Reader Questions: Who’s the Boss - Manager or Board?

By Kelly G. Richardson, Esq., CCAL

Mr. Richardson: I am president of an HOA with management whose performance has been lackluster. Lackluster is characterized by little to no communications unless initiated by the board, not following through with board instructions, and inability to manage our violations process in a steady and predictable manner. Once I accepted the position, I asked the board officers to tell me what roles they played and what functions they performed. They each said, "nothing, the manager does it all." The management agreement provides no metrics by which to measure performance. What is the most effective way to hold a manager accountable? Sincerely, B.L., Oceanside

Dear Kelly: We have a manager who is quite versed at her job however she is very rude to homeowners, responds to letters written to the board with her own answers without passing on the request letter to the board, and is condescending (verging on mean) to homeowners during the Q&A forum at meetings.  The board allows her to run the meetings to take the heat off themselves and she ends up ruling the meetings. She cuts off board members when they are answering community member questions and cuts off homeowners when they are attempting to express concerns.  Our board seems intimidated by her as well as appreciating her control and knowledge. Can anything be done? J.R., San Diego

Dear B.L. and J.R.: Corporations Code Section 7210 allows corporations to hire a person or company and delegate management of the corporation, “…provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.” Operating HOAs is so complicated these days with so many statutory requirements. It is often difficult to imagine any HOA operating properly and in compliance with the many laws without the help of an experienced manager. A good manager should not only execute the board’s instructions, but should also provide good advice about the decisions the board has to make. The HOA manager’s advice is the first line of “reasonable inquiry” for the board under the Business Judgment Rule found at Corporations Code Section 7231, so the manager is a very important element of the HOA’s governance. However, while the manager is legally responsible to follow instructions and provide competent advice; the board is responsible for making the decisions.

In board and management training sessions, I routinely encourage managers to take an active advisory role, but to ensure the board makes the final decision. I also encourage directors to stay in the decision-making role and not become involved in the implementation of board directives. Managers should regularly provide input to the board during meetings but should not be running the meeting, which is the chair’s role. Managers who cut off directors during deliberations are outside their role.

Managers, whether employed directly by the HOA or through a management company, are (and must be) ultimately responsible to the HOA and directed by the HOA. If the manager is directing the HOA (as opposed to advising) then the relationship is upside-down. Allow your management to do their job, but not yours, and expect them to do their job. When everyone executes their roles well, excellent HOA governance should follow.

Best regards B.L. and J.R., Kelly.