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Subject: Why is there such incompetence and misbehavior in the world of HOAs?
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PaulJ6
(New York)

Posts:319


09/21/2019 3:00 AM  
I work in the private sector, with businesses ranging from small ones to large Fortune 50 ones. I see a range of behavior from people in those businesses, but people in a company who have spent a long time in a sector generally know what they're doing and are pretty professional. I may disagree with their decisions, but they usually aren't sloppy, they usually don't break laws and they don't things that, on their face, almost certainly lead to problems.

Homeowners' associations, however, are a different story. In my limited involvement with them, I've regularly seen:

1. Wilful/intentional lawbreaking. For example, when boards are informed of legal requirements (such as requirements to deliver financial and other reports to owners), they yell and deny that they have to.

2. Malicious behavior that is likely to lead to problems. For example, I've seen boards single out owners, mock them at annual meetings and send emails back and forth among board members, stating that they want to "get" the owner. Breach of fiduciary duty, anyone?

3. Incompetence by HOA property managers. I've seen property managers make up fake invoices and give them to owners, post wrong information about owners in public (claiming that the owners are behind on payments to HOAs) and then admit that the information is wrong and the owners don't owe anything.

4. Incompetence by HOA lawyers. I've even seen HOA lawyers violate agreements, break the law and violate professional rules, such as by repeatedly threatening owners directly, despite the Fair Debt Collection Practices Act.

In short, I've seen a much lower level of professionalism in HOAs, even among professionals in the HOA world, and a lot of behavior that gets them in trouble.

Why is this? I don't expect boards of HOAs to be as knowledgeable as boards of for-profit Fortune 50 companies, but boards of HOAs that I've seen are far below even volunteer boards of charities that I work with.
MelissaP1
(Alabama)

Posts:8601


09/21/2019 4:52 AM  
This YOUR board. It is NOT every board. Each HOA is different. Don't assign what you see to apply to every HOA. There are believe it or not some HOA boards that do have their "crap" together. Which still will never be enough to please or meet every standard.

There is no "world of HOA's". It is your world living in a HOA. No two HOA's are alike nor should they be. No one lives under the same circumstances. My city has several HOA's in it. None of which are connected nor could operate under the same rules. Some are million dollar homes, townhouses, or combo's townhouse/condo/single family. Each one with a different developer. So having a "Standard" of HOA's and government control is impossible and unnecessary.

It's NOT a "They/Them" situation your in. It's a "Me and my neighbors" one. I tell people all the time. You want changes you start where you stand. It's your fears and aggravations that prevent changes from taking place. Only requirement in a HOA board is to be a homeowner. The next trick is to get elected. After that it seems it's the membership job to judge....

Former HOA President
TimB4
(Virginia)

Posts:16481


09/21/2019 10:18 AM  
Paul,

Are you doing research for a book?
GenoS
(Florida)

Posts:3234


09/21/2019 10:39 AM  
Posted By PaulJ6 on 09/21/2019 3:00 AM
I work in the private sector, with businesses ranging from small ones to large Fortune 50 ones. I see a range of behavior from people in those businesses, but people in a company who have spent a long time in a sector generally know what they're doing and are pretty professional. I may disagree with their decisions, but they usually aren't sloppy, they usually don't break laws and they don't things that, on their face, almost certainly lead to problems.

Homeowners' associations, however, are a different story. In my limited involvement with them, I've regularly seen:

1. Wilful/intentional lawbreaking. For example, when boards are informed of legal requirements (such as requirements to deliver financial and other reports to owners), they yell and deny that they have to.

2. Malicious behavior that is likely to lead to problems. For example, I've seen boards single out owners, mock them at annual meetings and send emails back and forth among board members, stating that they want to "get" the owner. Breach of fiduciary duty, anyone?

3. Incompetence by HOA property managers. I've seen property managers make up fake invoices and give them to owners, post wrong information about owners in public (claiming that the owners are behind on payments to HOAs) and then admit that the information is wrong and the owners don't owe anything.

4. Incompetence by HOA lawyers. I've even seen HOA lawyers violate agreements, break the law and violate professional rules, such as by repeatedly threatening owners directly, despite the Fair Debt Collection Practices Act.

In short, I've seen a much lower level of professionalism in HOAs, even among professionals in the HOA world, and a lot of behavior that gets them in trouble.

Why is this? I don't expect boards of HOAs to be as knowledgeable as boards of for-profit Fortune 50 companies, but boards of HOAs that I've seen are far below even volunteer boards of charities that I work with.

I'm not a lawyer and I'm aware of many such instances as you describe.

1. Been there, done that.
2. Haven't encountered this personally but stories abound in FL.
3. Been there, done that.
4. Been there, done that.

(By "done that" I mean I've seen it first-hand in my HOA, not that I've engaged in such behavior myself!)

They get away with it because the laws have no teeth. It seems there are planty of laws WITH teeth that aren't regularly enforced so I'm not really surprised the laws with NO teeth are virtualy ignored with impunity. I favor more regulation. Effective oversight of these communities and their governing boards has to be done by the government because the private sector is unable to do so.
CathyA3
(Ohio)

Posts:459


09/21/2019 10:42 AM  
Because incompetence and misbehavior is characteristic of humans, and because of Cathy's Law of Troublemakers ("It Takes Two to Tango, But Only One to Screw Things Up").
CathyA3
(Ohio)

Posts:459


09/21/2019 10:57 AM  
Posted By CathyA3 on 09/21/2019 10:42 AM
Because incompetence and misbehavior is characteristic of humans, and because of Cathy's Law of Troublemakers ("It Takes Two to Tango, But Only One to Screw Things Up").




