BETH GRIMM'S TOP TEN WAYS TO |
STAY OUT OF LEGAL (and other) TROUBLE - Part I
By Beth A. Grimm, Attorney, California, PR Chair, CLAC
recently gave two programs on this topic to groups of board members and managers and it went over so well I decided to share the tips in an article. The concepts are simple; however, they are undeniably important in this world of turmoil and stress, where people seem quite easily agitated.
I am in a good position to witness the common mistakes made by boards, managers, and others in this industry because I am consulted when there is a problem, not when everything is hunky dory. And of course, hindsight is closer to 20/20 than foresight! Everyone can use a little help from someone who sees just what goes wrong in this business. Perhaps you can benefit from the experiences I have seen that commonly lead to disaster!
Tip #1: BE COURTEOUS AND PROFESSIONAL AT ALL TIMES.
Be Respectful at Meetings
It is really important when you are on the board or in a management position to be respectful of everyone at a meeting, whether they are respectful or not. The board must have a persona (and management, too) that speaks to organization, courteousness and respect. If the board is disrespectful, the attendees will follow suit. It's contagious.
Be Firm at Meetings
Being "firm" does not mean being heavy-handed. It does however; mean responding instantly to situations that could lead to an "out-of-control" scenario. If the board president or chair keeps control of the meeting, it is less likely that people will act like children. Being kind and being firm are not incompatible. For example, if someone speaks out of turn or attempts to interject a comment when it is not appropriate to do so, the board president could say (after a light gavel tap): "Excuse me, but we do need to get on with business, and the homeowner forum time is at the (beginning/end) of the meeting. We really appreciate your being here, but we do need to move on." (And then be prepared to move on without giving the interrupter a chance to argue.) If the board has adopted a meeting policy which specifies when it is the homeowners' turn to talk and when it is the board members' time to do business, it can be a beg help - especially for any homeowner who doesn't understand civilized business meetings. As a diversion he or she could be could be handed a copy of the meeting policy and asked to read it. (Another opportunity to get on with business.) I encourage boards of directors to adopt a meeting procedure and hand it out with the agendas at the meetings, so the homeowners know the "ground rules." I believe that having a piece of paper with a structured plan on it will discourage interruptions and uncivilized behavior, and it certainly will help educate the homeowners as to what the process is. Many times, people speak out of turn because they simply don't understand the "process" that will enable the board to get on with business, and also allow the homeowners to appropriately address the board. If those in attendance know there is a structure, they will all be disturbed (and turned off) by a disruptive attendee.
Be Organized at Meetings
Being "organized" does not mean you have to be a master at anything. Parliamentary procedure is a great way to "get organized" at meetings, and to keep control of the meeting process. There are a number of books on parliamentary procedure (including my favorite "Parliamentary Procedure in Plain English") available at Amazon.com, through CAI (Community Associations Institute) and ECHO (Executive Council of Homeowners). The simpler, the better, I say. I find Robert's Rules somewhat complicated and cumbersome but if you have a parliamentarian available, more power to you! There are several alternative options that you can use. If your Bylaws require that board to use Robert's Rules you are stuck with it; I suggest someone on the board get familiar with the basics of it.
Learn a Few People Skills
One does not have to be a master to show respect and courteousness to other people and to help them be heard without a lot of stress. One can go to Borders (great music on Sunday afternoons), Barnes and Noble (great coffee shop and atmosphere), or Amazon.com (easy and quick), and find a wealth of information on negotiation, mediation, and dealing with difficult people. Even when people are not difficult, "active listening," and successful "rephrasing" in a positive way can turn around the conversation in very short order that is going the wrong direction. It is also important in all situations to exercise a certain amount of patience and compassion, and (as I said above), treat people respectfully and courteously. It will make you feel good even if it doesn't work! If any board member is lacking in the area of compassion, that may not necessarily prevent them from being a good board member or offering something, but they should not be the spokesperson or chair of the meetings! If the entire board is in that situation, it will definitely find communicating with homeowners quite difficult. In that case, someone might want to take a class. Boards of directors often fail to fully understand the importance of getting along with people, and responding in a manner that does not escalate any negative approach.
