This is the second of two columns addressing common mistakes of HOA boards. Last week’s covered the failure to consistently enforce rules and seek professional advice on big decisions.
3. Not being familiar with the HOA’s governing documents or state law. In order of priority, HOAs are governed by (1) federal law; (2) state law; (3) a Declaration of Condominium, or a Declaration of Covenants, Conditions, and Restrictions (CCRs) for townhomes and single-family communities; (4) bylaws; and finally (5) rules and regulations adopted by the HOA.
HOA board members need to have a working knowledge of all of the above. After state law, HOA board members must be well-acquainted with the community’s Declaration and bylaws.
The Declaration authorizes the establishment of the HOA and typically contains restrictions on the use of the real estate within the community. The Declaration also spells out the responsibilities of homeowners and the HOA. Most HOAs are established as nonprofit corporations. The HOA’s bylaws dictate how the corporation functions, including the qualification and election of directors and officers, how and when meetings of members and the board are called and held, and the powers and duties of the directors and officers.
Finally, the rules and regulations of an HOA mostly govern the use of common areas and sometimes govern the use of individual condos or lots. Rules and regulations are adopted by the HOA board and published to its members. All governing documents of an HOA can be amended.
Amendments to the Declaration or bylaws will require a “super-majority” vote of the members – usually 67 percent and as high as 90 percent. Rules and regulations typically can be adopted, amended, or abolished by the HOA board.
4. Not keeping accurate minutes of board meetings and other board actions. Although N.C. law does not specifically require that nonprofit boards keep minutes of their meetings, sound business practice demands it.
Action taken by an HOA board outside of an actual board meeting must be in writing, and must have the unanimous consent of all directors. North Carolina law does not allow board action to be taken by email (again, unless there is unanimous consent).
Minutes of board meetings should not be a transcript of everything that was said in the meeting, but they should reflect at a minimum who was present and what action was taken. The board may choose to make board meetings open to all members. While this is a good idea, the board may impose limits on the number of speakers and how long they can speak.
Members of the HOA are entitled to copies of the board meeting minutes upon request. Many HOAs post their board meeting minutes on the community’s website. Matters of a sensitive nature, such as owner’s delinquency in payment of assessments, should be discussed only in “executive session,” which is closed to members, and those minutes should not be made available to members without first consulting with the HOA’s attorney.
Charlotte attorney Michael Hunter represents community and condominium associations for the firm of Horack Talley.
“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer
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