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Residential Real Estate
Feb 15, 2022

The Fundamentals of Serving on your Association's Board: Part 1

Sponsored Content provided by Mike Stonestreet - Founder, CAMS (Community Association Management Services)

Serving on your community association's board of directors can be a complicated job, especially if you haven't received the proper resources and training needed to carry out your duties. But, just as with most things in life, a little bit of education will go a long way toward making your time as a community leader more rewarding and a bit less stressful. At CAMS, one of our core values is "we are here to learn and grow", and that extends past our team. Our CAMS Academy for board members offers tons of helpful resources which provide you with the knowledge you need to run your community successfully.

CAMS Academy
One thing that sets CAMS apart from other management companies is our dedication to our customers, which begins with empowering community leaders so you will be most effective in your role. In addition, our employees must complete ongoing industry-related training and education so that you may be confident you have a knowledgeable team committed to continuous improvement.

Board member education is also ongoing. Best practices are memorialized in our Trusted Guidance memos, and timely information is distributed via our monthly newsletters to board members. We also host monthly "Ask The Experts" webinars where industry professionals take a deep dive into topics that affect our customers. These resources live in the Board Member Toolbox on our website so that you have easy access to them when needed.

The role of governing a community association does not exist in isolation – it is critical always to be aware of the broader context that affects your association, owners, and your board.

State Statutes
In North and South Carolina, state statutes apply to non-profit corporations, including community associations, which are most often incorporated by the developer. In North Carolina, these are NCGS 47-C (for condominiums) and 47-F (for planned communities). In addition, community associations that are not for profit are subject to NCGS 55-A. In South Carolina, laws related to incorporated community associations can be found in the SC Code of Laws 33-31-101.

Governing Documents
Your association's governing documents define the physical parameters of your community and cover everything you can and cannot do within your community. The documents speak to different aspects of running your community, and, as a board member, you should be sure that you understand the purpose of each document and its content. If there is a conflict, the hierarchy of documents listed below will usually prevail.

  • Articles of Incorporation: This document essentially creates the association and allows it to obtain non-profit status. These must be filed with the Secretary of State.
  • Plats: The plat is a map of the development that defines what property is being subjected to the declaration. It shows where common areas are located, easements, if any, things like that. This map is recorded with the register of deeds in the county in which the development is located.
  • Declaration of Covenants/CCRs/Master Deed/Horizontal Property Regime: Whatever your association calls this document (in SC, it is most likely called the Master Deed, but for this article, we'll refer to it as the declaration), it must be recorded with the register of deeds and authorizes the existence of the association. Things included in the declaration, for example, are use restrictions, information on assessments, membership obligations. Further, the declaration gives the board the authority to take action on behalf of the association. Depending on the age of the association, this document may have supplements or amendments. Finally, this document is a contractual agreement between the association and the property owner that "runs with the land" and is binding.
  • Bylaws: The bylaws lay out the administrative parameters for the association and contain information on the number of board members required, information on the frequency of meetings, term limits for board members, and the board's duties. While these must be recorded in the county records alongside the declaration in SC, this is not required in NC.
  • Rules and regulations: Unlike use restrictions in the declaration specific to property, rules and regulations are adopted by the board. The authority for a rule must have its basis in the declaration and cannot be more restrictive than the provisions within the declaration. However, rules are beneficial for clarifying so that owners know exactly what to expect. In South Carolina, the rules and regulations must be recorded in the county where the association is located to be enforceable. Recording this document is not a requirement in NC.
What Roles do Board Members Play?
As a board member, your responsibilities extend past holding meetings, making financial decisions, and hiring vendors. Much like running a small government, you've got several hats to wear and must be able to switch between them depending on what situation arises.
  • The Policeman: That doesn't sound like much fun, does it? Well, unfortunately, it is an essential part of being a board member as one of your duties is to enforce restrictions. Keep in mind restrictions must be enforced uniformly, so you can't send a warning to Jane down the street about her lawn but not send one to your best friend Larry next door. However, acting as the policeman doesn't mean there isn't room for consideration of extenuating circumstances – always be sure to listen to members if they're facing a personal hardship and see if you can work with them to come to an amicable solution.
  • Lawyer: No, please do not go around "playing lawyer" – that would not be a good idea. Instead, as the "lawyer", you must be very familiar with your governing documents and understand their content. If there's ever a question or a need to interpret a restriction, call your actual lawyer immediately – it's always better to clarify a question first vs. clean up a huge mess later.
  • Politician: As a volunteer community leader, you're the face of the association in many ways. It is important to remember that your goal in serving on the board isn't to be reelected; instead, your goal is to look out for the association's best interest and its members. Some things to keep in mind are avoiding participating in gossip, keeping away from personal biases, and using your team of experts when executing your duties.
  • Social Director: Whether it be through committees, setting up community events, or coming up with social media policies, members often look to the board to handle these types of things for their communities. Also, it's essential that members see you getting involved in community activities – this will encourage them to do the same. After all, your attitude and actions as a community will affect your neighbors.
Responsibilities of Directors
Now that you know you have to be a policeman, a lawyer, and a politician, you're probably wondering what else you have to do (or if we're about to turn you into The Village People). Directors are ultimately called to act as a fiduciary of the association. What does that mean? To serve as a fiduciary means that you always act in good faith, in the association's best interest, and apply the business judgment rule.

