All New Board Members and Board Members New to Coast Management of California

I have prepared this information in order to assist you with your responsibilities as a member of your board of directors. Being a board member is serious business. As a member of your board, you have a fiduciary duty to your association and its members. This means you must place their interests above your own at all times and avoid any conflicts of interest.

Based upon more than 33 years of management experience, I am certain that your careful review of the information provided will make your job easier while reducing number of hours you will be required to invest each month.

The place to start is with our website: CoastManagementofCalifornia.com

Start with the page: "Information for Board Members" where you will find a great deal of important information. Pay particular attention to the following in order to get off to a good start:

  • FAQ for Board Members
  • FAQ for All Homeowners
  • Glossary - HOA Terms
  • Glossary - HOA Insurance Terms
  • Glossary - HOA Accounting Terms

After you have reviewed the sections above, go to "Articles for HOA Boards." Pay particular attention to the following:

  • Reserve Studies Required- Reserve Funds
  • Who Can Attend Meetings - Open Meeting Act
  • Breach of Fiduciary Duty by Directors
  • Executive Session Meetings
  • Recusal of Board Members
  • FAQ About Reserve Studies
  • Duties of HOA President
  • Duties of HOA Treasurer
  • Duties of HOA Secretary
  • Duties of HOA Director at Large
  • Conflicts of Interest

After reviewing all of the sections described above, you can go back and review the remaining sections which will be valuable to you, but they are not all top priority sections.

Checklist for New HOA Board Members

 

New HOA board members, that have little or no experience as board members, often ask what they should do to get started. Following is a basic Checklist:

Review the following:

  • CC&Rs of the association
  • Bylaws of the association
  • Operating Rules of the association
  • The most recent Reserve Study
  • The current Budget
  • Insurance Policies for the association
  • Minutes for at least the last 18 months
  • Assessment Collection Policy of the association
  • Most current Financial Statements, including Delinquency Report
  • All written contracts with:

    • CoastManagementofCalifonia.com
    • Maintenance providers
    • Contractors and vendors
  • The Davis-Stirling Act which can be found on our website
  • The last Accountant's Review or Audit, if applicable
  • Determine the following:

    • Is any litigation pending or threatened?
    • Is any construction in process?
    • Are any insurance claims in process?
    • Are any applications for architectural modifications pending?

If new homeowner association board members carefully follow this checklist, they will be in an excellent position to competently serve their community association.

Board Member Responsibilities

 

Board members have the following basic responsibilities:

  • To understand, follow, and enforce the governing documents of the association;
  • To implement a schedule of fines to assist in the enforcement of the governing documents;
  • To establish a realistic, reasonable budget and systematic reserve allocation so as to avoid the need for special or emergency assessments;
  • To obtain a reserve study every three years as required by law;
  • To take prompt action in collecting assessments from owners who fail to pay assessments when due;
  • To select an experienced, competent management company, independent insurance broker, accountant, and other professionals for the association.
  • To act in the best interest of the association, consistently, in a non-discriminatory way, after becoming fully informed;
  • To obtain all the insurance coverages necessary to protect the association and its members.
  • To avoid conflicts of interest and even the appearance of conflicts;
  • To attend all meetings of the board of directors and the annual meeting of homeowners;
  • To hold and attend board meetings on at least a quarterly basis;
  • To prepare and make available to all members and the management company accurate minutes of board meetings;
  • To hold annual elections for board positions on a timely basis;
  • To regularly inspect the common areas in order to discover and eliminate any unsafe conditions; and
  • To comply with all laws, including state and federal tax laws.

Description of Positions

 

While your board of directors is elected by the members of your association, the board elects its officers at the first meeting held by the new board of directors. All directors have equal voting power regardless of their status as an officer or non-officer. The powers of directors are derived from California law and the governing documents of the association.

The board has authority to establish policies and Operating Rules as set forth in the association's governing documents and the California Civil Code, and is responsible for conducting the business of the association subject to the governing documents and state law. While the board may delegate its authority to implement its decisions to others, it cannot delegate its legal responsibilities. Therefore, it must select qualified contractors and others to assist it in fulfilling its responsibilities to the association and its members.

Duties of HOA President or CEO

 

In the Common Interest Development industry, the terms President and Chief Executive Officer (CEO) are used interchangeably. The Davis-Stirling Act uses the term President while the California Secretary of State uses the term Chief Executive Officer (CEO).

For our purposes, we will use CEO. The CEO is an officer elected by the board of directors of a homeowner association.

The duties and powers of the CEO are generally set forth in the association's bylaws. In addition to those duties and powers, it is common for the board of directors of an HOA to delegate or assign other duties to the CEO.

Duties of the CEO usually (but not always) include the following:

  1. Presiding overboard and membership meetings.
  2. Being a cosigner on the association's reserve account with one or more other board members.
  3. Being a cosigner on the association's reserve account with one or more other board members.
  4. Meeting with contractors and vendors on site as required.
  5. Being the major point of contact with the management company.
  6. Monitoring the performance of the other officers and committees.

Duties of Vice President of HOA Board

 

The primary duty of the Vice President of an HOA board is to perform the duties of the president when he or she is unavailable, and to assist the president as needed in the performance of his or her duties.