Do Not Criticize Others In Public
On many, many occasions, I see board of directors "passing the buck," or doing anything to get the heat off of them. When a homeowner is in the audience at a meeting, or the board members are together in any given situation, or the manager is in a situation where there are homeowners and board members present, it is important to, to the best of everyone's ability; to avoid pointing fingers and making accusations. I was at a meeting recently where a board of directors was facing an angry crowd of homeowners. Every time a homeowner raised an issue or problems, there was so much "cross fire" among the board members, that no one could quite figure out "who's on first." The pointing of fingers did not resolve any of the problems, nor did it allow the board to move on, because every time someone was accused of something, they wanted to give a "rebuttal argument." The homeowner's forum went on for two and a half hours. Even though I had previously cautioned the board in executive session (on some personnel matters relating to board conduct), not to get into the "finger-pointing," it started right out of the chute as the first homeowner presented a "gripe". One way to avoid finger pointing in front of the members is to say: "Yes, we have been made aware of that problem, and we are working on it. We appreciate your concern." This could be the response to almost any issue raised by a homeowner. If there are personnel matters to be dealt with, and arguments about who did what, and whether it was right or wrong, those should be done by the board in executive session, and not in front of the members. At the meeting described, one of the owners ultimately spoke up and said: "We don't care whose fault it is, we don't appreciate it when the Board members act like children; we just want you to take care of business."
Tip #2: LEAVE PERSONAL AGENDAS BEHIND WHEN YOU SERVE ON THE BOARD
"It's The Principal of The Thing." (No ..... It's Not!)
Whenever I hear board members (which tends to happen way too often), say: "It's the principal of the thing," I know things are going in the wrong direction! The truth of the matter is any decision the board has to make should be for good business reasons, not principle (especially when it involves deciding discipline or action against a homeowner that has given the board grief). I do not really want to hear "It's the principal of the thing" when that is getting in the way of a reasonable resolution to a problem. I would much prefer to hear "I don't like this based upon the principal, but I do recognize my fiduciary duty in this situation to all of the members in the community, so I will act responsibly, whether I like the person or not." It is the upholding the "principal" that leads to lawsuits, and that present a barrier to settlement through negotiation or mediation. It doesn't matter how much a board member or manager likes or dislikes another person, if there is a dispute which could escalate to litigation or any other dispute that begs for resolution, hanging on to the "principal" is not the right answer, mainly because the person on the other end may not be "principled". It certainly may be appropriate for anyone who is making a decision for themselves that has no effect on others, but it not an appropriate stance for a board member or manager if it is getting in the way of acting consistently with application of the rules or disciplinary actions.
Abstain From Decisions That Affect Your Interests
This would seem like a "no brainier" to me. Anytime an owner is a board member, architectural committee chair, landscape committee chair, or is in any other leadership position where they are allowed to vote in an important decision, they should abstain if the decision is on something that benefits them. I find it hard to believe, but I recently was involved in a dispute which involved a board member voting on, constituting the vote that resulted in a majority vote, on a contract for services that was very beneficial to the board member, who was also acting as the manager of the association. Maybe it's just me, but that sort of situation seems to beg for a political and legal dispute, and raise eyebrows the minute anyone questions the contract, the compensation, the duties of the manager, or the way that the person is doing their job either as a service provider or a board member. When that person is also a board member, they gain a lot of power, and giving it to themselves seems extremely self serving and, as I know from experience, it leads to serious issues in any case where people are unhappy with the working relationship.
Do Not Focus On One Owner When Others Are Equally "Guilty"
In many, many of the enforcement situations that come to me, the board of directors has formed a strong opinion about the person who is on the receiving end of the proposed disciplinary action or court action. However, I find that in questioning the board about particular things, that it very often is the case that this person is not really doing offensive things and things that are serious violations, but is just doing things that other people are doing and is "fighting mad" because he or she is targeted as the "bad guy." It seems "the madder they get," "the more they then do." I find this often with regard to parking issues, pet issues, etc. When one owner is obnoxious and leaves their pet off the leash, and the board is pursuing fines or asking to get rid of the dog, I often find when I ask if other owners keep their dogs on a leash, that they do not. However, the board always has an excuse for them, i.e., "at least they have control of their dog" or "well that one is just a little dog." For your information, little dogs can cause big problems if they are not on a leash and run off in front of a big dog on a leash. I've seen situations where an owner was dragged because they had their dog on a leash and someone else did not (a reverse leash law lawsuit against the association for enforcing the leash law inconsistently ensued). If the CC&Rs; say that people have to have their dog on a leash, they have to have them on a leash. If the rules don't say the dog has to be on a leash, then the owner may not be required to have their pet on a leash. Certainly, there are all "flavors" of people, and it is more refreshing and self satisfying to punish the "really bad people," but as soon as a board of directors starts an enforcement action against one owner, and the court finds out that there are other owners doing the same thing who have not been pursued in any way, you can imagine what the hearing officer is going to decide. So often, it is not just another homeowner who is doing the same thing, but it is a board member. In many cases, the board does not want to take action against the particular board member, because that board member is either over bearing, has a lot of power, has a lot of respect, or brings cookies to all of the meetings and no one has the heart to pursue them. Inconsistent treatment of owners in enforcement is the #1 basis for lawsuits against associations, or at least that has been the claim of Chubb Insurance Group (Directors and Officers Liability carrier), having gathered statistics on the basis for lawsuits.
