Compensating board members

At present our Homeowners Assn does not pay board members for their tenure on the Board. Board members are made up of residents through an election process.
Because interest in serving on the Board and attendance at meetings is mediocre, a suggestion has been raised to waive board members annual dues as compensation. Of course this would have to be done by an amendment and 2/3 majority vote of homeowners. Question is, are any other HOA's doing this and is it successful?

In Florida compensation can be lawful if the governing documents provide for it, or the members may approve it with a simple majority vote. Our bylaws only refer to compensation for officers - and are ambiguous in that regard - but I'm pretty sure we have never paid compensation to any officers, directors or committee members.

In a real pinch a token compensation package, say $500 per year, might be enough to attract people to serve. But for the wrong reasons. You'd be surprised how tenacious and feisty some people might get if their paltry $500 a year was threatened.

Yes, it would be considered taxable income. Like I said, I would only consider doing something like that in a pinch. And even then only for a year at a time with an eye toward eliminating the compensation ASAP. It could set a bad precedent where future "volunteers" would come to expect it. If there's compensation involved, can they even be called volunteers at that point? Dunno. It beats receivership if that's the alternative due to extreme apathy, however.

Jawohl. Except in Florida the law says an HOA can do it if they want to. I do agree it's generally a bad idea.

Andrea

Bottom line is most, myself included, think it is a bad idea for a myriad of reasons.

Excellent point.

I just did the calculation for my Association and assessments would need to increase by $3.25 per month ($39 per year) to pay a board of 5.

But wait, if assessments increase and you are paying the board member the amount of assessments, Assessments would be needed to be raised again to make up for the pay increase. That or other services would need to be reduced to make up the difference.

Yuck! Our bylaws specifically prohibit paying Board members and I, for one wouldn’t vote for a change to allow this. In addition to fussing over how much to pay vs. waiving assessments, I see other issues muddying the waters, such as:

Qualifications – if someone’s going to be paid, shouldn’t there be a few more requirements than being a homeowner in good standing? For example, maybe someone should review his/her credit history to see how well the candidate manages his/her own money? Who would do the checking? How many details would be up for review by other homeowners? After all, if you have repos, bankruptcies and write offs all over the place, why should anyone pay you to oversee a budget that can easily exceed $100K?

Performance evaluation – who will do it, what will be the criteria and what happens if a board member gets a poor evaluation (does he/she get booted off? Are there appeal rights?)

Maybe we should flip the script and ponder if there should be mandatory board service. I've read several articles on the subject and there are pros and cons to that too. The pro side says there wouldn't be a problem with recruiting Board members because EVERY homeowner would serve sooner or later, while the con says people would look at this a lot like they already look at jury duty - a pain in the ass and people come up with dozens of excuses as to why they can't/don't want to do it.

And would any of this guarantee you'd have someone in the position who had some idea of what's going on and what to do? Nope.

Funny! Every owner is a board member and board members pay no assessments. That takes care of a lot of accounting headaches, doesn't it?

Do you have the authority to waive assessments?
Typically the governing documents say that assessments are to be equal.

What if there is a special assessment, are those also waived?

Do you issue a 1099-C in accordance with IRS Regulations?

Or do you issue a 1099-misc, a W-2 or are they simply being paid under the table?

What happens if one of these paid volunteers are injured on the job and they want to be reimbursed for medical costs? Do you carry workers compensation for this paid individual or do you have a contract to show that they are an independent contractor?

Are your board members aware of the legal protections they lose being a paid professional if they make a mistake?

NP,

It's all well and good until something happens. When that something does happen, it could cost the Association dearly.

If you recall, many individuals paid housekeepers under the table. Then one individual wanted social security benefits and the door swung wide open on everyone who had an employee and failed to pay payroll taxes.

Oh, as a side note, I'm sure that you are reporting that income/forgiveness of debt on your personal income taxes right?

Ummmmm..... I think it's safe to say that NpS wrote that with toungue planted firmly in cheek. God I hope so!

Larry,

My understanding is that most HOA's are incorporated under 501(c)4, which is applicable to the act as a civil organization. However, I am not as versed in this as I would like to be, so my understanding could be incorrect.

Having once been on the board of a real 501(C)(3) non-profit, my opinion is that an HOA does not meet the criteria of being organized for some public benefit. Among other problems, an HOA's membership is closed to all who do not own property within certain boundaries and operates for the sole benefit of its members. HOA's do not operate museums, feed homeless children, or teach illiterate adults to read.

Per http://www.irs.gov/pub/irs-tege/eotopici03.pdf

"The general concept, however, can be expressed as follows:

"Organizations that promote social welfare should primarily
promote the common good and general welfare of the
people of the community as a whole.

"An organization that primarily benefits a private group of
citizens cannot qualify for IRC 501(c)(4) exempt status."

I don't know about the tax rules, but I think it is wrong to pay a Board member. If folks don't care enough about their homes to volunteer, I would not want to live in the community. Of course the larger the community, the bigger the pool. Like most communities, we have a core of volunteers who will do most anything (about 10); we have another group who will do somethings like accept short term committee roles (about 10), another group who don't do anything who don't complain (the majority) and then a group which does nothing but complain (5 I can name!).

Quick question:

I have served on the Board of my HOA; in Suffolk County, NY for just over 13 1/2 years.
The past 2 years; served on the Board as the President; my elected role and also as the Vice President, Treasurer and the Secretary - because no one stepped up to volunteer.
I spent on average 10 to 15 hours per week full-filling all 4 roles.
I lost several hours each week; sometimes more form my normal paid career as a 100% commissioned sales person because of being forced to full-fill each of the 4 roles all on my own.
This resulted in affecting my normal work week, schedule both business and personal, my compensation earnings - due to the fact I would be forced to go to work late, leave work early, take HOA matters / calls during the course of my normal business day, resulted in injuries - falls, slips and lack of sleep; etc, etc.

For 1 year; I feel my dues of $200 per month should be waived / forgiven - as we truly were not operating according to the by-laws.
There are to be at minimum of 3 Board members - technically 4 board members ---not 1 person representing all 4 roles & responsibilities.
In this case; do you still feel / believe that a Board member's dues should not be forgiven?
I paid my dues for the 12 years; but I feel year 13 should be waived or forgiven.

Please advise.

Thank you.
Maria

Sorry but nope. If you know how to budget you know why this is no. I went to college, worked 2 jobs, and volunteered for the community for Habitat for Humanity while President. So I know busy. Still no to being paid or skipping paying. I did get reimbursed for approved expenditures out of my pocket after board approval. Otherwise purchases were just courtesy.

If you cannot stand the heat, get out of the kitchen.

NO.

However I thank you for your service.

I have served on my Board for the last 8 years and on the Architectural Committee prior to that.
Currently as Treasurer, Website Administrator, Maintenance Officer, having absorbed the bookkeeper duties (which we used to pay for - so the money could go toward the tree budget) and serving as part time Secretary, I also spend about 15 hours per week. I also have a full time job. I do not get paid. I point this out to show that I understand your position, have walked in your shoes (so to speak) and still believe that Directors should not be paid. However, you want to hire an independent contractor (as we used to do) to help out and take some of those duties from you, then the Board should do that.

Yep. Glad you got it too Geno.