Why is there such incompetence and misbehavior in the world of HOAs?

I work in the private sector, with businesses ranging from small ones to large Fortune 50 ones. I see a range of behavior from people in those businesses, but people in a company who have spent a long time in a sector generally know what they're doing and are pretty professional. I may disagree with their decisions, but they usually aren't sloppy, they usually don't break laws and they don't things that, on their face, almost certainly lead to problems.

Homeowners' associations, however, are a different story. In my limited involvement with them, I've regularly seen:

1. Wilful/intentional lawbreaking. For example, when boards are informed of legal requirements (such as requirements to deliver financial and other reports to owners), they yell and deny that they have to.

2. Malicious behavior that is likely to lead to problems. For example, I've seen boards single out owners, mock them at annual meetings and send emails back and forth among board members, stating that they want to "get" the owner. Breach of fiduciary duty, anyone?

3. Incompetence by HOA property managers. I've seen property managers make up fake invoices and give them to owners, post wrong information about owners in public (claiming that the owners are behind on payments to HOAs) and then admit that the information is wrong and the owners don't owe anything.

4. Incompetence by HOA lawyers. I've even seen HOA lawyers violate agreements, break the law and violate professional rules, such as by repeatedly threatening owners directly, despite the Fair Debt Collection Practices Act.

In short, I've seen a much lower level of professionalism in HOAs, even among professionals in the HOA world, and a lot of behavior that gets them in trouble.

Why is this? I don't expect boards of HOAs to be as knowledgeable as boards of for-profit Fortune 50 companies, but boards of HOAs that I've seen are far below even volunteer boards of charities that I work with.

Paul,

Are you doing research for a book?

Because incompetence and misbehavior is characteristic of humans, and because of Cathy's Law of Troublemakers ("It Takes Two to Tango, But Only One to Screw Things Up").

Paul's problem is he is applying one bad HOA's antics (his) and stuff he reads to all HOAs.

One of the worst BOD Members I served with was a lawyer. He wanted opinions and what iffed everything to death.

I’ve dealt with 4 HOA boards. In one, the board is awful. In another, the property manager and lawyer are awful. In another, I don’t know who’s at fault. The other HOA board is invisible but the building seems OK, so that’s the only one where I see no fault.

I see a lot of unprofessionalism among property managers and HOA lawyers. That’s their career so I would expect better. But in all instances, the board should hire professionals since the buck stops with the board.

I always find it funny when someone complains "The contractor is friends with a HOA member". So that suddenly means it's an "unprofessional" relationship. I am thinking what do you want them to be? Mortal Enemies? When I do business it may be with a friend because know their business ethic. I may recommend or hire someone another HOA member recommends. Do not see why that is a bad thing. It's a small town where I live. Your going to know someone.

It's like that old story of the only 2 barbers on an island. 1 barber has a bad haircut that is uneven. 2nd barber hair is always great looking. Which barber do you hire? The 1st Barber. It's the 2nd barber that is cutting his hair....

SheilaH, I am on several nonprofit boards. All of them are very by the book. We follow our governing documents very carefully and use sharp outside counsel- for one, we used an AmLaw top 10 firm (at discounted rates) for some real estate legal work. We’d love it if others paid more attention to us and offered to help.

For two HOA boards that I’ve volunteered to help:

One has been sued repeatedly for doing illegal things. Its lawyer has also been sued for various things relating to the HOA. I’m a lawyer and the board did not accept an offer for me to help with “legal compliance”- basically, helping it get its records and documents straight.

The other board refuses to tell owners who’s on the board, when it meets or what it does. At the HOA annual meeting, if anyone asks questions such as “why are only some board members here”, “where is the conflict of interest report that the law requires” or anything else, the management company and the board members who are there simply literally yell at owners and threaten them or dare them to run for the board. When any non- insider owner does run for the board and clearly has enough support to win a seat, the board simply cancels the meeting and refuses to give copies of ballots or proxies to anyone. The management company runs elections, has its employees on the board and refuses to disclose information.

Does that answer your question?

CathyA3, you make good points. Thanks for your insightful post.

One place where hopefully everyone on this thread could have agreement is that property managers and HOA lawyers should be highly professional. Unlike HOA boards, they are experienced and should know the rules.

