Common Sense: Balancing Responsibility and Authority in HOAs

There is a tendency in many people to equate responsibility with power. They are clearly not the same. Responsibility is a legal obligation. Power is legal authority. A popular maxim among management types is that you should not assign responsibility without also delegating the necessary authority. That, however, is an ideal, not necessarily reality, nor is responsibility that exists without the corresponding authority always a bad thing.

Board Responsibility and Authority 

Take the case of your homeowner’s association. The Conditions, Covenants, and Restrictions assign responsibility to the association for maintenance of portions of the project, for example. It is typical for certain associations to be responsible for painting, caulking, and sometimes repair of exterior siding. But do those same CC&Rs always give the association board of directors the authority to take whatever steps are required to raise funds to perform what is required? If you think about it, the answer is usually “No.” The board is limited in its ability to assess the members of the association by such things as the requirement that members vote on assessments, whether regular or special. These limitations are found in the CC&Rs, and also in the Davis-Stirling Act.

So it would seem that associations labor under a conflict in good management practice–we have assigned responsibility without also granting the requisite authority. If that’s so, then logic would dictate that we either cut responsibility or increase authority. But we must be careful not to be so rigid in our thinking that we miss some creative opportunities.

Levying Assessments 

As you know if you have read some of my articles on the future of homeowner associations, I believe in the principle that voluntary “taxation” leads to bad results. Members cannot usually be depended upon to vote in the community’s interest. That’s because their self interest is so compelling, and self interest and the community interest, like certain signs of the Zodiac, are only occasionally in alignment.

So, should we empower boards of directors to levy assessments sufficient to operate and maintain the development without getting the authority to do so from the members? A chilling thought to some, perhaps, but that is precisely what is done in several other states, Florida for one. I learned this in a discussion about my concern for the eventual obsolescence of common interest developments with a Florida attorney. “That could never happen in Florida” was her reply, “because in Florida, an association is obligated to assess whatever is required to operate and maintain the association.”

Perhaps California will adopt that thinking in the future. If it did, however, and even if associations were given a long time, say five years or more, to fund their maintenance reserves fully, the obligation would crush some associations. Their members simply could not afford to contribute the level of assessments that would be required to retire the shortfall.

A short-term solution might be getting creative and looking for ways to increase operational and reserve funding without smacking the members with a large assessment. Starting to save earlier in an association’s life for the repair of a greater number of components would be one example. Managing repairs to get a longer life out of existing components is another. In our quest for a solution to this never-ending dilemma, however, board members must be careful not to push the envelope too far. “Creative” solutions must also be legal ones. Buying new fencing from your brother-in-law might in fact be the cheapest solution, but have you considered your own conflict of interest? Saving on insurance costs by raising the deductible or cutting the coverage may be tempting, but what about the bylaw provisions or sections of the Civil Code that require certain levels of deductibles and coverage? Deciding to maintain the pool yourselves rather than hiring a professional service might actually save the association a lot of money, but what about the liability it faces if you fail to chlorinate the water adequately?

Management and Conflict Resolution 

Restrictions on the exercise of power can force a board to find creative and innovative solutions to management challenges. But that benefit cannot be taken too far. In the long run, there may be an inherent conflict between a board’s responsibility and its authority that cannot be resolved through creative thinking or the best of intentions. In such a case, legislation may be necessary not only to protect the equities of owners, but to relieve board members from the fear of their own liability in trying to deal with what may be an insoluble problem. A lot of the stress on board members comes from trying to balance responsibility and authority–when there is too much of one, and not enough of the other. That stress sometimes leads to individual board members avoiding their responsibilities or abusing their authority–always a bad situation for everyone.

Understanding the imbalance of responsibility and power in a homeowner’s association will at least insulate board members from the stress of believing that they must find an answer to every problem. Like so many things in life, it would be nice, but not always possible. Recognizing that the system is inherently imperfect will let board members get down to the real business of making the most of what they have.

Tyler Berding is a founding partner of Berding & Weil, a construction defect and homeowner association law firm ands a former member and the immediate past president of the ECHO board of directors.