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Subject: Why would a property manager want to serve on a board
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ChrisE8
(New York)

Posts:225


11/02/2020 2:50 PM  
If a board of directors lacks directors' and officers' insurance, and if there is nothing improper going on (for example, the property manager and its fees would be independently approved by other board members anyway), why would a property manager want to serve on a HOA board?

Since directors can get sued personally, serving on a board is at least somewhat risky, particularly when there is no insurance. I serve on a few nonprofit boards (and we have insurance), but I've declined invitations to serve on regular corporate boards without compensation, even when I had small investments in the companies.

A few residents of the NC HOA where the property manager serves on the board have asked the property manager, "what are you doing on the board" and the property manager has responded that it follows its fiduciary duties very closely and is not receiving any payment other than an arm's-length management fee. Some owners have hinted that the property manager is getting some additional payments from the HOA that haven't been disclosed, but I don't have any evidence of that other than hearsay.

But it does not make sense to me for a property manager to voluntarily serve on a HOA board, without insurance, if there is no benefit to the property manager (even making it easier to retain the HOA's business).

Thoughts?

Thanks.
MelissaP1
(Alabama)

Posts:9714


11/02/2020 3:34 PM  
It sounds like wrong impressions and assumptions here to me. They can't serve or be voted onto a board as a Property Manager. They don't qualify as NOT an owner/member. Unless maybe the HOA is still under the Developer control.

It doesn't mean they can't attend or even help organize the meetings. They are involved on some levels. They just don't have the voting powers to make real changes. The board has to make the vote first and then feed that to the Property Manager to follow up on.

Many times the lines get crossed and blurred. This sounds like one of those times. The line between board and paid property manager needs to be defined. Otherwise people are going to keep making the wrong assumptions and impressions.

Former HOA President
KellyM3
(North Carolina)

Posts:1575


11/02/2020 3:50 PM  
There are HOAs in North Carolina where a non-owner/non-resident may be elected to the board of directors. On a healthy board of directors, a property manager wouldn't need to serve as a director as community residents would step forward to create the minimum board headcount.

Otherwise, no vendor should be a director as it's a conflict of interest for the most part. I've seen boards where the manager runs the show and a "rubber stamp" board follow their lead. A manager's influence can be wielded numerous ways.
AugustinD


Posts:4421


11/02/2020 4:12 PM  
Posted By ChrisE8 on 11/02/2020 2:50 PM
If a board of directors lacks directors' and officers' insurance,
No insurance is one thing. No indemnification clause in the Declaration or Bylaws is another. Are you sure this non-condo North Carolina's governing documents do not require indemnification of directors?

If a property manager is corrupt, of course he or she would want to be on the board.

By any chance is this a retirement community?
ChrisE8
(New York)

Posts:225


11/02/2020 4:19 PM  
Posted By AugustinD on 11/02/2020 4:12 PM
Posted By ChrisE8 on 11/02/2020 2:50 PM
If a board of directors lacks directors' and officers' insurance,
No insurance is one thing. No indemnification clause in the Declaration or Bylaws is another. Are you sure this non-condo North Carolina's governing documents do not require indemnification of directors?

If a property manager is corrupt, of course he or she would want to be on the board.

By any chance is this a retirement community?




Thanks. There is no D&O insurance, but the bylaws do require indemnification of directors. The bylaws do not limit who can serve on the board--anyone can, even the property manager.

Not a retirement community.
AugustinD


Posts:4421


11/02/2020 4:27 PM  
Posted By ChrisE8 on 11/02/2020 4:19 PM
There is no D&O insurance, but the bylaws do require indemnification of directors.
Then all directors are covered as needed via a special assessment of the membership. If I were corrupt property manager, I'd be happy to serve on the board winning friends (on the board) through personal favors and influencing decision-making in my favor.
GeorgeS21
(Florida)

Posts:3411


11/02/2020 4:31 PM  
I’m still interested in reading the applicable excerpts from the governing docs ....
ChrisE8
(New York)

Posts:225


11/02/2020 4:55 PM  
Posted By GeorgeS21 on 11/02/2020 4:31 PM
I’m still interested in reading the applicable excerpts from the governing docs ....




Their provisions are not in question. I've reviewed them extensively. Practices that I consider shady are fully lawful in this HOA.
GeorgeS21
(Florida)

Posts:3411


11/02/2020 5:53 PM  
sure
JohnC46
(South Carolina)

Posts:10130


11/03/2020 1:42 PM  
Why? To protect his job and maybe funnel work to associates. Basic Protect My A$$ 101.
MarshallT
(New York)

Posts:114


11/09/2020 6:09 AM  
In some cases, a non-member can serve on the board, however a property manager should never be on the HOA board. It's a conflict of interest. Period.

I cannot say why this person would want to be a part of the board. Does your community have difficulty finding people who want to be elected? Whatever the case, the property manager shouldn't be on the board.
SheliaH
(Indiana)

Posts:3577


11/09/2020 9:06 AM  
If this is the community where you have the rental property you're selling or trying to sell, the lack of D
& O insurance could explain why no one is interested in serving on the board - otherwise you put your personal assets at risk.

As for the property manager serving on the board, if your documents say this is permissible, there's your answer. Like some of the others here, it would be interesting to see what your documents actually say on the matter because I have a feeling you've misinterpreted something (and given some of your questions previously, that's a possibility). If you want to know why the property manager is ok with serving on the board, have you tried asking him or her? I'd also ask the ENTIRE board why there is no D & O insurance - that protects their assets, so they may want to reconsider, especially if they passed up the insurance because it's "too expensive."

If you buy another rental property in an HOA, I certainly hope you take the time to actually READ all the documents before you so you'll know what you're getting into this time. If there's something that makes you uneasy, pass up that property - better to pass up on an HOA community that's poorly run as opposed to buying it anyway because the price of the house looks like a steal (there could be a reason for that).
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