Well, no one said change is easy. For HOA board #1, I have to wonder what the rest of the homeowners are thinking - if this one gets used over and over and loses, why haven't they tossed them out? These guys are costing the association too much money that's better spent on building reserves and routine expenses. But if the homeowners say nothing and do even less, I hate to say it but they get what they deserve.

(I suppose this is the bunch you talked about in your last post?)

Same thing for HOA #2 - of course the management company will go along with this setup - they'll still get paid, regardless (unless the homeowners revolt and toss this board, along with the management company.

You teach people how to treat you and power concedes nothing without demand. Frederick Douglass said that about slavery and this applies to every great movement before or since.
Changing this board and the community's direction isn't something you can do by yourself and once you get the bad guys and gals out, it will still take some time to turn things around this is your home, so unless you want to move, you have no other choice.

Keep wringing Your hands and bemoan the situation if you want, but when you finish, where will you be? I'm not being unsympathetic - most of the regular posters on this board have lived it or are living it. We have plenty of scars and we've had some setbacks, and a few of us had to leave and then the change took place. What we didn't do was shut down and come away wanting to know less about the problem because it seemed so huge, nothing would make it to away. If the property manager and board members won't straighten up because it's the right and responsible thing to do, you and your neighbors will need to make them sorry.

Well, in reading Melissa's post, a management company is just a contractor, not different than a plumber or landscaper, and they are to do exactly what the Board's demand. So it would be left up to the attorney, if one is even involved with the HOA, which many probably aren't legally represented.

Because when elections are held and the management company’s candidates are not the only ones who will win, then the board just cancels the meeting and refuses to give out information about the proxies and ballots.

Yes, the management company has its employees on the board. Those employees run elections. The board does not solicit candidates or even list board members on annual meeting materials. When owners ask who's on the board (at annual meetings), the board members who are there won't say who else is on the board; rather, they yell at owners and insist that there are other board members who attend all other meetings. I've never seen those other members, but I understand that they work for the management company. One board member told me their names, and I saw that they are listed on the management company's website, as senior management of the management company.

NpS, you’re above making petty insults online. I know that you are. I am as well. Let’s try to do better.

I took his comment to mean that a lawsuit may be needed to solve this. Another attorney would also bring a fresh set of eyes to the problem.

If your governing documents allow non-residents to sit on your board, then it appears that you've got an entrenched "special interest" in control of the process, and it's in their financial interest to hang on. This is very different from HOAs that only have homeowners on the board and where the bylaws lay out the process for removing incompetent board members. (To the best of my knowledge, the majority of HOAs are the latter, which is why I think some of us have disagreed that many HOAs are cesspits of corruption.)

Anyway, if your bylaws don't give you any workable options for ousting the bad actors, then you do need to bring in bigger guns from the outside. That's assuming that you believe it's worth staying in your community.

Thanks. I think that you're right. I'm not interested in litigating- the legal fees would outweigh the cost of my property there- so I think you're right, particularly about staying.

I thought this was funny.

To add:

* For 2 nonprofit boards that I'm on, I'm subject to the rules imposed by a higher governing structure. Both have extensive governing documents that we have to follow; one has a 400-page rulebook. Before being elected, I was tested on that rulebook and had to pass the test.

* For 2 nonprofit boards I'm on, I believe that I have fiduciary duties similar to what a director of a for-profit corporation has. That's serious, and more imposing than what HOA boards are subject to.

* For 1 nonprofit board I'm on, I was elected at a meeting of the members. My bio and professional credentials were circulated before the meeting, and I was interviewed a few times by other leaders of the organization before being put up for election.

* 2 boards that I'm on regularly use first-rate outside counsel for document review and guidance.

In short, the boards that I'm on don't pay a cent, yet they are serious, consider rules to be serious, and act in a serious manner. No way would any of them- particularly 2 of them- dare to behave like I've seen HOA boards behave.

Augustin, I ran for a HOA board once and had enough votes to be elected. But I had asked the board about why it didn’t disclose financial information to owners, which was legally required, and the board got mad. The board simply canceled the election.

Is your first sentence in error? I never said that a for-profit board is the same as a HOA board.

My explanation for HOA boards is that some “professionals” that help HOA boards are low-grade, and laws that require good behavior of HOA boards don’t have teeth. Thus the unable and the malicious can get on HOA boards and get away with bad behavior, intentional or not.

