Know the Risks of Serving on Your Condo/HOA Board or a Committee

Started by CathyA3 • 22 replies • 482 views

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CathyA3 (Ohio)
Posts: 6,299

Posted:

I came across an interesting article that discusses liability risks for professionals who serve on HOA/COA boards or committees.

It's something that I'd never considered before. And a number of community associations like to make use of professionals to supplement the board's skills - a typical example is appointing someone with financial knowledge to the office of Treasurer.

Honestly, there seems to be liability lurking everywhere...

MelissaP1 (Alabama)
Posts: 13,836

Posted:

It is much like the catch 22 of the "Good Samitrian" law. If you have medical training or professional and it is found out you did not assist in a medical emergency, you can be sued.

Sometimes I find those with "professional" backgrounds fall into two camps. Those who want to be in control and handle that aspect of their profession. The other camp, don't ask me anything. I will do nothing. It's a debate on who is right in their approach.

There is also many misconceptions on professionals. We had a sheriff deputy that was renting. They parked their police car near the front entrance. People ASSUMED that would be a deterrent in crime. Instead I was dealing with mailbox thefts that were happening only 100 feet in front of their car. Plus had to help them file a Postal report for theft of mail. Don't assume a professional is 24/7...

Former HOA President

KerryL1 (California)
Posts: 14,550

Posted:

Have you read the article yet, Melissa?? If so, why do you think a sheriff deputy is an example of the topic under discussion?

So, Cathy, we've had attorneys on our Board and some directors believed their various "legal" assertions. They both were disguising humans. Arrogant, rude to owners and directors who disagreed with them. One & his two like-minded gang member were defeated for reelection and their other attorney pal then resigned from the Board. One of the happiest months in my board service of 7 2-year terms.

We have a new director since Nov. who is a retired personal liability lawyer in PA. I wonder if not being licensed in CA matters at all? So far, he's been fairly quiet and in learning mode.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By KerryL1 on 04/30/2022 12:34 PM

So, Cathy, we've had attorneys on our Board and some directors believed their various "legal" assertions. They both were disguising humans. Arrogant, rude to owners and directors who disagreed with them. One & his two like-minded gang member were defeated for reelection and their other attorney pal then resigned from the Board. One of the happiest months in my board service of 7 2-year terms.

How many times are we to be subjected to you dislike of lawyers. We have hear this over and over and over again.

BTW, what does this have to do with the OP's subject?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

In general the two professions I have served on BOD's with and had the most issues with were Lawyers and Teachers. Lawyers as they often wanted to get a legal opinion to cover their own butts and/or felt they knew it all. Teachers as they wanted to treat owners like children and they knew nothing about finances.

Real estate agent seem to be good or bad. Nothing in between.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By CathyA3 on 04/30/2022 7:14 AM
I came across an interesting article that discusses liability risks for professionals who serve on HOA/COA boards or committees.

It's something that I'd never considered before. And a number of community associations like to make use of professionals to supplement the board's skills - a typical example is appointing someone with financial knowledge to the office of Treasurer.

Honestly, there seems to be liability lurking everywhere...

Seems to me the simple answer is do not vote on HOA matters that would fall under ones profession. As an example, a licensed electrician could vote on say plumbing issues but not on electrical issues.

KerryL1 (California)
Posts: 14,550

Posted:

Max, I only disliked the two on our Board. I have never written that I dislike all or even most or or some lawyers.

I have mentioned those two a lot --usually in reference to how association owners can get rid of rogue, abusive or obnoxious directors because some posters need to know it CAN be done through hard work and by uniting with other owners.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By JohnC46 on 04/30/2022 1:06 PM

I suspect it would be more than just voting when it comes to the pro's area of expertise. If the person were to participate in discussions, then the rest of the board could claim that they were swayed by the pro's opinions.

I wish I were currently on my COA's board because I'd like to pick our attorney's brain on this. The article sounds like it's saying that anyone with with useful professional skills needs to either not volunteer or to beef up their insurance. This doesn't sound like it serves anyone well - because it's pretty much saying that board/committees will have to limit themselves to people without useful knowledge. Of course plenty of homeowners already accuse their boards of exactly that ...

BillH10 (Texas)
Posts: 1,217

Posted:

There is an attorney on the board of one of our clients.

I knew from prior experience he would have to tell the managing partner of the law firm with which he is affiliated he had been elected to the Board.

A week or two after the election, the senior partner of the firm called me to discuss the firm's guidelines under which Tom could serve.

The big restriction is he cannot provide legal advice under any circumstances and asked that the PM and the Board members not ask him to do so. He can suggest a consultation with the association attorney if he believes the Board should do so but he cannot participate in the consultation. His firm prefers he not find himself in the position of suggesting the consultation, he is not familiar with real estate or Condominium/HOA law as his practice is in another area. Of course he must recuse himself if any matter which comes before the Board is in any way related to his work or other clients of his firm.

