Sunday, June 30, 2013

Three things every community association board of directors should never underestimate.


To underestimate something is to judge it to be smaller or less important than it actually is.

Far too many volunteer boards get into hot water when they underestimate the following in their communities:
  1. The complexity of a particular matter especially if it involves legal rights. The scariest thing for most association attorneys is to hear that a board has not contemplated the legal pitfalls associated with a number of different board actions. This is scarier still when decisive board action has already been taken and then the board tells the attorney what has been done. This can involve signing expensive contracts which were not reviewed; denying potential tenants and purchasers for reasons that could be interpreted as discriminatory; enforcing covenants and rules without the necessary authority and any number of other decisions that might just wind up in a lawsuit. Directors do not have to become their own professional advisers but they do need to know when to contact their professional advisers on a matter that requires their assistance and then, naturally, to follow that advice. 
  2. The costs involved in a repair or maintenance project.  No one likes costly surprises and the words "special assessment" are considered particularly evil in most communities. Directors should not underestimate the costs involved in properly fulfilling their fiduciary duties to the community. No good can come from not budgeting properly for costs involved with maintaining, repairing, replacing, improving and insuring the common areas. It is best for boards to rely on proper reserve studies and conservative quotes. Moreover, contracts should be properly negotiated to ensure that the association is not saddled with cost overruns when field conditions change or are different than the contractor anticipated. 
  3. The members' feelings.  It is important for boards to be able to read the proverbial tea leaves. If there are fights at every meeting, posters in the elevator decrying the current "administration" and the general morale reflects a community under siege, then the board should either resolve itself to make some changes or face the consequences.  Those consequences can include one or more directors being recalled or, in a more serious turn of events, a lawsuit being filed against the board for breach of fiduciary duty.  The best boards do not try to simply be popular while abdicating their responsibility to make tough decisions that are in the overall membership's best interests. However, the best boards also do not underestimate community sentiment and they regularly take the community's pulse to ensure they are on track. 
Far too many boards have found out the hard way that they underestimated a dangerous situation. Hopefully, every board has at least one member who plays the role of "Inspector" and points out the possible flaws in the argument that every contemplated board action is "no big deal".

No comments:

Post a Comment