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Residential Real Estate
Feb 18, 2021

Board Member Boot Camp Part 2: Compliance, ARC, And Pitfalls To Avoid

Sponsored Content provided by Mike Stonestreet - Co-Owner/President, CAMS (Community Association Management Services)

In a previous article, we discussed some of the topics board members must be familiar with in order to serve successful terms on their community’s board of directors. This second part of “boot camp” covers the enforcement of documents, rules, and covenants, ARC issues, and some things board members should always be sure to watch out for.
 
Compliance with Governing Documents, Rules, & Covenants

Ensuring compliance with various community rules is one of the many tasks assigned to board members. Though being the enforcer may not always be fun, it is essential to the smooth running of any community association.
 
Governing Documents

There are a few ways boards can go about ensuring compliance the community's governing documents and some of these tend to go better than others. When a member is found out of compliance with the governing documents, there are typically three options available: the "I'll do it myself" approach, injunctive relief, and imposing fines.
 

  • Of these three, the "I'll do it myself" approach is the least recommended. An example of this approach would be if an owner made unauthorized changes to their property, and the board or Architectural Review Committee (ARC) takes it upon themselves to enter that owner's property to remedy the violation. This approach can be dangerous - you never know what someone will do if you’re found on their property without permission.
 
  • The most effective method of gaining compliance with the governing documents is the use of fines. This is the least expensive option for the board and will often sway the member in question to come into compliance. In North Carolina, state statues give homeowner's associations the power to do this as do most association’s governing documents. In South Carolina, there is no state statute that gives boards the power to fine members, but it is typically given within the governing documents.
 
  • Injunctive relief involves using the court system to require an owner to do or not do something. This can be expensive and time consuming but has been found to be effective. It should, however, be used as a last resort.
 
Due Process

When addressing rule and covenant non-compliance, boards should follow due process. The requirement to establish due process is to give the non-compliant party notice of the violation and an opportunity to cure the violation. How should you provide such notice? It must be in writing and sent by mail, but managers may also send notifications via email in addition to the mailed notice.
 
When must boards provide notice to non-compliant homeowners? In SC, ten days prior to any action being taken is presumed to be reasonable. There are no specific rules speaking to this in NC - however, in NC, a hearing must be conducted before any fines are levied unless the governing documents state otherwise. Conversely, there is no hearing requirement in SC, though governing documents could speak to such. Regardless of which state you reside in, it’s always advisable to provide homeowners with the opportunity to be heard as it puts the association in the best possible position to justify fines for non-compliance.
 
Architectural Review Basics

ARC decisions are among the most controversial issues that board members will face when serving their communities. Though the nature of ARC restrictions and how they're enforced will vary for each association, there are some best practices that all board members should keep in mind.
 
Boards themselves can serve as the ARC or, of course, a separate committee can be created if authorized by the governing documents. The most important thing for board or committee members to do is to carefully read their governing documents and be familiar with the applicable requirements therein. There is typically a 30-day rule associated with ARC requests - if someone submits an application, many documents will specify that if the board doesn't respond within 30 days, the request is deemed to be approved. If a decision can’t be made within 30 days, the best thing to do is deny the request at that time which will allow the board to collect further information and allow the homeowner to submit the request again in the future.
 
Denying ARC Applications

What specific duties do board members or ARCs have when denying requests? This will vary association to association, but there are some best practices when it comes to denials. First, the board (or committee) should always respond to the request in writing and provide valid reasons as to why it was denied. Boards/committees can also make suggestions to homeowners regarding how a request may be altered to receive approval.
 
It is key to remember that ARC issues pertain only to the aesthetics of the community. When considering ARC requests, boards should ask themselves questions such as "What does it look like?” and “Is it harmonious and consistent with other structures in the community?". Beyond that, board members must be careful when seeking further information pertaining to an ARC request. Boards want to avoid determining property lines, inspecting drainage easements, or making judgements on the integrity of the building plans. Getting involved in any of these issues can open the board to liability as they are reaching into areas in which they aren't experts.
 
Board Members Beware!

There are, of course, things that all boards should keep in mind to maintain harmony in their communities as well as protect themselves and the association from potential liability or litigation.
   
  • Watch out for the "rogue board member" - Who is the rogue board member? This is someone who does things like approve ARC requests on their own, gives opinions on covenants, talks about violations of other homeowners, or shares board conversations. It is imperative to remember that one single person is not the board and cannot act as such.
 
  • Not utilizing professionals - Board members aren't experts in every area of running a community and should not act as such. Boards of directors are entitled to rely on outside professionals for information. If there is a legal question, boards should consult their attorney. If there is a financial issue, boards should consult a financial professional or community manager. Remembering this often saves boards a world of trouble.
 
  • Be more than fair - Though this may be subjective, it is arguably the most important part of being a board member— you should always put the board in the best position to remain in compliance with the governing documents. It is vital that good business judgement is used for every decision and that any conflict of interest be disclosed in writing to other board members.
 
As you can see, being a community association board member puts a lot on one's plate. However, keeping in line with best practices, having a full understanding of governing documents, and always aiming to act fairly can make the job a bit less stressful.
 
If you have questions about the running of your community or your responsibilities as a board member, please reach out to the experts at CAMS today for trusted guidance. Our experienced managers and proven processes can assist you, and your board, in being the community representatives you can be.


Mike Stonestreet, CMCA, PCAM, AMS, is Founder/Co-Owner of CAMS (Community Association Management Services). CAMS began in 1991 with Stonestreet and a few employees in a small office in Wilmington but has since grown to over 300 employees serving eight regions across North and South Carolina.

His current role at CAMS focuses on mergers and acquisitions, culture alignment and high-level business relationships. Stonestreet is an active member of the NC Chapter of the Community Associations Institute (CAI) and has spent time on their board of directors, serving as the chapter President in 2019.

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