HOA Boards’ Biggest Mistakes….

 

 3. Meeting informally—and improperly. “I’ve seen boards violating Florida’s Sunshine law, which governs members’ right of access to board meetings,” says Dennis J. Eisinger, a partner at Eisinger, Brown, Lewis & Frankel PA in Hollywood, Fla., who represents more than 500 condo and HOA associations. “When a quorum of board members gets together and talks about association business—maybe three of five board members are talking about association business over a poker or pinochle game—it’s a board meeting and has to be noticed. Or three of five members get together for lunch and talk about association business. That happens all the time. Homeowners get irritated, and they have a right to.”

4. Hiring insiders. “It’s a mistake to contract with a board member or relative,” says Eisinger. “Even though your intention may be good—like to save the association money—there are potential conflicts of interest. It often backfires.”

5. Not having enough communication—or cutting it off. “It’s a mistake to not communicate well with owners about what’s going on in the community through methods like email,” says Eisinger. “You cut off a lot of dissention and problems with communication. Similarly, some boards cut off owners’ speech at board meetings. They might say each owner gets up to three minutes to speak on agenda items, and then they cut them off in midsentence, which sends a bad message. The board has to go further than that.”

6. Acting before getting legal advice. “Sometimes, when boards are dealing with a difficult homeowner, they’ll shoot themselves in the foot and then call me and say, ‘Was it OK that I told her this?'” says Polomis. “What am I supposed to say now? You can’t unsay something. When you’re dealing with difficult situations, I really encourage boards to check with counsel before they do anything, especially disclosing information or conversing with a particularly difficult homeowner. What they’re planning might be just fine, or it might be disastrous.”

A similar problem is consulting your lawyer too frequently or not frequently enough. Boards do need regular legal advice. “Statutes change, so legal requirements regarding things like insurance and notice change from year to year,” says Solomon. “You should be getting consistent legal advice.”

The key is figuring out how often to seek legal advice. “Some clients call to ask if it’s OK to go to the bathroom, or they don’t call for a review of a contract for $1 million because they don’t want to spend the money,” says Eisinger. “If you do it too much, you’re spending too much money. If you do it too little, you’re risking too much liability. You have to get that correct balance as to when you should be using your attorney.”

7. Firing vendors abruptly. “We’ve been very fortunate, with 99-plus percent retention of clients,” says Solomon. “But on occasion, we work hard for a board, establish a relationship, do a great job, and a board doesn’t call us but suddenly says, ‘I have a cousin [or a friend] who’s a lawyer, so let’s go with him.’ This applies to any vendor, where they’re not giving the vendor a chance to see if it can provide the service. Sometimes boards terminate multiple vendors—the manager’s fired, the lawyer’s fired, and the landscaper’s fired. You’re imploding the whole project. Not only may board members be going to a less qualified vendor, but they may be triggering liability they didn’t anticipate.

“Don’t make abrupt changes,” Solomon adds. “At least be informed. I don’t recommend making a ton of changes at the same moment. You should be very strategic in making changes, and make sure you know your liabilities before making changes. Finally, allow vendors to respond or explain before you terminate them.”

8. Stealing money. Hard to believe our experts have to tell you this, but the growth in cases warrants a mention. “This is a bad one,” says Eisinger. “I hardly saw it for two to three decades, but we’re handling five cases right now. The economy is so bad that people are getting elected to the board and then stealing.”

9. Keeping costs artificially low. “Boards make a mistake by passing low, insufficient budgets because they want to be liked by their constituents,” says Eisinger. “But they have a fiduciary responsibility. They have to do what they have to do, and if they don’t like doing it, they shouldn’t be on the board.”