Decisions Based On Personal Preferences Can Be Disastrous
I see it happen often. Earthquake insurance is a good example. Board members don't believe it is necessary. They might have the idea that if there is a bad earthquake, everyone will suffer equally, so there is no reason to purchase earthquake insurance. Other board members may have more equity in their property, and believe that purchasing earthquake insurance for the association will benefit them in the end, if there is an earthquake. Either of those board members, if they do not have the benefits of the community in mind, might fail to do the research necessary to find out whether in their particular community, the risks are high or low, earthquake insurance is available or not, if it is expensive or not, or whether the other people in the development may or may not be interested in paying for earthquake insurance. Saving for repairs is another one. Investing is another. When a board member has a personal experience or agenda and makes a decision based on what they would do for themselves, without regard for anyone else, that can lead to a breach of fiduciary duty claim. Some weather losses better than others. Board members must put their personal agenda aside and make decisions on what is best for the community, and if that takes surveying the community to find out about how the members feel about something, they should do it.
Tip #3: HAVE A WORKING KNOWLEDGE OF THE STRUCTURE OF YOUR CID
Know and understand the basics about your community. Is it a condo or a PUD? Do people own the airspace in their units individually, and the buildings collectively, or do they own a Lot from the ground up to the sky? Are the assessments supposed to be imposed on an equal basis or a square footage basis, or otherwise? Where is the Association's insurance policy? Can someone put their hands on it when an Owner demands a copy? Do you even know that one has to be provided if an owner asks?
Read Industry Publications
If you don't have professional management in your association, the board members need to get involved and get educated. There are so many laws that affect homeowners associations now, and can lead to serious liability, that at the very least, a board should have a vague idea of what has legal ramifications and what does not, what correct accounting practices are and what are not, etc.
Attend Industry Training
ECHO (Executive Counsel of Homeowners) and CAI (Community Association Institute) provide quite a bit of education for people. They offer publications, and seminars in various geographic areas. Once again, especially if the board does not have any professional management, board members must be willing to attend training and get ideas on the right and wrong ways to do things. That will lead them to finding the right kind of people to help when the board needs it. Go to the meetings and brainstorm solutions with others in the same boat, or with exhibitors who are anxious to talk about the industry problems and solutions.
Budget For Education
Every homeowner association should have a budget for board education. I suggest $300 to $500 per year, depending on the size of the board. I suggest at least a majority of the board members attend at least two or three programs a year. Call ECHO and CAI to find local classes or in your area.
Learn Enough To Know How To Run A Meeting
Every board member, as I said above, should have some sense about parliamentary procedure. A lack of structure leads to disrespect in the way people talk to the board, talk about the board, or address the board, and the lack of structure can led to problems outside the meetings as well. "Loose lips sink ships." Disorganization breeds contempt. These things I know to be true through my many years of experience in trying to calm the storm after people without a modicum of good sense open the floodgates.
Learn Enough To Know When You Need To Seek Help!
I don't expect any board member to get to the level of knowledge I or any other professional in this industry has, overnight, or even over a course of years. The kinds of experience we professionals have come from day-to-day training, education, and experience. However, anyone who serves on a board of directors should educate themselves to the extent that at the very least, they know when to seek help. Every board member should understand that type of development (condominiums or townhouses, planned development, etc.), and should know the name of a good attorney, and a management company that provides services, even if what is needed is menu services. Every association should have someone performing or overseeing the management, even if it is a board member, who has some working knowledge of the requirements of the law for associations. A board member does not need to know who to do a reserve study or how to do a budget, or how to enforce a particularly difficult situation, but he or she does need to know who to call. Board members receive insulation from liability (see below) if they contact the right kind of experts to assist them.
