By Leigh Raper
Tired of feeling like you have no say in the decisions about the common areas or rules and regulations of your neighborhood or condominium development? Thinking of serving as president of your homeowners' association?
Before you take the big leap, it pays to know what you're getting into.
What exactly is a homeowners' association?
A homeowners' association (HOA) is a legal entity set up at the time of a shared community's development for the benefit of the entire community. The HOA is responsible for enforcement of the covenants, conditions, and restrictions (CC&Rs) that apply to the development, as well as the community bylaws, and all other applicable rules and regulations.
The board of directors of the HOA, or a designated management company, oversees the day-to-day maintenance and operation of common areas, develops a budget, and collects assessments from member homeowners.
The law of the state in which the community is located has jurisdiction over HOAs. Each state has particular laws with regard to the filing of CC&R documents, fiduciary duties and requirements, and other specific regulations regarding the operation of the HOA.
Responsibilities of the board and president
Before running for your HOA's board of directors, you should have a clear understanding of what the board does. One of its core responsibilities is enforcing the CC&Rs, bylaws, and individual community's rules and regulations.
Board members, especially the president, must read and understand all the legal documents, in depth. This could mean poring over pages and pages of legal language. The community members rely on the board to know the documents, rules and regulations backward and forward.
The board and HOA president are often called on to make decisions and enter into legal agreements on behalf of the association. This might involve selecting a management company to handle the day-to-day operations of the community, such as maintaining the common areas and collecting assessments.
The board might also be responsible for retaining legal counsel for the HOA and purchasing insurance for the community. Again, these decisions require time and research.
What happens if a disaster strikes? Say, for example, that a hurricane or tornado, or other natural disaster, causes catastrophic damage to the community.
The president and HOA board of directors would be the ones called upon to coordinate with emergency services. Someone would need to be onsite to meet with inspectors and insurance adjusters.
Often, this duty falls on the president. Even if the president isn't there in person, he or she is still the one responsible for making decisions, paying contractors, and ensuring that repairs happen.
Above all, the president and other board members have a fiduciary responsibility to the community members. This means they must legally act solely in the best interests of their fellow homeowners.
Can the president be held legally responsible?
A big question is whether or not the president (and other board members) can be held personally liable for actions taken in their official capacity. As in many cases where legal regulations and documents are involved, it depends on the situation.
Generally, board members acting in their official capacity and in the best interests of the community (i.e., acting responsibly and in “good faith“) aren’t held personally liable.
In California, this issue is well-settled. In 1986, the California Supreme Court put it succinctly in Frances T. v. Village Green Owners’ Association, absolving board members acting in good faith "even if the ultimate action or decision of the director or board of directors is incorrect."
But every state has its own detailed rules and precedents on the subject; would-be board presidents are encouraged to do a little research on the subject.
Obviously, the court's decision is predicated on the fact that the director or the board upheld their fiduciary duty. There is precedent for holding directors personally responsible for breach of this duty, particularly in egregious cases. Needless to say, board members can be held liable for criminal conduct, such as embezzling association funds.
Many associations allow directors to purchase errors and omissions insurance that indemnifies the HOA and its individual directors in the event of a lawsuit. This should definitely be on the checklist for any would-be HOA president.
Serving on the board, in any capacity, is a volunteer position. Volunteers need to have a clear understanding of what will be expected in terms of time, effort, and potential liability. Helping make your community a well-maintained, tightly run place is laudable, but be sure you understand all it will entail.
Related:
- Understanding Single-Family Home HOAs
- 8 Tax Breaks for Homeowners
- How an Easement Can Make for Lousy Neighbors
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
Leigh Raper has a degree in English literature from the University of Miami, a MFA in creative writing and writing for the performing arts from the UCR-Palm Desert, and a JD from Pepperdine University School of Law. She writes about labor and employment law, and fiction and blogs about pop culture. Leigh also writes for AvvoStories.
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