On a more serious note:

The main reason is that there are no qualifications for serving on the board other than being a homeowner (usually). Being a successful board member requires a boatload of knowledge and skills as well as a suitable temperament, and they don't hand these out when you sign the papers at closing.

You can pass all the laws you want and enforce them as best you can, and you may even manage to eliminate the bad actors from that very small pool of homeowners who are willing to serve. Then what? The percentage of communities that goes into receivership because they can't find enough volunteers to form a functioning board will probably rise. Is that better? I have no idea. It will certainly raise the cost of ownership in an HOA, because receivers don't come cheap.

You want better boards, you need to improve the pool of homeowners. No way around it. I have no idea how to accomplish that.

JohnC46
(South Carolina)

Posts:8730


09/21/2019 12:38 PM  
Paul's problem is he is applying one bad HOA's antics (his) and stuff he reads to all HOAs.
CathyA3
(Ohio)

Posts:459


09/21/2019 1:16 PM  
Posted By JohnC46 on 09/21/2019 12:38 PM
Paul's problem is he is applying one bad HOA's antics (his) and stuff he reads to all HOAs.




As well as comparing the behavior of professionals in the private sector with that of mostly unqualified volunteers in HOA land. Of course the professionals look better in comparison. Incompetent or badly dysfunctional employees know that they will be handed their walking papers and will be replaced by one of a number of others who will compete for their jobs. HOA volunteers are often untrained and perform an often thankless job that nobody else wants - only to be rewarded by a stream of criticism from poorly informed neighbors whose only contribution to the HOA is the criticism.

The two experiences couldn't be more different.
JohnC46
(South Carolina)

Posts:8730


09/21/2019 1:34 PM  
One of the worst BOD Members I served with was a lawyer. He wanted opinions and what iffed everything to death.
KerryL1
(California)

Posts:6632


09/21/2019 2:08 PM  
I served with, I dunno, 25 directors over 12 years? mong the bottom 5 worse are two lawyers who currently serve now on the board of 7. Noyth their backgrounds seem to be in employment and contract laws, which is OK. But they know nothing about CA HOA laws, which are voluminous and they don't bother to earn our governing documents.

they are very skilled though in finding justification for hiding so many topics in secret executive sessions that it makes my head open.
PaulJ6
(New York)

Posts:319


09/21/2019 3:16 PM  
Posted By CathyA3 on 09/21/2019 1:16 PM
Posted By JohnC46 on 09/21/2019 12:38 PM
Paul's problem is he is applying one bad HOA's antics (his) and stuff he reads to all HOAs.




As well as comparing the behavior of professionals in the private sector with that of mostly unqualified volunteers in HOA land. Of course the professionals look better in comparison. Incompetent or badly dysfunctional employees know that they will be handed their walking papers and will be replaced by one of a number of others who will compete for their jobs. HOA volunteers are often untrained and perform an often thankless job that nobody else wants - only to be rewarded by a stream of criticism from poorly informed neighbors whose only contribution to the HOA is the criticism.

The two experiences couldn't be more different.




I’ve dealt with 4 HOA boards. In one, the board is awful. In another, the property manager and lawyer are awful. In another, I don’t know who’s at fault. The other HOA board is invisible but the building seems OK, so that’s the only one where I see no fault.

I see a lot of unprofessionalism among property managers and HOA lawyers. That’s their career so I would expect better. But in all instances, the board should hire professionals since the buck stops with the board.
SheliaH
(Indiana)

Posts:2701


09/22/2019 9:22 AM  
No, the buck ultimately stops with the homeowners - where do you think board members come from?

As I said in your last conversation, people who live in HOAs must accept the fact that they will have to pay more attention to what the association (the board, that is) does and why. Same as your school board, church trustee board of whatever group you belong to.

It would also help if YOU would be a little more sympathetic. As Cathy said, you have homeowners who are out in charge of managing common areas worth hundreds of thousands of dollars of more and they usually don't get any training or help from their neighbors (who often don't have a clue either). Maybe instead of calling them idiots, you could offer to help. And I'm not saying that because you're an attorney - there are All sorts of skill sets people can bring to a HOA board regardless of their background you have to be willing to listen, ask questions, apply careful thought, make your decision and go on from there.

Unfortunately too many people expect perfection and there is no such thing, even among HOA property managers and attorneys.

My challenge to you is to think about ways to resolve whatever is going haywire in your community and then apply them. Pick what battle is most important to you and what you're willing to do to resolve it. Maybe it's as simple as getting to know the board members and being a sounding board. There may be some issues they haven't thought about that you could mention.

Or run for the board itself - I suspect the current group would fight over who gets to step down first to let you in! Got a better idea on how the community should be fun - get out there and show your neighbors. Let's see how you do when everyone starts screaming at you over assessments, the landscaping contractor, parking, the lady with the three Great Danes who leave behind doggie do deal the size of a bike, the teenagers who blast Mettalica and/or Nas at 3am, etc, etc., Etc....



MelissaP1
(Alabama)

Posts:8601


09/22/2019 9:49 AM  
I always find it funny when someone complains "The contractor is friends with a HOA member". So that suddenly means it's an "unprofessional" relationship. I am thinking what do you want them to be? Mortal Enemies? When I do business it may be with a friend because know their business ethic. I may recommend or hire someone another HOA member recommends. Do not see why that is a bad thing. It's a small town where I live. Your going to know someone.