Most HOA board members surely are well-meaning and do their best, but there are some rotten apples. But even the good ones can be led astray by bad HOA lawyers and the like.

Augustin, there’s a big difference between HOA board constraints vs. corporate board constraints.

I am on several nonprofit boards. I’m not in any for-profit corporate boards. But I work with numerous for-profit corporate boards as part of my career. So I see all sorts of boards for all sorts of organizations.

No board that I am on or that I work with would behave like some HOA boards I’ve seen, though. Basic human decency means that you don’t act like some HOA boards I’ve seen.

Joan is from CA. One of the states with them most restrictions on hw an HOA can operate but her answer is more restrictions........not

I'd argue the need is, in Florida as it appears to be in California, for not more restrictions but enforcement and penalties. There need to be consequences for bad behavior.

You are expecting professional behavior from people who are not professionals, who for the most part are not given training or the tools to become professional, and most important are not being paid as professionals. When these expectations come from other homeowners who are even less knowledgeable and skilled, and who flat out refuse to do their fair share of the work... well, it's not a good look, is it?

If various folks start "getting tough" on board members, they'll find it even more difficult to find people willing to serve. The Ohio legislature started making noise about doing something about all the complaints from HOA residents, only to give up after enough people pointed out that if their bill passed, every board member in the state would resign.

If HOA Board Member was a profession, with training and examinations and licensing and codes of ethics, and these folks were being paid fair market value for their skills - then homeowners would have every right to expect professionalism and expect penalties for bad behavior, the same as happens when doctors or lawyers or others violate the standards of their professions. But until that happens, getting angry at people for not being something they never claimed to be is a non-starter, and you can expect them to walk out the door when they get fed up enough.

Unless the hostility is based on race, religion, gender, disability or one of the other protected classes, the above is a fiction.

Nice post, CathyA3. I too wonder whether some nominal amount should be paid to HOA directors, kind of like what City Councilors are paid.

What you're paying is your share of expenses. You aren't compensating the board in any way, shape or form (and the boards I'm familiar with are specifically prohibited from being compensated).

However... this supports my belief that you need to have professionals doing the work of the board, and not untrained amateurs who have no idea what they're doing. However, prepare to pay a whole lot more for professional services. One thing you'll be paying for is the right to sue their butts when they act up.*

It also supports my belief that the real beneficiaries of HOAs and COAs are the businesses that earn their money from HOAs as well as local governments and tax payers who have been able to offload some portion of their responsibility (eg. road maintenance) onto a group of private citizens who are still charged the going rate for property taxes in exchange for reduced services.

Something's gotta change, but I don't expect that it will until people start avoiding HOAs like the plague or the whole thing blows up in everyone's faces.

(* I have no problem going after folks for things like embezzlement. You don't need special training to know that stealing money is wrong. I do have problems going after people for things they truly don't understand and who have had no chance to learn. F'instance:

- We've had some board members whose careers were in academia. I've been appalled at how little they understand about proper business procedures. And these are not dumb, uneducated people - they've simply had no business experience. Shall we prohibit them from serving on HOA boards? If we're going to sue them for things they don't know, I'd recommend that they never serve on a board for their own sakes.

- I'm often surprised by how few people understand the in's and out's of Fair Housing laws, which can be unforgiving even for good-faith mistakes. An uninformed board can easily do something that results in stiff fines, which everyone in the community will pay. When we come across an issue that has a whiff of Fair Housing to it, we turn it over to our attorney for verification of the claim and communication with the homeowner. Of course that costs money, which I'm sure some would say is not justified. However, I'm equally sure that some would also be the first to scream bloody murder if the board messes up.

- And seriously, who doesn't understand GAAP or FASB? A lot of folks, as it turns out. Shall we forbid anyone without accounting experience from serving on their boards?

- And what about ethics? Having boards sign Codes of Conduct is something of a fad lately. But more than one attorney has said that signing such may void the "business judgement" defense that's available to anyone who has a fiduciary duty to others, and may in fact violate the board's duty to do what they believe is in the best interest of the HOA. Forcing someone to do something that would compromise their right to defend themselves if they were to be sued is a good way to guarantee that no one volunteers - and may be actionable itself.

So you can see that "getting tough" is not the simple solution many think it is and may actually be counterproductive, although I agree it's justified in some cases.

Replace HOA Boards With Professionals!! I think I'm going to start a movement.)