Tough Calls Boards Must Use Common Sense and Resources

Tough Calls

Board members find themselves acting as referees so often, some may feel like they're wearing black-and-white striped shirts. Maybe they're mired in the middle of a conflict between homeowners because one group of gardening enthusiasts is at odds with a group of parents over whether to use a limited space to grow flowers or install play equipment. Another day might find them settling a dispute between two unit owners who are about to duel over noise or food odors.

Settling these conflicts often involve tough choices on the part of HOA administrators, who must weigh the positions of different groups against what's best for the building community at large. It's a balancing act with political, personal, and practical considerations.

Common Problems

For Lori Burger, senior vice president of the Institute of Real Estate Management (IREM) and of marketing and business development for Eugene Burger Management Corporation in Rohnert Park, California, the typical pet peeves among homeowners usually boil down to what she calls the Three P's: “That's people, pets and parking,” she says.

By contrast, most of the conflicts between residents and boards come down to money, in Burger's experience. “Anytime a board increases expenses or there’s a budget issue, it usually stirs up conflict,” she says.

Mary Faith Radcliffe, a principal with RCP Management Company in Princeton, agrees. “In these difficult economic times, a board is often conflicted between raising the maintenance to keep the development in top condition, or cutting back to help the homeowners financially,” she says. “Boards face this difficult decision with the expectation that some of the homeowners will not be happy, whichever decision is made.”

And some of those homeowners may voice their displeasure loudly, even if they themselves are part of the problem. The down economy has strapped many residents financially, causing them to fall behind on monthly maintenance payments. Multiple delinquencies may push a struggling building further into the red, prompting the board to decide that it’s time to cut back on expenses. But if the board opts to scale back pool or doorman hours, even residents in arrears are likely to complain.

Regardless of the nature of the conflict's origin, James Magid, executive director of the Smoke Rise Club condo community in Kinnelon, agrees that good communication can go a very long way toward defusing it. “I had a community where the swimming pool was really under-utilized, particularly between Memorial Day and the Fourth of July. So, the board decided that they just weren't going to open the pool until the Fourth of July thus saving several thousand dollars and putting that money toward other necessary projects.”

That's not what happened however, says Magid. “The board really didn't promote and communicate it well to the members and as a result they really got a lot of heat. From listening to some of the dialogue around the matter at the time, I think that...they could either have made other arrangements or they could have potentially rallied some additional revenues to allow the pool to still open on time. But, I think the point there is that while the board thought it was a prudent thing to do, and a fiscally responsible thing to do, it wasn't promoted well to the community and so the board took a lot of heat.”

Magid recalls another HOA that managed to salvage what could have been a very contentious situation regarding an assessment; “The community that was looking at a multimillion dollar renovation project. We went around and around as to the merits and the best approach to the project...and it started to leak out that this was being considered by the board, and what the financial impact would be to the residents—not only monthly, but over the long-term in 5 or 7 years as it increased assessment. We started to get some negative feedback and some vibes that members were not happy at all, so we mounted a very aggressive information campaign. We put together what I'm going to call storyboards that made a presentation to the members that explained the total project,” according to Magid.

“We actually gave photographs of the improvements—we said, 'Here are the colors of the siding and here's the look of the windows, and here's the reason why we want to do this all at once because everybody will get the benefit as opposed of being staged over two, three, four years.' And ultimately it went over successfully with the residents, even though it started off really on a bad foot.”

Information is Key

Managers and board members alike must be very familiar with the declaration or covenants, the bylaws, and other controlling documents that form the contract between homeowners and association or cooperative corporation. To make any decision, a board must use business judgment, wherein all the facts and circumstances are taken into account, options are identified, and a course of action is decided upon that serves the best interest of the community. A board must act for the benefit of the association—not the benefit of individual board members. They can't discriminate by favoring one homeowner over another—that's not only spelled out in a building's bylaws, but in the law of the land overall.

Being prepared to deal with arguments and conflict is particularly important in the context of resident and board meetings, where business needs to be conducted, records are kept—and board members' skills are on display for all.

“Being well prepared for a meeting is the best way to minimize in-fighting,” says Radcliffe. “It's extremely important for the manager to be as prepared as possible for any potentially confrontational topic, and to have the board members prepared as well. The more factual information presented, the better the chances of avoiding conflict. Get this information to the board members as early as possible so they can read it and digest it prior to the meeting, and make sure the meetings are conducted in an orderly fashion by following Roberts Rules of Order. Most of all, encourage everyone to keep an open mind and partake in the conversation on the issue.”

