I wrote this for the January 2013 WSCAI Journal.
Welcome to the Board of Directors
So you’ve been elected to the Board of Directors—congratulations! You’re in for a rewarding experience where you can help to foster a sense of community, protect and preserve property values, and connect with your neighbors in a way that you may never otherwise have. You also just became the director of a corporation responsible for hundreds of thousands, if not millions of dollars of property. Best of all, you volunteered for all of this, including the meetings, budgets, decision-making and enforcement that come with it.
By preparing for your upcoming term and knowing the basics before you jump in, you can avoid some common pitfalls and hazards faced by many board members. Knowing the ground rules and familiarizing yourself with the roles of Board members and officers, the contents of your governing documents, and the obligations of the Board will help you ensure that you’re off to a good start.
The community association’s primary function is to protect and preserve the value of the property in the association. Boards of directors help to accomplish this goal by maintaining and repairing the property, operating the association, and enforcing the governing documents.
Board members can have various roles on a board of directors. In most cases, the members elect the board members, and then the board members choose the various officer positions from amongst themselves. Typically, a board will have a president, vice-president, secretary and treasurer. Non-officer board members are usually referred to as members-at-large. Although not all associations are the same, most board members serve terms of one, two or three years. Officer positions are usually served one year at a time. In some associations, one person is particularly well suited for a particular position, so the Board chooses to have them serve in that position throughout their term. Other boards like to share the duties by shifting the officer positions each year.
Regardless of your position, it is a good idea to understand what your role is, and what the roles of the other officers and directors are. Discuss your understanding and expectations with your fellow board members at the outset of the year. If your association is professionally managed, discuss the manager’s role and how you can best take advantage of their training and expertise. Remember, boards determine policy and make business decisions. Managers implement the board’s directives and take care of day-to-day operations.
The most important thing for a new board member to understand is the association’s governing documents. These documents provide detailed guidance to the membership on the authority of the association, operating the corporation, including holding meetings and elections, and the rules for the members and their guests.
The primary document for most modern associations is the Declaration of Condominium (for condominium associations), or the Declaration of Covenants, Conditions and Restrictions (for homeowners associations). These documents typically set forth the definitions and respective maintenance responsibilities for units, limited common elements and common elements. They also provide the framework for the association’s authority, including assessments, maintenance, architectural restrictions, and enforcement. They can be thick, written in legalese and certain provisions may be somewhat complicated or confusing. Don’t worry—if you are unsure of how to interpret a section of the Declaration or the board does not agree, you can always seek advice.
Bylaws should provide guidance on the operation of the corporation, including the manner of holding association meetings and elections and the terms, qualifications and elections of board members. Bylaws usually also set out the respective roles of the officers of the board.
Rules and regulations provide specifics on community expectations, as well as a description of the consequences for violations, including a published fine schedule. Reasonable and consistent enforcement of the rules is a critical role of the board of directors.
Other resources including educational seminars, written materials, and consultants such as managers, accountants and attorneys can also be invaluable sources of information on how to best function as a successful board. When you are confronted with a difficult decision, being familiar with your governing documents is critical. Adding the experience of expert consultants and others that have been in similar situations will give you more confidence that you are considering the most relevant information and making the right choice.
Use Consultants and Committees.
All of the details of the governing documents and operating your association may seem like a landslide of information to take in all at once, but there’s good news: you’re not on your own. In fact, our legislature has recognized that you shouldn’t be on your own.
Board members are protected from potential liability by the “business judgment rule.” For non-profit corporations such as associations, this rule states:
A director shall perform the duties of a director, including the duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
In performing the duties of a director, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by:
(1) One or more officers or employees of the corporation whom the director believes to be reliable and competent in the matter presented;
(2) Counsel, public accountants, or other persons as to matters which the director believes to be within such person’s professional or expert competence; or
(3) A committee of the board upon which the director does not serve, duly designated in accordance with a provision in the articles of incorporation or bylaws, as to matters within its designated authority, which committee the director believes to merit confidence; so long as, in any such case, the director acts in good faith, after reasonable inquiry when the need therefor is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted. See RCW 24.03.127.
For board members, this means that relying on consultants, such as attorneys, accountants and managers, is a reasonable approach for a volunteer board member. Similarly, relying on a committee that has acted within its authority and in such a manner as to merit the confidence of the board is also reasonable. In short, not only do you not have to do it all yourself, but the legislature has recognized that you are entitled to reasonably rely on others. Take advantage of this and utilize consultants and committees to help you consider issues, weigh options, and make recommendations to the board. Remember, only the board of directors can make a decision, but it is entitled to rely on the expertise and reasonable recommendations of others.
Most importantly, the board of directors must act in a reasonable manner in operating the association and enforcing its governing documents. This means putting the interests of the community first and setting aside any personal bias. It also means carefully considering important issues and not rushing to judgment on unpopular requests. The board’s first priority is the good of the community, not any particular agenda.
With these strategies in mind, you have the tools to not only succeed as a member of your board of directors, but to keep a volunteer position from becoming a full-time job.