Tip #4: UPHOLD YOUR FIDUCIARY DUTY
Attend Meetings or Resign
Every board member has an obligation to attend meetings of the association. If they cannot do so for a long period of time, it is my opinion that they have a fiduciary duty to resign. Board members can be sued for not participating the same as they can be sued for participating and making mistakes. Even worse, when someone fails to come to meetings, they are holding a position open where there could be someone else providing input and making meaningful choices by voting. Some people have the misconception that board members can vote by proxy at board meetings (in other words, give their vote to another board member and have the other member vote for them during the meeting). It is my opinion that doing so constitutes a breach of fiduciary duty, because that board member has an obligation to pay attention to all matters, and educate themselves about them.
Read and Be Familiar with Report Packets and Be Ready to Weigh In On Business
I've been to a number of board meetings where the board members are provided their packets at the beginning of the meeting. In one case, the packet each Board Member was provided a notebook about 4 inches thick! The meeting opened up, and everyone is immediately flipping through pages. That goes on for the rest of the meeting, and the Board never really got into what was in the packet, and never got too educated on what matters come up for a vote. The manager ran the show. Many boards rely too heavily on management for feedback and direction, and don't really want to know what's going on. The fact that I was invited to this meeting, and I am there because of a problem (I don't usually get paid to come to meetings unless there is a problem), might give you some indication of this benefit (or not) of this "shoot-from-the-hip" method. Certainly this does not happen in all associations, but it seems to happen more often than it should.
Board members should require that the packets come at least a day or two before the meeting, and should have read them and be prepared to discuss matters at the meeting, rather than flipping through pages while the actual business is being discussed.
Take the Business Seriously!
Board members, if they think about it, might take the responsibility of running a "multi-thousand" or a "multi-million" corporation more seriously, than if they are thinking from their own personal perspective and just want to get the architectural rules changed so they can extend that deck or something else that gives them tunnel vision. The business of the association should be taken seriously, even if you are not getting paid. The "you-get-what-you-pay-for philosophy is pretty scary. The association is a corporation with an income stream that needs to be spent in a responsible manner, and each board member is a "fiduciary" that has responsibilities to the corporation and to all of the members in it.
Do Not Divulge Association Confidences
I get asked to address boards on many occasions where board members are taking the "secrets" of the association and divulging them to the membership, sometimes with quite a twisted perspective. Board members are in breach of their fiduciary duty if they disclose any matters outside of the confidential circle of executive sessions to people who do not belong in that circle. They don't' realize it, but the ramifications can be quite serious. If a board member divulges association confidential communications or discussions they may be sued for breach of fiduciary duty, or they may be disciplined for violation of the association rules and regulatory documents, and/or they may be removed by the court for abuse of their power, if the board decides to take them to court.
Divulging association confidential information can be a very serious offense, and if any board member wants to be a "whistle blower" and feels that certain things need to be divulged, it would probably be a good idea to resign from the board - that might allow them to avoid a breach of fiduciary duty claim.
I believe an association could get a restraining order against a board member to prevent access to records, in a case where a board member is divulging important and legally valid confidences of the association.
Be Careful About E-Mail and Telephone "Business"
Most boards of directors are fairly casual about telephone conversations and e-mail for some reason believing that the conversations are protected in some way. If those processes are used to vote on matters and make decisions before the board meetings occur, and result in board business being treated like a government "consent calendar," then they are being used improperly. If those tools are being used to communicate and keep other board members out of the loop, purposely, they are being improperly used. If board members are using e-mail to discuss confidential matters, and fail to do anything at all to protect the e-mail (at the very least, fail to include a paragraph about the intended confidentiality), those board members may be creating serious liability for the association. It is very likely that email notes back and forth are discoverable as evidence in litigation, so a case could be won or lost according to what shows up. I have seen emails criticizing owners (for personal reasons) and giving critical "admissions" included in the trail of email notes going back and forth and back and forth between board members - very dangerous!
copyright 2003, Beth Grimm
By Beth A. Grimm, Attorney. A "service oriented" attorney and member of ECHO and CAI and various other industry organizations in California and nationally, host of the website www.californiacondoguru.com; two Blogs: California Condominium & HOA Law Blog, and Condolawguru.com Blog, and author of many helpful community association publications which can be found in the webstore on her site.