HOA CEO?

Started by NpS • 17 replies • 1559 views

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NpS (Pennsylvania)
Posts: 4,216

Posted:

CAI just released a report on governance in 2020. See file:///C:/Users/Bob%20Wood/Downloads/CAI%20-%20Community%20Next%20-%20Association%20Governance%20Model%20Report%20(1).pdf

One idea they have is to move from board management to CEO management. Here's a quote:

"Communities may also turn to a corporate model in which the association president is the CEO. This
position would be paid, and this person would make the big decisions. This CEO position might be
filled by a manager, by a community resident or by a corporate executive. The balance of the board
would include volunteers who would function under the CEO/president’s guidance. In this model, the
CEO would work closely and directly with a professional manager."

Wonder what you all think. Good idea or not?

Sikubali jukumu. Read all posts at your own risk.

SheliaH (Indiana)
Posts: 6,964

Posted:

One person’s comments:

One size doesn’t fit all (community association governance model) – that’s for damn sure! Since I don’t live in a small association, I can’t comment on exempting them from most HOA statutes. I won’t comment (yet) on cyber security, community diversity, millennials and all that stuff!

Regarding your question about the association president as a paid CEO – I think that would create more problems and we already have enough with VOLUNTEERS behaving as if they’re Master and Commander of all they survey. If this is going to happen, there needs to be some sort of minimum requirements, mandatory training and an annual performance evaluation (who will do it, what will it be based on). And how easy or difficult would it be to get rid of a bad one?

Assorted thoughts on other items from the report:

I don’t think stipends for Board members are necessary - the idea’s nice, but it doesn’t guarantee competence and you may wind up with people who are only in it for the money and aren’t willing or able to make tough decisions. Clearly, they should be reimbursed for reasonable expenses incurred in doing certain activities for the Association (e.g. going to Office Depot or somewhere to print off newsletters) and I can live with a stipend for initial and continuing education. I’m a huge fan of mandatory education and the association should pay for it (the property manager can check with CAI or whoever sponsored the training to ensure they showed up). That can be placed in the budget as a line item. Or, reimburse the board member upon completion. Showing registration isn’t enough – I would want to see some sort of certificate issued by whoever sponsored the training.

The Board as police – that doesn’t always work too well (just look at all the conversations on this board!) I would hope mandatory training would prevent at least some of these problems (how to deal with difficult people and principles of dispute resolution should be part of board training), but people are people, so it may be a better idea to have the property manager or another outside source do the initial intake and investigation.

There should be SPECIFIC procedures on what triggers an investigation, appeals process and a low cost (preferably free) alternative dispute resolution program. This could keep a lot of drama out of the courts – I like the kind where both sides agree in advance to comply with the mediator’s decision. Maybe it could be set up similar to a program our local BBB has (or used to), where ordinary citizens could volunteer to be mediators and received about 6 weeks of training before they started work.

Regarding the developers – they should be paying for board training for that initial group. In fact, once it’s established, the developer should be working with the board and community in modifying the governing documents so they’ll be ready to go once the community officially changes hands. That could include setting a reasonable percentage for approving changes to the documents – since anything over 75% is almost impossible to achieve, let’s make it 51%. As I’ve said in other posts, a lower percentage doesn’t take away anyone’s right to vote – if it’s a horrible, no good, bad idea, you should be more motivated to get off your ass and vote accordingly

Speaking of voting, it might be interesting to see if we could make that mandatory or at least require people to attend the annual meeting. Ignorance is not bliss for anything and I, for one am tired of people who howl about how awful their HOA is, but don’t have the first clue what’s really going on because they don’t read and don’t bother to attend a meeting once in a while.

Regarding reserves – it’s past time for people to understand that sooner or later nearly everything in your house will wear out and need to be replaced, so developers should be creating realistic budgets from the start, and not set these low, low assessments, only for homeowners to be shocked and dismayed when it really doesn’t cost $100 a month to run the community.

Developers should be required to provide initial funding of a reserve fund, say, enough money to make repairs starting five years after they leave and pay for a reserve study so the new board will have something to use to create a realistic budget.. Mandate reserve funding with a minimum of 10% of the annual budget being devoted to this.

