Association board members are volunteers, and most have little training in the job. The vast majority have their own jobs and families, and have only limited time to apply to this very important job.They apply their own skills to the job and do the best they can. No one gets it right all the time. Here are some common errors I’ve seen Associations make.
Not reading the governing documents
Amazingly enough, most board members think they can do the job without even reading the governing documents! And even fewer read the appropriate statute (Ch 718, for condominiums). How can you enforce your rules and covenants when you don’t even know what they are? Additionally, the board’s authority and officer’s job descriptions are usually spelled out in the documents. Every board member should have a basic understanding of the governing documents: the declaration, articles, by-laws, and rules & regulations. All board members are now required to either attend a state-approved board member certification class, or sign a certificate that they have read, understand, and will uphold the governing documents. My recommendation: take the course! In just a couple of hours, you will get a thorough understanding of the most important regulations you must work under.
Interpreting the governing documents
If you aren’t a lawyer, don’t think you can interpret the documents. While some sections are written in a fairly straightforward manner, some are quite convoluted, with a lot of legal jargon.
Interpretation can be quite difficult, and an incorrect interpret can be quite costly. Ambiguity is generally interpreted in the favor of the owners, so the burden of proof lands on the board. The best way to overcome this error is to ask for a legal opinion from the Association’s attorney (who should specialize in association law) on anything that is not completely clear to all readers.
Preparing transcripts rather than minutes
The association is required to maintain minutes of all board and committee meetings. Many, however, prepare minutes that are closer to a transcript – documents that include all the “who said what” details. This information does not actually belong in minutes. Per Robert’s Rules, minutes are a record of the business that occurred at a meeting, not what was said at the meeting. This includes the motion made (should be exact phrasing), who made the motion, and the vote result. If the result was not unanimous, the record should include who voted yea and nay. Minutes should not include all the discussion around the topic.
Not preparing minutes
As previously mentioned, minutes are required by statute to be maintained. They must be produced within a “reasonable” time after the meeting. What is reasonable? Most seem to consider this to be before the next meeting, but I would recommend as soon as possible after the meeting, while everyone still remembers what occurred. Draft minutes should be labeled as such, and approved minutes should also include the date of approval.
Signing contracts without protecting the Association’s interests
Many board members just sign vendor contracts that are presented to them, thinking that they sound fine to them. However, if the contract is prepared by the vendor, then it is most likely written to protect the vendor, not the association. Any significant contract should be reviewed by the association’s counsel to ensure that the contract protects the Association, and not just the vendor. This is often an example of penny wise but pound foolish – the board thinks they are saving money by not paying the attorney to review the contract, but one error in the contract can be far more costly than that review would have. Remember, most contracts are negotiable.
Forgetting that the Association is a business
Condominiums, co-operatives, and homeowner associations are not-for-profit corporations. How many are run as businesses? Very few, from what I’ve seen. What does running it like a business actually mean? The answer is simple: it means making the tough decisions necessary to properly maintain, repair, replace and insure the common property, even if those decisions are unpopular with the members. It means budgeting seriously – ensuring that proper amounts are budgeted for to fund those essential maintenance and repair needs. It means responsibly reviewing reserve needs. It means being transparent, and properly handling inspection requests. The proper goal is not to keep maintenance fees as low as possible – it is to properly maintain the Association’s property.
Selecting vendors on price alone
Many associations are very good about getting multiple bids on contracts or purchases, but often make the final decision on the wrong element: price. The ultimate goal of bidding is not to locate the lowest price, but to find the vendor that offers the best value. What is value? It’s the comparison of what you get to what you paid. There is quite a bit of truth to the old adage – you get what you pay for. The lowest price often means either poor service, change orders resulting in a much higher ending price, or other potentially serious issues. Ensure that all bids are based upon the exact same specifications, so you are not comparing apples to oranges. Look at factors such as reputation, expertise, time in business, guarantees, and cancellation clauses. Look for value, not price.
Budgeting incorrectly
Many board members feel that their priority is to keep maintenance as low as possible for the owners. This is not the case. The job of the board is to properly maintain, repair, replace, and insure the common property. Unfortunately, the amounts needed to do so are not always what the unit owners want to see. The board must make the unpopular decisions required to properly fund for the association’s needs. And contrary to many board members’ beliefs, most unit owners prefer higher monthly maintenance to constant surprise special assessments. Better the known than the unknown.
Audit, Review or Compilation?
Reality is, you may not have a choice. Florida statute outlines basic guidelines of size versus level of service, and allows the option of voting to downgrade the service level. However, this only applies if your Association’s governing documents don’t specify a level of service. Many documents specifically state that an audit or review of the books must be completed. In that case, you do not have the option to downgrade below that required level. Not sure? Ask your independent CPA, not your attorney! I’ve seen many attorneys answer this question incorrectly, because they don’t understand that a “review” is a specifically named level of service. Lastly, remember that vote to downgrade must be completed before the end of the applicable year – it cannot be done afterward. Logically, that is backwards, but that is the statute.
Have you seen a common error not mentioned here? Tell me about it!
