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March, 2011

OWNERS DON'T LIKE UNPLEASANT SURPRISES!

  Sideswiping the Owners Will Have a Backlash!

I" f you are on the board in your homeowners association and you think that the owners are asleep at the wheel, you may be right.  However, carrying that assumption into every thing the board considers doing, even when it is a very important undertaking, can be a problem in itself. "Sideswiping" the owners on a big project will very likely have a painful backlash!

What do I mean by a big project? I mean something that can be very controversial in nature or that requires approval of owners. In my experience, the most controversial and/or important projects a board is likely to undertake in the homeowners association include these:  

  • Large Special Assessments
  • Arranging for Bank loans
  • Lease Limitation Restrictions
  • Amendment of Governing Documents
  • Handling Complaints About Management
  • Recall Attempts
  • And Emotional Issues Like:
  • Filling in the Pool
  • Removing Trees
  • Changing Paint Colors
  • Reassigning Parking Spaces
  • Changing Pet Rules

Why should you believe me? Because I have been working with homeowners associations and homeowners in them for more than 20 years and I tend to see how problems unfold, and have helped many associations and homeowners iron out problems. Many HOAs wait until there is a problem to come to an attorney rather than seeking preventive legal advice that could assist greatly in strategizing how things might be laid out in a positive way for owners. 

Most of the above topics ­ if handled by a not-so-experienced board, lead to a stressful time. It is hard for a board to anticipate all of the issues that can arise with the individual homeowners unless they have the experience of going through it already. And even if a homeowners association board has gone through a difficult ballot presentation, emotional issue, major rehabilitation project, or attempt to get much-needed amendments and updates to the governing documents, it is likely that by the time it happens again, the board makeup has changed. Unless the new board has access to the former directors to ask for guidance, it is not likely to be able to get through a controversial topic without having the homeowners "come out of the woodwork!"

How can a board avoid "sideswiping" the membership and prevent a major backlash, a  revolt, or worse, a recall! This article is all about how to prepare the membership for those big changes, big projects, or big assessments, things that experience tells me are likely to rile the homeowners. You may think the members aren't listening and don't care. But believe me, they do, when it is something that is going to extract a pound of "flesh", such as a huge packet of documents that requires their approval or a large special assessment, or an amendment that leads them to believe they may lose some rights.

Some of the specific issues that arise a re growing dissatisfaction with management, a big rehabilitation project costing a lot of money where a loan and/or special assessment will be needed (and substantial bank fees will be required), a governing document update project where an unhappy contingent of owners is just waiting to criticize anything the board tries to do, presentation of a ballot on a restricting leasing, or an emotional issue like changing the paint colors, filling in the pool, or removing the spa or some trees.

This article will of course encourage preventive measures; however, even if you are in the midst of a crisis or "restless-native" situation, tips will be given on how to turn things around. Attorneys like me with lots of experience in quieting the waters can offer strategies for building consensus, solving problems, preparing members for difficult decisions, improving communications, and avoiding major conflict, and helping boards and owners dig out of a difficult political hotbed.

What is Do Board Members Seem To Overlook or Underestimate the Most When Dealing With Controversial or Emotional Subject Matter?

The Owners!

What Do Directors Need To Get The Homeowners On Board?  

  • Patience
  • Understanding
  • Compassion
  • People Skills
  • Consensus-Building Skills
  • Organizational Skills
  • Knowledge
  • Leadership Qualities
  • Honesty
  • Fortuity
  • Ethics
  • Competence
  How Many Directors Have All of These Qualities?

Not all, in fact, probably a very small minority. So what do you have to do? You have put your heads together and share your ideas, talents and strengths, and assign tasks. Without a strategy and sufficient resources (which include a collective "brain-trust" of sorts), you may have to punt!

What do I mean by that?  You may have to pull in the right resources to help you prepare to avoid, or respond to, the controversy before you.

How do you do that?  Reach out to ECHO! The vendor directory is full of qualified and experienced providers in all areas including legal, financial and management. Call these people and ask them questions; ask how they might help you! Check out the web! Locate informational sites such as mine that offer free information, articles and valuable resources.

Where Do You Start As A Board?

Information Gathering - Knowledge is truly power. Any board that raises issues or questions or proposals to the membership without providing sufficient information to garner the trust of the members is asking for trouble.  When you discover a problem, or decide to tackle a potentially controversial topic, "Be Prepared" ­ the very motto of the Boy Scouts and Girl Scouts of America.  If you are having to ask the members for something (that proverbial "pound of flesh"), or are broadsided with any difficult problem and fail to prepare properly for handling it, the problems will multiply. You may slip something past them if the owners are truly "asleep at the wheel" but its better not to risk it. It is a lot harder to calm members when they have lost trust or been misinformed by the rumor mill than to educate and prepare them on the front end. Certainly, there are times when a board skates by, but in my experience certain subject matter seems to consistently "raise hairs". If a situation or action of the board gets the wrong kind of attention of even one vocal member, it can become a much bigger problem. The easiest way for any homeowner to gain support from the rank and file or from a judge or arbiter of any dispute is to argue a lack of transparency on the part of the board. Secrecy gets people riled, and while a board may think meeting behind closed doors is the right thing to do to avoid stirring up problems, or believes its okay because no one ever comes to meetings, owners want to know when there is something happening that may affect their property or them.

