compensated for their service will open the door to owners who only want to serve for the money – and not for the best interests of the association.

– Boilerplate –

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