How smart is your association board?
No one likes to admit lack of knowledge. But condo and apartment association boards are generally made up of volunteers – good Samaritans who want to help out the community. And that’s the problem – a good portion of condo association board members have no head for business. And this could put your association at greater risk of loss.
As a nonprofit entity, your condo, homeowner, community or apartment association must meet relevant state laws. What’s more, association board members who aren’t often familiar with the legalese of association practice may not understand the bylaws, covenants, or other legal documents that the association has adopted. Worse, if your board has no standing experience with writing, amending, or interpreting your bylaws, any move by the board could open your association up to legal entanglements.
Suppose your apartment association bylaws do not allow pets. However, several unit owners have aquarium fish, guinea pigs, or reptiles. How is your regulation being enforced? Is that enforcement opening your association up to debate or legal action? As for noise levels, do you address specifics in your bylaws as to what constitutes disruptive levels of noise? Do crying babies receive the same treatment under your bylaws as revving car engines? And are you sure your board members are able to make such determinations?
That’s why directors and officers insurance coverage (D&O) is a must for any association board. While well-meaning board members may act in what they think is the best interest of their association members, their actions, or lack thereof, could expose your association to a number of potential losses.
Take your bylaws to your condo or apartment association insurance broker. A broker specializing in association coverage will be able to determine if your bylaws are conforming to state statutes, and can discuss with you any potential loss areas that may be covered by a sound insurance program. Consider also having a risk assessment done on your board’s bylaws and practices. Make sure your association board’s attempts to serve aren’t leading you down a risky path.
Flickr photo credit: mbgrigby
HOA Boards of directors can go wrong in so many ways to leave the community not only in disrepair but also prone to lawsuits and litigation. Read how one Montgomery County Maryland HOA Board got off track and where the County Commission On Common Ownership Communities recently ruled against the derelict Board (July 2009) at his link: