Saturday, 16 December 2017

Ask the HOA Expert: Governing Document Provisions

Written by Posted On Tuesday, 28 November 2017 20:15

Question: Our governing documents have a provision that limits rental agreements to 12 months except for extenuating situations approved by the board. Since the HOA has not been turned over yet by the developer, is the developer the "board" and does this give him the power to change the rules for his own benefit? For example, the developer rented several units for 18 months.

Answer: Yes, prior to turnover, the developer controls the board and can grant himself an "extenuating circumstance" although this would be a clear conflict of interest. Since the developer controls the board, it puts a lot of responsibility on the developer to govern equitably meaning he should not grant himself special favors. But developers want and need to sell units and sometimes bend the rules when necessary to make a sale. It often comes in the form of granting a buyer some special right (for example, like installing a fence) that is prohibited in the governing documents. In most cases, these are verbal agreements since the developers know it will come back to haunt them if they put it in writing.

Usually, the rules developers bend are minor since major ones could have some nasty consequences when the turnover board takes over. If a developer is grossly out of line during his control period, the new board can hold him legally and financially accountable.

That said, during down real estate markets, developers are forced to do things they did not plan to do, like rent units, until the market recovers. Failing to take measures like these would likely force the developer into bankruptcy or foreclosure by the bank. Banks are generally not good substitutes for the developer so it may behoove the current owners to be somewhat flexible with the developer if he is struggling but doing his best to fulfill his developer obligations.

Question: Must all HOA business be discussed, debated, and voted on at board meetings open to the members? We have a group of dissidents that routinely disrupt and interfere with the board discussions. It's hard to get business done.

Answer: The board should deal with most HOA business (except legal matters, contract negotiations, private collection matters and a few other topics) at open board meetings. Part of the disruption issue may be related to how the board seats itself at board meetings. If the board is sitting firing line style facing the audience, it encourages the audience to engage and interrupt since board comments are aimed at the audience. If this is the case at your meetings, the board should reorient itself around a conference table large enough for that purpose and seat the audience elsewhere but not at the conference table.

Regardless of the seating arrangement, if the board president is not effective in restraining members of the audience that interrupt, the problem will persist. The issue can be handled tactfully in a short statement preceding the opening of every board meeting where there is an audience by simply stating "Please remember that this is a board meeting, and that guests are not to interrupt unless asked to speak by the Chair." The Chair, of course, must quickly seize control if an interruption happens and ask the person to leave if they do not cease and desist. If your Chair is not up to this task, someone that is should run the meeting.

Question: Our board president has many wonderful qualities, however, lacks level headedness when confronted by irate members at meetings. Being aware of his own shortcomings, he has delegated the act of chair to the vice president whom is well versed in parliamentary procedure. Is this against any rule? Our documents state that the president presides over meetings.

Answer: Dealing with confrontation at board meetings is a basic duty of the president. A vice president should only assume this duty if the president is absent. The president cannot transfer his authority to someone else. It has nothing to do with parliamentary procedure. The president needs to maintain control over civility and the tone of the discussion. If he is not up to the job, he should step down and the board should appoint someone else, like the VP, who is.

For more innovative homeowner association management strategies, see www.Regenesis.net

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Richard Thompson

Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues.

Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at rich@regenesis.net.

www.regenesis.net

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