Tuesday, January 27, 2015

First Steps

Newcomers to a Board of Directors face a steep learning curve.  Without understanding the mindset and lingo, a volunteer will more than likely be ineffective and frustrated.  And any short-term accomplishments may be overshadowed by negative long-term consequences. 

Prior to your first meeting it would be beneficial for you to review the governing documents (Declaration, Bylaws, Amendments and any Board Resolutions) of your community.  Highlight any areas of importance or of which you feel you do not fully comprehend. 
In the first Board meeting held after a community's annual meeting, it is good practice to have the Association's attorney speak about basic rules.  This step gets everyone off on the same foot.  Discuss your highlighted items with the attorney to ensure you have a full understanding of the topic.  The standard “there are no stupid questions - except those not asked” definitely applies when trying to understand these documents.

One topic should definitely be a quick introduction to contract law.  Yes, you will (hopefully) have your attorney reviewing any contracts before you sign them, but the interactions before and after a signed agreement are just as important.

Another item is identifying the typical sections of the governing documents that cause confusion.  This is also a great time to identify the gaps in the regulations that need amending.  Declarations drafted twenty years ago, and those issued by developers, often fall short.

Your attorney should also discuss how judges approach typical situations in homeowners associations.  For example:  Without thorough documentation, a judge often will be very lenient toward the homeowner.  Another example:  Something as simple as 'may' versus 'shall' in a contract or governing documents can be disastrous.  The judge can be a grammarian with a microscope focused on a single word or phrase. 

The attorney visit will easily consume the first meeting, so the next should involve the insurance broker, CPA, and association manager.  These three will identify weaknesses that the Board should focus on, such as life-safety items or under-funded cash reserves.

While the above are just the beginning steps, remember the First Rule:  Always insulate the Board by always seeking professional advice from third-party experts.  Relying on a patchwork of self-knowledge only exposes the individual Director and the Association to liability that your insurer will likely refuse to cover.  This expensive lesson happens all too often in communities around the country - don't let it happen to yours!

As a new Board member it is very important to remember you are running a corporation for the benefit of all stakeholders (homeowners).  While being a Board member is a volunteer position, the responsibilities are quite real.  When reviewing any issue, be sure to ask how it will benefit the community - and then do what the documents allow. Keeping both these items in mind will help ensure your efforts will bolster everyone’s investment in, and enjoyment of, your community. 

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