Approximately 65 million Americans reside in a subdivision, condominium complex, or other planned community which is governed by a community association.
The typical community association is governed by a board of directors comprised of volunteers who are elected by their fellow owners. The directors manage the corporate affairs of, and set policy for, the association, and as a result, they often become the main focus of dissatisfied members. This can lead to directors being sued individually for failing to fulfill their duties to act in the best interest of the association, its owners, and directors.
As a result, associations often encounter a lack of interest and willingness of members to serve on their board. However, if a board and its directors follow a simple set of best practices, they can avoid many problems and thereby encourage community members to serve on the board. These practices benefit not only the board and its members, but the community as a whole.
Below are some best practices which should help directors and boards avoid common pitfalls.
The board should communicate frequently, openly, and honestly. Communicating effectively with other directors, owners, and professionals hired by the board to help manage the community is essential. Each board should develop a communication strategy containing, at a minimum, the following elements:
Communication methods can include personal contact, informational meetings, printed newsletters, email, social media sites like Nextdoor, or a website. The key goal is to be as transparent as possible and help owners develop a sense of trust in the board.
It's very seldom that a director will consciously act in an unethical manner. But being technically ethical is not enough, alone, to avoid unnecessary conflict and expense. Directors should strive to be above reproach and affirmatively avoid actions and comments that might create an appearance of unethical behavior. Each board member should strive to:
By exhibiting sound ethics and integrity, a director can help build the community's trust in the board.
A director should always take the director's responsibilities to the community seriously, exercise sound judgment, and not hesitate to rely on simple common sense. Discussions with owners and other directors should be respectful even if the individuals vigorously disagree with one another; and, importantly, but difficult, even when an owner or another director acts with disrespect.
Sound judgment is essential and is perhaps one of the most crucial assets required of a director. Exercising sound judgment requires a director to think about things clearly, calmly, and in an orderly fashion so that a good decision can be made.
Most importantly, a director should consider all the facts and opinions so that each decision is fair and reasonable under the circumstances. A director should investigate and research issues, and approach problems with a common-sense attitude, relying on personal experience and perceptions regarding the situation or facts. If a topic needs more investigation, research, or discussion, the director must recognize the need and advocate for it. Rash decisions must be avoided—but directors should never overcomplicate matters that have a clear and simple solution.
In other words, directors should apply their own experience and general knowledge to each situation in order to make the best decision under the circumstances.
Financial stability is essential to the success of an association. A director should always seek to establish sound fiscal policies, help develop a workable budget, and continually look for ways to carry out the purposes of the association in a responsible manner.
A director should seek the advice of professionals such as community association managers, accountants, and financial advisors. The right professionals can assist the board to develop accounting controls to protect the association's assets, realistic budgets which ensure that operating funds are sufficient to cover ordinary expenses of the association, and detailed reserve studies to provide sufficient capital for any future, or unexpected, expenses.
Owners typically do not like increased assessments and demand the board look for ways to cut costs and effectively budget. However, sometimes increased assessments are unavoidable, and if the board can increase assessments gradually and have robust reserves for when inevitable expenses and replacement costs arise, many of these issues can be solved.
Conclusion
Directors of an owners' association play a very important role in the successful operation of the association. A successful director will be open and honest, ethical, reasonable, and financially prudent.
Content provided by Ward & Smith P.A., original article can be found here.
For more information on how you can be a successful board member as well as access to some helpful resources, visit the CAMS Board Member Toolbox.