Fit for the Board: It’s Not About You

By Kathy Danforth / Published January 2017

Like so many experiences in life, becoming a new board member involves realizing it’s not about you, and the situation may be different than it looked on the outside. Whether you were pressed into service or led a community coup, whether you advocated reform or defy change, there are constraints and methods to learn to fulfill one’s fiduciary duty.

Al LeBeau with MAY Management Services states, “A new board member will need a thorough understanding of the responsibility involved and the statutes that relate to governing an association.” Associations operate under documents that will include the Declaration of Covenant, Articles of Incorporation, Bylaws, and Rules and Regulations. These will empower and limit what the board can do within the context of state, federal, and local laws and ordinances, which also impact decisions.

Gary van der Laan with Leland Management advises, “Read the community documents. This may seem obvious, but it is surprising how many people sign up for the job of director and have not even cracked open the governing documents. These documents (which are considered required reading for association board members) explain the vision of your association and provide guidelines on how the community is supposed to run, the authority of the board, and what rules are to be enforced. Knowing these can save time and keep problems and issues from getting out of hand.”

The board is obligated to perform its fiduciary duty, meaning “each board member must place the interests of the association and its members collectively above his or her personal interests. Additionally, each board member should avoid conflicts of interest or the appearance of conflicts while serving the community,” states David Burman with Aegis Management. Board members are to act with reasonable business judgement, which is why research and relying on professional advice are essential. Nevertheless, because as fiduciaries the board of directors is personally liable for its actions, Directors and Officers Liability insurance coverage is advised to cover any lawsuits arising out of service to an association.

LeBeau notes, “A fiduciary duty requires taking care of the assets, operating within governing documents and statutes, and putting association interests first. It is a position of trust.” Jordan Goldman with Castle Group adds, “As a general principle, if you vote to spend association money as frugally as if it were your own, you understand the financials, and you understand the cash flow, you’ll probably handle the position properly.”

New directors must be sensitive to the fact that authority is given to the board as a whole and not as individuals. “Many board members come from a business situation where they have the authority to make decisions, and they may carry that over,” notes LeBeau. “Now they are part of a board that works together to run a business.” Goldman points out, “Each member needs to also understand that his or her position on the board will determine his or her responsibility as well as role in the meetings.”

Goldman advises, “One of the most important aspects for a new board member is to understand what’s previously been done by the community and board. Often new board members don’t realize there are already things in the queue, and everything doesn’t start fresh when a new board comes on. The community may have longer-term goals where plans are already in place and the gears are turning. The best way to get up to speed is with a board orientation, but if that is not provided, sit down with the property manager and have him or her walk through what’s been going on over the last year with regards to financial management, upcoming projects or ones underway, social dynamics, lifestyle planning and committees, and vendors.”

LeBeau comments, “When a board or CAM changes, the president and CAM should meet to decide on their working relationship. This is a guard against both parties proceeding with doing what they think is best, but being in disagreement.”

Next, though, Goldman suggests, “Once you find out what has been going on, figure out what’s coming up. Establish what you want to accomplish over your term in office—how you plan to contribute. Often candidates run on a platform; now it’s time to deliver.”

Before running for the board, it is best to count the cost. However, you will soon be discovering the scope of work. LeBeau says, “The time investment is a function of the amount of work to do, how frequently the board meets, and whether there are committees to help. If there is frightful damage from a hurricane, the time required to assess damage and recover can be huge. Normally, it may take two to three hours of studying to prepare for board meetings.”

Typically, a detailed age-nda is prepared, usually by the CAM, for board members to study a week or two in advance, shares LeBeau. “Everyone should have a copy of the agenda and do their homework to understand background information,” states LeBeau. “A well-written motion should start the discussion, and the conversation should stick to the motion rather than digress to a general topic; at the end, the motion should be read again.

“Robert’s Rules of Order are a good guide, but a few guiding principles are to leave your emotions at the door, stay on the subject, and listen to others,” says LeBeau. “Owners have the right to make a statement, but they can’t ask questions. Boards should keep owners informed and be receptive to opinions. Some associations may hold an open forum after the meeting for a further exchange of ideas.”

Van der Laan notes, “The best way to be effective is to work together with fellow board members. At times where you disagree with the direction of other members, it is important to leave your personal agenda behind and try to facilitate decisions and compromise for the good of the community. Listen to the other board members and to the residents. It is important to remember that you are a representative of the community and should provide good customer service to the residents by listening to and understanding their concerns.”

