Is Your Association Governance Balanced?
Jun 19, 2023
By Kelly G. Richardson, Esq.
The ancient Chinese concept of yin and yang deals with opposite and inseparable forces. Common interest developments (“homeowner associations”) have their own “yin and yang” issues, in which four basic and inseparable priorities must be balanced to produce a successful and harmonious community. These four interests are the association’s corporate, real estate, financial, and community priorities. Each are critically important areas of emphasis for a healthy community. Neglecting or over-emphasizing any of these priorities can result in major association problems and even community conflict.
The “Corporate:” HOAs are a legal entity and are governed by legal documents such as covenants and bylaws. Boards must obey laws and the governing documents and observe the corporate process.
The “Property:” HOAs are real estate developments, and their boards must act to preserve, protect, and maintain the common area and the community’s architectural continuity. Buildings, streets, and other common elements must be repaired and maintained.
The “Fiscal:” HOAs collect money from the owners and then spend it to benefit the association community. Money must be collected diligently and be spent wisely. Budgets, bids, and bills are part of the “bottom line” in the association’s financial world.
The “Community:” HOAs are made up of people who chose to live in a way that trades some independence for the benefit of cooperatively sharing some control with one’s neighbors. The community interest attends to the fact that the members are not just stockholders or investors but neighbors, and boards promote the peacefulness of the community.
The real estate interest can often conflict with the finances, as a board tries to keep the property in good repair but also keep the budget under control. It can be tempting to delay preventative maintenance, reduce landscaping, or cut back on janitorial services, in order to try to avoid increasing assessments and “hold the line” on expenses. The financial responsibilities demand that the board is careful to spend reasonably, but if taken too far can result in member unhappiness as the property deteriorates in appearance.
The corporate interest often can conflict with the association’s community interest. The legalities are important, but too often boards, managers, and lawyers address only part of most decisions, asking “Can the board do this?” but neglecting the related important question - “Should the board do this?” Community interest might influence a board to take extra effort to inform the community in advance of a significant project, even though the board may have the legal power to pursue the project without member vote or input. Community interests are advanced by member communication (websites, newsletters) and may cause a board to occasionally issue a warning before citing members regarding violations, or to plan and fund community social events to promote neighborly interaction.
The cause of serious HOA struggles can often be traced to an imbalance between these four facets of association operation, if any of these priorities has been overemphasized or neglected.
Excellent association governance results from balancing these four critical but often competing priorities:
- Making sure the association obeys the law and its governing documents,
- Ensuring the community is well-maintained and presentable,
- Diligently collecting and carefully spending assessment funds;
- Making sure the community is a pleasant place to live, with residents feeling they are considered and valued by their association.
