If you live in a planned community, you or various of your neighbors may decide to join the board of your homeowners' association (HOA). It's a way to get involved and to have a say in how your community maintains its quality and acts according to the rules. These are rules that all homeowners agreed to when they bought in.
Over two million people in the United States serve on HOA boards or committees! (Source: Community Associations Institute "Statistical Review for 2014.") But what does the role of a board member really involve?
First, some legal background: An HOA is a nonprofit corporation or unincorporated association, the purpose of which is to manage a common interest real estate development. The HOA comprises owners of property in the development, which elect members of a governing board to direct its activities. The board of directors has certain powers and duties. Directors also have individual duties, and may incur liability if they breach those duties.
How an HOA Is Organized
HOAs are created under and regulated by state law. State laws often require the first meeting of the HOA to be held within a certain amount of time after the first unit in a development is sold. For instance, the first meeting of the HOA may have to occur within six months after the closing of the sale of the first unit in the development. All property owners, including the developer, are invited to the meeting.
The first governing board of the HOA should be elected at the first meeting, and all positions should be filled. Since these elections will occur at the first meeting, information about the candidates will need to be circulated before the meeting.
Manner of Voting for HOA Board
State law may require a secret written ballot for board elections. State law may also require or permit voting to be cumulative, which means that each property owner may cast as many votes as he or she has, for one or more but fewer than all of the members on the slate.
The governing documents should require that so long as the majority of power resides in the developer, a certain percentage of board members should be elected by the non-developer owners.
After the first meeting, the board should meet, elect its officers, and decide on how it will operate.
HOA Board's Powers and Duties
The governing body (or board of directors) of the HOA is responsible for the management of all aspects of the association. It may delegate management of certain activities to other persons or businesses, such as a property management service, but it must retain ultimate control.
As a board member, you will want to carefully review and understand all the HOA's governing documents, such as the bylaws, articles of incorporation, convenants, conditions, and restrictions (CC&Rs), and day-to-day operating rules.
The board's powers and duties normally include such things as:
- Enforcing provisions of the declaration, articles, and bylaws for the ownership and management of the development.
- Paying taxes and assessments that are, or could become, a lien on the common area.
- Contracting for insurance on behalf of the association.
- Contracting for goods or services for the common areas or for the association.
- Delegating powers to any committees, officers, or employees of the association as authorized by the governing documents.
- Preparing budgets and financial statements for the association.
- Formulating rules of operation for the common areas and facilities, and
- Conducting disciplinary proceedings against members of the association for rule violations.
Clearly, becoming a board member can be a serious commitment of (unpaid!) time and energy.
Personal Liability of HOA Directors
Members of the board of directors of an HOA that is organized as a nonprofit corporation must perform their duties in good faith, in a manner that is in the best interest of the corporation, and with the care that a reasonably careful person would use under the circumstances. HOA directors may not make decisions that benefit their own interests rather than those of the members.
An HOA board member is entitled to rely on the advice of other officers, professional people, or HOA committees, but can't simply step back from a supervisory role.
So, for example, in a landmark California case called Ravens Cove Townhomes, Inc. v. Knuppe Development Co. (114 Cal.App.3d 783 (1981)), members of the initial developer-controlled board of directors were found personally liable for failing to exercise their supervisory and management responsibilities in order to establish, collect from homeowners, and maintain adequate HOA reserve funds.
What if the HOA gets into financial trouble—for example, can't pay the snow-removal company? A director of an unincorporated association cannot be held personally liable for HOA debts and obligations unless the director:
- personally assumed responsibility for the debt
- executed the agreement or contract without disclosing that he or she was acting on behalf of the HOA, or
- executed the agreement contract without the authority to do so.
HOA directors cannot be held personally liable for the injuries caused by an HOA corporation. Directors may, however, be held liable if their own conduct causes injury. In some HOA disputes, volunteer HOA directors or officers may not be held personally liable in excess of minimum insurance limits set by law.
If you have any questions about the powers and duties of an HOA or its board of directors, contact a Residential Real Estate Lawyer in your area.
Questions for Your Attorney
- How do I get a board member removed from my HOA's board of directors?
- If I own a concession company, should I get preference from my HOA for a concession contract for our association's pool?
- Can I sue the directors of our HOA if they failed to hire someone to clear ice and snow from the sidewalks and I slipped on the ice on the sidewalk and broke my leg?