Getting professional input helps as well, says Gary Rothberg, president of the board at Brittany Townhomes in Plainsboro. “Obtaining opinions from professionals like architects, engineers...[and] financial consultants can help formulate or guide a direction on a particular issue.”

Rothberg also recommends forming a task force or study group to assess a given conflict or proposal, made up of stakeholders from board members to owners and professionals. “Give the group a charter, deadline and clear direction of what the issue is and what recommendations are expected of the group to provide,” says Rothberg. “The group should present their results only to the full board in an executive meeting to review their findings/recommendations for the board’s review and consideration. That approach can help achieve a uniform approach or consensus of the issues.”

Melvyn Tarnopol, a partner with the Atlantic City-based law firm Fox Rothschild offers a word of caution, however; “It's quite common for a board to appoint subcommittees to study particular issues,” he says, “however, if the sole reason for doing so is to try to avoid pressure that is being exerted on the board, this tactic will only delay that issue, not eliminate it.”

Don't Get Personal

No matter how heated a debate among residents or administrators gets, “It's always advisable to be diplomatic,” says Tarnopol. “It's always best for board members to treat residents and each other with courtesy. It's always desirable to gain consensus, but not always possible. Sometimes hard decisions have to be made, and reasonable people can disagree as to the proper solution. In this event, it is necessary that everyone have the opportunity to speak but, if consensus cannot be reached, then a vote has to be taken.”

When it comes to problems between residents, most HOA professionals say they do their best to keep the boards of the buildings they serve from getting involved. “Unfortunately, that's not always possible,” says another attorney specializing in condos and HOAs. “If the board has to get involved, it's better to act as a mediator and not to look as if the board is taking sides. Appearances are very important to residents, and it's important for the board to appear impartial. In co-ops, the board has significantly more power than in a condo.”

That being said, Burger contends, “Boards don’t believe they have a duty to intercede, but they do. When it comes to management’s attention that there is an issue, it’s important to resolve it so it’s not festering. Get the parties to sit down and talk to the management, and if necessary, the board. Owners live side by side, and we are here to help build a community, so it’s important to address problems immediately.”

At some point, however, the board may have to get involved in the dispute, especially if it involves the safety of the building or other residents, or when rules are being violated outright. For example, the HOA attorney recalls, “I heard of a situation where multiple apartments in a co-op were being rented as furnished short-term rentals by the owner. A new person was using the apartment every few days. At that point, when many people are coming and going and no one knows who is living there on a given day, and the owner is the cause of the problem, it is imperative for the board to get involved.”

“The board also has to consider its fiduciary responsibility to its members,” adds William A. Gillis, senior vice president and corporate counsel for Eugene Burger Management Corporation. “They need to decide if they are going to spend the resources to resolve this dispute between two neighbors. It may not be justified.”

Most boards, and board members take this responsibility seriously, and they are protected to the extent they use their proper business judgment and aren’t discriminatory in their decision-making. The law—and their Directors & Officers insurance—will protect a board in the course of doing its job, even when, in hindsight, the board may have made the wrong decision.

When weighing a tough building- or resident-related decision, listening is every bit as important as talking, says Burger. In the case of a resident objecting to a rule or having issues with a neighbor, “Most of the time the person is trying to communicate, but just not being heard or validated,” she says, adding that her company stages enactments of common problems between residents as a training tool to help their managers better learn how to handle them.

Board members can turn to managers and other members of their team for help in settling a matter or ruling on a tough procedural call. “I think the greatest thing is that the managing agent is there for the board,” says Burger. “A building or association has lawyers, engineers and accountants and other team members to call upon, and they should see us as a similar resource.”

Other Resources

Another factor that can help boards make fair and balanced decisions is the existence (or non-existence) of mandatory Alternative Dispute Resolution (ADR) requirements in their state. ADR typically refers to processes and techniques such as mediation, arbitration, or other collaborative methods for resolving disputes that fall outside of the judicial process. New Jersey is one state that require homeowners to use mediation before going to court.

Other resources include publications like The New Jersey Cooperator, and books such as Community Associations: A Guide to Successful Management, published by IREM. One chapter of the book is devoted solely to successful communication, and covers various communication strategies and conflict resolution techniques. The “Board of Directors” section includes topics related to successful board meetings. CAI-NJ's website and publications also offer a wealth of advice and information.

The most important thing to remember, say the experts, is that whenever different people with different preferences, agendas, and tolerances live in close proximity, conflicts will always happen. The key is to have a strong, conscientious board who knows the rules, and knows how to make the best use of the various resources available to them.

Lisa Iannucci is a freelance writer, author and a frequent contributor to The New Jersey Cooperator. Additional reporting by David Chiu.

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