Foreclosures – I love the idea of mortgage lenders being required to escrow and pay assessments. There are more ways to find out if a home is in a HOA community, so they'll just have to buckle down and do the work. It's good business in my view - a little more work upfront might ensure the homeowner has the means to pay. Better than than later on when you have to spend money to foreclose and lose money when the house sells at a loss.

And finally – mandate mandatory disclosures when a house is in a HOA community BEFORE the sale (perhaps coughing up a copy of the governing documents when an offer is made?) Follow that up with an acknowledgement form to be signed at closing where the homeowner states he/she/they received a copy and agree to comply with the community rules. If they’re smart, they will have read it first.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TimB4 (Tennessee)
Posts: 21,059

Posted:

My initial thoughts are that the problems I've seen first hand is due to the President thinking that they are the CEO vs. simply a member of the Board.

I will also add that CAI tends to worry about condominiums more than HOAs. Therefore, I suspect that they were thinking COAs when they wrote the policy.

I was not able to access the report. However, I did find it online. Here is the link:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwiknND04vDMAhVDND4KHU0cDVAQFggcMAA&url=https%3A%2F%2Fwww.caionline.org%2FAboutCommunityAssociations%2FAbout%2520Comm%2520Assns%2FCAI%2520-%2520Community%2520Next%2520-%2520Association%2520Governance%2520Model%2520Report.pdf&usg=AFQjCNGQUcB43KwRbfqsXVDAoC9BkPfuqg&bvm=bv.122676328,d.cWw&cad=rja

Once I get a chance to read it, I'll likely have more opinions.

Tim

KevinK7 (Florida)
Posts: 1,343

Posted:

We probably all know my opinion on this. But I agree with the above comments of how one size does not fit all. My neighborhood problems stemmed from entire boards of know-nothings. I could see this working only if there was more government oversight and accountability.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Thanks for providing working link Tim.

Sikubali jukumu. Read all posts at your own risk.

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By SheliaH on 05/23/2016 7:06 AM
One person’s comments:

One size doesn’t fit all (community association governance model) – that’s for damn sure! Since I don’t live in a small association, I can’t comment on exempting them from most HOA statutes. I won’t comment (yet) on cyber security, community diversity, millennials and all that stuff!

Regarding your question about the association president as a paid CEO – I think that would create more problems and we already have enough with VOLUNTEERS behaving as if they’re Master and Commander of all they survey. If this is going to happen, there needs to be some sort of minimum requirements, mandatory training and an annual performance evaluation (who will do it, what will it be based on). And how easy or difficult would it be to get rid of a bad one?

Assorted thoughts on other items from the report:

I don’t think stipends for Board members are necessary - the idea’s nice, but it doesn’t guarantee competence and you may wind up with people who are only in it for the money and aren’t willing or able to make tough decisions. Clearly, they should be reimbursed for reasonable expenses incurred in doing certain activities for the Association (e.g. going to Office Depot or somewhere to print off newsletters) and I can live with a stipend for initial and continuing education. I’m a huge fan of mandatory education and the association should pay for it (the property manager can check with CAI or whoever sponsored the training to ensure they showed up). That can be placed in the budget as a line item. Or, reimburse the board member upon completion. Showing registration isn’t enough – I would want to see some sort of certificate issued by whoever sponsored the training.

The Board as police – that doesn’t always work too well (just look at all the conversations on this board!) I would hope mandatory training would prevent at least some of these problems (how to deal with difficult people and principles of dispute resolution should be part of board training), but people are people, so it may be a better idea to have the property manager or another outside source do the initial intake and investigation.

There should be SPECIFIC procedures on what triggers an investigation, appeals process and a low cost (preferably free) alternative dispute resolution program. This could keep a lot of drama out of the courts – I like the kind where both sides agree in advance to comply with the mediator’s decision. Maybe it could be set up similar to a program our local BBB has (or used to), where ordinary citizens could volunteer to be mediators and received about 6 weeks of training before they started work.