It's like that old story of the only 2 barbers on an island. 1 barber has a bad haircut that is uneven. 2nd barber hair is always great looking. Which barber do you hire? The 1st Barber. It's the 2nd barber that is cutting his hair....

Former HOA President
CathyA3
(Ohio)

Posts:459


09/22/2019 10:44 AM  
Just for honks and giggles, let's turn the question around.

Why do so many homeowners believe that they are entitled to receive professional services from a small number of their neighbors without providing anything in return?

No, paying your assessment is just paying your share of the HOA's expenses; it isn't compensation for services rendered. Board members pay the same assessments as everyone else, and they are not compensated in any way other than intangibles like a sense of accomplishment (many governing documents specifically state that board members may not receive compensation).

We can all come up with reasons why board members are ineffective: lack of training, lack of effort, desire for power, etc.

But what causes the sense of entitlement in homeowners who won't serve on their boards?
PaulJ6
(New York)

Posts:319


09/22/2019 11:29 AM  
SheilaH, I am on several nonprofit boards. All of them are very by the book. We follow our governing documents very carefully and use sharp outside counsel- for one, we used an AmLaw top 10 firm (at discounted rates) for some real estate legal work. We’d love it if others paid more attention to us and offered to help.

For two HOA boards that I’ve volunteered to help:

One has been sued repeatedly for doing illegal things. Its lawyer has also been sued for various things relating to the HOA. I’m a lawyer and the board did not accept an offer for me to help with “legal compliance”- basically, helping it get its records and documents straight.

The other board refuses to tell owners who’s on the board, when it meets or what it does. At the HOA annual meeting, if anyone asks questions such as “why are only some board members here”, “where is the conflict of interest report that the law requires” or anything else, the management company and the board members who are there simply literally yell at owners and threaten them or dare them to run for the board. When any non- insider owner does run for the board and clearly has enough support to win a seat, the board simply cancels the meeting and refuses to give copies of ballots or proxies to anyone. The management company runs elections, has its employees on the board and refuses to disclose information.

Does that answer your question?



CathyA3
(Ohio)

Posts:459


09/22/2019 12:25 PM  
HOAs are non-profits, but that doesn't mean they are like charitable organizations and such.

* Charitable organizations are often allowed to compensate officers and staff. Officers are chosen, I hope, for their expertise, and they consider themselves professionals and behave accordingly.

* HOA board members are not professionals (although we may wish they would behave as if they were). They often have no clue about what they bought or how to run the business. They are not compensated in any fashion. They are doing a job that nobody else wants, and they won't be fired unless they've done something so egregious that it overcomes the apathy and inertia of the rest of the community. All of this affects the attitude they bring to the job.

As long as the only qualification for being on the board of an HOA is home ownership, and as long as the only qualification for home ownership is having enough money, you're going to have some clueless and incompetent board members. The laws as they exist guarantee this. Charitable organizations aren't facing the same handicaps - they are free to restrict board membership to those who they believe will do a good job - so it should be no surprise that they get more competent and professional officers.
PaulJ6
(New York)

Posts:319


09/22/2019 1:58 PM  
CathyA3, you make good points. Thanks for your insightful post.

One place where hopefully everyone on this thread could have agreement is that property managers and HOA lawyers should be highly professional. Unlike HOA boards, they are experienced and should know the rules.
CathyA3
(Ohio)

Posts:459


09/22/2019 2:26 PM  
Absolutely agree about the attorneys and community managers.

My community has been fortunate in both areas. We switched to a new management company in 2015. It's a local company founded by someone who was upset at the lack of professionalism displayed by the manager in her community. She complained enough that the board president finally asked if she thought she could do a better job, and she said yes. Started out managing her own community, and her company grew through word of mouth.

Our attorneys are with a firm that specializes in community association law, and associations are their only clients. Their motto is "communicate, don't litigate" and they believe their first job is to keep associations out of legal trouble. In exchange for the annual retainer, they hold quarterly educational seminars around the state, provide quarterly newsletters, and provide other educational materials on their web site. In addition, board members and our property manager are entitled to unlimited free 15 minute phone calls (for general advice). One of the founding partners is also licensed in Florida - he likes to keep up with what's happening there since Florida, along with California and some other states, are ahead of the curve compared with Ohio.

I can't say enough good things about both companies.
SheliaH
(Indiana)

Posts:2701


09/22/2019 3:12 PM  
Well, no one said change is easy. For HOA board #1, I have to wonder what the rest of the homeowners are thinking - if this one gets used over and over and loses, why haven't they tossed them out? These guys are costing the association too much money that's better spent on building reserves and routine expenses. But if the homeowners say nothing and do even less, I hate to say it but they get what they deserve.

(I suppose this is the bunch you talked about in your last post?)

Same thing for HOA #2 - of course the management company will go along with this setup - they'll still get paid, regardless (unless the homeowners revolt and toss this board, along with the management company.

You teach people how to treat you and power concedes nothing without demand. Frederick Douglass said that about slavery and this applies to every great movement before or since.
Changing this board and the community's direction isn't something you can do by yourself and once you get the bad guys and gals out, it will still take some time to turn things around this is your home, so unless you want to move, you have no other choice.

Keep wringing Your hands and bemoan the situation if you want, but when you finish, where will you be? I'm not being unsympathetic - most of the regular posters on this board have lived it or are living it. We have plenty of scars and we've had some setbacks, and a few of us had to leave and then the change took place. What we didn't do was shut down and come away wanting to know less about the problem because it seemed so huge, nothing would make it to away. If the property manager and board members won't straighten up because it's the right and responsible thing to do, you and your neighbors will need to make them sorry.







