Bringing in a New Board Inheriting a Mess

Bringing in a New Board

When it comes to running a building or community association, all board members are not created equal—at least not when it comes to administrative ability and skill. Some bring experience in construction or backgrounds in law, finance, or other professions that can be helpful to a board. Others bring little insight or professionalism to the group, and seem more concerned with personal vendettas, cronyism or other compromising pursuits. It can be a frustrating fact of democracy that rule “by the people” means that sometimes, things will be done poorly, or at least not ideally.

Thrown Into the Deep End

With the degree of professionalism on boards varying so widely, it probably comes as no surprise that some boards (or at least some members of boards) make a mess of managing their communities. Some boards can go so completely wrong that residents are compelled to vote individual members—or even the entire board—out of office and start from scratch.

When new board members join their building or association’s administrative team during such a time of crisis, they have to hit the ground running and deal with the community’s problems immediately. Often, they must do so with little guidance and no training. But given the right information, new board members can take the reins of a troubled HOA and smooth the transition. With savvy advice, new board members can avoid the pitfalls that contributed to their predecessor’s failures.

Musical Chairs

While it is not very common for an entire board to be replaced due to resident dissatisfaction, it does occasionally happen. More commonly, one board member or a few board members will be replaced through an election. Cases of gross mismanagement or outright fraud by a board can quickly disaffect residents and can lead to the board’s unceremonious ouster.

Although it doesn’t happen very often, a total board replacement is not a good situation, says attorney Wendell A. Smith of Woodbridge-based law firm Greenbaum Rowe Smith & Davis LLP.

“The whole board is not usually removed because bylaws have staggered terms. The benefit of this is continuity and a sense of history, and not having all brand-new people who don’t have any experience, history, or knowledge of what’s going on in their association,” Smith says. Staggered terms help maintain “a blend of experience and new members,” allowing for new members to contribute while maintaining some of the experience of existing board members. Since only part of the board is usually replaced at one time, the association’s institutional memory remains intact, which can help new boards avoid making the same mistakes their predecessors made. (That’s also why board meeting minutes are so important to keep, and important for all residents to read.)

But as Smith says, it’s very rare for a whole board to be unseated all at once, no matter how disgruntled the residents may be. Usually, disaffected residents will vote out two or three board members at most. But such changes can be even more complicated, since outgoing board members are not legally required to help incoming board members transition into their new jobs. That doesn’t mean that they shouldn’t, however. “Certainly [outgoing board members] have a moral obligation, especially if they’re continuing living in the community, to help their fellow board members,” says Scott Dalley, senior vice president for Access Property Management in Flemington.

New board members should touch base with their association’s lawyer, accountant, and engineer or general contractor if the HOA is in the midst of a construction project, or if one is planned. They also should speak to the property manager and to the superintendent, to ensure that they are well versed in all of the issues currently before by the board.

If an entire board is replaced, old board members could grudgingly hand over control of the board to new members, without helping them to understand the issues the board is managing. Again, staggered terms for board members help alleviate that kind of problem. Most co-ops have one-year terms for board members, and about one-third of the board members are replaced each election.

If the board is in the midst of litigation when new board members join the group, outgoing board members would have a greater obligation to convey information to new board members, says Dennis H. Greenstein, a partner with the Manhattan-based law firm Seyfarth Shaw LLP. New board members should be provided with copies of meeting minutes that are pertinent to work they will be doing on the board. Copies of papers related to any expected or ongoing litigation should also be provided to new members.

“Everybody has a fiduciary responsibility to perform those things that are in the best interest of the community,” Greenstein says.

Taking Control

Regardless of the cooperation—or lack thereof—of outgoing board members, the newly constituted board will have to take the reins on their own at some point. Even if the transition from the old board to the new one is a rocky one, the board’s consultants can help to ease the transition. Smith also recommends clear understanding between all parties involved and the importance of not getting embroiled in board members’ personal conflicts. “That’s probably the bottom line,” he says. “Stay out of the politics, and represent the association and all the members.”

The property manager’s main functions are to collect fees from residents, pay bills, and deal with property repairs and staff of the building or community. The property manager works for the board, and takes instruction from the board. Sometimes the property manager might be taking instruction from a divided board as a result of new members being elected.

In the event of an acrimonious transition between old members and new, says Dalley, then the management company should help facilitate a smooth transition. “We have expertise in knowing what the new board members’ duties and responsibilities are, and we… guide them and help get them up to speed on whatever issues are facing the community.”

“It happens sometimes that new board members get elected, and their personalities create tension between old and new members,” Greenstein says. “I’ve generally seen a balance found between the two, but not always.”

New board members should investigate all of the matters in which the board is involved. New members have an obligation to their community to get themselves up to speed, and should talk to the board’s attorney, accountant, property manager, and superintendent about issues the board is facing.

Many property managers and accountants work with several buildings and thus, some of these professionals have a greater depth of knowledge in navigating the troubled waters of a board facing tough choices.

Smoothing Wrinkles

After a new board is created, board members can do things to restore confidence and trust in the board. Keeping residents well informed is essential, Greenstein says.

“It’s not uncommon in such situations for unit owners to want to know more of what’s going on,” Greenstein says. “One way to respond to their complaints is by sending out more regular reports on what’s being done.”

Newsletters, web logs, and email groups are good tools for spreading word within a community, and are commonly used by many buildings to maintain open lines of communication. One aspect of the rule of open communication is avoiding defensiveness. Boards are elected caretakers of their building or community. Boards don’t need to be defensive about necessary projects that will be expensive, or about receiving criticism from residents.

“The important thing is for the board to be open and responsible. The job of the board is the correct operation of the building,” Greenstein says.

Some newly constituted boards may have to institute new policies for how they’ll do business, in order to restore residents’ confidence in the board. Sometimes, the board might want to hire a new property manager. However, mentions Dalley, for the sake of continuity, that is not always the best case scenario.

New board members should find out what their rights and responsibilities are.

Educate Thyself

Resources exist, and professionals abound, that can help board members to restore order and confidence in the board. Various public seminars offer information on good governance of buildings and communities. Also of value is attending trade shows such as The New Jersey Cooperator’s upcoming event this spring at the Meadowlands Exposition Center in Secaucus. The 2009 Condo, HOA & Co-op Expo, in its second year, will take place from 9 a.m. to 5 p.m. on Wednesday, May 13, 2009, and feature more than 120 exhibitors, a free advice booth, and timely informational seminars on topics of interest to boards and residents.

The New York Timesincludes an informative Question/Answer feature on co-ops and condos in its Sunday real estate section, Greenstein says. “The best resource really is the attorney for the building. He’ll make the board aware of any legal matters or legal developments.”

Dalley also mentions that “it’s never a bad idea, especially for [new] board members,” to attend classes that go over their responsibilities as board members. “The Community Associations Institute actually has classes on community association volunteer leaders,” he says.

Dedication to the job of being a board member is important, because the value of many peoples’ property is at stake in decisions a board makes. Putting in half an effort in deciding financial matters that can result in millions of dollars being spent is not only foolish, it could verge on the criminal.

Their fiduciary responsibility to residents of a community is a trust that wise board members work hard to live up to. Smart board members take their elected jobs seriously, and put the effort into those jobs to do the best they can.

Jonathan Barnes is a freelance writer who regularly contributes to The New Jersey Cooperator and other publications.

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