It is also common for the Vice President to chair one or more important committees and to meet contractors and vendors on-site as needed.

See Duties of HOA President or CEO.

Duties of HOA Treasurer - Chief Financial Officer

 

In the Common Interest Developments industry, the terms Treasurer and Chief Financial Officer (CFO) are used interchangeably. The Davis-Stirling Act uses the term Treasurer while the California Secretary of State uses the term Chief Financial Officer.

For our purposes, we will use CFO. The CFO is an officer elected by the board of directors of a homeowner association.

The duties and powers of the CFO are generally set forth in the association bylaws. In addition to those duties and powers, it is common for the board of directors of an HOA to delegate or assign other duties to the CFO.

Duties of the CFO usually (but not always) include the following:

  1. Receiving, reviewing, and maintaining the financial records of the association, including monthly financial statements, the year end financial report, and both federal and state tax returns.
  2. Ensuring that both the federal and state tax returns are signed and filed on time and that any amounts owing are paid timely.
  3. Ensuing that reserve studies are prepared in accordance with the law so that unfair special assessments are avoided.
  4. Making certain that only current board members are authorized to sign on any reserve accounts.
  5. Preparing an annual budget for the board's approval with the input of the management company and other board members.
  6. Reviewing monthly invoices from vendors and contractors and verifying that all accounts payable are paid on time.
  7. Reviewing the status of all delinquent assessments with the management company and board after the 15th day of each month.
  8. Reviewing the association's year-end financial Review or Audit (if required) with the board and management company upon receipt.
  9. Being a cosigner on the association's reserve account with one or more other board members.
  10. Making certain that all financial records are passed on to the next CFO and obtaining a receipt for the documents passed on.

While it is perfectly acceptable and customary for the CFO and board to delegate much of the work described above to the management company, it is still the responsibility of the CFO to supervise and make certain that all requirements have been met.

Duties of an HOA Secretary - Corporate Secretary

 

The secretary of an incorporated homeowner association is a corporate secretary, and the preferred title for this position is "Corporate Secretary". Since more than 98% of homeowner associations in California are incorporated as non-profit mutual benefit corporations, nearly all homeowner associations have a corporate secretary.

The duties and powers of the corporate secretary of an HOA are generally set forth in the association's bylaws. However, in addition to those duties and powers, it is common for the board of directors of homeowner associations to delegate or assign other duties to the corporate secretary.

The duties of corporate secretaries of California homeowner associations usually (but not always) include the following:

  1. Making certain that meeting agendas and notices are prepared, posted, and mailed timely. This includes making certain that all agendas and notices contain the input of all board members as well as the management company.
  2. Attending and making certain that board meeting, executive session, committee meeting, and homeowner meeting minutes are taken and approved as required. Upon approval, minutes should be signed by the corporate secretary.
  3. Maintaining custody of all important corporate records including, agendas, notices, financial reports, minutes, insurance policies, tax returns, warranties, members list, important correspondence, legal files, and governing documents.
  4. Making certain that all Secretary of State filings are made.
  5. Being a cosigner on the association's reserve account with one or more other board members.
  6. Making certain that all corporate records are passed on to the next corporate secretary and obtaining a receipt for the documents passed on.

While it is perfectly acceptable and customary for the corporate secretary and board to delegate much of the work described above to the management company and a recording secretary, it is still the responsibility of the corporate secretary to supervise and make. certain that all requirements have been met.

Duties of Member at Large - Director at Large

 

A Member at Large, also referred to as a Director at Large, refers to an elected homeowner association board member who does not hold an elected officer position. A Member at Large has the same voting rights as any other director.

Members at Large are often asked by the board to accept responsibility for special projects and/or to organize and preside over important committees such as a security committee, landscape committee, litigation committee, or architectural committee.

 

Fiduciary Duty

The members of a board of directors of an association have a fiduciary relationship with the members of the association. This fiduciary relationship of trust and confidence requires the members of the board to act in good faith and in the best interests of the members of the association. It means that board members must exercise due care ·and diligence when acting for the community, and it requires them to act within the scope of their authority.

The fact that the association is a not-for-profit corporation, or that the members of the board are volunteers and unpaid, does not relieve them from the high standards of trust and responsibility that the fiduciary relationship requires. When a member accepts a position on the board of directors, he or she is presumed to have knowledge of the duties and responsibilities of a board member. Board members cannot be excused from improper action on the grounds of ignorance or inexperience.

Each board member must recognize the fiduciary duty that the board has to the association and each of its members. The board's duties must be performed with the care and responsibility that a reasonably prudent person would exercise under similar circumstances. Board members should also understand that the ultimate legal responsibility of board members cannot be delegated to a manager, a management company or other third party.

Operating a homeowner association carries with it many of the very same duties and responsibilities as overseeing any other business. Serving as a board member is a valuable and rewarding experience that should be undertaken by those who see it as an opportunity to serve their neighbors while protecting and enhancing the assets of the community. It is serious business, but also a task worth doing well in order to safeguard the investments of all.

If you have questions, please do not hesitate to call about any matter.

Coast Management of California
818-991-1500