Regarding the developers – they should be paying for board training for that initial group. In fact, once it’s established, the developer should be working with the board and community in modifying the governing documents so they’ll be ready to go once the community officially changes hands. That could include setting a reasonable percentage for approving changes to the documents – since anything over 75% is almost impossible to achieve, let’s make it 51%. As I’ve said in other posts, a lower percentage doesn’t take away anyone’s right to vote – if it’s a horrible, no good, bad idea, you should be more motivated to get off your ass and vote accordingly

Speaking of voting, it might be interesting to see if we could make that mandatory or at least require people to attend the annual meeting. Ignorance is not bliss for anything and I, for one am tired of people who howl about how awful their HOA is, but don’t have the first clue what’s really going on because they don’t read and don’t bother to attend a meeting once in a while.

Regarding reserves – it’s past time for people to understand that sooner or later nearly everything in your house will wear out and need to be replaced, so developers should be creating realistic budgets from the start, and not set these low, low assessments, only for homeowners to be shocked and dismayed when it really doesn’t cost $100 a month to run the community.

Developers should be required to provide initial funding of a reserve fund, say, enough money to make repairs starting five years after they leave and pay for a reserve study so the new board will have something to use to create a realistic budget.. Mandate reserve funding with a minimum of 10% of the annual budget being devoted to this.

Foreclosures – I love the idea of mortgage lenders being required to escrow and pay assessments. There are more ways to find out if a home is in a HOA community, so they'll just have to buckle down and do the work. It's good business in my view - a little more work upfront might ensure the homeowner has the means to pay. Better than than later on when you have to spend money to foreclose and lose money when the house sells at a loss.

And finally – mandate mandatory disclosures when a house is in a HOA community BEFORE the sale (perhaps coughing up a copy of the governing documents when an offer is made?) Follow that up with an acknowledgement form to be signed at closing where the homeowner states he/she/they received a copy and agree to comply with the community rules. If they’re smart, they will have read it first.

1) I don't see the need to make going to a meeting mandatory
.
2) The Developer: why force the developers to fund the future reserve and to train the board? The HOA could very likely squander the money away on things that have nothing to do with maintenance. It should be up to the board to get training if needed

3) Mandatory training of the Board: What if members are already board members for corps, organizations and the like? What if they already know what they are doing?

4) Foreclosures: Banks are probably protected statutorily at several levels against what you propose.

5) Mandatory disclosure. Already exists at the title level.

SheliaH (Indiana)
Posts: 6,964

Posted:

To MarkM31 – thanks for your comments on my comments

No, you can’t MAKE anyone attend the annual meeting or anything else, but my point is HOA boards make decisions that ultimately affect the overall quality of life in the community in which you live, whether it’s deciding which street will be repaved or if someone will be foreclosed on for not paying assessments. Maybe it’s just me, but I find people make time for the things they really care about – you shouldn’t have to mandate showing up to one meeting once a year and at least meet the people who are making those decisions and get to know them.

On foreclosures, my concern is protecting the HOA, not the banks – by escrowing assessments, the HOA can get its money at the start of the year and the bank can duke it out with the homeowner for non-payment. We know the assessments is used to maintain the common area, so by escrowing the money, the HOA can do that instead of spending limited resources chasing after those who don’t pay for whatever reason. If the house is maintained, it might sell faster and the bank will lose less money because it didn’t have to spend money worrying about HOA liens, overgrown grass, unpaid property taxes, etc.

Will this increase the cost of the mortgage? Probably, but if the banks had done their job in the first place, they might not have given out mortgages to any boob with a pulse without doing their due diligence to see if the owner was able to pay all the costs of homeownership.

On reserves, yes, the HOA can squander the money away, but people also think that $100 assessment they paid in 2010 will work just fine for 2016 prices and you know that’s not true. I think the developer should at least provide a starting point for the reserves – it’s up to the homeowners to build upon that. If people understand from the start what’s at stake, they might be inclined to make better decisions.

Ditto for providing some basic education – the homeowners are going to be running it eventually, so wouldn’t it be nice if that initial board got some training on what’s expected of them? If the homeowners mess it up, that’s on them – at least the developer did a little more than build a bunch of houses, take the money and run. If the homeowner is already on a board of directors or has other relevant experience, hooray – they’ll hit the ground running a little faster.

Then again, that doesn't guarantee competence either. A HOA board isn’t exactly like serving on a church board of trustees or a for profit corporation, because the objectives are different. You’re talking about people’s homes and the community in which they live, so there are some things a HOA board member has to think about that a for-profit trustee might not need to. As you know from reading all over this website. some people join a HOA board and behave like it's block club (or their own little kingdom). You can make whatever decision you want for your own household, but when you're on a HOA board, you must think about other people and what’s best for the ENTIRE community and you can't use the money like it's your own piggy bank.

