HOA board members getting paid

Worst idea ever .. however it can happen. It takes away income from the HOA. Each HOA is different so is the culture. They may not see the problem until they do ..

ClarkeS1,

-- Yes, this is unusual.

-- Check your governing documents for the exact wording on assessments. Typically the bylaws or covenants state that all owners shall pay the assessment. The wording is not trivial.

-- Check your governing documents for what they say about compensation of directors. Typically they say that directors may not be compensated. Now and then the Bylaws permit the treasurer (who may or may not also be a director, depending on the HOA/COA) to be compensated.

-- A federal statute exists that talks about how "volunteers" who are paid lose certain protections. See https://en.wikipedia.org/wiki/Volunteer_Protection_Act

-- If you quote the wording in your bylaws and covenants on these subjects here, this forum can likely offer more insights.

To add to what Bill said, reimbursement would be for things like photocopying a community newsletter for distribution or supplies for an association sponsored event such as a block party. In my community, the board usually authorized the reimbursement during a meeting and receipts were required before anything was paid. This wouldn't be a piece of notebook paper listing random amounts,but those generated by an actual company.

As others have said, check your governing documents.

If they don't say anything about reduced payments for serving, then the Association is doing it improperly.
What should be done is the Board members pay their regular assessment and the Association cuts a check to the individuals serving.

Additionally, one should be aware of the following:

A 1099-misc should be issued if the amount is $600 or more per individual.

A 1099-C should be issued if the amount of the waived assessment is $600 or more.

The Board may be giving up protections under the Federal Volunteer Protection Act because they are now being paid (hence considered a professional).

Assessments Section I
Assessments against units and co-owners. All expenses arising from the management, administration and operating of the Association in pursuance of its authorization and responsibilities as set forth in the Condominium Documents and the Act shall be levied by the Association against the units and Owners. ( no mention of payment).

Board of Directors section 1
Directors' compensation, if any, shall be set by the affirmative vote of 60% of all Co-owners. (can not find the records of when this actually happened) and the amount is $50.00 per month and is paid by reducing there monthly assessment payment by this amount. Just right at $600.00 per year.

Tim would you consider a reduction dues taxable or a way for the HOA to avoid paying taxes? They are not getting a check cut to them. They just do not have to contribute the same rate

It's not really germaine to this discussion, but our attorney law firm said that Board members can be paid for work outside of their duties as Board members. They said it was rare, but for example, if an engineer board member oversaw a major construction project that took a lot of hours, that would be above and beyond what a Board member is expected to do and they legally could be compensated for that activity. They did caution that it wouldn't be good optics and doesn't normally happen.

I think few homeowners would put up with paying Board members regardless of whether what they are doing.

Oh my. I'd say Michigan has broken the mold again.

Exactly $600 translates to the requirement that TimB4 so carefully identified.

The HOA should pay 50 cents less over the course of the year so that, rounded to the nearest dollar, the directors' income is $599, and the paperwork can be avoided?

This is not what the IRS is posting on it's website.

Per the link to the 1099-C I posted earlier:

File Form 1099-C for each debtor for whom you canceled $600 or more of a debt owed to you

Agree.

$600 - 50cents - 599.50 which rounded up to the nearest dollar is still $600. Therefore shouldn't they pay $1.50 less? This would result in a total of $598.50 which rounds up to $599.

Correct, what you posted is not germane at all. You should start a new thread so you can get the dressing down that I think you so richly deserve for proposing this plan.

-- A director who wants employment as some kind of project manager for the HOA should submit a bid just like any other vendor.

-- Said director/project manager candidate must not use any more information than any other vendor has to prepare his/her bid.

-- Said director/project manager candidate must abstain from voting on whether he/she wins the contract. Down the line, he/she must abstain again if and when questions arise that require a board answer.

-- If the project requires particular licensing, the licensee needs to check the rules of ethics (which may have the force of law, depending) for the particular license to see whether conflict of interest requirements are being met.

Serving on a HOA/COA Board is a thankless, time intense, conflict-ridden, and often draining job. If a director resents how much work he/she does for the HOA and for no money, then I think he/she should quit. Similarly when a director starts actively looking for ways to be compensated, then I think it's time to go.

This forum has a purity about it. The long-time posters who have served on boards have done so selflessly. They never speak of seeking out ways to make money from their labor. They're all about service to the community. In this dog eat dog world (such as it is as forests burn, crops go without water, towns flood and more), how heartbreakingly rare indeed this is.

No. It's $600 and up. Easily confirmed at the IRS site.

Yup. It shows.

I have sometimes wondered if paying HOA Board members can be shown to lead to better management? Trusted authorities like my Psych 100 class decades ago would have me believe that getting paid some small amount will tend to make people take the job more seriously. It might even encourage more people to volunteer for the job?

Just curious if there's any reliable research on this, one way or the other?

BillD

Keep in mind the what I posted earlier.
Being paid means you lose protections under the volunteer protection act.

See:

HOA Volunteer Standard of Care: 5 Layers of Immunity to Litigation 2021 article by a MC

Why it is safe to join the Board of your HOA 2022 article from an attorney

And this from the trippscott.com site is totally bogus

As a result of the applicability of the federal Volunteer Protection Act, our neighbors no longer need to have a concern that they may become subject to a claim made by a dissatisfied neighbor or one who disagrees with the board's activities."

Directors are routinely named in lawsuits for all manner of alleged wrongdoing. The VPA does not protect directors from claims.

Yes. This is my point: Even if directors and officers are paid some nominal amount, and so the federal Volunteer Protection Act does not apply, D&O insurance is going to cover the directors and officers.

I read some history on the Volunteer Protection Act. It was created to help encourage people to volunteer. But for god's sake, the VPA absolutely does not stop someone from suing HOA/COA directors, and just being named in a lawsuit is so damning and so burdensome, even with D&O insurance.

Some history of the 1997 VPA and whether this federal statute has made a difference, up to about 2014: https://www.degruyter.com/document/doi/10.1515/npf-2014-0001/html?lang=en

More. Like $3000 to $5000. Compare to what city councilors are paid (said councilors having an enormous staff available to answer questions).