Is your board being pulled in many different directions by competing needs and demands? They key is determining where the board’s focus is most needed and deserved. A nine-step process was developed by two community managers to help condo and HOA boards make effective decisions. It can be found in this article (link) and it is a great process from a practical point of view, but since this is a legal blog, I’ll go ahead and give a legal take on the first step of the process.
The first step is to determine whether the immediate issue is really a problem that the association needs to be involved with in the first place. The board will need to examine the issue and the facts, make inquiries if necessary, review their authority (remember, a homeowners association only has the authority to act given by law or its governing documents) and review their obligations (remember your fiduciary duties and the obligations imposed by the law and the governing documents).
There are many instances where deciding to do nothing at all is a valid, and sometimes the best, decision because of any of a variety of reasons. While a board has a duty to use ordinary care to manage the property and financial affairs of the community, if a board conducts a reasonable inquiry, considers the relevant factors, and makes an informed decision in what they believe to be the best interests of the association, then even deciding to take no action at all can be a proper decision.
Let’s look at two hypothetical instances where a board failed to act:
1. The governing documents of the Oceanview Condominium Association provide that the association and any unit owner may enforce the covenants. Owner A complains to the board that Owner B constantly plays his music too loud, yet other adjacent unit owners are questioned and none of them have noticed such a problem, and when talking with Owner A and Owner B, it is clear there is a long history between the two. The board decides to take no further action.
Alleged violations are often brought to a board’s attention through a complaining resident effectively seeking to have the board intercede in what is, in realty, a personal dispute between the complainer and another resident. In such cases, a board, rather than becoming a tool of the disgruntled resident, should refrain from involving the HOA in the issue.
2. Five members of the Oceanview Condominium Association fail to pay assessments for common expenses. The board does not take action to enforce their obligation to pay assessments.
In the absence of other facts or circumstances, the conclusion would be justified that the board has breached its duty to use ordinary care and prudence in managing the financial affairs of the association.
The decision not to take any action is still a decision nonetheless and as such it should be noted in the minutes of a board meeting. I recommend also including a brief statement of the inquiry, factors and/or analysis undertaken by the board in reaching its decision. Such a step can help the board in the future in ways too numerous to explain here.
The range of power a board holds over its community’s well being and the range of decisions a board is called on to make can be significant. Every board should have a process for making effective, well-considered and well-documented decisions.
Curtis G. Kimble