When it comes to running an HOA, as a board member, there are a lot of “special circumstances” or advanced facets that don’t come around every day. In fact, many board members can go their entire terms without ever running into these types of situations, which is truly an ideal situation. However, for those who do run into these unfortunate circumstances, it can be hard to get the training you need to truly get through it, and it can be even harder to manage it the correct way. This guide is to help remedy that precise problem. Read on for some of the rare but important circumstances you may encounter as a board member.
Updating Your HOA’s Governing Documents
While your HOA management company can play a vital role in maintaining an efficient and effective community government, the quality of that governance largely depends on whether your community’s governing documents are up-to-date or not. Governing documents can be a source of great frustration if they are not updated properly. There is a growing debate over the importance of keeping your association’s governing documents up-to-date.
Some provisions become outdated and end up being ignored. For instance, there may be references to the developer and the developer’s role. If the developer’s no longer in the picture, you don’t have to amend to remove those references. You can just ignore them. Superseding over all of this are federal and state laws. You have to follow the law, no matter what your governing documents say. Restrictive covenants can be more restrictive than the law, but they can’t be less restrictive. At the same time, restrictive covenants can only be more restrictive than the law until they begin to conflict with the law. When it comes to order of priority, follow federal law first, state law second, then local law, and finally association covenants.
Another school of thought maintains that outdated documents can pose a serious problem, for a number of reasons. First, if documents are not updated, then the association and its owners may not have the ability to use legislative remedies enacted over the years, leaving them at a disadvantage. For instance, Florida law requires mortgagees of properties with outstanding assessments to pay either 12 months’ worth of missed assessments or 1 percent of the original mortgage debt. However, some associations have older documents that contain language giving mortgagees a free ride, meaning associations with that particular outdated language can’t collect anything in past due fees or assessments.
Old documents can also risk of exposing the association to liability. Many older governing documents contain provisions that are now illegal and unenforceable. Age restrictions prohibiting persons under 12 or 16 from residing in the community aren’t enforceable unless the community qualifies as housing for older persons. Many associations face discrimination lawsuits as a result of these provisions, even if the community doesn’t actively enforce the age restriction.
There are also all kinds of governing documents prohibiting things like satellite dishes, even though federal law allows people to have them now. Laws also prohibit HOAs from enforcing restrictions that discourage owners from using renewable energy resources, like clothes lines. These kinds of provisions won’t necessarily expose an association to increased liability like a discrimination claim would, but keeping your documents up-to-date with current law can save you from some nasty homeowner’s fights.
Finally, outdated documents can become a huge deal if that’s all owners know about association rules. Amending outdated documents is most important if you live in a state that has frequent changes occurring in its statutes. Owners tend to rely on the governing documents as the basis for how things are to be done; they’re not likely to go back to check for (or even know about) changes in the statutes. They rely on governing documents for when assessments are due, when maintenance should be done, etc.
As a good rule, we recommend that HOA boards review their governing documents every 3 to 5 years, to see if they need to be updated or if there have been significant legislative changes. Amending governing documents often requires a supermajority of owners’ approval, which can be difficult to get. If you can’t reach that benchmark to fix problems with the governing documents, then at least record something in the rules. Your board can add a message stating something along the lines of how they know that the governing documents contain an outdated provision, but they won’t enforce it, and will also comply with fair housing laws. This can save you and your board a lot of headaches, and provide clarity on where your association stands in relation to superseding law.
Using Proxies for Your HOA Meetings
State laws generally require associations to allow the membership to make voting decisions by proxy when they are unable or simply do not want to attend HOA meetings in person. A proxy is an authorization one person gives to another in writing. A general proxy authorizes a person to vote however they choose at HOA meetings on behalf of another member. Like a general proxy, a directed proxy authorizes a person to cast a vote on behalf of another person. However, unlike a general proxy, a directed proxy will also tell the person how to vote on certain issues, as well as who to vote for. A quorum proxy is known as an attendance proxy; it’s not meant for voting at all. The purpose of the quorum proxy is to get the desired quorum at HOA meetings.
Proxies can become a nightmare when running a community association. General complications include members’ lack of comprehension of or apathy concerning proxies, intentional misconduct, having the same member with multiple signed proxies, members not returning proxy cards, and failure to keep ballots secret. There is no magical solution to solve these issues, but there are some actions your board can take to decrease the number of problems and consequences associated with them.
Members often confuse proxies for an actual vote. When a member doesn’t understand proxies, they are more easily manipulated by other members. Intentional misconduct of the membership can cause serious issues for boards and community managers that are often difficult to overcome. Even the association may try to manipulate the process of voting. Additionally, when members sign a proxy for a person who solicits them, the secrecy of that vote can become compromised.
Having one member with multiple signed proxies also creates conflict. Because it’s hard to tell which proxy is legitimate and which ones need to be tossed out, all of the proxies get tossed out. Members also have a propensity for not returning proxy cards at all. This is the most common issue, because the association needs a certain amount of proxies to conduct business in the first place.
Special Assessments
Much like proxies, special assessments are also seen as a necessary evil. Getting a notice from your HOA management company that you owe more money to your association can not only put a damper on your day, but also put a dent in your wallet.
Oftentimes, special assessments are levied when the homeowners association needs to make essential repairs, improvements, or additions to the common areas, but lacks extra reserve funds to cover the costs. While the board works with its HOA management company to keep a healthy reserve fund and to budget in advance for these types of projects, occasionally unforeseen expenses occur. When this happens, the board has to call upon residents to pitch-in financially, so that the association can remain solvent.
Unfortunately, special assessments aren’t optional fees, and homeowners are responsible for paying special assessments in the same way they’re responsible for general homeowners association assessments. Just remember that these fees are funding projects that will benefit all residents, and your special assessment fees are your contribution toward that.
Of course, the board doesn’t take levying special assessments lightly. Not only do they understand that special assessments can be a hardship for homeowners, but they’re an extra financial burden on resident board members as well, since they are also responsible for paying their share of any new special assessment.
Because of this, the board works with its HOA management company to try and make levying special assessments a last resort, as well as offer payment plans when possible. There are also regulations set forth in an association’s bylaws that the board must follow before levying a special assessment. In some instances, these regulations require residents to vote on the proposed project before they can adopt the special assessment for it.
These subjects all have two things in common: they don’t happen very often, and they require an effective and knowledgeable HOA government in order to be acted upon in any useful capacity. Once your HOA’s board has begun to run itself efficiently, you’ll be able to help make these special circumstances easily understood by all community members, and prevent misunderstandings associated with miscommunication, governing documents, proxies, and special assessments.
