Have a Healthy and Effective Board

Attached is a Board Effectiveness Checklist from governance.pro that helps an organization determine if it is being as effective as it can be. The checklist applies to all types of organizations, so all the factors may not apply to every organization, but it is a good starting point. There are some additional specific items I would recommend for homeowner associations and smaller non-profits.

1. Communicate with the members. This is the most important rule for a smooth running HOA.
2. Have a packet of the declarations, bylaws, rules and regulations of the HOA available for every director. Since all these documents have to be consulted to make sure a board can do what it wants, it saves time and allows the board to debate real possibilities. When a board turns over as HOA boards frequently do, the new directors are able to see what exactly earlier boards had decided. I’ve been in HOA meetings where time was wasted debating and crafting new rules, when there already was an old rule that applied. It may also be helpful to have a copy of  Chapter 47C or 47F and 55A of the North Carolina General Statues since those statutes govern much of what a board is allowed to do.
3. Have a welcome packet for new residents with the same documents and other information about the community.
4. Keep a close eye on assessment delinquencies. Usually the individual amounts are small next to the HOA’s entire budget, but they will sneak up a board. You’ll never have 100% on time payment from any planned community of any real size, but you are doing a good job if you can keep those delinquencies below 5%.
5. Fund and maintain a reserve. Your delinquencies will go way up if you hit all the homeowners with a special assessment for roof repair or road repair. It is far easier to budget each year for a small amount to build up reserves and prevent sticker shock.
6. Do a little MBWA (“management by walking around”). Board members tend to focus on problems that they see from their driveway. Try to be aware of small possible violations in other areas of the community so they can be addressed before they become a larger problem. It also nips in the bud arguments by homeowners of favoritism or one board member that is perceived as “picking on them.”
7. Get multiple bids from outside vendors and award contracts fairly.
8. Have all the board members understand the reasoning for any rule or decision made by the board (even if they don’t agree with it). Neighbors will stop and ask board members questions and if they can’t articulate the reasons for a decision, the neighbors will imagine unfavorable and nefarious reasons for the decision.

Follow these guidelines and you will have a great community and happy neighbors.

-Bradley A. Coxe is a practicing attorney in Wilmington, NC who practices in Personal Injury, Car Accidents, Medical Malpractice, Contract and Real Estate disputes, and all forms of Civil Litigation.  Please contact him at (910) 772-1678.