Relations in Associations: Symbiosis Between HOAs and Homeowners
Like any other organization, homeowners associations rely on people to make decisions and perform organizational functions. For important constitutional matters like amending an association’s declaration of covenants, this usually means a vote of all HOA members. But for more day-to-day affairs, an association acts through its board of directors and officers.
An elected HOA board is tasked with general administration and operation of the association, including enforcement of covenants, restrictions, and rules. When running smoothly, a board serves a valuable purpose in the community, helping to maintain an orderly, peaceful neighborhood. Unfortunately, though, friction between an HOA board and individual members, or even among board members, is not uncommon. And the resulting conflict can lead to litigation and other unpleasantness. With that in mind, it’s helpful for members to have a good understanding of how community associations are governed, particularly the role of the board of directors, and options available for members if difficulties arise with the board.
Importantly, homeowners associations are governed by the laws of the state in which the community is located. Because HOA laws vary considerably from state to state, this article focuses on the general principles applicable to association boards. Members in need of legal advice with regard to a specific issue, should consult with an attorney licensed in the relevant jurisdiction.
Roles and Duties of an HOA Board and Officers.
An HOA’s board consists of a pre-determined number of board members elected by the association’s homeowners. The procedure and standards for elections are set forth in the HOA’s declaration, subject to any relevant state-law requirements. Once elected, the board appoints executive officers - typically consisting of a president, vice president, secretary, and treasurer – to act on behalf of the board. In many jurisdictions and communities, officers must be chosen from among the elected board members, but that is not always the case.
The responsibilities of the board of directors generally include maintenance of common areas and elements, adoption of rules and bylaws relating to matters within the board’s authority, calculation and collection of assessments, and enforcement of community covenants and restrictions. In some communities, the board also appoints an architectural review committee (or similarly titled body) responsible for ensuring compliance with the association’s aesthetic standards. For instance, in a community with landscaping rules, an architectural review committee would determine if proposed improvements are compliant, and the board of directors would take action against non-compliant homeowners, whether through fines, suspension of common-element and/or voting rights, or civil litigation. Importantly, a board’s enforcement powers are limited to what is authorized by the community declaration and state law.
Individual board members and HOA officers generally owe what is known as a “fiduciary duty” toward the association and its homeowners. Just as officers of a for-profit corporation have a duty to act in the best interests of the business and its shareholders, so too are board members and HOA officers obliged to act in the best interest of the community. The fiduciary obligation, when properly observed, prevents self-dealing and requires officers and board members to avoid conflicts of interest.
When carrying out their duties, the board and officers must act in good faith and enforce community rules uniformly, consistently, and in compliance with any relevant statutes. Arbitrary or inconsistent enforcement can sometimes result in waiver of the association’s right to enforce the covenant at issue. See Alfaro v. Community Housing Improvement System & Planning Assn., 171 Cal.App.4th 1356, 1380 (2009). Some communities have decided to adopt a “Board Member Code of Ethics” to assist board members and officers in understanding their ethical obligations to the community.
Board Member Terms.
The “term” of a board member is the duration the board member holds the position after being elected. Terms may be set by state statute or may be defined in the association’s declaration or bylaws, with individual communities sometimes varying considerably. A common approach is to have an annual election followed by a one-year term, with a board member free to serve as many terms as he or she likes as long as reelected. Other associations limit the number of consecutive terms a board member can serve. Or, a larger association might provide for multi-year terms with staggered elections to ensure a certain amount of board continuity while still allowing for regular turn-over.
Potential Signs of Problematic Board Members.
Under the above-described fiduciary duty, a board member is prohibited from taking any actions on behalf of the HOA, or making any decisions within his or her capacity as a board member, which is motivated by self-interest. Any such self-dealing is contrary to the fiduciary duty and can lead to liability against the HOA and the board member personally. Further, actions taken by an association or board member with improper motives are subject to be reversed or voided by a court if challenged.