Goldman charges board members to set an example for behavior. “The key word is ‘respect.’  If someone is rude, you have to hold to a higher standard and not respond in kind. Most often, if someone is quite upset, there may be an issue that is affecting him personally. Advise him that the meeting is a public forum, but that you are available after the meeting to address their concerns. Also, try to avoid cross talk in the audience.

“Establish a regular meeting schedule so people can plan to attend, whether it’s on a monthly or quarterly basis,” Goldman suggests. “If you want good attendance and participation from the community, plan for a date and time that is best for everyone. Be aware of the religious holidays your residents observe, their seasonality, and their demographics. One of the goals of a good board is to maximize attendance and participation. Boards should also set up a met-hod for board members and residents to attend meetings remotely, whether by Skype, conference call, or another method.”

“A well-run board meeting should take less than 90 minutes, though it is a function of how well the president manages the meeting and how many items there are to discuss,” according to LeBeau. “Good minutes of the meeting should not ramble; they should record what was done, not what was said.”

To facilitate the effective running of the community, Goldman advises establishing long-range plans and goals. These can prevent budget drift. A tool of convenience that is probably used at half the communities now is a board iPad or tablet, which the community can set up with a Dropbox account. “A lot of reports—financials, project packages, weekly updates—are large, so this is an easy way for all directors to be prepared with the information they need. When the board changes, the iPad or tablet goes with the position. Documents are never lost, and people don’t have to carry around huge file folders to access old documents,” Goldman notes.

LeBeau advises all board members to read The Law of Florida Homeowners Associations, updated every other year, or The Condominium Concept: A Practical Guide for Officers, Owners, Realtors, Attorneys, and Directors of Florida Condominiums, both by Peter Dunbar.

Committees are another tool for success in a community and can devote time and attention beyond what the board is able to devote to a particular area. “Successful communities work together,” points out van der Laan. “Recruit people to volunteer for committees that will enhance your community or to put on social events.”

“Committees serve at the pleasure of the board,” states LeBeau, “and should have a well-written charter or job description.” LeBeau does caution that a board cannot give the committee authority to spend money, so they cannot have the ability to directly make commitments, only recommendations.

And as always, communication is a first priority. “If the board doesn’t communicate, rumors and misinformation will run rampant,” observes Goldman. “If you don’t communicate pro-actively, it’s like a game of telephone where stories are changed and exaggerated. Our managers send the board a weekly update with the highlights of the previous week and the week ahead,” explains Goldman. “That also often goes out to the commu-nity by e-mail, with paper or posted copies for those who don’t use the computer. We also recommend creating a monthly or quarterly newsletter to focus on the social side.”

“It is fine for board members to share facts outside of meetings,” LeBeau says, “but they should not telegraph their feelings; opinions are held for the open board meeting.”

Interactions between the board and management are essential to implement plans. “The manager typically provides the board an action list of what he or she is working on, from the minute up to major projects. This allows the board to help direct the manager and prioritize without having to micromanage,” relates Goldman.

“Primary communication with management should come through the president and should reflect the will of the board,” notes LeBeau. “No directors should independently be giving a manager directions. Usually the CAM is responsible for evaluating and directing vendors,” LeBeau states. “It is critical that vendors get direction from one person—that control is needed for efficiency.”

In some instances a board member may take on a specific liaison role because of his expertise, but it is important that the board present a unified voice to external parties. “You certainly don’t want four people contacting the association attorney,” Goldman obse-rves. “Usually the treasurer works with the CPA and the president with the association attorney, but it can vary.”

The basics of running an association involve understanding financial issues (to be addressed in the February issue of FLCAJ), working with people, taking care of physical assets, and contributing to the long-term health of the community—all within a context of community regulations and governmental laws that may not be intuitive. Though serving on a board is a new path for many, take heart that others have learned the ropes, and classes for new board members are plentiful! 

 

Contributors:

Al LeBeau is with MAY Management Services. For more information, visit www.maymgt.com.
Gary van der Laan is with Leland Management. For more information, visit www.lelandmanagement.com.
David Burman is with Aegis Management. For more information, visit www.aegiscms.com.
Jordan Goldman is with Castle Group. For more information, visit www.castlegroup.com.