Our HOA president is kind of... not suited for the job

16 Replies

Wow, I didn't know we had this forum! Anyhow, it would be great to get some advice from people. I joined our HOA's board this year. We have 3 people who have been on the board for years, 2 for one year, and me and another joining this year. The old HOA president was apparently incompetent; he didn't spend a dime on CapEx when needed, and the board didn't do much. So, when I joined, we also replaced the old president with one of the guys who has been on it for 3 years. He's an old guy, ex-military, been in the development for 17 years (but doesn't pay dues because his brother owns the house).

We got into a tiff early because he was volunteering other people to do things and taking major renovation projects under his own belt, without much participation from others. Now, he's just being negative toward all my suggestions. Our HOA has reserves equal to 250% of our annual budget (aka a lot), and he seems pretty keen on spending (although much of the spending is needed).

I've seen a ton of issues with him in only a few months. For example, he wanted to spend 10% of our revenue on having the streets blown weekly (in Atlanta, where it rains like... always). He had a $5000 key-fob-based lock for the gate for our pool installed that also included a $100/month phone bill just to give people access. I told him that we could use that $100/month to get internet/phone at the clubhouse and use a wifi-enabled lock, meaning we pay less per month AND actually have WiFi at the clubhouse (he claims WiFi is a luxury we don't need... in 2017). We also have NEVER done a reserve study in 20 years. He says that idea is bad because that is essentially too advanced for us. Our reserves sit in money market accounts, meaning we're losing money to inflation each year. He said in GA, we need 100% of owners to agree to put that money in something like CDs or bonds. I don't buy that. Finally, our management company's budget does not separate CapEx from Operating Expenses, and we don't have a separate CapEx budget. The President thinks that this is all fine and that the management company's team of lawyers is doing their job correctly.

How do you deal with HOA presidents who ... just seem like they are living in the 60s and don't have any financial knowledge?

@Jonathan Roveto oh where to start... the basics: a board has what is called a "fiduciary duty" to its owners. They MUST put the owners ahead of themselves and must make decisions that they legitimately feel are in the best interests of the community. If they do not, then they can be sued. Your HOA should have some governing documents that talk about how financial decisions are made and you should have a policy requiring two signatures on checks and votes on expenditures over certain amounts. If your docs don't address this then it is time to write some.

You have reserves - that is good. However, you need a reserve study (whether you hire it professionally or not) that designates a replacement amount for each item and how long you believe that item should last. For example: a roof on the community center that will last 20 years and will cost $10,000 in future dollars. Therefore you set aside $500 per year for the roof. Reserve funds ARE NOT to be used for "new" items - such as the pool locks. That should be a separate Capital Improvement fund. Once a new item is purchased then you add it to the reserves and start saving for its replacement. 

Investments: the HOA I manage has some of its reserve assets in a liquid money market fund. The amounts that are for anticipated expenditures further out are in 5 year CDs paying 5%. Under no circumstances should your reserve monies be placed in anything besides FDIC insured accounts. Instead you should factor in inflation and save accordingly.

Georgia probably has state statutes regarding non-profits if they don't have specifics for HOAs (luckily Colorado has some great laws for HOAs). And the IRS definitely has things to say about it. The biggest thing to remember is that your board works for the owners. Get them involved, ask them what they think, publish regular income and expense sheets that are easy to read and see what people think. When we started our Capital Improvement fund we gave the owners some choices on the first ways to spend the money. Do the owners want wi-fi? (rhetorical question - of course they want guest access while sitting by the pool). 

Good luck...

@Teri S. Thank you for the comments on the situation! We have a management company, so I don't think any HOA member actually sees any checks to be written. Also, as far as reserve studies, the President doesn't think that that is necessary. Even our management company suggests it on their page! Sigh.

Thankfully, we don't use CapEx funds for things other than CapEx; for example, the gate lock was taken out of operating funds.

How does one even go after a board member for failing their fiduciary duties? We're also all volunteers, and there's  more than a few ounces of "No one is getting paid here... so is it worth it? Is this all just childish politics for people with more time on their hands than responsibility?" in my thoughts.