As for mandatory disclosure, yes it’s there, but people still complain they didn’t know about a HOA or what that means. I agree people need to slow their roll, sit down and READ and ask questions, but there are realtors who don’t know anything about them and developers who don’t take the time to explain it, so the issue could be timing. Provide that information when the offer is made, while you still have time to review and back out if you find this isn’t the right house for you after all. I’d rather lose a little in earnest money than thousands more because I didn’t know something was out of compliance or the HOA was getting ready to issue yet another special assessment.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By SheliaH on 05/24/2016 7:25 AM

On foreclosures, my concern is protecting the HOA, not the banks – by escrowing assessments, the HOA can get its money at the start of the year and the bank can duke it out with the homeowner for non-payment. We know the assessments is used to maintain the common area, so by escrowing the money, the HOA can do that instead of spending limited resources chasing after those who don’t pay for whatever reason. If the house is maintained, it might sell faster and the bank will lose less money because it didn’t have to spend money worrying about HOA liens, overgrown grass, unpaid property taxes, etc.

But this will require changing both state and several federal laws. Good luck with that

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By SheliaH on 05/23/2016 7:06 AM
That could include setting a reasonable percentage for approving changes to the documents – since anything over 75% is almost impossible to achieve, let’s make it 51%. As I’ve said in other posts, a lower percentage doesn’t take away anyone’s right to vote – if it’s a horrible, no good, bad idea, you should be more motivated to get off your ass and vote accordingly

The limits to change the CC&Rs are purposely high to prevent willy nilly changes to a document that controls the entirety. Make it too small and easy (like 51%) and it becomes a matter of the CC&Rs becoming the puppet of who ever is in charge, good, indifferent or completely mad. While you may think a lower limit is a good idea while sanity rules, there are plenty of examples on this board where a HOA board becomes populated with idiots, nazis, control freaks and fools. Do you waant to make it easier for these individuals to wreak havoc. In fact, they could pass bylaws to insulate themselves from recall, and at the minimum, make their terms longer.

KevinK7 (Florida)
Posts: 1,343

Posted:

Quote:

Posted By MarkM31 on 05/24/2016 8:14 AM

Or you could be like my neighborhoods and ignore everyrhing. They amended restrictions with a majority force people into more restrictive covenants that refer back to the by-laws at every turn, so that they could do things like raise assessments without approval. They had also changed requirements for serving in the board, quorom, and even when a homeowner can vote (even members in good standing).

Making a CEO would probably make it easier to abuse the laws the government has no authority toenforce.

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By SheliaH on 05/24/2016 7:25 AM

As for mandatory disclosure, yes it’s there, but people still complain they didn’t know about a HOA or what that means. I agree people need to slow their roll, sit down and READ and ask questions, but there are realtors who don’t know anything about them and developers who don’t take the time to explain it, so the issue could be timing. Provide that information when the offer is made, while you still have time to review and back out if you find this isn’t the right house for you after all. I’d rather lose a little in earnest money than thousands more because I didn’t know something was out of compliance or the HOA was getting ready to issue yet another special assessment.

How much hand holding do adults require?

And how do you enforce the requirement to make the documents available, and when do you make them available?

And what if weeks later it comes out that the documents were not available at the point in time that the HOA mandated? What then? The previous owner is sipping drinks on the beach, out of your legal grasp.

And in fact, they were probably always out of your grasp, because to prevail in court, you must prove that the HOA suffered monetary damages. Just how do you do that and what price do you place on it?

RichardP13 (California)
Posts: 3,868

Posted:

Sheila

We are in a presidential election cycle. Generally 75% of Americans will vote for a president and the promises (which they can't keep) he/she made during the campaign. We put so much emphasis on something we have no control on, versus the community in which live 24/7. If we put the same effort in running our HOA's or communities as we do electing a president, this site would not need to exist.

While at Countrywide we investigated whether impounding HOA fees would fly. It's not an issue with the lender but who services the loan. In a complex of 1000 houses, you could have well over 100 different servicers. Then what if an association changed management companies, who was tracking all the mortgage servicers.