PaulJ6
(New York)

Posts:319


09/22/2019 3:59 PM  
Thanks. Board 1 will not provide info about the lawsuits. I was just told about them by a board member. Owners generally donnotnknow.

It would take a big lawsuit to get rid of Board 2. I am not up for that. Board 2 would surely retaliate anyway.
MarkW18
(Florida)

Posts:121


09/22/2019 6:03 PM  
Well, in reading Melissa's post, a management company is just a contractor, not different than a plumber or landscaper, and they are to do exactly what the Board's demand. So it would be left up to the attorney, if one is even involved with the HOA, which many probably aren't legally represented.
MelissaP1
(Alabama)

Posts:8601


09/22/2019 7:16 PM  
Why would it take a lawsuit to remove a board? It takes a majority of eligible members votes to do so. If you don't want to do the work or cause the drama, then it's not going to happen. 95% of a HOA's issues is resolvable if one would read and do what the CC&R's or Articles of Incorporation allows one to do. Heck they can even be changed if you don't like them. Just takes the work to gather a majority vote.

Former HOA President
PaulJ6
(New York)

Posts:319


09/23/2019 2:23 AM  
Posted By MelissaP1 on 09/22/2019 7:16 PM
Why would it take a lawsuit to remove a board? It takes a majority of eligible members votes to do so. If you don't want to do the work or cause the drama, then it's not going to happen. 95% of a HOA's issues is resolvable if one would read and do what the CC&R's or Articles of Incorporation allows one to do. Heck they can even be changed if you don't like them. Just takes the work to gather a majority vote.




Because when elections are held and the management company’s candidates are not the only ones who will win, then the board just cancels the meeting and refuses to give out information about the proxies and ballots.
MelissaP1
(Alabama)

Posts:8601


09/23/2019 4:57 AM  
Management candidates? Where do those come from? Should be from the HOA membership unless still under developer control. So when people reference "Management candidate" I don't get where those people come from if not from the HOA pool? Sounds like the people who are interested in running contact the Management Company whom passes this along. Does that mean now they are Management Company choice?

Former HOA President
PaulJ6
(New York)

Posts:319


09/23/2019 5:30 AM  
Posted By MelissaP1 on 09/23/2019 4:57 AM
Management candidates? Where do those come from? Should be from the HOA membership unless still under developer control. So when people reference "Management candidate" I don't get where those people come from if not from the HOA pool? Sounds like the people who are interested in running contact the Management Company whom passes this along. Does that mean now they are Management Company choice?




Yes, the management company has its employees on the board. Those employees run elections. The board does not solicit candidates or even list board members on annual meeting materials. When owners ask who's on the board (at annual meetings), the board members who are there won't say who else is on the board; rather, they yell at owners and insist that there are other board members who attend all other meetings. I've never seen those other members, but I understand that they work for the management company. One board member told me their names, and I saw that they are listed on the management company's website, as senior management of the management company.
NpS
(Pennsylvania)

Posts:3758


09/23/2019 7:11 AM  
Posted By PaulJ6 on 09/23/2019 5:30 AM
Yes, the management company has its employees on the board. Those employees run elections. The board does not solicit candidates or even list board members on annual meeting materials. When owners ask who's on the board (at annual meetings), the board members who are there won't say who else is on the board; rather, they yell at owners and insist that there are other board members who attend all other meetings. I've never seen those other members, but I understand that they work for the management company. One board member told me their names, and I saw that they are listed on the management company's website, as senior management of the management company.


Maybe you should find yourself a good lawyer.

Sikubali jukumu. Read all posts at your own risk.
PaulJ6
(New York)

Posts:319


09/23/2019 7:22 AM  
NpS, you’re above making petty insults online. I know that you are. I am as well. Let’s try to do better.
NpS
(Pennsylvania)

Posts:3758


09/23/2019 8:02 AM  
Having a sense of humor comes in handy sometimes.

Sikubali jukumu. Read all posts at your own risk.
CathyA3
(Ohio)

Posts:459


09/23/2019 8:05 AM  
Posted By PaulJ6 on 09/23/2019 7:22 AM
NpS, you’re above making petty insults online. I know that you are. I am as well. Let’s try to do better.




I took his comment to mean that a lawsuit may be needed to solve this. Another attorney would also bring a fresh set of eyes to the problem.

If your governing documents allow non-residents to sit on your board, then it appears that you've got an entrenched "special interest" in control of the process, and it's in their financial interest to hang on. This is very different from HOAs that only have homeowners on the board and where the bylaws lay out the process for removing incompetent board members. (To the best of my knowledge, the majority of HOAs are the latter, which is why I think some of us have disagreed that many HOAs are cesspits of corruption.)

Anyway, if your bylaws don't give you any workable options for ousting the bad actors, then you do need to bring in bigger guns from the outside. That's assuming that you believe it's worth staying in your community.
PaulJ6
(New York)

Posts:319


09/23/2019 8:06 AM  
NpS--insulting someone and then claiming that it was a joke is below you. You're better than that. You're a valuable member of this community with insightful posts. Let's keep things "aiming high".
PaulJ6
(New York)

Posts:319


09/23/2019 8:28 AM  
Posted By CathyA3 on 09/23/2019 8:05 AM
If your governing documents allow non-residents to sit on your board, then it appears that you've got an entrenched "special interest" in control of the process, and it's in their financial interest to hang on. This is very different from HOAs that only have homeowners on the board and where the bylaws lay out the process for removing incompetent board members. (To the best of my knowledge, the majority of HOAs are the latter, which is why I think some of us have disagreed that many HOAs are cesspits of corruption.)