Also, since I am on an HOA board for the first time ever, how do we really bring the desires of owners (e.g., wifi?) to connect with actions by the board. The president thinks it's a luxury, and another board member is thinking that such a thing would be so much trouble, despite even the smallest mom and pop business having wifi these days (oh my god, who is going to reset the router every 3 years?). In other words, if the community actually wants it, how does it get done?

If they aren't enthused about doing the work voluntarily then they've chosen the wrong volunteer project. That said - you mentioned "chores" - the board should just be overseeing the management company, the funds, interfacing with the members. If there are chores to be done then hire someone. 

Someone is telling the management company what bills to pay. Treasurer? They didn't just go out and spend $5000 without direction. 

You should have a website with the governing docs and monthly financials, calendar of events, next meeting date, etc. You should have a member email / text group where you can send info quickly and monthly. You should remind the members over and over that you work for them and want their input. Mail a survey. Do something to remind them you are there. 

Wifi - someone must be taking care of the building and pool somehow - checking the wifi connection would be a pretty minimal addition to the job. 

Lastly, the president is one vote. How many board members? It isn't an autocracy... you need to make a motion and take a vote on things. Get it recorded in the minutes. Stop letting him run over you and your neighborhood. 

@Robert Hudson Unfortunately, the board seems to be the HOA president, his ally, the VP, me, and 3 others who don't really care about what's going on and are just yes men/women.

@Teri S. I don't necessarily think that the President isn't enthusiastic about doing work; on the contrary, he seems happy to do it, as long as it's stuff he thinks should be done. 

As far as the bills, I am the treasurer, and we basically vote on any expenses (the President emails everyone saying "We need this done. Here is the quote. yes or no?", if yes, he CCs our management company's contact to tell them to pay the contractor). My job as treasurer seems to be largely symbolic. Oddly enough, I'm probably the only one with formal financial accounting training.

I would love to see more member input, but I think most people in the community may not care. Until the new board, no one posted HOA meeting times/dates, and now that we are doing it, we get like 1 or 2 people to come out of 130ish families. We basically only communicate to the members via violation letters from the management company. I have suggested and started a newsletter, but it's been dumbed down by the VP to a black and white 1-sided, 1 page flyer.

I also think if I sent out  a survey, Mr. president would see it as going rogue and not being part of a team (he likes saying that he is building a team, even though his team dynamics are hilariously bad). We are also having a lot of these suggestions tabled/buried through email. Most of our communications are through email, and at actual meetings, he sets the agenda.

I hesitate to proclaim that reserves are "a lot" simply because they are 250% of the annual budget. Without a proper reserve study, the status of the reserve fund balance is questionable. This is not to say that the fund might not be "a lot", but without a current reserve study indicating that status, the fund might be "too little". Reserve contribution level must also be accounted for when judging reserve adequacy. Answering these questions requires a reserve study performed by a credentialed preparer.

@Mike McDermott That's definitely a good point. I think, given my knowledge of prices from contractors around here and such, we could redo the pool, re-roof the clubhouse, and re-surface the tennis court and still have 33% of our reserves remaining, and I don't really think we have any other CapEx to be concerned with. Even the management company said that we have a very large reserve for the size of our common areas/amenities. That being said, yeah, we can't know for sure unless we have a study done, which the President is against.

You need to look at Roberts rules of order. Any board member can request an item be added to the agenda and acceptance of the agenda should be the first vote after a quorum is acknowledged. I'm not saying send a survey on your own - propose and vote on it. Make it a matter of record. Poor attendance is typical. People only show up if they are mad. But it doesn't mean you shouldn't keep reaching out to them and give them access to what is going on. We use email. You use what works best for you guys. Talk to your fellow board members - why did they join? What do they want? As treasurer you need to take the lead regarding reserves. It is your responsibility to oversee the annual budget. Use the IRS as an excuse. They don't want HOAs to assess unless they have an approved and "balanced" budget that justifies the amounts being collected and the amounts being held in reserves. You are not supposed to collect $1000 if all you need is $800. You aren't supposed to collect the $1000, spend the $800 and then toss the extra $200 into reserves. Contributions are supposed to be planned and justified. Your butt is on the line too... That said, our HOA paid thousands for a reserve study and still needed to tweak it. Reserves aren't only for replacement but also for major maintenance: repaint the community center every 10 years? asphalt and stripes in the parking lot? perimeter fencing? There can be a lot of items that you maybe aren't thinking about. The president is wrong on this one...

