Membership on a Homeowners'

Association Board: Trap for the Unwary

by Donald H. Upjohn

Fall 2002

In recent years, the number of residential condominiums and planned communities has grown rapidly. Many residents purchase and occupy units without fully understanding the nature of the development. Sooner or later, an individual may be asked to serve on the board of the Homeowners' Association (HOA). Before agreeing to undertake such service, a resident should investigate the board and the development and ask questions.

A HOA generally is the entity or association responsible for managing, maintaining and regulating common areas, and also enforcing uniform standards among the individual units. Often, but not always, the HOA is a nonprofit corporation. The questions that arise during service on the board are wide ranging and often complicated. Many rules and regulations apply. There can be the risk of individual liability. In order to avoid unpleasant surprises, the following is a list of some important items an individual should review before agreeing to undertake service:

•  Read and become familiar with the governing documents of the HOA and the applicable law including all amendments thereto.

•  Determine whether the HOA has written rules and procedures in place for hearings and grievances.

•  Complete an inventory of the HOA's resolutions and policies on fines, late fees, termination of utilities, collections, parking, architectural modifications, and maintenance of HOA's books and records.

•  Review and understand your fiduciary obligations and responsibilities.

•  Undertake a thorough financial review of the HOA including determining whether a reserve study was done and whether it has been adequately funded. When was the last financial audit/review of the books? Does the HOA have investments? Has the HOA filed appropriate tax returns?

•  Review the HOA's insurance coverage. Is there directors and officers liability insurance?

•  Understand that applicable laws that may override HOA documents, including the Federal Fair Debt Practice Collection Act, Federal Fair Housing Amendments Act, Americans With Disabilities Act, 1996 Telecommunications Act, local city/county ordinances, state and federal civil rights acts, and case law.

•  Determine whether the HOA has competent professional advice, including architectural engineering and legal advisers. In many cases, it may be helpful to discuss the situation with the lawyer for the HOA, or if none, with your personal lawyer.

Service on an HOA is an important obligation. In many ways, such boards act as private governments. They have a great impact on the quality of life in the development. Such service may prove to be satisfying and rewarding. On the other hand, board membership is also an occasion for much unhappiness. Consider the Italian proverb: No good deed goes unpunished.