No matter what the profession or position, it’s difficult to work where you live. For condo and HOA board members, that can certainly be the case. These volunteers must make decisions that impact not only the bottom line, but their friends and neighbors as well. That reality makes matters of ethics and etiquette even more important for board members as they strive to be fair and smart representatives of their community at large.
Part of the Greater Good
First and foremost, according to the experts, it is important to remember one key point: whether in a co-op or condo, a board member is a representative of the people. Too often, “Shareholders or unit owners will run for the board with a specific agenda—something personal,” says Rosemary Paparo, director of management for Buchbinder & Warren, a property management firm based in Manhattan. “They’ll think, ‘I want to do this with my apartment, or ‘I have this issue.’ And it’s not even a broad issue, but something in which they alone are interested. They can’t do that.”
Board members are elected to serve the entire association and make decisions based on what’s best for the community. The decisions they make should function for the greater good, and not succumb to the “tyranny of the majority,” as one manager interviewed put it.
Board members also have to remember their fiduciary responsibility to the building. “They have to ask, ‘What’s in the best interest of the co-op or condo? Will the decision I’m making hold up five or 10 years down the road?’” Paparo says. For example, “raising a fee might not help my building right now, but will it prevent shortfalls later? Will it help the association in the longer term?”
Going hand-in-hand with the idea of working for the greater good comes the basic rule that board members cannot fly solo, meaning they should only act with the authority of the entire board behind them and in the best interest of their residential constituents. Individual board members must remember that their decision isn’t the end-all.
“Decisions that create additional financial burdens on neighbors require special care,” says Robin L. Habacht, property manager with Monticello Management in Matawan, New Jersey. “Ideally, the board as a whole would start an information campaign leading up to the deadline. Keep residents informed, advised and participating so that there is a sense that the decision is not being made by a single entity, the board, but rather that the owners were party to the decision.”
Speaking out of turn and making promises they don’t have the authority to fulfill can also backfire on board members quickly and oftentimes messily.
For example, one property manager cites a board member who wanted to do a favor for a resident who was in arrears. Thinking he was being helpful, the board member told the resident that he could temporarily suspend payment of his monthly fees. “There’s no way they can do that for one person and not everyone,” says the property manager. “Any decisions have to be made across the board. They can’t be unilateral. Board members cannot play favorites, and they cannot overstep their bounds.”
When situations like this arise, it’s important for board members to let the rest of their team help—meaning they should turn to their managing agent or property manager and allow them to follow procedures that likely are already in place. Problems should be handled “in a manner that removes the board from contact,” the property manager continues. “They have to live with these people. It’s better to let a third party handle things rather than be in a position where they’re having trouble with their neighbors.”
No Playing Favorites
To eliminate possible conflicts of interest Elaine Warga-Murray, co-owner and property manager with Regency Management Group in Howell, New Jersey suggests establishing procurement policies, concerning transparency and conduct to uphold a community of trust.
“A policy of full disclosure and making the community aware of the Code of Ethics is helpful. Our firm recommends posting financial status reports on websites monthly so owners may see what money is spent on and how funds are being used,” she says.
Scenarios that involve working with friends or other business contacts on building business can be rife with conflicts and sticky wickets. Paparo suggests that board members who want to put people in line for possible work with their HOAs should still follow a blind-bid process. With a construction project, for example, they can ask management to send out an announcement for blind-bids, and their contractor friend can then apply for the job the same way any other contractor would. Then, together with the association’s architect, engineer and the rest of its administrative team, they will open up all the bids, look at them together and make a fair and unbiased decision.
After that bid process takes place, however, “It would be unethical of them to say, ‘My friend the contractor came in high, but I’m going to go back to him and let him rebid,’” says Paparo. “That’s unethical.” If a board member is recommending someone to do a job, they should recuse themselves from voting.
“Who doesn’t want to help a friend, especially in today’s economy, by giving them a shot at a small or big job,” adds Habacht. “But as board members you’re not only held to a higher standard but should something go wrong, fingers will be pointed squarely at you. Remember, as a board member, you are responsible for the welfare of 40 or 400 residents. Their home is the single largest investment they will ever make.”