The first thing I noticed is that the President is NOT the homeowner.  Check your governing documents.  The vast majority of HOAs require a board member to be a homeowner.  The homeowner may not delegate that position to their brother.

@Teri S. We definitely don't do that. The President simply hands out an agenda at the beginning of each meeting. Re: my job as treasurer, I think I'm largely symbolic. I am supposed to be CCed in on checks that are cut, but I don't ever see anything like that from our management company. The management company is also the one who oversees the annual buget. I literally have done nothing other than vote on proposals. Also, you bring up a lot of great points on things like fencing/parking lots. I wouldn't have thought to do these things in the future, and I feel like this is why we need an actual engineering firm to come in and do our reserve study.

@Linda Weygant So, the previous President left in a very pissed off manner. He shortly after started bringing lawyers into the picture saying that the new president wasn't actually a homeowner. The management company told our new president/board that it's not going to be an issue and to just ignore it. I don't know where that has gone. I don't think we have anything in our covenants restricting who can be President.

Update! So, as far as the investing HOA money goes, the President stated that 100% of the development has to agree to investing the money. I went through GA Code for Domestic NonProfit Corporations and found that a simple majority of the board can authorize investments as long as no director could personally financially benefit. This brings up the point of how do I present this information (aka info showing that he is wrong on 2 counts) to him or the board in a way that does not come off as politicizing the issue but also shows that he is not the end all of what goes on around here?

@Jonathan Roveto If the investing policy isn't part of the governing docs then the president is wrong. Respectfully ask him to show you where it is... If it is just HIS policy then politely remind him and the rest of the board that it is the board's DUTY to make the best decisions for the entire community and that you don't take the office of Treasurer lightly. Is this how everyone else on the board handles their money? Secondly, if there is no policy then it is time for this board to write one and implement it. Solve these problems as you go and make it easier for those who follow. In Colorado it is against the law for an HOA to require more than 67% of the members to agree on anything. 100% just paralyzes a community - it doesn't bind them. Georgia may have similar laws. The HOA attorney may need to guide you through some of this.

@Teri S. There is nothing in the covenants/bylaws that dictate anything about investments. In talks with others, I have also realized that he is implementing "actions without meeting" (or something to the effect) by only waiting for a majority to vote yes on things when he requests votes over email (and our bylaws do not allow for meetings to be conducted electronically).

I also have been in touch with our management company's rep for us, and she 1) said that we need every homeowner to agree (without citing anything, whereas I cited GA Code to her) and that 2) she didn't understand why an HOA of SFHs would want to invest their money because "whereas condo associations typically have roofs to replace, pavement to replace, etc, whereas your HOA only has amentities". I reminded her that we also have a clubhouse, with a roof that needs replacing, pavement to replace, tennis courts to repave... I don't understand what she was trying to get it at all. I didn't bring up the obvious "more money is better".

Am I missing something obvious here? I feel like I'm on the Twilight Zone.

So you not only have a bad president but a bad management company. You guys have some work to do... Keep asking and insisting on see the rules in writing. If they can't produce them then they don't exist. I still don't recommend investing outside of a bank or credit union - but you need these financial guidelines. Maybe you can find some similar HOAs that are well run and see their docs. Attend one of their meetings to see how it is done. The best I can offer is to educate yourself and others as much as they will allow. 

I'm also wondering if this is worth even trying to fix. Our President is definitely stubborn, and being a BP member, I obviously have many other things going on in my life (real estate, PhD in engineering, a W2 job... hobbies sometimes maybe?). My friend has mentioned that this would all make for a fantastic consulting interview story when they ask things like "Tell me a time in your life where you had to convince someone or a group of people of something" or "Tell me about a significant challenge you faced in life", but other than that, is this worth it? 

If the "president" isn't an owner (you said his brother owns the unit?) then how is he even eligible to be on the board or vote?

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