Anyway, if your bylaws don't give you any workable options for ousting the bad actors, then you do need to bring in bigger guns from the outside. That's assuming that you believe it's worth staying in your community.




Thanks. I think that you're right. I'm not interested in litigating- the legal fees would outweigh the cost of my property there- so I think you're right, particularly about staying.

AugustinD


Posts:1934


09/23/2019 10:03 AM  
Posted By PaulJ6 on 09/21/2019 3:00 AM
I don't expect boards of HOAs to be as knowledgeable as boards of for-profit Fortune 50 companies, but boards of HOAs that I've seen are far below even volunteer boards of charities that I work with.



Charity and other nonprofit boards --

-- do not have to manage, and so have knowledge of, infrastructure;

-- do not have to enforce rather demanding contractual rules (a.k.a. covenants) against their members;

-- likely do not have "members" with rights that the courts say equate to shareholder rights;

-- unlike HOAs and condos, do not serve as a quasi-governmental legal entity in the eyes of the courts.

-- have directors that are likely appointed and not elected.

-- often expect directors to be significant donors. In other words, for charities and other nonprofits, often a seat on the board is purchased.
AugustinD


Posts:1934


09/23/2019 10:05 AM  
Posted By NpS on 09/23/2019 7:11 AM
Maybe you should find yourself a good lawyer.


I thought this was funny.
PaulJ6
(New York)

Posts:319


09/23/2019 10:12 AM  
Posted By AugustinD on 09/23/2019 10:03 AM
Posted By PaulJ6 on 09/21/2019 3:00 AM
I don't expect boards of HOAs to be as knowledgeable as boards of for-profit Fortune 50 companies, but boards of HOAs that I've seen are far below even volunteer boards of charities that I work with.



Charity and other nonprofit boards --

-- do not have to manage, and so have knowledge of, infrastructure;

-- do not have to enforce rather demanding contractual rules (a.k.a. covenants) against their members;

-- likely do not have "members" with rights that the courts say equate to shareholder rights;

-- unlike HOAs and condos, do not serve as a quasi-governmental legal entity in the eyes of the courts.

-- have directors that are likely appointed and not elected.

-- often expect directors to be significant donors. In other words, for charities and other nonprofits, often a seat on the board is purchased.




In my case, I am on two nonprofit boards that have the exact opposite setup as every point you list (except "unlike HOAs and condos, do not serve..."). One oversees an organization that is subject to an additional regulatory regime under state law.
PaulJ6
(New York)

Posts:319


09/23/2019 10:22 AM  
To add:

* For 2 nonprofit boards that I'm on, I'm subject to the rules imposed by a higher governing structure. Both have extensive governing documents that we have to follow; one has a 400-page rulebook. Before being elected, I was tested on that rulebook and had to pass the test.

* For 2 nonprofit boards I'm on, I believe that I have fiduciary duties similar to what a director of a for-profit corporation has. That's serious, and more imposing than what HOA boards are subject to.

* For 1 nonprofit board I'm on, I was elected at a meeting of the members. My bio and professional credentials were circulated before the meeting, and I was interviewed a few times by other leaders of the organization before being put up for election.

* 2 boards that I'm on regularly use first-rate outside counsel for document review and guidance.

In short, the boards that I'm on don't pay a cent, yet they are serious, consider rules to be serious, and act in a serious manner. No way would any of them- particularly 2 of them- dare to behave like I've seen HOA boards behave.
AugustinD


Posts:1934


09/23/2019 10:44 AM  
Posted By PaulJ6 on 09/23/2019 10:22 AM
* For 2 nonprofit boards I'm on, I believe that I have fiduciary duties similar to what a director of a for-profit corporation has. That's serious, and more imposing than what HOA boards are subject to.


I do not agree that the duties of a for-profit board are at all similar to a HOA board. It's typically high profile individuals who need not have any understanding of the underlying business of the board on which they serve. Their boards do not meet that often.

I can get behind requiring HOA board candidates to pass a test. They're nonprofit but private, so I think this might be legal.

What is your explanation for why HOA boards are often so incompetent?

How come you are not running for a HOA board? Have you ever served on a HOA Board?
PaulJ6
(New York)

Posts:319


09/23/2019 10:52 AM  
Augustin, I ran for a HOA board once and had enough votes to be elected. But I had asked the board about why it didn’t disclose financial information to owners, which was legally required, and the board got mad. The board simply canceled the election.

Is your first sentence in error? I never said that a for-profit board is the same as a HOA board.

My explanation for HOA boards is that some “professionals” that help HOA boards are low-grade, and laws that require good behavior of HOA boards don’t have teeth. Thus the unable and the malicious can get on HOA boards and get away with bad behavior, intentional or not.

Most HOA board members surely are well-meaning and do their best, but there are some rotten apples. But even the good ones can be led astray by bad HOA lawyers and the like.
AugustinD


Posts:1934


09/23/2019 11:00 AM  
Paul, you seem to be indicating that there is not a significant difference between what HOA Boards have to do and the constraints HOA Boards have versus what non-HOA corporate Boards have to do and what constraints they have. I do not agree. I do agree that poor laws and an overburdened court system are a key reason why many HOA boards act unlawfully and get away with it. I will also throw a nod towards Cathy's post. I think the typical HOA member is as incompetent as the typical director, not bothering to read the governing documents and then complaining inappropriately.
PaulJ6
(New York)

Posts:319


09/23/2019 11:08 AM  
Augustin, there’s a big difference between HOA board constraints vs. corporate board constraints.

