In recent articles for this column, we have talked about the benefits of owning a home in an Association community. We have also talked about the overall framework for the operation and governance of an Association. In today’s article, we outline the role and responsibilities of an Association’s Board of Directors. Our law firm has expertise on laws governing Associations in Minnesota and assists many area developers, Association boards, and Association owner/residents.
Association communities offer a place for homeowners to share some of the responsibilities and burdens of owning property. Through a collective effort, decisions are made and carried out, relieving the individual homeowner of the responsibility to decide and pay for things like maintenance, lawn work, snow plowing, well/septic, or garbage disposal. This collective effort is carried out by the Association’s Board of Directors.
Whether an association is a non-profit corporation or a cooperative, it’s the responsibility of the Board of Directors to govern the Association and maintain the assets of the Association for the benefit of all the owner / members.
At the early stages of an Association, the developer typically makes up the Board and runs the Association. As parcels are sold, it’s up to the owner / members to take on this role. The owner / members of the Association elect individual Board members at the annual meeting of the Association. The elected Board has the responsibility to govern pursuant to the Association’s Declaration and Bylaws and in a way that is fair to all member / owners. The Declaration establishes the rights and obligations of the Association and individual property owners specific to the development, and the Bylaws set out how Board members are elected, how long they serve, when they meet, and what responsibilities they have. Self-governance serves as the foundation of any Association.
Self-governance can be hard work. Board members typically serve on a voluntary basis. They have the duty to make decisions in ‘good faith’ and in a manner that the director reasonably believes to be in the ‘best interest’ of the Association. Members of the Board must disclose conflicts of interest and abstain from voting on matters that my affect or benefit them as an individual owner. For example, a Board member cannot vote to waive their own fine or forgive their own past due assessments. Board members can appoint officers and hire managers to carry out the day-to-day operations of the Association. They can also hire professional advisors, such as attorneys, tax advisors, and contractors, to assist them in their decision-making.
Specifically, it’s the responsibility of the Board of Directors to adopt an annual budget, levy and collect annual and special assessments, adopt rules for the community, establish committees, and address other community issues. It’s the Board’s job to enforce the covenants set forth in the Declaration and enforce rules and regulations adopted by the Board. The Board may appoint a committee to perform certain tasks, such as architectural review of construction or remodeling plans. The Board decides how much to collect in reserves and when to perform routine maintenance and major repairs and replacement of common elements.
If you’re a homeowner within an Association, serving on your Board can be very rewarding. You’ll get to know your fellow owner / members, become more familiar with the governing documents, and gain a better understanding of what it takes to manage and maintain your Association community. If you serve on a Board for an Association, be sure to seek out available resources such as professional advisors and organizations supporting Association communities, such as CIC Midwest and CAI Minnesota.
Any requests for topic suggestions may be sent to firstname.lastname@example.org. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.