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Residential Real Estate
Sep 7, 2021

7 Mistakes HOA Boards Should Avoid Making

Sponsored Content provided by Mike Stonestreet - Founder, CAMS (Community Association Management Services)

Serving on your community association’s board is a tough job, regardless of whether you’ve done it before or not. And, unfortunately, there are some mistakes that board members can inadvertently make that end up causing the association a world of trouble. Here, we’ve listed seven of the more common mistakes that board members can make as well as the consequences of these mistakes and, of course, how to best avoid them.

1.  Improper Voting
There’s only one way for the board of directors to properly vote – a duly called meeting - right? Well, not necessarily. Boards can also vote via email if needed. BUT there are stringent rules surrounding email/written voting. If your board chooses to vote on an issue using email, there are two standards that must be met: every member must vote and there must be unanimous consent. So, for example, if your board has 7 members, all 7 members must respond to the email with a yes or no. What if someone votes in opposition to the rest of the members or doesn’t respond at all? Simply put, you cannot consider that issue as having been properly voted upon. The reason this rule exists is because board decisions should be reached after thorough deliberation and consideration of all points of view on the topic. Email voting is useful for simple decisions but should never be used to replace proper protocol for governing bodies to carry out their duties.

So, what do you do, if a member has voted in opposition to the others, you can try to find out why they don’t agree and have a discussion on the matter. If that doesn’t work, your only option is to have a duly called meeting. And, once you have a duly called meeting, the typical voting rules apply – you need a majority vote of the present members. So, in this instance, call a meeting for the sole purpose of voting on the issue at hand, have the meeting, and vote. The meeting need not be in-person, it could be via phone or virtual.  The requirement for any meeting is that everyone participating must be able to hear everyone else during the meeting.

Therefore, you can attend via phone if the call is on speaker mode and all members are able to listen to all participants in the conversation. Board members don’t ever want to find themselves accused of improper voting as that will create distrust between board members themselves as well as between the board and the membership.

2.  Misunderstanding the Purpose and Authority of Association Documents
As a board member, you’re fully aware that community associations have a lot of governing documents and those sets of documents have different names. Confusing one set of documents for another can cause big trouble, especially mixing up the rules and regulations with the covenants. It is also critical to clearly understand the narrow limits of the authority given to associations and to leave issues alone when they fall under the jurisdiction of other governing bodies (e.g., town ordinances or state laws).

Rules and regulations may only be adopted if there is underlying authority for the rule, and these generally apply to the common areas – think amenities, speed limits, pet areas, things like that. Rules and regulations can often be adopted by the board alone without a vote of the membership but remember, they must be reasonable or else you may be opening a can of worms. Rules must also be clearly defined and enforceable in practice i.e., any reasonable person would easily be able to identify a transgression. If not, there is no value in passing the rule. An example of an unenforceable rule is would be “no loud noises after 10 pm” – what is the threshold for “loud” and who is going to patrol the property to identify violators?

Declarations, covenants, or whatever your association calls them, provide the board with the authority to make any rules or restrictions that govern private lots These days, courts tend to favor the free use of one’s private property, so it is essential that the language within the covenants be clear and reasonable. And, if your board is considering any changes to these, it typically requires an amendment and a super-majority vote of the membership to impose more restrictive measures, such as rental restrictions. Also, be careful with both rules & regs as well as covenants as these are easy places to inadvertently violate the Fair Housing Act (FHA).

3.  Overstepping on Architectural Approval & Enforcement
Architectural issues are one of the main sources of HOA-related litigation, so this is a big one. Overall, architectural restrictions should aim to control only the aesthetics of your community and ensure that it remains consistent and harmonious. If an ARC denial case makes it to court, the judge will be evaluating the reason for the denial – “What did you measure as the basis for your denial?”. Further, ARC restrictions should only apply to a property’s exterior – if someone has painted their living room a garish lime green and you can see it from the street, sorry, you can’t do anything about it– the architectural review body are not “the taste police”!
When owners make ARC requests, boards should only evaluate the aesthetics of the request and stay away from viewing permits, etc. Why? Because viewing things like this can potentially expose the association to liability. A good example is if your board approved the addition of a second-story deck, viewed the specs, permits, etc., and the deck collapses. The association could easily find itself being named a party to a lawsuit surrounding the collapse. Architectural rules and guidelines should be kept separate from rules and regulations governing the use of the property.