I am on several nonprofit boards. I’m not in any for-profit corporate boards. But I work with numerous for-profit corporate boards as part of my career. So I see all sorts of boards for all sorts of organizations.

No board that I am on or that I work with would behave like some HOA boards I’ve seen, though. Basic human decency means that you don’t act like some HOA boards I’ve seen.
JoanM7
(California)

Posts:1


09/28/2019 9:23 AM  
Dear Paul,
I am a member of a large HOA board and, like you, am dismayed at the behavior and willful lack of knowledge of the corporate docs. The trouble for us is that there are no legal repercussions for HOA board member who act inappropriately. A percentage of the entire community has to vote members off the board. There are no swift repercussions, other that lawsuits from staff when a board member creates a hostile work environment. Personally, I would like the states to get together to tighten legal controls on HOA boards, because, even though they are volunteers, they have a fiduciary duty that seems to be ignored in some cases. Board candidates are not vetted as to their experience and resumes - they just have to be current with their dues and have "some business knowledge." AAAGH!
JohnC46
(South Carolina)

Posts:8730


09/28/2019 9:28 AM  
Joan is from CA. One of the states with them most restrictions on hw an HOA can operate but her answer is more restrictions........not
CathyA3
(Ohio)

Posts:459


09/28/2019 11:18 AM  
Augustin posted a list of things that differ between HOA and other non-profit/charitable organization boards. I'll add to this by saying that serving on an HOA requires more knowledge and skills than serving on other boards. For example:

* property management (if you don't hire a professional manager) - knowledge about physical infrastructure, green space, utilities, and environmental regulations

* managing association employees and contractors - knowledge of employment laws

* maintaining appropriate levels of insurance - knowledge of the insurance market

* legal - knowledge of the laws affecting HOAs, including federal, state and local municipalities, as well as thorough knowledge of the HOA's governing documents

* finance - effective budgeting, accounting and money management for a corporation whose value can be in the tens or hundreds of millions of dollars; basic investment knowledge

* ability to deal effectively with owners who have some rights similar to owners of stock, some of whom will have mental or physical issues (Fair Housing laws), most of whom will be completely ignorant of the nature of HOAs, most of whom will value your efforts according to how much they pay for them (zippo) and will feel free to express their opinions, many of whom will feel no responsibilities to keeping the HOA running

* acting as "enforcers" when HOA members violate the CC&Rs; acting as collectors when HOA members fail to pay their assessments

If the HOA were to hire professionals to perform all of these tasks, they would pay through the nose. I base that on the cost of going into receivership, where a professional replaces the board. Receivers are well paid and can earn more per hour than an attorney. That should give you a rough idea of how a board member's knowledge and skills are valued on the open market, and just how demanding the job is.

I personally think that it's unreasonable to expect that level of knowledge and expertise from unpaid volunteers. I don't think that more regulation is the answer. I lean toward some form of receivership. I realize there are issues with that, not least of which is that it would raise the cost of ownership in an HOA. But so be it.

Nor do I support making the board jump through more hoops. The current system already unfairly burdens a small minority of HOA members upon whom the business of the HOA falls while providing an unfair advantage to the large majority of HOA members who enjoy the same rights and benefits as those doing the work but without any effort on their part. The whole point of HOAs and COAs is that all owners have the same rights and responsibilities. The current system does not provide that, and adding more requirements to an already overburdened board just further widens that gap between the advantaged and disadvantaged.
GenoS
(Florida)

Posts:3234


09/28/2019 1:40 PM  
Posted By JohnC46 on 09/28/2019 9:28 AM
Joan is from CA. One of the states with them most restrictions on hw an HOA can operate but her answer is more restrictions........not

I'd argue the need is, in Florida as it appears to be in California, for not more restrictions but enforcement and penalties. There need to be consequences for bad behavior.
JohnC46
(South Carolina)

Posts:8730


09/28/2019 2:05 PM  
Posted By GenoS on 09/28/2019 1:40 PM
Posted By JohnC46 on 09/28/2019 9:28 AM
Joan is from CA. One of the states with them most restrictions on hw an HOA can operate but her answer is more restrictions........not

I'd argue the need is, in Florida as it appears to be in California, for not more restrictions but enforcement and penalties. There need to be consequences for bad behavior.




Good point.
CathyA3
(Ohio)

Posts:459


09/28/2019 2:43 PM  
Posted By GenoS on 09/28/2019 1:40 PM
Posted By JohnC46 on 09/28/2019 9:28 AM
Joan is from CA. One of the states with them most restrictions on hw an HOA can operate but her answer is more restrictions........not

I'd argue the need is, in Florida as it appears to be in California, for not more restrictions but enforcement and penalties. There need to be consequences for bad behavior.




You are expecting professional behavior from people who are not professionals, who for the most part are not given training or the tools to become professional, and most important are not being paid as professionals. When these expectations come from other homeowners who are even less knowledgeable and skilled, and who flat out refuse to do their fair share of the work... well, it's not a good look, is it?

If various folks start "getting tough" on board members, they'll find it even more difficult to find people willing to serve. The Ohio legislature started making noise about doing something about all the complaints from HOA residents, only to give up after enough people pointed out that if their bill passed, every board member in the state would resign.