Put Yourself in "Their" Shoes - One of the most important things boards overlook is the owner's perspective. Once on the board, you become a "member of the private club" and can forget about your peers' perspective. A good question to ask is "if I was an owner just hearing about this for the first time (or being asked to vote on this), what would I want to know?" (That is a simple question but I wonder: Has anyone on your board ever asked it before dumping an important measure on the membership?) Another good question: "What would make me appreciate/approve/understand what the Board is proposing?" Boards often fail to identify subject matter that is likely to have an emotional impact. Why? Because the board members may underestimate the impact on any individual owner! And, of course, board members tend to have much more information than owners ­ thus, until owners are brought up to speed, what may seem like a good idea or "business as usual" may trigger an uprising! You cannot expect one simple letter or communication asking for support to bring owners completely up to speed on something the board has taken weeks or months to research or investigate.donkey

Have you ever heard the expression: "To assume something can make an "ass" out of "u" and "me". How can you expect that an owner will see things from your perspective if you do not share what you know with them?

Examples For Purposes of Discussion

SITUATION: Owner Concern, Problem With Perspectives/Interests/Critical of Board Decisions/Lack of Transparency: Two owners came to me for representation. They were very upset about a serious lack of transparency around some critical (and material) financial decisions and management. They could not get any financial records, not even those the HOA was required by law to provide. There was an election coming up and they decided to run for the board. There were some "tactics" engaged to try and prevent these two owners from getting on the board but that just made them try even harder. They reached out to HOA members seeking support, and were able to illustrate some of the roadblocks being put up by the board and management. That got them the support they needed to get on the board!

These owners were well-intentioned, and willing to work hard, but had a lot of ground to cover to get up to speed on what a Board member should know and do, how meetings should be run, and how to resolve problems involving financial issues, contractors, and management. Immersed in straightening out financial matters, they gave short shrift to one (unwitting to them) very emotionally-charged subject: tree removal.

Someone mentioned at a board meeting that some of the mature trees in the project were a bother. They called out an arborist. The arborist mentioned that trimming the trees would help, but since they had not been properly maintained, it might be expensive. "It would be cheaper to remove them," he said. This sounded reasonable, and so there was an order to the landscapers to start removing the trees." When the chopping and cutting began, it brought owners out of their armchairs, screaming and shouting, at the landscapers and at the board members.

Ruffled feathers had to be soothed. Other options had to be considered. Owners had to be brought into the loop and brought up to speed as to the "whys" and "wherefors" and a plan to replace removed trees had to be determined, to avoid a riot that would interfere with other ­ what seemed more pressing matters (at least to the Board).  

A little medicine can go along ways to help cure a festering sore.

SITUATION: Amendment/Restatement of Governing Documents Project - Gone South. I was working with the Board of Directors and Association and an important amendment/restatement/updating of governing documents project. Everything went well until the documents were sent out to the membership with the ballot. The Board had been offered a plan for followup, and had been encouraged to call if there were any problems that arose in the process. A meeting with owners had been discussed ­ the they board opted not to have one, believing the owners would simply trust the board and blithely return ballots. 

In this particular case, the board and committee became aware that an owner was circulating communications to neighbors that encouraged opposition and criticized the board's efforts. I did not find out about it until a couple of months later, when on a calendar to follow a process, I contacted the board to see how things were going. 

"Oh, that is over," I was told by a committee member. "We didn't get enough votes. In fact a lot of owners never voted. We think it is because an owner sent out a letter to all owners shortly after the ballot documents were sent to owners criticizing the documents. So a lot of people didn't even vote."

My question was: "Did you see it? What did you do about the letter?" The answer: "Oh, nothing, we assumed the owners would not listen to this owner who is a troublemaker."

That was that! The Board had scrapped the entire $6000+ project because an owner's letter to the members kept people from voting!

What kind of "damage-control" might have saved the project? I can think of a few things:  

(1)   A reply to the nonsensical owner letter sent to all of the members, stating facts and encouraging owners to contact a board member or come to a board meeting if they had questions.

(2)   A Q and A with pertinent questions and answers to any questions raised in such a letter.

(3)   A townhall meeting and/or encouragement to members to consider the source and content/substance of any communications or complaints before giving them credibility, and to help owners understand that though it is impossible to please everyone, the benefits of the updated/restated documents to the community would be considerable.

What preventive measures could have been taken? Communications and followup to the mailed ballot package by board or committee members to see if owners had any questions or concerns, including door to door or phone calls.

SITUATION: Lease Limitation Proposal ­ Never Had a Chance.  Lots of boards want to pose lease limitation proposals to members. These are controversial proposals. It often comes down to the board (that has gathered considerable evidence before offering the measure) vs. the skeptics - with a lot of fence sitters in the middle. Where things fall apart is the boards fail to adequately share gathered information on why the amendments can be important. The skeptics often oppose them on principal alone ­ i.e., "You cannot tell me what I can or cannot do with my property!"  Unless the Boards make a considerable effort to educate the members, the skeptics often "out-shout" the rational people who are concerned about renter issues and financing issues around a high percentage of owners. Today, these measures are even more controversial than ever, because owners commonly want to keep all options open in this economy.

