Question: Our HOA board has some funds that we want to put into a CD to earn more. The funds are not going to be needed for about 3-5 years. We are currently getting a very low rate of return in a Money Market account but can improve our position by 2-3% by long term CD investing. What are the downsides?

Answer: One of the big advantages of a well prepared reserve study is that the board can make informed decisions about investing reserve funds to maximize return on investment. For example, if the reserve study indicates that $75,000 of the $100,000 reserves are not going to be needed for 5 years, the $75,000 could be invested $25,000 in a 1 year CD, $25,000 in a 2 year CD and $25,000 in a 3 year CD. When the 1 year CD comes due, the money could be reinvested in a 3 year CD. In just two years, all excess reserve funds could be yielding the rates of a 3 year CD. This strategy is called “laddering”. Increasing investment return on reserves will reduce the level of owner contributions. It’s a beautiful thing.

Question: Is it advisable to allow the members to attend board meetings and work sessions? We try to hold a meeting on a monthly basis, some of the attendees can get quite windy, as we give then a chance to express their concerns and wishes. After they are finished, we allow them to sit and listen while we conduct the rest of the meeting discussing budgets, projects, delinquent homeowners, etc.

Answer: Board meetings should be open to members. The exception is an emergency board meeting that's required to handle urgent business that can't wait. For standard meeting, it's good to provide a homeowner forum prior to the meeting to allow homeowners to speak and ask questions of the board. It is also prudent to put a time limit on the forum of, say, 15 minutes. The president should ask in advance which members would like to speak and, based on the response, divide up the time among them. And, hold them to it. The board has important business and needs to get to it. Long board meetings is one of the reasons many won't run for election. Respect everyone's time.

Allowing homeowners to sit through the meeting is their right but there are certain topics (like homeowner delinquencies) that are best discussed anonymously (no names mentioned) or in "executive session". Executive session is a meeting closed to owners to discuss highly sensitive issues like litigation, delinquencies, employee personnel matters and contract proposals. If you do insist on discussing delinquencies in your board meetings with homeowners present, names should not be named to avoid libel and defamation of character issues. Same goes with recording names in the minutes.

Work sessions are another matter. As long as no business decisions are made and they are done only for discussion and gathering information, they can be closed to owners. Formal decisions need to take place at a regularly scheduled board meeting.

Question: We have had problems with our management company in recent years. They do not respond to questions and have given us a grief over certain issues. How should we handle this?

Answer: The management company is hired by and takes direction from the board. The board should do periodic reviews of the management contract which can always be terminated for just cause. The board, if dissatisfied with management’s performance, should sit down with the manager and discuss specific issues and come to an agreement on how they will be handled in the future. If the manager won't or can’t comply, it's time to find a new manager.

In most cities there are several companies that specialize in this kind of work. The board should develop a Request for Management Proposal which includes a detailed scope of work. (There is a sample Request for Management Proposal at www.Regenesis.net available to Gold Subscribers.) Always get references and exam the management agreement

Published: January 11, 2012

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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 .