By Kimberly Gaddis, and Mindy Waitsman of Weissman, Nowack, Curry & Wilco, P.C.
Whether you are motivated by a single project such as enhancing your amenities area, whether it was your desire to give back to your community or to turn around a poorly run corporation, by serving on your association’s board of directors, you have an opportunity to make a difference. You are in a position to have a direct hand in maintaining, protecting, and enhancing property values in your neighborhood.
WARM UP — LEARN THE AUTHORITY AND RESPONSIBILITIES OF A DIRECTOR
The governing documents of most community associations provide the authority, duties, and responsibilities for the board. Here are some typical ones to consider:
? Associations are Non-Profit Corporations governed by a Board of Directors.
? The members of the board are elected by the owners/members of the community.
? The members of the board elect the officers: President, Vice President, Secretary and Treasurer from amongst themselves.
? The board makes broad policy decisions and the officers are given the authority to carry out these decisions.
? Like a major corporation, the board of directors determine how monies are spent, hire and fire employees and contractors, and take care of a broad range of responsibilities for the community.
? The board of directors is charged with management of the association and this includes:
(1) running the business affairs of the association
(2) creating budgets,
(3) establishing a collection policy
(4) developing and enforcing rules and penalties
(5) hiring an accountant, attorney, a manager/management company, and the necessary personnel for maintenance and repair
(6) coordinating physical maintenance of the common areas, and
(7) other responsibilities.
TIP: WE CAN DO IT ALL OURSELVES … BUT SHOULD WE?
Professional engineers, property managers, lawyers, and accountants can help an association save money in the long run by reducing liability and providing valuable guidance. Board members are not expected to have the skills and knowledge of all of these professionals. If an issue is beyond the abilities of board members, undertaking an issue without professional advice could create liability for the board.
BEGIN TO EXERCISE AND KNOW WHERE TO FIND HELP
Being on the board of directors of your community association can be both a gratifying and frustrating experience. Volunteering to serve on your Board comes with the risk of personal liability for your actions and decisions. Association directors assume the same responsibilities and liabilities as directors of other corporations. In virtually every association, the only qualification required to be a community association director is that you own a home in the community at the time of the association’s annual meeting. Members of a board must be in shape to be able to discharge their responsibilities and duties without injuring the association. Below we discuss “exercises” we recommend to help protect directors and officers from liability.
? Board member duties – Each board member has two duties set under law and as established by the courts: (1) a duty of CARE and (2) a duty of LOYALTY.
1. Duty of Care. The first duty of a member of a board of directors is the duty of care. This duty requires each board member to exercise ordinary and reasonable care in making decision. A board member need not be blessed with unique talents found only in the board rooms of the nation’s largest corporations. Rather, each board member must act in good faith with the diligence, care, and skill of an ordinarily prudent person in the same or similar circumstances.
Board members should perform the following exercises before attempting to make any decisions:
ü Review matters, inquire, ask questions, and investigate in a manner that you reasonably believe to be appropriate under the circumstances.
ü Rationally believe that the decision you are making is in the best interest of the association.
ü Be informed, attend meetings, register dissent when you disagree, know the association’s documents, and act on issues when necessary.
Generally, courts will not second guess the actions of a board if the board members performed those three exercises. Those exercises tone a director’s ability to act in good faith. The law and courts, as a general rule, do not hold directors liable for honest mistakes of judgment, as long as they act in good faith.
TIP: READING IS FUNDAMENTAL: Know Your Documents.
The Bylaws typically define how the corporation should conduct board meetings, annual meetings, elections, votes, and other operations. The Declaration of Covenants or Declaration of Condominium typically establishes and defines use restrictions, maintenance responsibilities, assessments, and enforcement powers. These are essential reading for board members.
2. Duty of Loyalty. Each board member has a duty of loyalty. That duty is commonly referred to as a fiduciary duty. Exercising a duty of loyalty requires a board member to avoid conflicts of interest (such as a board member failing to disclose they own the landscape company), not to compete with the association, not to take the association’s opportunities for personal gain (such as buying a piece of property adjacent to the common area which the board of directors had discussed purchasing), and taking responsibility for and protecting the association’s funds. Breaches of this duty can range from the obvious – using association funds for a board member’s personal benefit – to the less obvious – failing to raise assessments when necessary because of personal financial difficulties.
