Decisions, decisions, decisions. Board members have to make them all the time, from how money should be spent on repairs to what contractors should be hired.
Making decisions might seem easy, but deciding between two courses of action when each seems plausible and has supporters behind it may not be as easy as it seems –especially when board members and homeowners with strong personalities and opinions are involved.
For example, perhaps the down economy has really strapped some residents financially and they aren’t paying their dues. As a result, the association’s bottom line is teetering near the red and the board decides that it’s time to cut back on expenses. But how do they choose whether to savemoney by closing the pool or cutting back on landscaping maintenance?
One on hand, closing a pool can be a lost amenity that can affect quality of life. On the other hand, flowers can be replanted, but the association loses that great curb appeal that drew new owners in the first place. In addition, some may argue that closing the pool would save the association more moneythan cutting back on landscape maintenance. What to do?
Perhaps making a decision might be easier if it resulted in a more positive outcome. For example, there’s an empty a plot of land in the development and the board has decided to build something on it. Should a new playground be built that the children and their parents can enjoy? Or should the board approve a gazebo and garden area, that is more peaceful and serene? What doesthe board do when there are strong supporters for both on the board?
Community Associations are Businesses
“Homeowners need to remember that, at their most basic level, community associations are businesses, and they need to be operated accordingly,” says Ryan Poliakoff, co-author of “New Neighborhoods: The Consumer’s Guideto Condo, Co-Op and HOA Living.”
“The [boards of ] directors who run these businesses will need to make decisions on insurance, reserves, employment, repairs and maintenance (including landscaping, groundskeepingand housekeeping), all of which can result in significant expenses,” says Poliakoff.
According to the experts interviewed for this article, the most common denominator in difficult board decisionsis money. “As we all know, any time that money comes into play between friends and neighbors, relationships become complex,” says Poliakoff. “Nearly every decision made by board members will impact the bottom line of their community and invite criticism, whether warranted or not, from neighbors who might not be able to pay their fair share.”
Poliakoff also explains that when the time comes to finally collect from thoseowners, the social and interpersonal complexities of board service can become overwhelming. “It is this unique interaction between corporate responsibility and personal relationships that makes board service so challenging,” he explains.
But the decision-making process doesn’t have to be difficult. There are steps the board can take to make the process smoother and minimize any angst and potential infighting during aparticularly difficult decision-making time.
Comply with the Law
All board members must remember, first and foremost, that they are obligated to follow the law and the governing documents of the association and apply and enforce them in a fair and uniform manner. A board member must be very familiar with the declaration or covenants, the bylaws, or other controlling documents which form a contract between the homeowners and the association. To make those decisions, board members must use business judgment, where they obtain all the facts and circumstances, identify the options and weigh which course of action would be in the best interest of the association.
“The board members need to remember that they also have a fiduciary responsibility to protect the complex,” says Walt Williamsen, president of Reserve Strategies, based in northwest Connecticut. “Many associations are in financial distress and some board members look like a deer in headlights when they try to make a decision now.”
Think Return on Investment
Based on that fiduciary responsibility, the board must make decisions that protect the association’s bottom line. “Your choices are really based on a return on investment,” says Dr. Jasmine Martirossian, national expert on strategic planning and board dynamics and owner of Strategic Planning & Research in Boston, Massachusetts. “You need to weigh your alternatives. What’s the best-case scenario and what would happen if you have to forego something?”
To determine what the ROI is on the options the board has, it’s best to ask the experts. For example, in the scenario of the pool versus the landscape, it’s best to go to the source – the pool and landscape companies – to find out what would happen if the board gave up one or the other. “Ask how much it would take to get the lawn area up and running again when you are ready,” says management employment consultant Julie Adamen of Adamen, Inc., in Seattle, Washington. “However, it would probably take more than that to get the pool back if it turned green.”
Ask the Homeowners
One veteran board member says that when his board has to make a tough decision, they just go straight to the homeowners and find out what they want. “We would present the three choices to our residents, which are close the pool, cut landscaping or increase fees. Then we do what they tell us,” he says.
To get their opinions, the board can form either a committee or task force that researches the options, asks the homeowners how they feel and reports back to the board. The board can, and should, schedule an open meeting and invite the homeowners in to express their viewpoints. “Don’t be secretive,” says Martirossian. “Post the meeting times seven days ahead and get things out on the table. Then circulate the meeting minutes. There’s no need for secrecy.”
In some areas, such as Connecticut, posting these meetings and having the homeowners there while the board makes decisions is now the law. Starting July 1, legislation adopted by the General Assembly and signed by Governor M. Jodi Rell went into effect that gives new rights for condo owners to know when the board meets, to attend the meetings, to be able to speak up and to get access to documents that before could be denied. According to the law, the board and its committees must hold regular meetings at least twice annually. The board must give the unit owners meeting notices and agendas at least 10 days in advance, and make extra copies of any materials to be considered by the board available to them as well. Robert’s Rules of Order will control unless the declaration, bylaws, or two-thirds of the unit owners say otherwise. All owners will have the right to attend and speak at all meetings, with narrow “executive session” exceptions such as to allow the board toconfer with the association’s attorney. The board can act without a meeting so long as they do so unanimously, document the action, and notify the owners afterward.
Know When to End Discussions
Homeowners’ input and committee recommendations can go on forever, so boards should make sure to have a date and time to end it and make a final decision. “It’s up to the board to manage how to end it all,” says Adamen. “Give the homeowners the information and put a deadline on when they can respond.”
When the results are in, Williamsen says that majority rules. “If 75% of the residents wanted the playground,” saysWilliamsen, “I don’t know of any situation that a board would go against what the homeowners really wanted.”
However, if the results are much closer to 50/50, the board makes the final decision.
Avoid the ‘Because-I-Said-So’ Syndrome
Once a decision is made, Martirossian says that most people are hard-wired to want an explanation, so boards should avoid the “because I said so” syndrome. “Any parent knows that when you tell a child your decision and then they question it, you say ‘because I said so,’” she says. “A child wants a reason, an understanding as tohow you came up with that decision and most adults are the same way. Justify why you came up with this decision and keep it fact-based. The board isn’t disagreeing with a person; they should be following guidelines based on fact rather than emotion. It can’t become an us-versus-you.”
Once a board has made the final decision, Adamen says they should be prepared to hear from the homeowners who wanted the other choice. “Be prepared for the homeowner’s wrath,” she says. “Through appropriate communication and surveys you can survey and make the opposite decision and leteveryone know you made a decision and why.”
Lisa Iannucci is a freelance writer and a frequent contributor to New England Condominium magazine.