The board member attorney also was asked by his firm to explain the foregoing to the Board during a regular meeting of the Board, which under the Declaration of the Association and the Texas Property Code, is open to the members.

During his participation in Board deliberations, he never refers to the fact he is an attorney nor does he 'pontificate'.

From other posts I have read, this Association is fortunate they do not have to contend with the issues others have experienced with Board member professionals.

CathyA3 (Ohio)
Posts: 6,299

Posted:

As far as lawyers on the board go, I think there also would be an issue with them thinking they know more than the association's attorney.

One of the values of our attorney was that he was an independent set of eyes who could ask our board "are you sure about that?" That's useful, and attorneys on the board couldn't do that.

Financial pros could get themselves into trouble because none of them have crystal balls.

Anyway, this article was a surprise. My securities licenses have expired, so I can't claim to be a financial professional at this point. But it sure is hard to forget what I know and to avoid using that knowledge if I think it could benefit our association.

'Tis a conundrum.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Overall I'll take someone with a strong management background that has dealt with contracts, managed projects and budgets and supervised people.

AugustinD
Posts: 3,698

Posted:

The article's main source is an attorney. I think this attorney is merely covering his own derriere. The way he's talking, a board should have no one with a license in law, a financial field, or one of the trades.

Bona fide professionals know where to draw the line in sharing their opinions. They know what their liability insurance does and does not cover. As well, suppose either a plumber, an attorney, a licensed engineer, a contractor, or an electrician does state that xyz (in an area that is in their field) needs to happen. Does this relieve the rest of the board from consulting other professionals?

I am not buying that there's any concern here.

KerryL1 (California)
Posts: 14,550

Posted:

I'm agreeing with all of Augustin's arguments. Don't think there's much there, there.

AugustinD
Posts: 3,698

Posted:

Note how towards the end of the article, attorney Meskin suggests ways to get additional insurance for directors and committee members. E.g.

“I’ve had architectural review committees come to me for their own insurance because they want to make sure they have proper coverage...”

From Meskin's company web site:

"Joel W. Meskin, Esq., has been Vice President – Community Association Insurance and Risk Management, McGowan & Company, Inc., since January, 2005. McGowan & Company, Inc., now known as McGowan Program Administrators is a leading provider of Community Association and Property Manager Insurance Products nationwide."

Conflict of interest much, Mr. Meskin?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By BillH10 on 04/30/2022 1:52 PM
There is an attorney on the board of one of our clients.

I knew from prior experience he would have to tell the managing partner of the law firm with which he is affiliated he had been elected to the Board.

A week or two after the election, the senior partner of the firm called me to discuss the firm's guidelines under which Tom could serve.

The big restriction is he cannot provide legal advice under any circumstances and asked that the PM and the Board members not ask him to do so. He can suggest a consultation with the association attorney if he believes the Board should do so but he cannot participate in the consultation.

Meaning the director-attorney will not have the benefit of hearing impartial, and paid-for legal advice from the HOA's attorney. Did the senior partner also state that the attorney-director may not subsequently vote on how to proceed after the board has a consultation with the HOA attorney? Did the senior partner explain to Manager BillH10 that BillH10 is not the senior partner's client, and that BillH10 therefore need not take his (the senior partner's) advice?

Does the senior partner even realize he crossed the line and gave BillH10 legal advice?

According to the article CathyA3 linked, I think this senior partner just held himself out to liability by advising the HOA manager how to manage one of the directors so as to protect someone from liability. Which someone is being protected is not clear.

To order a director not to hear the HOA attorney's counsel while the other directors have this counsel is a big deal.

I think this conversation with the senior partner of the director's law firm is surreal and frankly, based in remarkable ignorance on the part of the senior partner.

MaxB4
Posts: 3,513

Posted:

If this article had been handed to me in paper form, I would wadded it up and thrown it straight into the trash can as being pure nonsense.

KerryL1 (California)
Posts: 14,550

Posted:

Waidaminute! Max, Augustin & I all agree?

Reminds me of an article I read about the horrors of pumping leaks in high rises, scary stuff about bad cast iron drain lines. Turns out the author was a "facilities manager " for a national property management company that touts how to make high rises somehow impervious to water messes. Author clearly was trying to sell his firm's services PLUS he was not even and plumbing/mechanical professional.

AugustinD
Posts: 3,698

Posted:

GMTA

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By KerryL1 on 04/30/2022 6:02 PM
Waidaminute! Max, Augustin & I all agree?

Reminds me of an article I read about the horrors of pumping leaks in high rises, scary stuff about bad cast iron drain lines. Turns out the author was a "facilities manager " for a national property management company that touts how to make high rises somehow impervious to water messes. Author clearly was trying to sell his firm's services PLUS he was not even and plumbing/mechanical professional.