4.  Not Raising Assessments When Needed
We know, telling people that they must pay more money isn’t fun, and you probably don’t enjoy being told that yourself. But, for the proper running of an association, it is essential as time goes on. As a board member, you’re called to use the business judgment rule and, as we all know, things get more expensive over time. So, a prudent business person will see that in order to keep the association in good financial health, assessments will have to be raised from time to time. In fact, failure to do this could be considered a breach of fiduciary duty if it causes the association to go into dire straits financially. When facing raising assessments, it’s helpful to keep your emotions separate and view the association as the business entity that it is.

What about reserve funds, are associations legally required to have these? While there is no law in NC or SC requiring these, your governing documents may so be sure to consult those. Is it a good idea to keep a reserve account? Absolutely. What will you do if a long-term capital improvement need pops up and you don’t have the money to address it? Sure, there are special assessments (but remember, the membership must vote on this) and loan options but, when a bank is considering giving a loan, they’ll look at your association’s financial health and, if they see that you haven’t been responsible with money, it’s unlikely they’ll be willing to give you a loan. Board members should consult with specialists to determine the appropriate levels of funding and keep the capital plan updated by having a reserve study conducted every 3-5 years for associations that are responsible for capital assets.

5.  Board Members Privately Communicating with Owners
Chatting with my neighbor Deb, how could that be troublesome? Well, it can be. If board members individually communicate with owners on certain topics, it may be interpreted as if that one board member is speaking on behalf of the entire board when that is not the case. Besides that, we all know how words can be easily misconstrued – if you tell Deb you think the deck she wants to install in her backyard sounds like it would be a great place to hang out, that may be taken as “Oh, the board is going to approve my deck!”. And, if the deck isn’t approved, you may find yourself in a heap of trouble. It is useful to remember that board members are only empowered to act when they are convened in a properly called meeting or when carrying out duties consistent with a policy that is on file. Outside of this, a board member is a regular homeowner.

6.  Not Asking for Expert Advice When You Need It
This one is pretty cut-and-dry. If you wanted to install new lighting in your home, would you attempt to do it yourself or call an electrician? You’d probably call an electrician. The same rings true for many issues that board members will face. There are numerous situations that will arise during your time as a volunteer community leader that may require the opinions of outside experts and it’s part of your fiduciary duty to consult those experts. If you’re facing legal issues or have a question about interpretation of your documents, call your attorney. The same is true for other experts – community managers, tax professionals, and engineers are all available to assist you and provide guidance and you should absolutely consult them when needed. This ensures that the association remains insulated from liability resulting from actions or decisions carried out by the board.  Oh, and that new lighting – even if you would normally undertake the task in your new home, it is a very bad idea to do it as a favor to the association – even if you happen to be a licensed electrician!

7.  Inadvertently Violating the FHA & ADA
Most of the time, violations of the Fair Housing Act (FHA) and Americans with Disabilities Act (ADA) are unintentional but that doesn’t matter in the eyes of the law. It is essential that your community’s policies fall within the requirements of both acts, and when they don’t, make adjustments. While there are some obvious ways to violate these acts, there are some less obvious ones as well that can easily trip you up if you aren’t careful.

One of the easiest to violate is familial status. Though this is often thought to be saying something like “families with children can’t live here”, it goes further than that. If your community has common area policies that put restrictions on minors, you’re likely in violation of this part of the FHA and you should have your attorney go over your documents. Some examples would be things like “no skateboarding” or “no toys in the common area” – those are all things that are probably going to be applicable to minors. Even posting pool hours that are designated as “adult swim time” can be a big problem.  Again, consulting your attorney is the best way to determine if these rules are violations and come up with some acceptable alternatives.

Regarding the ADA, there are parts of the act that address rules and policies and others that address real property. The ADA states that handicapped persons can request reasonable accommodations and modifications. What’s the difference? Reasonable accommodations apply to rules – an example would be assigning a handicapped person a parking space close to their unit at a condominium complex where there are otherwise no assigned spaces. Reasonable modifications apply to property – this would be something like allowing a person to install a ramp at their home by granting a temporary variance to the community’s architectural restrictions.

It is also crucial to remember that the ADA applies to more than just obvious disabilities – it very much applies to things you can’t see, like mental illnesses, so boards must be very careful in determining what requests to deny (think “comfort animals”). Not sure? Call your attorney!

This list, of course, shouldn’t be considered the end-all and be-all of possible pitfalls board members may encounter. But, if you’re conscious of these things and consult professionals when uncertainties arise, you’ll be doing your best to avoid litigation and keep your community running smoothly, thus fulfilling the “prudent man” standard for board members.

Mike Stonestreet, CMCA, PCAM, AMS, is Founder/Co-Owner of CAMS (Community Association Management Services). CAMS began in 1991 with Stonestreet and a few employees in a small office in Wilmington but has since grown to over 300 employees serving eight regions across North and South Carolina.


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