HOA boards, whether developer-appointed or homeowner-elected, ultimately determine the overall HOA success and degrees of satisfaction. Directors are volunteers, serving at the pleasure of and for Association Members. This article focuses on homeowner Boards.
Boards must not operate in a vacuum. Hopefully, it’s a team effort, creating and nurturing pride of ownership and a sense of community. An effective board-led governance team includes the manager, management staff, legal counsel, key contracted vendors, and homeowners, typically through various committees or participation strategies. Yet, many HOAs can’t or don’t achieve this. Why?
Positive or negative perceptions of a board are typically based on what they do, and how they do it, with direct correlations to transparency, accountability, and communication. Change is a constant, so boards must know governing documents, stay current on HOA legislation, seek continued education, and receive regular training.
Judged individually and collectively, board actions and behaviors sometimes look like “they don’t know what they don’t know,” but sound decisions result from applying expertise, research, due diligence, and deliberation. And, since many decisions have a budgetary impact, actions should consider one-time versus ongoing costs, cost/value equations, Reserve Study impacts, budget parameters, and quality of life factors, ultimately serving the community’s best interests.
Boards sometimes make emotional decisions rather than follow principles of sound fiscal management and strategic foresight. For example, a board may not raise assessments, citing affordability as justification. They may cut expenses, citing the desire to save money. Boards must be pragmatic, realizing they manage a corporation where revenues and expenses fluctuate, maintenance and operation have costs, assets need repair or replacement, and the HOA’s stability may be impacted by external economic or other variables.
So how does a board achieve accountability and transparency? Accountability ensures that Boards follow all the rules, perform due diligence, reflect “best practices”, and most importantly fulfill fiduciary duty.
Accountability is also a member responsibility, primarily through returning ballots and voting. Voting is vital, but properly submitting a ballot is equally important. Ballots count toward quorum, regardless of a vote. No quorum, no action. No action, no changes or forward momentum! The “one lot, one vote” principle makes a difference, but only with Member participation.
Governing documents specify when Members vote, which is typically 1) annual board elections, 2) amending governing documents (different from Board-approved rules), 3) approval of special assessments, and 4) approval of capital expenditures over specific monetary thresholds. Everything else is a board decision.
Transparency is making decisions and taking action openly, including posting agendas and meeting minutes, when applicable. Depending on governing documents and state statute, advance publication of agendas may not be required but doing so increases accountability and transparency.
Communication involves multiple forms, and each HOA is different. Successful Boards know and comply with Arizona open meeting law provisions, encourage meeting attendance, actively facilitate committee participation, ask about and listen to resident wants or needs, and maximize communication. They explain the “why” or “why not” of actions taken, especially when spending Association funds. They balance current and future priorities, managing resources to yield optimum, sustainable results.
Transparency and accountability also mirror directors themselves. Diverse personalities, skill sets, experience, and areas of expertise matter. Request that your HOA hold “meet the candidate” opportunities. Vet board candidates to determine the best ones. Ask candidates about intentions, priorities, and vision. Inquire about a “pet project” or “personal agenda”. What do they know, what don’t they know? Scrutinize levels of engagement and commitment. Will they truly represent all residents? Remember, when you give someone your vote, you give them your voice.
Positive/desired Board member characteristics include:
- Be open to compromise – ideas and issues have multiple ways to address or resolve them. Compromise often results in better, more positive outcomes, which may be more cost-effective. Choose wisely.
- Commitment – serving on a board is more than showing up to meetings and voting. It’s full-time, frequently putting community needs ahead of individual ones.
- Communicator – listening as well as talking.
- Inclusivity and collaboration – directors represent everyone, not an “us” vs. “them” mentality. Directors should know the culture of the community and respect diverse opinions. Directors also need a thick skin, not taking criticism personally. They’re business decisions, even though they’re perceived as personal.
- Knowledgeable – knows and understands the governing documents, laws, governance, parliamentary and other procedures, etc.
- Leadership / business acumen – Directors have multiple roles: researcher, analyzer, debater, and ultimately voter, learning a little about a lot of topics. Can/will the person apply those skills to make a positive difference?
- Ownership – of a home but also the “community” and all that term implies. The HOA is a multi-million-dollar corporation, not a neighborhood club.
HOA boards have significant power and authority, serving as the HOA executive, legislative and judicial body. The only exception is an Architectural Committee, which is required per the CC&Rs, charged with specific duties and authority.
From a member and director perspective, serving on the HOA Board can be a thankless yet rewarding experience if done right and done well.
The next article will delve more into what every resident should know about HOA meetings.