9 Responsibilities HOA Boards Shouldn't Delegate to a Manager
HOA management companies can be a great help to an association's board of directors. But a manager is not supposed to usurp the board's duties. Here we share nine duties you shouldn't allow your HOA manager to handle.
1. Those duties specifically given to the HOA board. "Managers shouldn't be doing anything reserved to the board in the governing documents," says Elizabeth White, a shareholder and head of the community associations practice at the law firm of LeClairRyan in Williamsburg, Va. "That means anything legislative in nature like the adoption of rules or setting architectural review board guidelines and policies and procedures."
2. Signing certain checks and overspending your budget. Don't allow your manager to sign checks over a set amount. That amount depends on your budget, says Steve Daniels, coordinating partner of Arnstein & Lehr's West Palm Beach, Fla., office, who has advised hundreds of HOAs. Whatever that amount, the point is to avoid giving your manager carte blanche to sign checks.
Similarly, shouldn't be able to bust your HOA's budget. "Managers shouldn't be given the authority managers to spend in excess of the approved budget limits," says Harry Styron, an attorney at Styron & Shilling in Branson, Mo., who's drafted covenants for more than 100 subdivisions and more than 40 condominiums.
Download our exclusive Special Report:
HOA Management Companies
A Practical Guide for Homeowners Association Boards
3. Waiving rules. "Managers shouldn't be allowed to waive late fees or make compromises concerning violations by saying something like, 'I'll let you park here for another week; then I'm telling the board,'" says Styron. "I've seen managers make representations to owners where an owner says, 'The manager told me that if I paid by this date, I wouldn't have to pay the late fee,' and the board says, 'What?'"
That includes approving architectural changes, says Bill Worrall, vice president of The Continental Group, which is based in Hollywood, Fla., and manages 1,300 condominium and homeowner associations totaling 310,000 residential units. "Managers should never be the final approver on architectural modifications in the community. It's always a good idea to appoint a committee to oversee architectural modification applications, but approval should always come from the board. It's too easy for a manager to be influenced--and, candidly, bribed--by an owner, and that can affect the aesthetics of the community."
4. Arranging and overseeing annual audits. "I always recommend every organization--no matter the size or structure--have an annual audit," says Worrall. "The board should hire an independent CPA to audit the books. Some boards like to have the managers sign checks or keep the books, but the board should be engaged in the audit process with an independent auditor. In fact, a couple of months ago in several associations in West Palm Beach, Fla., associations found that their manager had embezzled funds. That was possible because of the lack of an audit."
5. Hiring or terminating vendors. You can and should ask your manager to solicit bids, and review the quality of bids and the contractors, says Daniels. But once that work is done, your manager should advise the board and then let it make hiring and firing decisions.
White agrees. "Managers shouldn't be doing contract approvals unless they have board policy that allows them to execute certain contacts up to a certain amount for recurring services," she explains. "We've seen this when we've dealt directly with mangers, and we say, 'Wait a minute. Why are you doing this?' Many managers have a get-it-done mentality, and if something slows them up, they might just do it. It's important for them to understand the buck stops with the board."
6. Procuring HOA insurance. "The board can delegate to the manager to execute on the request for proposal process for insurance," says White, "but what insurance should be purchased should be decided on by the board."
7. Setting the lien process in motion. For a raft of reasons, the responsibility to file a lien against a homeowner should be left to the board, not your manager. For more details, see our new article, Why Your HOA Board--Not Your Manager--Must Authorize Liens.
8. Assessing fines. "A lot of associations have a grievance or violation committee," says Worrall. "But before an owner is fined or legal action is taken, that should be approved by the board, not the manager."
9. Anything beyond their contractual duties. "The manager's contract should define the parameters of his responsibility," says White. "It should spell out the duties the board is going to delegate to the manager and show what the manager shouldn't be doing. The board shouldn't be conducting the day-to-day business but should focus on HOA policy.
"There's a line the manager can cross, and sometimes the board encourages that because it doesn't want to do certain things. But ultimately, if there's liability, it goes back to the board, which needs to have a really good understanding of what its responsibilities are. A good start is the HOA's governing documents, but the board also needs a good understanding of its fiduciary duty."