The issue of banks doing their job, the blame lies with Fannie Mae and HUD. The present Governor of New York had a big hand in the problems that later followed.

Reserves, smaller associations have a tougher times starting up than larger ones, and that applies to reserve startups.

SheliaH (Indiana)
Posts: 6,964

Posted:

Interesting comments everyone! We will have to agree to disagree on some things, but bottom line, home ownership is not and never has been a spectator sport. Richard, I agree with you – after all is said and done, all of us choose where we want to live – no one put a gun to our heads. I was a first time homeowner at the ripe old age of 40 and the most important thing I learned from the first time homebuyer classes I took (for free) was - no one will look out for my interests better than me – not the realtor, who may be more interested in the commission or the bank, who only want to make a profit on the mortgage. For that matter, the seller doesn’t really care much because he/she wants to sell the house and get the hell out for whatever reason.

That is why when you buy a house in a HOA community, you need to go in eyes and nose wide open, knowing what you’re getting into. The success or failure of any neighborhood, but HOAs in particular, ultimately depends on the people who live there, because we're all pooling our resources (money) together to take care of it. Ideally, your community consists of people who want to be good neighbors and take care of their homes as you do. But people aren’t perfect – you have some geniuses, some smooth criminals, a few idiots (well, more than a few!) and everyone else falls somewhere in between.

Much of what I’ve learned about my HOA comes through 15 years of living here, 10 on the board, 7 as treasurer, 8 as the community’s CAI representative and 9 as newsletter editor. Have I completely figured things out? No. Did I make mistakes? Plenty! Have I learned a lot? Hell yes – and I’m still learning every day. I continue to come to this site to see what's going in other communities and usually, I find an interesting thought or two I can take back to my own board. They may or may not accept it and don't have to, but at least they know someone's taken an interest.

Life is fluid and HOAs will continue to evolve and change as people do, and there is no single answer to every question. Maybe that’s the major takeaway from the CAI report. Keep an eye on how your community is changing and the people making the decisions. Keep asking questions, follow the money, decide what you want your community to be - and offer to help get it there. Whatever you do, don’t just sit there.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JeffT2 (Iowa)
Posts: 880

Posted:

I found this in my governing docs:
"The President shall be the chief executive officer of the Association."

So I copied that into a Google search (put it in quotes, along with either condominium or homeowners association) and found thousands more with the identical wording. Interesting. Anyone else have that or something similar?

We don't pay the President, and decisions are made by the board, not the President alone.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By JeffT2 on 05/24/2016 12:44 PM
I found this in my governing docs:
"The President shall be the chief executive officer of the Association."

So I copied that into a Google search (put it in quotes, along with either condominium or homeowners association) and found thousands more with the identical wording. Interesting. Anyone else have that or something similar?

We don't pay the President, and decisions are made by the board, not the President alone.

Jeff, I did as you suggested and indeed multiple links showed up. However, most were not for Homeowner assocaitions.

When I tried the following search:

"The President shall be the chief executive officer of the HOA"

I only had 5 links show up and only 4 were relevant. One of the four was actually a link to a thread in this forum.

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By TimB4 on 05/24/2016 3:16 PM

Try these two searches:

"President shall be the chief executive officer" homeowners association
"President shall be the chief executive officer" condominium

I get About 5,920 results for the first search
I get About 8,940 results for the second.
Most results on the first page seem to be actual bylaws or descriptions/quotes from bylaws.

What do your bylaws say for a description of the President?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Jeff,

Our bylaws are simple and, I believe, typical of most HOAs:

The President shall preside at all meetings of the Board of Directors; shall see that orders and resolutions of the Board are carried out; shall sign all leases, mortgages, deeds and other written instruments and promissory notes

That's it.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TimB4 on 05/24/2016 3:39 PM
Jeff,

Our bylaws are simple and, I believe, typical of most HOAs:

The President shall preside at all meetings of the Board of Directors; shall see that orders and resolutions of the Board are carried out; shall sign all leases, mortgages, deeds and other written instruments and promissory notes

That's it.

Typical boilerplate language in Bylaws is the President is the Chief Executive Officer and the Treasurer is the Chief Financial Officer.

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