HOA or Condo President Rules the Roost, Gets the Contracts – Is that Bad?

What does it mean when a board member is able to control important decisions in an HOA or Condo Association or act alone? I used this topic on both blogs this week because I have been getting an unusual number of emails, triggered, possibly, by some discussion board. Apparently there are some controlling Presidents around.

So, when  Board President takes over as manager is the rest of the board is asleep, weak, lazy, too busy with other things to be concerned, unwilling to take responsibility, ineffective, or extremely gullible? Are the association members are apathetic, visibly absent when association meetings are held, loathe to vote, offer to serve, or pay attention in elections as to who is running for the board. Is the job of President, well “… a thankless job” that someone has to do? Is the President obnoxious or scary? Have any of the board members been serving for 5 or 10 years, or more?

Any of these conditions can lead to the President taking over.

Here are a couple of real life scenarios that members have sent to me:

“Our current condo association president has gone through at least five local property management groups during his four year tenure. He is now contemplating paying himself to become the new property manager. From what I can gather from your site it doesn’t seem like there is anything illegal in that but as a homeowner I am concerned. How can we as homeowners protect our own interests and make sure our president and board is held accountable? Is there a book or web site that would be a good resource to turn to? “

“We have a board member who is apparently a controller for the winning bid contractor. The bid that won was 70% higher than other bids and this bid was awarded to the board member who was a controller of the company. Other bids were stonewalled and passed over.”

The key is that the President is appointed by the Board, so one has to look at the board makeup. Either of the above scenarios could work to the benefit of the Association if the President is honest, willing, capable, and competent to do the job. However, in both scenarios it does look like there is a problem. Turnover of management can occur as a matter of course, but 5 companies in 4 years suggests that there is a problem of some kind. That could be a fickle board, an overbearing or difficult leader on the board, failure to communicate or set parameters, or a real run of bad luck with managers. A President who tries to take over or end the run of bad luck with the offer to become manager could be a boon, if the matter is handled properly and the person is willing to step down as President of the Board. I do not believe any person should serve as President of the Board and Manager, two of the key positions in operations. And that’s that. If the President is hired as manager there should be a contract clearly spelling out what duties are compensated as manager so that the volunteer board duties do not get confused.

In the other scenario, it does not make sense on its face that any association should have to pay 70% more for contract work. So just let me say that I too would be concerned. A contract like this is fraught with potential issues. In fact, both are. If not real, the perceptions of the members could cause serious unrest – and this, too, is an important consideration.

Still, I have to say that the only way this happens is if “warm, breathing, persistent, and concerned” members of the association and the other members of the board let it happen. The contracts are not illegal if the Board makes the proper disclosures regarding financial interest in the contracts. Disclosure is the key legally, unless of course there is something fraudulent or dishonest that is occurring.  It is certainly possible that either of these contracts could be executed without causing any fights, litigation or actionable losses to the association or the members, but at the outset neither passes the “smell” test.

As for advice, the owners have to join forces and work to get new people elected and/or the current board members need to participate in the decisions and try to avoid contracts like these. Recall may be an option, but it is similar to finding board candidates to support. Even if members go through all the correct steps to get the board recalled, each director can run in the followup election, and that might include the seemingly powerful President in these scenarios.

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One Response to HOA or Condo President Rules the Roost, Gets the Contracts – Is that Bad?
  1. Tammy Dale
    September 15, 2012 | 7:30 am

    Creating board members for an HOA association is just as crucial as creating the ones for a corporation. They make important decisions that you’ve already mentioned here. They build a structure and better ways to make the association and its members more organized.