What decisions can the President make on his own?

Started by NatalieF1 • 10 replies • 6090 views

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NatalieF1 (Virginia)
Posts: 40

Posted:

I am on the Board of our Hoa and the Treasurer brought up that the insurance was coming due to renew and as a first time homeowner Board and refering to points out of the audit, she thought the board should meet with the insurance professional to go over making sure the current coverage was adequate. Our President told her he had checked with the management company and the insurance was fine. Some argument persued and the Treasurer resigned.

The next meeting the President announced he had met with the Community Manager and they had decided the insurance coverage adjusting one of the ammounts of coverage and the President had reneweed the policy. Should this not be a Board decision to decide to change the insurance coverage? What are the items that the President is allowed to decide on his own?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Natalie,

Basically the renewal was a bill that needed to be paid or let the insurance lapse.

A change in policy would need Board approval.

Now, if the insurance was going to lapse prior to a meeting and that the change was needed to remain compliant with existing laws, it's possible that the President could have done an action without a meeting. If the Board believes that the President should not have made that decision they need to take actions to prevent it happening in the future. Depending on the individual this could be anything from a warning to removal from the office of President.

The Board should review the decision at the next meeting. The insurance company can adjust coverage anytime the Board decides. Therefore, the Board can increase or decrease coverage at their leisure.

The larger concern is why did the Treasurer resign.

Tim

TimB4 (Tennessee)
Posts: 21,059

Posted:

Natalie,

A good resource for HOAs in the State of Virginia is
the Fairfax County Community Association Manual. Even if you don't reside within Fairfax County, this manual brings the State laws and procedures for Associations into a plain language reference tool.

It's also a good general info resource for Association not in Virginia.

Tim

BruceF1 (Connecticut)
Posts: 2,535

Posted:

The only authority the president has to make decisions on his/her own is the authority granted to the president in the CCRs, the bylaws, or by the board.

Unfortunately, sometimes people who are elected to be the president of a deliberative assembly (which is what HOAs and HOA boards actually are) mistakenly believe that the office of president is the same as one who is president of a company - the president is the "boss." Not true in a deliberative assembly. The best example is the President of the United States. The President only has the authority granted to him/her in the Constitution and the authority granted in the laws and resolutions passed by Congress.

Some people also mistakenly believe that when the president of a deliberative assembly signs a document for the organization, he or she is "approving" it. Again, not true. By his or her signature on a contract or agreement, the president is "authenticating" that the contract or agreement was approved by the body empowered by the bylaws of the assembly to approve it (ie., the association or the board of directors).

The president cannot assume the powers and duties granted by the association's governing documents to the board for him(her)self.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Tim,

I don't get the sense from the OP that there was any urgency to the situation. I also believe it's up to the PM to notify the board that the policy is due for renewal in plenty of time for the board to review the policy and make a decision. Unless the governing documents specifically empower the president to make unilateral decisions in urgent situations, I question if such actions would stand up to a challenge. Unfortunate, but that's life.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Bruce,

I agree as I got the same sense of lack of urgency in the post. However, the OP had asked "What are the items that the President is allowed to decide on his own?" Therefore, I was trying to give possible answers as to what could be decided on their own.

You summarized it well within your response - the President (or any officer) has the powers granted to it by the Board or governing documents. Typically, this isn't a lot as Directors are to make the decisions and the Officers are to implement those decisions.

I like the following quote from the Association Manual I provided a link to [emphasis added]:

"It is important for each director to remember that the association is not exclusively his or
hers. While the directors have the authority and responsibility to conduct the business and make the important decisions, all members of the association have the right to attend meetings and to know what is happening and proposed in their community."

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Tim,

After reading your post I went and quickly skimmed through the manual you referred to and posted a link to. Although it is specific to the laws in your state, it does provide a lot of plain language information that would be useful to any board member.

NatalieF1 (Virginia)
Posts: 40

Posted:

The Treasurer brought the insurance issue to the attention of the mangement company on June 1 after talking to the insurance office asking that the current policies be looked into as the insurrance agent was unaware there was a homeowner board and not a developer Board. They were up for renewal the end of July. The Treasurer tried to arrange for the insurance agent to talk at a Board meeting in mid June but the president told her after asking the property mangement co. the current coverage was sufficient. The Secretary told her she was throwing a fit becuase she didin,t get her way. She resigned because of the treatment by the Secretary and the President for only doing her job to bring up normal business issues. She also quit as to the lack of the concern for following the laws required for Board meeting notice to the community by part of the Board. The issue I asked about innitially. I as Vice president have done a lot of research and have the lawbook that refers to the state laws and try to inform the rest of the Board, but I am not sure how to get them to listen.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Natalie,

You know what they say: "You can lead a horse to water, but you can't make it drink." You can bring the state laws regarding corporations and HOAs to their attention, but you can't make them adhere to them if they choose to ignore them. Unfortunately, not doing so could someday wind up in a lawsuit.

What has to be remembered here is that you are, most likely, a REAL corporation operating a REAL business (a homeowners association). You are not a bunch of high school students doing s school project to get a feel for how corporate America works. There are documents and laws that have to be adhered to and there are consequences (not just an "F") if you mess up. Unfortunately, mess up bad enough and it's not just your board that is affected, it's every homeowner in your community. That's why it's important to follow your documents and the law to the best of your abilities. Just like any other corporation in your state you have a corporate charter or articles of incorporation filed with the Secretary of State, you will need to file annual reports, and you have to have a Registered Agent. (That's the guy who gets served with the legal papers when you do mess up.)

In all probability, no real harm was done. Still, the matter should have been brought before the board, debated, voted on, and recorded in the minutes. That's the proper procedure. How do you account for the expenditure of HOA funds to pay the insurance premium if there's no mention in the minutes that the BOARD ever approved it?

Your board needs to get down to business, follow the rules, and do things properly. Also, no one should be quitting and going home because someone else doesn't want to follow the rules.

NatalieF1 (Virginia)
Posts: 40

Posted:

I agree totally. I wish you could be a member of the Board! We are in the process of changing management companies and there is a long history behind the problems of the current one. We are on our second developer for the community (the first one dissapeared in 2008).The new developer turned over the Board of Directors to homeowner control in October last year while retaining their declarant rights. We have had no training even after I asked repeatedly for help from the management co and the lawyer. The lawyer met with us once and gave us a couple of papers on fiduciary duty that I am not sure everyone has read. I have read books and articles online to educate myself on the basics and tried to share that knowledge with the other members with the only one listening being the Treasurer who has now resigned. We have had two Board meetings with the community manager and the other two with just the Board.

If I were to tell you the whole story you might think I was making it up! It would probably make a great book! The Association is financially not in good shape from the managing agent spending the Association's money on lawyer bills during the almost two years their was no builder or Board control. The corporate status was allowed to be terminated at one point also. It has been a real headache. I have never given up on hoping the wrongs can be righted and our community can get on its feet. I am hoping the new management co. can come to our rescue to get the Board on the same page as to the proper funtion and purpose it was created to do. I appreciate hearing your point of view as it appears you are well informed on the HOA process.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Natalie,

It sounds as if you are trying. Since you're professionally managed, that may eventually help to educate the other board members in their responsibilities. It is because some new boards are not familiar with the responsibilities of running an HOA that some mortgage lenders will not write mortgages for purchases of homes that are in a new HOA that is not professionally managed. Also, some D&O insurance companies will give small premium discounts to HOAs that are professionally managed. The guidance of a professional property manager helps to lower the risk of a claim.

There are several good articles on the internet and in the Library section of this very website that you can download and read. You might also recommend to your board that the board purchase an annual membership in the Community Associations Institute. The fee is $124 for one board member, but is discounted for additional board members. I believe a 5-member board can join for around $375. The CAI has a wealth of information available for its members, and if there is a local chapter nearby you and your fellow board members can attend and learn from other HOA board members. Our president tried to make every meeting of our local chapter and brought good information back to our board. Membership includes a magazine with interesting articles. You can join on your own if you wish to pay the fee yourself. But, if you don't have the support of the other board members, it probably wouldn't do much good. You can still start by finding the free articles on the internet.

A couple of sample articles similar to those you can find are attached.

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