A board member can also cause problems for an association by simply failing or refusing to do the job for which he or she was elected. If members do not show up for board meetings and therefore a quorum is not present, the board may be prevented from taking actions necessary to the association’s core functions. If the board fails to collect assessments and make arrangements to maintain common property, areas of the development could fall into disrepair. Or, if a board neglects to enforce restrictions, a future board may find that the association’s enforcement rights have been waived.
Likewise, a board member who ignores association rules, abuses his or her power, or singles out disliked homeowners for adverse treatment can expose the association to significant liability. In cases of egregious and/or intentional misconduct, the offending board member may incur individual civil liability – or even criminal charges (e.g., a board member who misappropriates association funds) – though the majority of states exempt individual board members from liability for simple negligence.
Options for Dealing with Problematic Board Members.
The remedies available to homeowners for handling a problematic board member depend, in part, on the applicable state’s laws and the HOA’s governing documents. In relatively mild cases, simply organizing a campaign to defeat the board member in the next HOA election may be sufficient. When more immediate action is necessary, most states and/or community bylaws have procedures for removal (akin to recall of a political officeholder), allowing homeowners to submit a petition for removal (or similar request) seeking a vote to remove the troublesome board member. Generally, a governing document or state statute authorizing removal will define the types of conduct warranting removal (e.g., misappropriation of association funds or other criminal conduct, failure to properly perform duties).
If an HOA board or board member is violating the association’s governing documents or refusing to enforce valid covenants, individual members have standing to bring a lawsuit asking a court to issue an order enjoining further violations, reversing invalid rules, directing the board to enforce covenants, or even awarding money damages, when warranted.
HOA boards are generally granted considerable discretion in determining what constitutes a violation and what enforcement mechanism, if any, is appropriate. See Beehan v. Lido Isle Community Association, 70 Cal App.3d 358 (1977). Under the “business judgment rule,” extended to HOA boards in most states, board members are shielded from liability for what amount to business decisions made within the scope of the board’s authority. However, the protection of the business judgment rule generally does not extend to a board member’s failure to exercise reasonable diligence or failure to act in an area within his or her authority. Palm Springs Villas II Homeowners Assn., Inc. v. Parth, 248 Cal.app.4th 268 (2016).
Harassment by a homeowners association or board member is never acceptable. The appropriate response to harassment of a member depends on the nature and severity of the conduct. Harassment reaching the level of criminal conduct should be reported to the appropriate local law enforcement agency. Harassment relating to debt collection can be addressed through a complaint under the Fair Debt Collections Practices Act (FDCPA) or by reporting the conduct to the Consumer Financial Protection Bureau (CFPB).
A member who believes he or she is being harassed via selective or overzealous enforcement of community rules may be able to obtain relief through a civil suit. A member subject to harassment by an association based upon his or her race, color, religion, sex, familial status, national origin, or disability may have recourse under the Fair Housing Act (FHA), Americans with Disabilities Act (ADA), or similar state anti-discrimination statutes. See, e.g., Bhogaita v. Altamonte Heights Condominium Assn., 765 F.3d 1277 (11th Cir., 2014). Administrative complaints under the FHA can be filed with the Office of Fair Housing and Equal Opportunity of the Department of Housing and Urban Development here, and ADA complaints can be filed with the Department of Justice’s Civil Rights Division by following this link. Both the FHA and ADA also allow for private civil lawsuits in federal district court.
HOA’s can help protect themselves from these types of problems by adopting policies and procedures clearly defining the association’s expectations with regard to board members and officers - ideally with the assistance of counsel. Association policies can establish a protocol for members to submit complaints and a mechanism for sanctioning offending board members and officers, when warranted. Alternative dispute resolution, like mediation or arbitration, can also be helpful when conflict arises in an association. A few states – most notably California and Florida – require ADR before legal proceedings can be instituted between an association and a homeowner.
For homeowners and board members alike, it is important to understand the proper role, obligations, and authority of an association’s board of directors. An HOA board that performs all of its key functions without exceeding its powers is not only less likely to get sued, it also stands a much better chance of maintaining a smoothly run organization with satisfied members willing to support the board in carrying out its duties.