High & Mighty When Boards Go Overboard

There’s nothing worse than being a unit owner in a building and seeing someone disregard a rule and seemingly getting away with it—particularly if that person is a member of your homeowners association board. Sadly, this scenario isn't wildly uncommon. Some building and HOA board members believe that they are “above the law” so to speak, and seem to be operating under a different set of rules than the rest of the building. This could be anything from giving themselves preferential treatment for parking spots, flouting pet rules, fast-tracking their own alteration projects or voting on financial matters when they themselves are in arrears.

Denise Lindsey-Becker, CMCA, AMS, PCAM, vice president of business development at Signature Property Group in Englewood Cliffs, has seen her share of board members try to get away with things, but believes that most of the time such breaches are unintentional.

“I have seen cases of board members not following their own bylaws, but usually they are not aware of it until it’s brought to their attention,” says Lindsey-Becker. “If they are not aware of a certain bylaw that they are in violation of, we’ll bring it to their attention and more times than not, they’ll correct themselves. It usually has to do with landscaping, or parking, or a satellite dish. Maybe they’ll have different plants that don’t follow the landscaping guide—it's not usually anything too egregious.”

“I think every manager has probably experienced a situation where the board has not followed the bylaws. Most times it is not a premeditated decision to not follow the bylaws but more of a misunderstanding,” says Paul Santoriello, PCAM, CMCA, AMS, the president of Taylor Management Company in Whippany. “For example, let’s say somebody were to resign from the board. Oftentimes, the board would then name somebody to replace the resigning board member. But the governing documents might say something to the effect of ‘if there’s greater than x amount of time left in the term then there should be an election.’ Governing documents vary from association to association, and can be a bit vague—associations sometimes have a tough time interpreting them.”

Rogue board members are awful for community morale, have a corrosive effect on residents’ confidence in their board, and can cause a myriad of legal problems. In addition, in Florida there’s a law that if a board member is 90 days past due on his or her assessments, they are no longer eligible to serve on a board. Many New York metro area real estate professionals would like to see a similar law enacted in the Garden State.

“Sometimes board members make innocent mistakes that are corrected quickly and unfortunately sometimes board members think they are above the rules,” says Liz Comando, vice president of the North Jersey branch of Towne & Country Management, Inc. in Red Bank. “It is always a difficult situation when a board member puts his/her personal agenda ahead of the needs of the association. This can create legal implications for the association and may create personal liability for the board member who believes he/she doesn’t need to follow rules or that it’s acceptable to operate outside the established scope of a board member’s responsibility.”

Fiduciary Duty

A fiduciary relationship exists when one party puts its trust in another party and grants to that second party a degree of influence and power. There is the understanding in a fiduciary relationship that the second party has a high level of accountability, including moral accountability, to the first party, and that the second party—the fiduciary—will put the best interests of the first party above his or her own.

“The concept of fiduciary duty is that board members have to keep in mind that their decisions are for the good of the whole and you have to keep your own personal agendas out of it,” explains Lindsey-Becker. “I think they need to understand that they have to stay within the confines of their budget and reserve studies. They basically have to make sure they are doing the right job for the collective association.”

“When a board member is elected by members of an association, he/she has a legal duty of trust to put the needs of the association first,” says Comando. “The board is charged with the responsibility to act in the best interest of all the owners—not just themselves, or a select few. Now more than ever, boards are looking to maintain property values without raising maintenance fees. Replacement reserve funds have come under very close review by board members with ‘short-timer’ attitudes. These are board members who may be selling their unit or seniors who tell me, ‘I won’t be alive in 20 years’ and think it's okay to hold off properly funding resources.”

In a black-and-white world, a board member shouldn’t be held to any higher standard than any other unit owner in terms of their obligation to follow rules, but in real life, they must be to keep things running smoothly. If not, unit owners get upset and all of a sudden it undermines a board’s authority and it makes them wonder what else they can be doing wrong—like possibly embezzling—it creates a firestorm of problems.

Breaking the Rules

Board members who break rules may do so out of a feeling of superiority or it may just be in their nature and they think they can get away with it. Santoriello believes that there should be no differences between how a rule-breaking board member should be dealt with compared to a unit owner who may step out of line. In fact, he believes that the board member should be held to a higher standard and should be setting the example in the community.

“You would hope, very simply, that the board members are to be held to the same standards when it comes to applications and rules and regulations,” says Santoriello. “I believe that a board member has a greater threshold of responsibility. Because at times they are the rule-making body—so they are making the rules and enforcing them—so to that extent, I believe that they have a responsibility that is greater than a unit owner to abide by the rules. How do you preach these rules and regulations and they don’t apply to you? If they are going to carry the torch, carry it strong.”

“From a managers’ perspective, there should be no difference between an owner or board member stepping out of line,” adds Comando. “Most times a ‘friendly reminder’ will resolve the issue. Once in a while, if a board member continues to act outside of the rules, the matter needs to be dealt with by the rest of the board and/or by the association’s counsel.”

Prime Suspect

Without question, unit owners expect board members to lead by example and comply with the same rules and regulations all unit owners abide by. To do otherwise breeds distrust in the board and lowers the morale of a community. If a unit owner sees a problem, they should contact the managing agent or property manager and put them on notice regarding the board member’s infraction.

“It’s important for them to put down all of their concerns in writing, rather than approaching the situation themselves because we don’t want to have any confrontations in the street,” says Lindsey-Becker. “The best way to handle it is through management. The management can address it with that board member and the collective board and try to correct it ahead of time and nip it in the bud. They also must make sure that their claim is not unfounded. Some of these claims may just be out of being vindictive or an ax to grind. I think checking for accuracy should be first.”

Santoriello agrees with Lindsey-Becker on the importance on putting concerns down in writing.

“If a unit owner sees misconduct by the board they should put it down in written form asking for an explanation or response to the concern,” adds Santoriello. “I would also indicate a time period when they would ask for a response. If a response is not given and there is no indication that they are going to respond—the unit owner has to read the governing documents. There are procedures by which a board member can be removed from the board. Typically the unit owners will have to petition the board for those particular types of things if they get adequate support from the community as a whole.”

Another thing unit owners can do if they suspect fraud is to attend board meetings to follow the issues as they come up. Also remember to speak up at owners’ forums or at a board meeting. “Homeowners tend to be very vocal if they feel in any way, shape or form that a board member is receiving special treatment,” says Lindsey-Becker, “For example, if it is a trend that a board member’s house is always the first to be snowplowed.”

And, lastly, the easiest course of action against a board member breaking rules is to simply campaign against them in the next election and make sure they don’t get their position back.

Final Thoughts

One of the best ways to make sure everyone—board members included—is on the same page is to have a good set of rules with all procedures in place. These include a complete set of documents for suspected rule violations as well as guidelines for disputes such as arbitration or mediation.

Keith Loria is a freelance writer and a frequent contributor to The New Jersey Cooperator. Staff writer Christy Smith Sloman contributed to this article.

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Comments

  • At our last board meeting there was an election. The Bylaw require a secret ballot. When I called the management company to inform them that the back of the ballot they sent requires the name and address of the voter. I was told that unless the form on the back of the ballot included at the very least the unit number of the voter, it would not be a valid ballot. I pointed out that this would be a direct violation of the Bylaws. There was no acknowledgment of that fact. I voted and brought proxies on the signed "secret ballot" so we could at least participate in the election. The management company encourages the board with these maneuvers. Help. Our management company believes that the board is his customer and that the customer is always right. The owner of the management company has been very clear on that point. Solutions?