Anything that involves an exchange of money or favors between the board members and the prospective vendor is also a huge ethical no-no, says Paparo, “I’ve had people ask, ‘If I give someone a referral, can I get a fee?’ I say, ‘No, that’s called a kickback.’ There should be no fees, no freebies, no new free kitchen cabinets.”
Knowing the Rules
Many ethical “gray areas” can be avoided if the board simply knows the rules and parameters of their position. It’s important for boards to know their roles—it’s also just the polite thing to do, saving time and energy at busy board meetings.
“Board members need to read the condo declaration and bylaws, or the proprietary lease and bylaws,” adds Paparo. “They need to look at the house rules. They need to know what’s in place already, and learn what the mechanisms are for change. There has to be an understanding of how things work.”
“An old lawyer once gave me the rule of thumb: ‘If you have to ask then its probably an issue. Keep walking’,” advises Habacht. “Steer clear of gray areas and if you’re not sure, seek the advice of the association’s counsel.”
Knowing the ins-and-outs of the association’s building or buildings and its functions just makes good management sense, and makes life easier for all involved. “Some board members are extremely diligent,” Paparo says. “Others come to meetings absolutely and totally unprepared, so the meeting becomes about bringing them up to speed. I hate to say it’s like being in school, but some people do their homework and others don’t.”
Talk is Cheap—Except When it Costs
As they used to say in World War II, “loose lips sink ships.” Too much talking between board members and residents might not bring down Europe, but saying the wrong thing to the wrong person at the wrong time can cause more than enough headaches for all involved.
“Board members are going to have conversations with their neighbors,” Paparo says. “But they want to be prudent about what they’re going to say. They need to use discretion and common sense.”
Gossiping with the neighbors, for example, is a cardinal sin for board members. “In order to maintain amiable relationships with owners, board members should refer to [their] confidentiality agreements,” says Warga- Murray. “State that you can not speak for the entire board but that you will carry the inquiry to the board, and ask that a written response be provided. The best thing to do is for the board member to listen and be available to hear owner comments and questions.”
Warga-Murray also advises board members to use email, text messaging and Twitter with utmost discretion when communicating with residents. “Board members should refrain from responding to emails, other than to acknowledge receipt of the emails, tweets and text messages,” she says. “Refer the owner to management for a complete response. Emailed responses are often not well thought out and may jeopardize the board as a whole.” Certainly, she says, board members can use emails to “forward” written responses from management or the attorney, etc., and [these responses] should always acknowledge any [previous] form of contact from owners.
“That is not to say that boards should never utter a peep to their fellow residents. Boards need to keep the channels of information and conversation open to inform owners of issues which affect daily operations.”
While Habacht encourages the use of various forms of new technological and media innovation for communication, she advises board members to refrain from divulging any questionable content. “Anything that isn’t in the minutes should not be discussed,” she says. “After all, how do you determine what is confidential?”
Keeping the Proper Attitude
In most instances, board members will avoid trouble simply by approaching their job with the proper attitude and perspective. They have to remember that the “most effective boards maintain good communication with owners and are very detailed about the basis of their decisions,” says Warga-Murray. “Sometimes board members might think or act as though they own the whole association. “But a few boards have been voted out of office by those wanting to contain fees, reduce maintenance and return money to resident owners, so obviously there is dissent and conflicts,” she continues.
And, say the professionals, it helps for board members to remember that they are not alone; they are, in fact, part of a team. Letting management do the job for which they were hired and act as guides and expert advisors can free board members from stress and also give them the time to do what they were elected to do: lead and make decisions. Letting management do their job, whether dealing with residents or vendors helps make a building or association a better place to live overall.
Working in concert with management and understanding the rules and their respective roles, board members can avoid ethical pitfalls and problems—something that will go a long way toward building an idyllic residential oasis for themselves and for their fellow residents.
Liz Lent is a freelance writer and a frequent contributor to The New Jersey Cooperator. Melissa Swinea provided additional research for this article.