NEVER!

CathyA3 (Ohio)
Posts: 6,299

Posted:

I suppose there are different standards depending on what sorts of licenses the professional carries. See Bill's description of how a lawyer director of one of his client associations has to behave.

There were significant limits on what I could do when I was in the financial services industry. New employees went through several weeks of training, the first session of which was with one of the company's compliance officers and during which they read us the riot act. Among other things, we could be fined, prosecuted and jailed for just the appearance of wrongdoing, even if our actions hadn't been illegal. They also said that we possibly would be dealing with the rich and famous, and we had to know how to keep our lips zipped even while talking with fellow employees. We had to be affiliated with a brokerage firm in order to be licensed, so it's not surprising that any liability protection we enjoyed would not cover off-duty acts such as serving on a community association board.

What I take from the article is that an employer isn't going to want to be on the hook for actions that their licensed employees take while off the job, and so they make very sure that any liability that arises falls on the employee. If you're one of those employees, it's good to be reminded of that (especially if you don't have compliance officers reading you the riot act).

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By CathyA3 on 05/01/2022 5:56 AM
I suppose there are different standards depending on what sorts of licenses the professional carries. See Bill's description of how a lawyer director of one of his client associations has to behave.

I do not see how a senior law firm partner has any legal authority to order a HOA/COA manager and board to prohibit any of the HOA/COA directors from participating in a Board consultation with the HOA/COA's attorney. I believe this senior law firm partner crossed a legal line in other ways as well.

Attorneys serve as directors on non-profit and for-profit boards all the time. If the law muzzled these attorney-directors the way the senior law firm partner insists they have to be muzzled, I think these attorneys would not be serving on any boards.

If a law firm wants to have its own in-house rules prohibiting its attorneys from serving on boards, then this is the law firm's prerogative. But pushing around HOAs/COAs, and even as in this case, giving the HOA/COA what is legal advice, as if the law firm represents the HOA/COA, is outrageous and a violation of the rules of professional conduct.

This law firm partner should have simply said to the manager, "I am the attorney for my law firm. The law firm is my client on this very limited matter. Serving on your board at this time is one of our associates, one attorney Jane Smith. The law firm's rules for its associates prohibit the law firm's associate, attorney Smith, from participating in any consultation the HOA/COA Board has with the HOA/COA attorney. If you have any questions about this, please ask the HOA/COA attorney." Whence I think any competent HOA/COA manager will immediately inform the board and HOA/COA attorney. Why? Because the law firm partner's verbiage could be construed to be a threat to sue if the HOA/COA is interfering in the law firm's rules and relationship with the associate.

In view of, first, the veiled threat, and second, the reality that no way no how can the attorney fulfill his/her fiduciary duty without the counsel of the HOA/COA attorney, I think the HOA/COA attorney might advise the Board either (1) to disallow Director-attorney Smith from serving on the HOA/COA board; or (2) to require Director-attorney Smith to not participate in a good deal of any Board meeting (regardless of whether it is executive session or an open meeting). The worst part is the Board cannot explain why the Board is tying the hands of Smith, due to the risk of litigation from this law firm.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I don't think anybody is ordering anybody else to do anything.

I think employers are informing their licensed employees that there are liability risks that the employee is assuming when they use their professional skills outside of their workplace. When I was a financial professional, my employer paid all of the costs associated with my having the licenses, and being employed by a brokerage firm was a requirement. I think it was entirely reasonable that there were certain conditions associated with that. One of those conditions was that my employer would not be liable for any professional risks I took on outside of my regular employment - and that if I were foolish enough to do so and got caught, that would be grounds for firing.

My employer had nothing to say about any other extracurricular activities - I could have had any number of side hustles as long as they did not involve use of my professional license. And I was free to decide that these requirements were not to my liking and to find another line of work.

I do think that employers in this country are often unreasonable about employment conditions, but this isn't an example of it.

In contrast, when I was in IT, many of us had certifications of various sorts, and there were no issues about using our knowledge outside of our regular workplace.

So I think this issue is very much industry-dependent. I noticed that the professions mentioned in the article involved fiduciary duty to the clients of the employers - that may have something to do with it since it involves a higher standard of care than is required in other jobs.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By AugustinD on 04/30/2022 2:49 PM
Note how towards the end of the article, attorney Meskin suggests ways to get additional insurance for directors and committee members. E.g.

“I’ve had architectural review committees come to me for their own insurance because they want to make sure they have proper coverage...”

From Meskin's company web site:

"Joel W. Meskin, Esq., has been Vice President – Community Association Insurance and Risk Management, McGowan & Company, Inc., since January, 2005. McGowan & Company, Inc., now known as McGowan Program Administrators is a leading provider of Community Association and Property Manager Insurance Products nationwide."

Conflict of interest much, Mr. Meskin?

Good point.

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