5 Common HOA Board Mistakes & How to Avoid Them

Many condo and HOA board members have never served on a board before. However, they find themselves responsible for the value of the most important personal asset that their association members own: Their homes.

Amateurs usually mean well, but they make amateur mistakes, too—mistakes that can lead to poor accounting practices, inefficiency, increased liability, and beyond. Here are the 5 most common HOA board mistakes that we see in the condo and association world and tips on how to avoid them.

5 HOA Board Mistakes to Avoid

#1: Being Slow to Collect Overdue Fees

Everybody wants to be liked. However, once you take on the fiduciary responsibilities of being a board member, you have to put personal feelings aside and collect overdue fees promptly, professionally, and without fear nor favor. If you let one owner slide, you are being unfair to everyone else whose interests you represent and who have expect you to conduct yourself fairly and in the interests of the association.

This means that you shouldn't become a board member unless you are 100% ready, willing, and able to vote to pursue legal action against your best friend in the association, on schedule. Sometimes, you might have to confront your tennis buddy and kick his family out of the common areas he hasn't paid for.

Don't ignore the standards and precedents that you set because if you do, you could endanger the entire association's cash flow.

#2: Failing to Review Financials

As a board member, it ultimately comes down to money. Your mission is to safeguard your association members' hard-earned money, ensuring that it's invested in their best interests and accounted for to the last dollar. In our posts on HOA fraud and embezzlement, you can see how easily a thief can make off with tens of thousands of dollars or more in association funds. Board members need to examine every transaction carefully. Fraud often comes from the treasurer, accountant, or bookkeeper. It's your job to provide oversight over these functions.

#3: Failing to Ask for Professional Help

Often, board members are highly intelligent, educated, and successful individuals. However, these kinds of professionals tend to overestimate their own abilities when it comes to acting as board members. They often resist bringing in specialized assistance when it's needed most. In the short run, this may save a few dollars (or your pride), but in the long run, it's disastrous.

Few board members have any personal expertise in putting together a capital plan for a large real estate development. Few are contractors or security experts themselves. Few are well-versed in forensic accounting. Don't be afraid to bring in a new set of skill from time to time, especially when it comes to accounting and money management.

#4: Holding Closed Meetings

Generally, all board meetings must be publicized ahead of time and open to all association members. The only exceptions should be meetings to privately discuss collecting dues from or enforcing rules against a specific homeowner or staff member. Technically, two board members stuck in an elevator together can't discuss association business lest the conversation be construed as a closed meeting.

The board is subject to a quorum that must be met (and documented) before any issues related to the association are discussed. The meeting must be publicized in the method specified by the association's bylaws, and items can only be added to the agenda via an approved process known to all members. At meetings, always have the president or secretary send around a sign-in sheet to document the presence of the required quorum.

#5: Failing to Maintain Standard Insurance Coverage

Insurance mistakes are at the root of many legal actions against board members. Problems often arise that could have been avoided with standard insurance coverage. Boards need to take special care to review insurance policies, understand lapse dates and renewals, and review coverage amounts to ensure they're accurate. Otherwise, you'll have to break the news to your association members that they're getting a special assessment.