If HOA Board Member was a profession, with training and examinations and licensing and codes of ethics, and these folks were being paid fair market value for their skills - then homeowners would have every right to expect professionalism and expect penalties for bad behavior, the same as happens when doctors or lawyers or others violate the standards of their professions. But until that happens, getting angry at people for not being something they never claimed to be is a non-starter, and you can expect them to walk out the door when they get fed up enough.
GenoS
(Florida)

Posts:3234


09/28/2019 6:19 PM  
Posted By CathyA3 on 09/28/2019 2:43 PM
You are expecting professional behavior from people who are not professionals, who for the most part are not given training or the tools to become professional, and most important are not being paid as professionals.

You bet your bippie I am. Anything less is unacceptable. We pay too much to allow morons to screw things up. Accountability demands consequences for misfeasance, nonfeasance and malfeasance. "Guilty as charged," is a phrase that needs to be uttered a whole lot more in the world of HOA and condo board mismanagement. Especially when they've got their hands in my pocket.
AugustinD


Posts:1934


09/28/2019 6:54 PM  
Posted By JoanM7 on 09/28/2019 9:23 AM
There are no swift repercussions, other that lawsuits from staff when a board member creates a hostile work environment.


Unless the hostility is based on race, religion, gender, disability or one of the other protected classes, the above is a fiction.

Nice post, CathyA3. I too wonder whether some nominal amount should be paid to HOA directors, kind of like what City Councilors are paid.
MarkW18
(Florida)

Posts:121


09/28/2019 7:11 PM  
The problem everywhere is enforcement. It becomes more frustrating to the states that have more restrictions, that it's not the answer, enforcement is. No different than state or federal legislative bodies creates more laws instead of enforcing the ones they already created.
CathyA3
(Ohio)

Posts:459


09/29/2019 8:59 AM  
Posted By GenoS on 09/28/2019 6:19 PM
Posted By CathyA3 on 09/28/2019 2:43 PM
You are expecting professional behavior from people who are not professionals, who for the most part are not given training or the tools to become professional, and most important are not being paid as professionals.

You bet your bippie I am. Anything less is unacceptable. We pay too much to allow morons to screw things up. Accountability demands consequences for misfeasance, nonfeasance and malfeasance. "Guilty as charged," is a phrase that needs to be uttered a whole lot more in the world of HOA and condo board mismanagement. Especially when they've got their hands in my pocket.




What you're paying is your share of expenses. You aren't compensating the board in any way, shape or form (and the boards I'm familiar with are specifically prohibited from being compensated).

However... this supports my belief that you need to have professionals doing the work of the board, and not untrained amateurs who have no idea what they're doing. However, prepare to pay a whole lot more for professional services. One thing you'll be paying for is the right to sue their butts when they act up.*

It also supports my belief that the real beneficiaries of HOAs and COAs are the businesses that earn their money from HOAs as well as local governments and tax payers who have been able to offload some portion of their responsibility (eg. road maintenance) onto a group of private citizens who are still charged the going rate for property taxes in exchange for reduced services.

Something's gotta change, but I don't expect that it will until people start avoiding HOAs like the plague or the whole thing blows up in everyone's faces.



(* I have no problem going after folks for things like embezzlement. You don't need special training to know that stealing money is wrong. I do have problems going after people for things they truly don't understand and who have had no chance to learn. F'instance:

- We've had some board members whose careers were in academia. I've been appalled at how little they understand about proper business procedures. And these are not dumb, uneducated people - they've simply had no business experience. Shall we prohibit them from serving on HOA boards? If we're going to sue them for things they don't know, I'd recommend that they never serve on a board for their own sakes.

- I'm often surprised by how few people understand the in's and out's of Fair Housing laws, which can be unforgiving even for good-faith mistakes. An uninformed board can easily do something that results in stiff fines, which everyone in the community will pay. When we come across an issue that has a whiff of Fair Housing to it, we turn it over to our attorney for verification of the claim and communication with the homeowner. Of course that costs money, which I'm sure some would say is not justified. However, I'm equally sure that some would also be the first to scream bloody murder if the board messes up.

- And seriously, who doesn't understand GAAP or FASB? A lot of folks, as it turns out. Shall we forbid anyone without accounting experience from serving on their boards?

- And what about ethics? Having boards sign Codes of Conduct is something of a fad lately. But more than one attorney has said that signing such may void the "business judgement" defense that's available to anyone who has a fiduciary duty to others, and may in fact violate the board's duty to do what they believe is in the best interest of the HOA. Forcing someone to do something that would compromise their right to defend themselves if they were to be sued is a good way to guarantee that no one volunteers - and may be actionable itself.

So you can see that "getting tough" is not the simple solution many think it is and may actually be counterproductive, although I agree it's justified in some cases.

Replace HOA Boards With Professionals!! I think I'm going to start a movement.)
MelissaP1
(Alabama)

Posts:8601


09/29/2019 9:21 AM  
I shudder to think what you might think when tell you I held "Board meetings" IN the pool! It's Alabama and it's HOT. Our clubhouse was attached to the pool area. Since most of our members were already at the pool, why not join them? We did have a lot of apathy so wasn't like a lot of people were showing up. Plus my Vice-President and other board members were already at the pool with their kids/spouses.

The HOA to me is just a "club" of your neighbors. It has rules to follow and the need to gather money for it's operating budget. A HOA still exists whether the neighbors want to gather together in meetings or participate in operations. They can decide to hire a professional service.

It's all in the perceptions and what you perceive things should be. I don't expect "Professionals" in my HOA. Expect just interested homeowners who want to get together to make their neighborhood look good. (Not for property values)….