Example: Enforcing rules and covenants may be the board’s least pleasant job. However, the board has a duty to enforce the covenants, and most neighbors expect to have the community’s standards maintained. Under Georgia law, a board has a maximum of two years to sue for a covenant violation. Speed and agility are essential. A slow start from the blocks leads to delay. Delay in commencing enforcement action can lead to confusion regarding interpretation and enforcement policies.
Exercising takes time and commitment
While serving as a volunteer on the board of directors will require a reasonable amount of time to properly perform the association’s business, there is a great reward in accomplishing a task where results can be seen and felt.
New members of a board genuinely want to catch up to existing board members fitness so the need to establish a reasonable routine that doesn’t lead to exhaustion is important. Many board members over-do-it in what they say in emails. They strain their civility and tolerance for other members of the association. All emails are subject to discovery. Do not write something in an email that you would not say.
Many boards of directors will meet on a monthly basis while others find that only quarterly meetings are necessary. Many boards use e-mails or conference calls to keep each other informed and to make certain decisions. When using e-mail, you should verify whether your governing documents allow for decisions to be made outside of a meeting. In many cases, the decisions can take place via e-mail, but a written consent may need to be recorded in the minutes of the next board meeting.
TIP: FRANKLY, MY DEAR, I DON’T GIVE A DAMN: The Non-Empathetic Board
Homeowners want board members to listen, hear, and understand their concerns, even if their concerns do not have merit. The board that shows concern for owners will have community support, avoid litigation, and have a much easier job.
COST OF KEEPING IN SHAPE
There is no law in Georgia that prohibits a member of a board of directors of a non-profit corporation to be compensated for his or her service. However, the by-laws of most community associations do prohibit the directors from receiving any form of compensation for their service or only permit it if it is approved by a majority of all of the members.
Whether your by-laws are silent or prohibit compensating board members, it is a good idea to look at this issue. In the past, the notion of compensating board members was discouraged. Service on the board was considered an owner’s civic duty. With the demands of dual careers and individuals with many time demands, many associations have a difficult time convincing qualified members to serve on a board of directors. Some communities have sought out ways of encouraging the best and the brightest residents to make the commitment to serve on the board of directors.
If your community suffers from members’ inertia, check your by-laws and see if they address the compensation issue. If your by-laws are silent, they will need to be amended to authorize board member compensation.
CONTINUING THE PROGRAM
Your Year-Round Board Planning Guide
1. Update Your Reserve Study. Winter can take a real beating on a community’s buildings and amenities. Spring is a great time to update your reserve study or, if you don’t have one, contact an appropriate professional, such as an engineer, to have one performed.
2. Spring Cleaning. Spring is also a good time to involve owners in a community clean-up day. Many communities coincide their clean-up day with Earth Day which is typically in the third week of April of each year.
3. Contract Review. Spring and fall are excellent times to take stock of your vendors and the contracts you have with them. Are any of the contracts going to expire soon? Be sure to keep a log of your contracts and when they expire or automatically renew.
4. Review Your Association’s Documents. Have issues arisen which are not covered by your association’s covenants, bylaws, or community rules? Are there updates which are needed to modernize your documents? Use those colder fall and winter months to get your house in order when it comes to your association’s documents.
5. Covenant Reminders. Throughout the year, use your newsletter or other method of communication to remind your owners of various specific restrictions, such as obtaining architectural approval before installing fences or new play sets. Regular and consistent communication about the covenants and obligations of owners can help prevent enforcement battles from arising.
6. Perform an Insurance Check-Up. Did you recently elect new directors? Then it’s a good time to have a professional perform a review of the association’s insurance. Does the insurance meet the minimum standards and requirements of the association’s documents? Even if the minimums are met, is the coverage adequate and sufficient?
7. Year-Round Social Activities. Often, when we get to know our neighbors, problems are reduced and sometimes avoided. Plan a summer barbecue or pool party around Memorial Day or the Fourth of July. Or, plan something for the dog days of summer such as, a children and pet parade. Other ideas are a luau by the pool, a round-robin tennis tournament with a celebration on the courts afterwards, or a neighborhood talent show. A Halloween street party in the fall brings out all ages. Whatever you choose, plan something to bring together your neighbors.