What can be done to improve HOA governance?

By Deborah Goonan, Independent American Communities

There has been much online discussion about dysfunctional boards of association-governed communities. Homeowners complain that their board members operate in secret, they discourage participation of members, and resist providing access to official records.

In some communities, the same handful of homeowners takes turns serving on the board, rotating officer positions, for more than a decade.

If and when new blood is elected to the board, these new members may be intimidated by incumbent board members, particularly those with an authoritarian leadership style. Consequently, some board members remain silent when they should speak up, or resign before their term is up, out of a feeling of frustration or helplessness.

Many board meetings of homeowner, condominium, and cooperative associations are conducted haphazardly, without following Roberts Rules of Order or similar procedures that would allow for democratic participation of members.

Some professionally-managed associations with weak or clueless boards yield too much power to the hired manager, in violation of their fiduciary duties.

Can any of these problems be resolved? If so, how?

Let’s consider some possible solutions.

Training for board members

At first glance, homeowners think that training board members will professionalize meetings and convince people to do the right thing.

Although the board training “solution” has been attempted in Florida, California and other states, we still hear many complaints from homeowners. Offering free training to board members has not improved governance or management. Why?

There are several reasons.

First of all, board training is one solution commonly proposed by industry trade group Community Associations Institute (CAI), but not without self-interested motivation for their group members. You see, CAI attorneys are a primary provider of board member training.

Let’s be candid. HOA attorneys have somewhat selfish reasons for holding free board member workshops. Their hope is to cultivate new client Associations. After all, nearly every HOA needs an attorney to help with assessment collections, updating governing documents, putting pressure on owners to follow the restrictions and covenants, and defending lawsuits.

And many workshop attendees tell me that these training sessions serve as a way to indoctrinate board members to the industry viewpoint of “you must enforce the CC&Rs, no matter what,” as well as a policy of aggressively pursuing nonpayment of assessments, to set an example for other owners.

Although these are important duties of an HOA board, enforcement and collection methods can be taken too far, creating or escalating conflict. Handling collections or litigating conflict can be lucrative for an HOA attorney, but can also be very costly for the association, even if it prevails in court.

Second, the board members that are most in need of training often refuse to attend workshops. Frankly, they are too arrogant or lazy to bother. But CAI generally opposes mandatory training, because they say few will volunteer to serve.

Third, and most fundamentally, you simply cannot train someone to be moral, ethical, or selfless. Those are critically important personal traits lacking in HOA bullies and opportunists.

That said, basic procedural training for conducting meetings could be of some help, if a board member lacks previous experience serving on a corporate or nonprofit board.

One suggestion would be for states to contract with disinterested third party training professionals. Perhaps a group of Registered Parliamentarians or members of a civic Voting League could help to design online, downloadable training publications or videos that would explain how to conduct democratic meetings and fair elections.

But don’t expect board training to make drastic improvements in HOA governance.

I maintain that even objective board training will do little to improve HOA leadership.

Training board members to fix HOA dysfunction is like putting on a Band-Aid when major surgery is needed.

Private organizations not necessarily bound by Constitutional principles

Our Constitutional system of government was created with multiple branches and checks and balances – and free press – in order to overcome basic selfish tendencies of human nature. The Founding Fathers of our U.S. Constitution understood that power corrupts.

They recognized that the only way to curb abuse is to have division of power, splitting our government into three branches (executive, legislative, and judicial), and separating power at the local, state, and federal levels.

However, true division of power does not exist in the modern, mandatory, corporate HOA.

The First Amendment was created because Founders also knew that public scrutiny by a free press, combined with a fundamental right to freedom of speech and assembly, were absolutely necessary to hold government leaders accountable to the people.

In most HOAs, however, transparency is rare, official communications are controlled by the board, and meetings are not open to the general public or local media. Most industry leaders fight to keep HOA affairs private, and try to avoid public scrutiny. They get away with it because Associations are private organizations, usually corporate nonprofits. The industry argues that constraints of the U.S. Constitution need not apply to HOAs, because they are not official governmental bodies or even state actors.

Another difference between the typical mandatory HOA and City Council is the method of electing leaders.

The City Council is elected by registered voters, according to residency, with one vote per person.

The mandatory HOA board is elected by members in good standing, according to shares or units of property owned, without regard to residency. Voting interests are not equally distributed, because the voting power attaches to the property, not the person.

Contrast between meetings for public governance and private governance

For example, a school board is a public unit of government accountable to voters, with meetings that are required to be open to the public. Local press or media can and do attend these meetings. This is a BIG deal, because the more community watchdogs monitoring the school board, the more likely members are to remain on good behavior, and serving the best interest of the public.

Does a city council or school board have mandatory training? Possibly, after elected.

But candidates for government office are usually well-vetted before being placed on the ballot. By well-vetted, I am referring to thorough background checks, verification of work experience, relevant education and skills, a review of credit history, tax records, and financial assets. The press often digs even deeper into a candidate’s past history.

HOA Board candidate are rarely vetted in this manner. In fact, in many Associations, there is a shortage of willing candidates, and anyone with a pulse can be a candidate and then, by default, end up elected to the board.

In public government, the procedural framework and laws for conducting meetings and public administration already exist. These procedures and customs are passed down over time, so there is continuity as new officials are elected.

Not so with HOAs!  Each new board often reinvents its own way of doing things, for better or worse.

Therefore, one way to improve HOA governance would begin with state mandates for all board candidates – including those running for reelection. HOA board candidates must be fully vetted, to ensure they are qualified to do the job and that their previous history does not create an unacceptable insurable risk for the Association.

Prevention of problematic leadership is always preferable to enforcing regulations upon troublesome behavior after the fact.

Eliminate the fear factor

One other critical difference between governance of HOAs vs. cities or the typical nonprofit organization.

In an HOA, every member’s home and personal wealth is at risk by way of punitive fines, liens for nonpayment of assessments and fees imposed by the Association, possible garnishment of wages, and even loss of one’s home and equity by way of HOA foreclosure.

That is a HUGE design defect of the HOA. The board of an association-governed community wields considerable power over members with little accountability.

That’s why most members, including some weak board members, fail to speak up and stand up for what is right. They fear being the next target of abuse by one or more board members that misuse their power.

In order to improve HOA governance, it is critical to permanently revoke and prohibit police powers that should be reserved for governments or official state actors.

Among these police powers are the power to enact and enforce rules and regulations, to impose monetary fines, to issue traffic tickets, and the authority to file liens or foreclose on private property (especially without judicial process, as is allowed in some states).

Other police powers include removal of voting rights in the association, collecting rent from a unit owner’s tenant in order to collect on purported assessment delinquencies, and other punitive actions taken against a unit owner by an association-governed community.

Could you imagine your local government council operating with these vast powers over citizens? Do you know of any nonprofit that holds this kind of power over its employees, clients, or members?

Reflect on that for a moment.

Without onerous, unchecked police powers, HOA members would no longer live in fear of the consequences of an abusive board.

Think about how that would empower members to create better communities.