  • What can a board do to properly educate the members?  For one, check out the link entitled "Lease Limitation Restrictions ­ Are They Legal in California" on the main page here, and use the information to assist in educating members. Be honest about presenting the pros and cons. If you only present one side to owners, trust will be lost when they find out there are two sides to the question.
  • What can a board do to make the amendments more palatable to the members? "Grandfather all current owners."
  • What can a board do to make a meeting with the owners more fruitful? Invite an attorney who can answer the questions from the members honestly, and stand up to the naysayers with credible feedback.

SITUATION: Management Has Upset Some Members and There is a Revolt Brewing.  I have seen a number of times when a few or a bunch of owners get upset with management. Sometimes it's just because the owners have received violation or hearing notices. Sometimes it is because management was short with them at a meeting, perhaps there was a misunderstanding by owners that they could participate in business meetings. Sometimes it is because management is suffering from burnout, is rude, incompetent, or seems to be running the board and that makes owners angry. Sometimes the Board does not even like the association manager but doesn't know what to do ­ or believes it is more trouble to change managers than to remain with what they have. Some boards change management regularly. Sometimes it is because they are fickle and cannot communicate effectively with management, or boundaries are not clearly set. And some boards change management continuously because they cannot find a manager that can adequately manage the association.

What should the Board do? Here are a few suggestions: (1) Consider surveying members with questions geared to elicit member feedback, (2) ask the manager how they feel (get their side), (3) hold an evaluation discussion meeting with the manager and/or (4) ask if the manager is willing to attend a meeting where owners can ask questions or express concerns. If the manager says: "To he[ck] with the members," it may be time to look around.

SITUATION: The Board Is Facing the Need For A Substantial Special Assessment And/Or Bank Loan That Will Require Member Approval. The board is going to need owner approval of a special assessment and possibly for a bank loan for necessary reconstruction or some other project. Owners are already complaining about expenditures and what they get for their money. There are challenges coming from all directions, i.e., owners who believe the board should be able to find a cheaper contractor, find a less expensive way to do the work, cut back on some of the work, wait to do the project until the next year, etc. Some members are in favor of getting a loan for the project and paying it off over time and others are highly opposed to the loan and costs involved. The "natives" are really getting restless and rumors abound about the board's intentions or positions.

  • What can the board do to stop the rumors?  
  • What can the board do to gain consensus?
  • What can the board do to make sure it is on the right track?
  • How should a board prepare for a meeting with owners?

Here are some quick answers: communicate, communicate, communicate! Send out informational packets. Educate the owners. Hold town hall meetings. Have the association experts come and answer questions (banker, manager, contractor, lawyer, CPA, and an attentive board). Survey the members to find out preferences of owners on structure of paying assessments, work being contemplated as add-ons but not necessary, etc. so you can get more information about the pulse of the community and what opposition might arise. Check out the various forms of communicating at the end of the article.

SITUATION: The board has hired contractors to repaint the buildings using new colors and/or trim, remove trees, fill in the pool, take out the spa, eliminate or reassign parking paces, or has decided to change the pet rules or some action that will likely touch one or more owner's last nerve.  Owners hear about it and come unglued. The rumor mill is rampant. Potshots are prevalent.

What should the board do about it? How much lead time? How much information/preparation should they engage in? Share with owners? Why is paint color such an emotional topic and what extra effort is needed? Does the Board have the right to reassign parking spaces/change the pet rules?

Recognizing hot button issues is a good place to start and many are listed in this article. Prepare owners in time for them to respond ­ before you sign contracts and get backed into a corner you can't gracefully get out of. Survey members. Have a townhall meeting. Get all the facts before doing this so that trust is not lost over a failure to be able to answer any questions with credible answers.

SITUATION: The board is served with a recall petition. What should it do?  Call an HOA attorney.

In the bullet point notes below, there are some tips.

RIOT-PREVENTION TACTICS - CONSIDER:  

  • Informational and Townhall or Board Meetings: Preparation/organization/comfort of attendees, determine whether    experts are needed? Pay attention to body language/ approach. Pictures are worth 1000 words.  Don't try to suppress dissenters ­ use information to challenge their credibility. 
  •  
  • Informational Communications:  Provide valuable information - experts reports when possible. Explain necessity of confidentiality if needed. Don't assume people who don't come to meetings don't deserve communications.
  •  
  • Question and Answer Communications: Anticipate questions and provide answers.
  •  
  • Surveys/Straw Polls (not to be confused with ballots): provide meaningful information to get meaningful feedback. Make sure owners are clear the survey is not a ballot.
  •  
  • Painting Projects ­ What Works: Paint samples, on a building that owners can see and view and comment on! Not a piece of paper or paint chip.
  copyright 2011, Beth Grimm, all rights reserved.

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.




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