Avoiding Mistakes That Self-Managed HOAs Usually Make

Self-managed Homeowners Associations or Condominium Associations are designated as non-profit organizations that must function in accord with certain state laws and the Associations’ governing documents. No exceptions. However, a newly elected Board can read state law or a set of governing documents and have different interpretations of them. This is due to the biases that individuals have when they read anything, including a newspaper. Typically, a reader will pick up on the facts that are consistent with his or her own beliefs which are problematic if they violate the law or the governing documents. (I have served on, or helped, enough Boards to know this is usually the first problem a self-managed Association of a non-profit organization should want to avoid because if some policies that are adopted an implemented are illegal, it can be difficult to reverse them. An Example follows.

I know of one self-managed HOA that has a set of governing documents that must be strictly enforced. However, the first thing the first Board of Directors did in 2005 was to adopt amendments to the original View Preservation Plan that violated Section 1 (Purpose) of the Architectural Control Standards and Regulations), violated Section 6.2 of the CC&R that prohibited most of the trees in the HOA’s common Areas from being disturbed; and violated Sections 3.3 and 9.6 of the CC&R that granted the authority to amend all documents except the Bylaws to the lot owners who must approve changes by super-majority (75%) of the lot owners. This Board failed to notify the lot owners before or after it started to implement the amended governing document, with no more thought than if it had decided to change the provider of lawn-care services to a different provider. It took until 2016 before one non-resident owner of a vacant lot realized that trees in the common areas had been removed; and that the base of the HOA was being damaged repeatedly by surface water runoff that was costly to repair. Moreover, surface water runoff had not been a problem until 2010.

Imagine if you will, an HOA developed on a steeply sloped, heavily forested piece of land that is designed for 85 residential lots, 20 of which are located at the base of the HOA. The CC&R and original View Preservation Plan prohibited the removal trees from the sloped common areas; but after the Board amended this Plan, native trees were removed so that the views created for homeowners would be improved substantially as depicted in Figures 1 and 2 below.

Figure 1- view Created from Original VPP

Figure 2- View Created from Amended VPP

No one would argue that the view from Figure 1 is inferior to the view from Figure 2; but the relevant points are:

  • The 85 lot owners agreed to preserve the native trees and views shown in Figure 1 when their lots were purchased originally.

  • The trees in the common areas preserve the functionality of the forests and the stability of sloped common areas which benefited the 20 lots at the base on the HOA.

  • The Board felt that all of the lot owners should pay for the enhancement and maintenance of the views that the HOA would create for a subset of the 85 lot owners.

  • Therefore, the Board should have submitted its proposal to the 85 lot owners and obtained their vote of approval before it proceeded to implement it.

The newly elected Board also neglected to consider that

  • The costs of implementing the amended VPP, that the maintenance costs associated with Figure 2, as opposed to Figure 1 would be higher, and that their could be excessive "repair costs" associated with implementing the Amended VPP.

  • It turned out that the implementation of the amended VPP and the repairs associated with it, would add an average of $500 per year per lot to the annual dues over the period between 2008- 2017, which means the contribution from the 20 owners of lots located at the base of the HOA totaled $120,000 for which they received absolutely nothing useful in return; plus,

  • The implementation of the Amended VPP damaged common areas, roads and drainage systems at the base of the HOA as Figures 3 and 4 illustrate, which increases the risk of damaging the 20 lots at the base of the HOA.

Figure 3

Figure 4

Summarizing, this example reflects a major mistake that would be very difficult to reverse. Therefore, it would be so much better if the Board of Directors had read the governing documents carefully before they entertained a project that has cost thousands, possibly millions, of dollars to implement. At this point, the first elected 2005 Board of Directors has probably walked away from a messy situation; but the 2018 Board will have to deal with whether the implementation of the amended VPP should be terminated until a substitute for it can be presented to the lot owners for its approval; or wait until the lot owners take matters in their own hands and change the Amended VPP by exercising their voting rights.

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