Is Your HOA Board Doing the Basics?
By Brian E. Moore
Congratulations, you have just been elected to the board of directors of your homeowners association! Your victory might have come after a hard-fought and hotly contested election or more, likely, you were one of a few who showed-up at the annual members’ meeting and was therefore “volunteered” to become a director. Either way, you have now assumed duties and responsibilities to your association and neighbors of which you might not be aware and which may not have been carried out by previous boards.
Many of your neighbors probably decided that the did not want to serve on the board because they do not wish to be involved in common area maintenance issues, squabbles between neighbors or confronting covenant violations in the community. I will save those more interesting issues, relatively speaking, for a later blog. My purpose here is to make you aware of a few questions to ask when you assume the position of director to help ensure that the board is carrying out its more mundane duties.
- Is the board keeping the members informed of the financial condition of the association?
The association should be run like a business and the board is required to keep basic financial records. These records should include records of receipts and expenditures and assets and liabilities. Also, an annual income and expense statement and balance sheet must be made available to all members within 75 days of the close of the fiscal year. Of course, if your covenants and bylaws may require that additional financial documentation be provided.
- Is the board adopting a budget?
The board must prepare a proposed budget. Within 30 days of adopting, the board must provide a summary of the budget to all members and notice of meeting to ratify the proposed budget.
- Is the board providing members with notice of their right to mediate disputes?
North Carolina law requires that once a year members be provided with a written notice of their right to mediate disputes with the association. This notice can be published on the community’s website if one exists.
- Does the board follow a written collections policy?
This is not required under the law, however it is critical. Delinquent assessments are a constant hassle for many associations and therefore having a written policy that ensures all homeowners are treated the same is critical. Also, a properly written policy will advise board members of the requirements of applicable fair debt collection laws, which if violated, can expose the association to substantial monetary penalties.
- Does the board have in place a written procedure for conducting due process hearings?
If a member is violating the covenants, the association has the authority to impose a fine or suspend community privileges. However, before it can do so, it must follow the procedure in the covenants. If there is no procedure in the covenants, the member must be given notice and an opportunity to be heard before the fine or suspension can be imposed. A written policy should be in place that the board can follow for noticing and conducting these hearings.
- Does the association have adequate insurance?
The board should have in place insurance policies against property damage to common elements and liability insurance. A policy should also be in place to cover acts and omissions of the directors and officers of the association. The governing documents of the association may specifically state the types and amounts of insurance required.
The above items are fundamentals which you as a director should ensure that you board is performing consistently. Of course, this is not an exhaustive list and often times the association’s covenants and bylaws may require substantially more depending upon the nature the size of the community and the types of amenities offered. We highly recommend that the board retain legal counsel experienced in representing homeowners associations to advise directors of their duties and obligations under applicable law. Please give me a call or email me at firstname.lastname@example.org if you need assistance with any of these issues.