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".

Sunday, June 23, 2013

Annual Check-up for Community Associations

We are often told that, at a minimum, an annual physical is needed to ensure that we are in optimum health. The same school of thought holds true for a community association. Let things go untended for too long and you wind up with a community that is seriously out of whack.

What should your board do at least once a year to ensure your community stays on track?

The following should be reviewed at least annually:
  • Review the annual corporate report to be sure that the information on current board members and your association's registered agent is correct and that you have paid your annual corporate fee.
  • If your community is classified as "Housing for Older Persons" be sure to to confirm that recent sales and leases in the last 12 months still put you at a minimum of 80% occupancy by someone age 55 or older.
  • Review all vendor contracts and discuss work quality, expiration dates, and any automatic renewal clauses that need to be considered if a termination of those contracts is desired.
  • Review all residential leases in the community to determine their renewal dates and put any owners with nuisance tenants on notice that their leases will not be approved for renewal.
  • Review any safety and security issues that may have cropped up throughout the year which would require your board to take steps to improve security measures in order to protect your residents/guests and to insulate the community from liability.
  • Review your community's disaster preparation and recovery plan and confirm that everyone on the board understands his or her individual role in carrying out that plan and make any necessary updates to the plan.
  • If your board governs a condominium association, the statutorily-required Frequently Asked Question and Answer sheet needs to be reviewed at least annually to ensure its continued accuracy.
  • If your community prepares and distributes a Social Directory containing contact information for your members, you will need to review that information to remove the listing for any members who have elected to opt out of being included in that directory.
  • If your community issues vehicle ID stickers, guard gate remote control devices or pass-codes, key fobs and other access/entry devices, you will need to disable devices for occupants who no longer reside in the community to ensure your continued safety.
  • If you maintain emergency contact information for your residents (particularly elderly or infirm residents) you should look to update that information at least annually and well before you may need it.
  • If you have approved pets, service or emotional support animals, you should review those cases annually to confirm that the original pets/animals which were approved are still the ones in residence.
  • An annual rules audit is always a good idea to ensure that rules are being routinely and uniformly enforced in order to avoid enforcement challenges in the future.
  • Any payment plans for delinquent owners should be monitored at least annually to ensure that those owners are still in compliance.
  • Any settlement agreements entered into by the association should be similarly monitored to ensure compliance continues.
  • All common and limited common areas as well as association-owned property should be inspected at least annually to determine that preventative maintenance is being performed and to determine estimated remaining useful life of various community components.
The idiom, "An ounce of prevention is worth a pound of cure" is usually attributed to Benjamin Franklin and it certainly sounds like something he would say. Boards would be well advised to heed this advice and take the community's pulse on an annual basis at the very minimum.

Monday, June 3, 2013

Do you have directors who are missing in action?

Recently, several blog readers have written in to discuss the issue of fellow directors going MIA (missing in action) from their board duties. 

One reader mentioned that a director had attended just one of the previous 5 board meetings while another mentioned that a director had only ever attended board meetings telephonically and had never gotten to know her fellow directors in person.

In Florida, attending a board meeting by telephone is equivalent to attending in person. The law was changed some years ago to permit directors to attend meetings in this manner given how jam-packed our lives are these days. However, there is simply no substitute to sitting in the same room with your fellow directors and association members and undertaking the significant work of running a community.

Just as you can't grow a personal relationship by proxy, you can't grow your board and community  relationships in absentia. In addition to those directors who show up only by phone, what about those that just don't show up at all? Several blog readers have suggested that those directors should be removed from the board after missing a certain number of consecutive meetings. Currently, Florida law would not permit an association to implement that protocol in the absence of a legislative change. Would it make a difference if a director is missing meetings due to illness?

What about directors who do attend meetings but refuse to contribute or take on tasks and abstain from voting without legitimate reasons to do so? One may question why such individuals ran for the board in the first place but the fact remains that you are stuck with them until the next election if you cannot convince them to either (a) become a real, participating member of the board or (b) resign and allow someone else who will contribute to take their place.

If one of these MIA directors is also an officer, your board can vote to remove that person as an officer but not as a director. Perhaps it would not be the worst thing if each board put a blurb on one of the association's communication channels (newsletter, website, mailing, etc.) that let potential board candidates know what would be expected of them if they win the election. Perhaps a listing of the number of meetings, the length of those meetings and the tasks that are regularly assigned to each member of the board would help wannabe directors decide if they are made of the right stuff. 

Unlike the role of some modern-day monarchs, serving on a board means you are expected to actually do something and not just take on a title.