Of course, you have more tangible duties to fulfill as well. For example, board members are responsible for making decisions for the association, executing service contracts, collecting assessments, and enforcing the covenants and rules. Further, board members are also responsible for the association's budget and expenses (unless governing documents state otherwise), deciding on needed maintenance of common areas, and considering special assessments.

What decisions are not those of the board? Firstly, board members should never take any action that isn't allowed per the governing documents. Also, board members shouldn't attempt to solve neighbor-to-neighbor disputes. Is this illegal? Not necessarily, but it will end up causing you a world of trouble.

What Decisions Require Member Participation?
Though this will heavily depend on your governing documents and state statutes, there are some things that the board may need approval from the membership to do. How do you get approval? By taking a vote. And the percentage of the votes necessary to pass an item will, once again, vary between associations. Some examples of things that might require a vote of the membership to pass are:
  • Making amendments to documents
  • Election of board members
  • Putting forth a special assessment
What about the budget? Do members have to approve that? In North Carolina, the budget is ratified unless a majority of the membership votes against approval. In South Carolina, there is no state law requiring members to approve the budget, but the governing documents may require member participation.

Regardless of whether member approval is required, it is good business practice for the board to be as inclusive as reasonably possible. For example, offer polls or surveys before implementing new rules and hold informational meetings at regular intervals so that the membership feels included and informed. These things are how strong communities flourish and grow stronger.

Fiduciary Duty & The Business Judgement Rule
As we said earlier, board members must fulfill their fiduciary duty to act in good faith, with prudent care, and in the association's best interest. It sounds like a tall order, right? It can be, especially if you're new to being a board member. Thankfully, there's another component to fiduciary duty – seeking out the advice of experts when needed. What experts? People such as your attorney, service providers, CPAs, and your community manager are all experts and should be consulted if you ever have a question or concern about a decision you're making for the association. In fact, if you fail to consult experts, you may be in breach of your fiduciary duty.

What is this "Business Judgement Rule"? This rule essentially states that a director isn't liable for the consequences of a good or bad (or even dumb) decision as long it was made in good faith, with due care, in compliance with governing documents and state statutes, and the director is acting in a volunteer capacity. So no, this isn't an invitation to start making rash decisions. Instead, it is a protection for board members that alleviates the threat of legal action should a decision you made not work out the way you'd hoped as long as you can show that you believed you had the best interest of the association in mind.

Though this is just an overview of some of the things you need to know as a board member, it's an excellent place to start. Please be on the lookout for a follow-up to this article to discuss additional information essential for you and your fellow board members to know.  
Is your community getting the Trusted Guidance it deserves? If not, reach out to the experts at CAMS here or at 888.798.2624 to learn about some of the outstanding services we offer.

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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