Former HOA President
CathyA3
(Ohio)

Posts:459


09/29/2019 9:44 AM  
Posted By MelissaP1 on 09/29/2019 9:21 AM
I...

The HOA to me is just a "club" of your neighbors. It has rules to follow and the need to gather money for it's operating budget. A HOA still exists whether the neighbors want to gather together in meetings or participate in operations. They can decide to hire a professional service.

It's all in the perceptions and what you perceive things should be. I don't expect "Professionals" in my HOA. Expect just interested homeowners who want to get together to make their neighborhood look good. (Not for property values)….




The HOA is most definitely NOT a club. This belief is exactly why you have some board members who don't understand what they've been elected to do and who take a casual approach to laws, accounting standards, and anything else where there are professional standards. That's what people are so upset about.
MelissaP1
(Alabama)

Posts:8601


09/29/2019 9:52 AM  
It is a club. Clubs have elections/hierarchy, rules, and budget. They are formed for a shared interest. Girl/Boy Scouts are a "club" and have similar structure as a HOA. A HOA is incorporated "club" so to protect it's members and allow it to do business.

You may not like the term "club" but it's basically what a HOA is.

Former HOA President
CathyA3
(Ohio)

Posts:459


09/29/2019 9:56 AM  
Posted By MelissaP1 on 09/29/2019 9:52 AM
It is a club. Clubs have elections/hierarchy, rules, and budget. They are formed for a shared interest. Girl/Boy Scouts are a "club" and have similar structure as a HOA. A HOA is incorporated "club" so to protect it's members and allow it to do business.

You may not like the term "club" but it's basically what a HOA is.




From our attorney's web site:

"There are many forms of governance that are NOT applicable to a community association. As an example, some owners think they have brought into a democracy in which they are entitled to vote on everything. A community association is NOT a democracy. Some owners think they have bought into a social organization where owners sit around, drink scotch, and make casual decisions. A community association is NOT a social organization. Many owners belong to a civic organization or a union. These owners believe that the community association is similarly run. They believe that a board makes a recommendation to the members, such as on an annual budget and the members vote for or against the budget. A community association is NOT a civic organization or union. Occasionally, owners think they have bought into a dictatorship or monarchy where one board member, usually a president, makes all decisions individually. Remember all board members are elected, not anointed. A community association is NOT a dictatorship or monarchy.

A community association IS a business, and a very substantial business at that. Virtually every association is subject to a corporate form of governance. For example, if an individual purchases $75,000 worth of General Motors stock, that individual is entitled to attend the general Motors annual meeting at which time the election of a governing board takes place. The same concept applies in a association. An owner has the primary right of attending the annual meeting at which the election of the association’s governing board takes place."
MarkM19
(Texas)

Posts:419


09/29/2019 10:03 AM  
Melissa,
I believe calling any HOA a Club is the lowest common denominator. It would be like calling the Police department a bunch of men and women. I have reminded my boards over the years that the HOA is First and Foremost a Business and should be run like one. Yes it is made up of Volunteers that should only be picked out of the pool of people that live in the HOA. I think every board benefits from getting the Best and also most diverse group of members they can muster. Bad boards usually have Bad people on them and Good board have a group of Good people on them. I am constantly looking for the next board member that brings a unique talent or ideas to my boards. Once you find them you need to mentor them and get them involved.

My boards have all had budgets over 1 million dollars a year. It is far different from the Boy/Girls Scout group.
CathyA3
(Ohio)

Posts:459


09/29/2019 10:28 AM  
And the local gardening club can chuck you out if you're disruptive, violate the rules, don't pay your dues, etc. etc. You have no right to membership.

No HOA can do that, and all members have rights by virtue of owning a home.
MelissaP1
(Alabama)

Posts:8601


09/29/2019 12:49 PM  
Why is it called "Rights"? It's NOT a right thing. It's called "RESTRICTIONS". You don't have the "Right" to own a home. You have the "Right" to live in this country in the pursuit of happiness which may or may not include ownership of a home.

Former HOA President
CathyA3
(Ohio)

Posts:459


09/29/2019 1:33 PM  
Anyone with enough money has the right to buy a home wherever they chose. That's what the Fair Housing laws are about.

Once they own that home, they have certain rights resulting from ownership. If the community has amenities, they are entitled to use them. If the HOA provides services such as cutting the lawns, they are entitled to this service. They have the right to vote for candidates for the board. They have the right to run for the board themselves. They have the right to the HOA version of due process, such as the right to a hearing before the board if they have been accused of violating one of the restrictions. All of this stuff is spelled out in the community's governing docs. If you believe that it's nothing but restrictions, you're missing half of the stuff in there.
MelissaP1
(Alabama)

Posts:8601


09/29/2019 1:44 PM  
Entitlement and rights? Your not entitled to use the HOA's amenities unless you pay for them. That has nothing to do with "entitlement". Fair Housing has NOTHING to do with the "Right" to own a home. That is apple and oranges. You can't be discriminated against for applying for a loan for a home.

Your getting your terms really confused.

Former HOA President
MarkW18
(Florida)

Posts:121


09/29/2019 5:42 PM  
Posted By MelissaP1 on 09/29/2019 1:44 PM
Entitlement and rights? Your not entitled to use the HOA's amenities unless you pay for them. That has nothing to do with "entitlement". Fair Housing has NOTHING to do with the "Right" to own a home. That is apple and oranges. You can't be discriminated against for applying for a loan for a home.

Your getting your terms really confused.



IT is YOU that is and have been confused.
GenoS
(Florida)

Posts:3234


09/29/2019 6:36 PM  
Roll Tide.
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