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To be effective, a homeowners association needs a strong board of directors that understands its
role and pursues it with passion and a concise mission in mind. The following outline provides an overview of board roles and
responsibilities.
To form an effective board, directors must have a clear understanding of the strengths and
weaknesses of the association, its history, and what is to be accomplished. Every homeowner association should have responsibility for its
assets as well as its operation in accordance with standards established by state and federal law,
local ordinances, and the governing documents upon which the entity itself was
created. To the extent that the association has
such authority and control, it is the board of directors that makes certain these
responsibilities are fulfilled.
Understanding the homeowners association concept:
The homeowners association is the cornerstone of a planned residential community. It brings continuity and order to the community; it preserves the
architectural integrity and it maintains the common elements. Properly run, the association promotes the concept of “community”
and protects the neighborhood's property values. In
many cases, it collectively makes available recreational and other facilities that might not
otherwise be affordable or available to homeowners and residents on an individual
basis.
Deed-initiated homeowners associations have become an essential part of the overall concept of
residential property ownership in today's marketplace.
Purchase of a home or lot often brings with it mandatory membership in an association which then
provides the structure for operation and management of the residential
development. With membership comes certain
maintenance obligations, financial responsibilities, and a commitment to abide by use
restrictions and other rules of the association.
To a degree, it necessitates individual conformity for the good of the
whole.
The association's responsibilities may be limited to basic maintenance functions or they may be
expanded to include sophisticated and extensive upkeep of the property as well as delivery of
special services to individual homes (e.g. back door trash pickup). To be successful, its officers and directors must uniformly and
fairly govern the community, and it must have a reasonable level of participation by each of its
members over time.
Board of Directors
The association has responsibility for its common elements as well as the management and operation
of the association's business affairs - - all in accordance with standards established by the
governing documents created when the community was first developed. To the extent that an association (typically a non-profit
corporation) has such authority and control, it is its board of directors that carries out these
duties and responsibilities.
Members of the board of directors of an association serve without compensation unless the bylaws of
the association provide to the contrary. The board's
authority includes all of the powers and duties enumerated in general law, as long as these powers
are not inconsistent with the provisions of the documents governing the
association.
Officers of the Association
The association acts through its officers and agents.
The board of directors makes the policies for the association, but the officers and agents carry
out these policies and administrative functions for the community. Some of the officers are clerical while others carry out
substantive functions based on policies established by the board of directors. All of the officers have an affirmative obligation to act with
utmost good faith towards the association and cannot deal in the funds or the property of the
association to their own self-advantage. Each
association typically has a president, secretary, and treasurer and may have one or more vice
presidents. However, an association may officially
conduct its business with fewer officers than these, depending upon the laws of a given state.
PRESIDENT
The president of an association is vested with all the powers generally given to the chief
executive officer of a corporation. While specific
by-law provisions may vary the president's duties, it is generally presumed that he or she will
preside at all meetings of the board and the membership. The president will execute contracts, orders and other documents
in the name of the association as its agent. When
signing documents, the president should indicate the capacity in which he or she is signing in
order to avoid any personal liability since the president's signature, under most circumstances,
will bind the association under a doctrine of inherent powers.
The president also assumes general charge of the day-to-day administration of the association and
has the authority to order specific actions in furtherance of the board's
policies. The president serves as spokesman for
the board of directors in most matters relating to general association business. Like all officers of the association, the president has an
affirmative duty to carry out the responsibilities of the office in the best interests of the
association. Unless otherwise specified in
governing documents, the president serves at the will of the board of directors and can be
removed with or without cause at any time by a majority of the full board.
VICE PRESIDENT
The vice-president is vested with all the powers that are required to perform the duties of the
association president in the absence of the president.
The vice president does not automatically possess inherent powers to act in the capacity of the
chief executive officer, and may act for the president only when the president is actually absent
or otherwise unable to act. The vice-president may
assume such additional duties as are defined by the board of directors. Often, the vice-president will chair one or more substantive
committees like that of architectural review.
SECRETARY
The secretary of the association is responsible for keeping and maintaining a record of all
meetings of the board and the membership and is the custodian for most of the official records of
the association. The position of secretary is not
simply a clerical position. In many cases, the
secretary will not actually keep the minutes of the meetings, but will be responsible for obtaining
someone who will do so as a recorder or assistant secretary. As the custodian for the minutes and other official records of
the association, the secretary is responsible for insuring access to those records by the members
of the association and their authorized representatives.
TREASURER
The treasurer is the custodian of the funds, securities, and financial records of the
association. When the association has a manager or
management company that actually handles the funds on a daily basis, the treasurer's duties will
include overseeing the appropriate people to insure that the financial records and reports are
properly kept and maintained. Unless the by-laws
otherwise specify, the treasurer is responsible for coordinating the development of the proposed
annual budget and for preparing and giving the annual financial report on the financial status of
the association.
The treasurer does not have the authority to bind the association or the board of directors in
dealings with third parties unless the board has provided express authority for the treasurer to do
so. As with the association's secretary, the treasurer
does not have to perform the day-to-day record keeping functions of the association when this
responsibility is transferred to a management company, but the treasurer will ultimately be
responsible for insuring that the financial records of the association have been maintained
properly in accordance with sound accounting practices.
Fiduciary Relationship and Responsibility
The members of the board of directors and each officer of the association have a fiduciary
relationship with the members of the association. This
fiduciary relationship imposes obligations of trust and confidence in favor of the corporation and
its members. It requires the members of the board to
act in good faith and in the best interests of the members of the association. It means that board members must exercise due care and diligence
when acting for the community, and it requires them to act within the scope of their
authority.
The fact that the association is a not-for-profit corporation, or that the members of the board are
volunteers and unpaid, does not relieve them from the high standards of trust and responsibility
that the fiduciary relationship requires. When a
member accepts a position on the board of directors, he or she is presumed to have knowledge of the
duties and responsibilities of a board member. Board
members cannot be excused from improper action on the grounds of ignorance or inexperience and
liability of board members for negligence and mismanagement exists in favor of the association and
the property owners.
Each board member must recognize the fiduciary relationship and the responsibilities that the board
has to the association and each of its members. The
board's duties must be performed with the care and responsibility that an ordinary prudent person
would exercise under similar circumstances, and the ultimate responsibilities of these unique
positions cannot be delegated to a manager, a management company, or other third
party.
A Recap of the Board Member's Role:
Acting through the board as a whole, a board member should:
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Enforce the documents
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Establish sound fiscal policies and maintain accurate records
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Develop a workable budget, keeping in mind the needs, requirements and expectations of the
community
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Establish reserve funds
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Act on budget items and determine assessment rates
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Collect assessments
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Establish, publicize, and enforce rules and penalties
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Authorize legal action against owners who do not comply with the rules
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Review local laws before passing rules or sending bylaws to membership for
approval
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Appoint committees and delegate authority to them
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Select an attorney, an auditor, insurance agent and other professionals for the
association
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Provide adequate insurance coverage, as required by the bylaws and local governmental
agencies
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Inform board members of all business items that require their vote
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Inform members of important board decisions and transactions
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See that the association is protected for the acts of all parties with fiscal
responsibilities
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Attend and participate at meetings
Operating a homeowner association carries with it many of the very same duties and responsibilities
as overseeing any other business. Serving as a board member is a valuable and rewarding experience
that should be undertaken by those who see it as an opportunity to serve their fellow neighbors
while protecting and enhancing the assets of the community. It is serious business, but also a task
worth doing well in order to safeguard the investments of all.
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