Homeowners won't volunteer for boards of directors of community associations--another nail in the coffin?

Community associations are corporations. Their bylaws require management of the association by an elected board of directors. That board serves all of the owners by conducting the business of the association. Like any corporation, the board of directors, and its officers, have the sole legal authority to handle all of the vital functions of the enterprise—from hiring and firing property managers, to contracting for repairs, to determining the adequacy of the association’s revenue stream.

A property manager does not have the authority to conduct the business of the association on its own. No matter how good, how skilled the manager, without the legal power of the corporation behind it, business would stop. Vendors would not continue to provide critical services to the association if there was no one with the authority to write checks. Local government would begin to question whether a condominium project could continue to be habitable if no one was able to pay the water or the electric bill.

Without the board of directors, the association would cease to function. There is no alternative within a corporate framework. Yet many associations have a very difficult time recruiting board members. Board positions go unfilled waiting for volunteers. This has potentially disastrous consequences and justifies further examination. First, we’ll examine some of the reasons why it is so difficult to convince owners to serve on their community association’s board of directors and then discuss the impact of that.

Reason Number 1—Lack of awareness. Many owners of property in common interest developments have little knowledge of the operation of the homeowners’ association. They pay their dues when that bill comes, but know very little about the organization itself or its activities. They may not read the newsletter or if they do it’s only to find out the pool hours. The only budget figures they are concerned about is the amount of the monthly assessment. They are only remotely aware that it is the board of directors and not the management company that has legal responsibility for the business decisions of the association. They simply do not connect the operation of the association with anything in which they have a personal interest.

Reason Number 2—Time Constraints. There are those owners who are familiar with the role of the association and its board of directors and who generally stay abreast of it activities and decisions. They read the newsletter, and occasionally attend a meeting of the board, but they see their occupations or family responsibilities as impediments to accepting the additional responsibilities required of members of the board of directors.

Reason Number 3—Fear of Responsibility. Many property owners in community associations are quite aware of the operations of the association and the function of the board of directors, and they would otherwise have the time to devote to a place on the board. The problem is that for one reason or another they are afraid to accept the responsibility. Perhaps it is a lack of confidence in their own ability or concern about liability should they make a mistake, or they are simply discomforted by the thought of making decisions that are critical to the economic interests of their fellow owners.

Reason Number 4—Us vs. Them. This is the most difficult reason of all. Some owners view the board of directors and the community association as an extension of governmental authority, but more to the point, authority that should be challenged at every opportunity. They do not see a board member as simply a fellow owner volunteering his or her time, but rather an incompetent bureaucrat. These owners often lack the tolerance necessary to acknowledge that board members are unpaid volunteers trying to do their best. This problem serves the dual purpose of insuring that the critic will have no interest in serving as well as dissuading those who otherwise might. But then, the critic may be right. But this should open the door to challenging an existing board member at the next election--not to providing more reasons for no one to run.

Reason Number 5—Not your landlord speaking. When a landlord tells his or her tenants that they can’t smoke inside their apartments, or put satellite dishes on their balconies, or park backwards in the carports, the tenants generally obey the rules. When the board of directors of a community association passes similar rules it is often met with profound resistance—why? The tenants “own” their airspace, at least for the duration of the rental agreement, so why is their disposition toward the landlord’s dictates different than the owner of a condominium? Probably because owners feel more empowered than tenants, but whatever the reason, board members, neighbors and sometimes friends, do not want to be put in the position of landlord and be required to enforce the rules.[1]

The net result of these and other reasons is that boards often have to struggle with open positions, and with few members willing to assist in the operation of the association it makes the remaining board members' jobs that much more difficult—if there are remaining members. If the corporation cannot function because it has no members willing to be directors, the alternative is to seek assistance from the courts, often by petitioning the court for the appointment of a receiver, a very expensive proposition. So there is good reason to be concerned. There is also an argument that the entire scheme of association operation and management—by volunteer owners—is essentially flawed and that the authority to run the business of all multi-family common interest developments should be vested in professionals, arguments that are difficult to refute if the owners refuse to step up.

And that may happen one day. Developers, tired of the construction and budget litigation that invariably ensues, may retain sufficient ownership rights to allow them to manage the property for years or in perpetuity, with a set management fee and assessment formula in the governing documents which allows the manager to assess whatever is necessary to maintain the project without a vote of the members. Or, as we have previously written, developments could be joined into large special districts with sufficient governmental powers, including the power to tax, to manage their constituent developments—again without a vote of the owners.

I call these, and similar ideas the “de-democratization” of community associations. That sounds bad, but what good is representative democracy if there are no representatives? For the democratic volunteer management system to work, there have to be volunteers. But the trend is to fewer, not more, people willing to serve their neighbors in this capacity. If this trend continues any remaining funds could be exhausted through legal fees and the fees of a court-appointed receiver or local government may have to act to protect habitability by condemnation of the project. If those situations become widespread we could see either a wholesale change in the governance of owned, multi-family housing or a major shift of that type of housing into rentals.

It seems that I am increasingly a prophet of doom. But really, if owners are unwilling to govern themselves then condominiums are merely apartments, and if they are unwilling to make the contributions that must be made for a community association to survive, then they must be willing to surrender their ownership interests and be renters. This is a housing crisis as serious as the present economic one, and it may be worse, because the crisis in community association government is not likely to end in a year or two.

TPB





[1] It may also be the reason why it so difficult for boards to raise assessments to an appropriate level. They do not want to be the ones to tax their neighbors or field complaints.