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 which 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:
