Board Duties
Q:I live in a 60 unit condominium and some of us think the board has too much power over money matters. They get to approve the budget and make special assessments for unforeseen expenses without owner consent. Some of these were unforeseen because prior boards didn't do their homework. We want to put some limits on the board's powers, such as a cap on annual assessment increases. What are the usual powers of the board regarding money and how can we go about limiting them?
A:It is a common occurrence that owners are concerned about the power of the board of directors over their money and it is certainly one of the primary areas of responsibility of the board. There are also lots of other board responsibilities, like common area maintenance, risk management through insurance, and enforcement of the covenants. Under the law, your board of directors has a fiduciary responsibility to the unit owners which means that they must always be looking out for the welfare of all the owners and cannot make decisions which benefit one group of owners over another, especially themselves. While is seems elementary, owners must sometimes be reminded that directors are owners as well, and any decisions they make, financial or otherwise, affect them equally with all owners - it is not an "us and them" situation. Also, they are not permanently elected to he board; if the majority of owners are dissatisfied with the board's (or a board member's) performance those individuals can be replaced at the next election.
We are generally opposed to putting any significant limitations on the board's authority over the funds of the association. The board is charged with the responsibility of maintaining and operating the association. They are required to become intimately familiar with the details of the needs of the association by studying the documents, reviewing and analyzing the reserve schedule and other budget line items, consulting with the association's manager, accountant, attorney and vendors about the needs and costs of maintenance, insurance and other services. To place a cap on annual assessment increases would unduly hamper the board in performing their fiduciary duty to properly budget. In reality, we often see problems with boards not being willing to make assessment increases, or levy a special assessment, when the association desperately needs to do so because of political pressure from the owners not to increase dues or make a certain repair. Boards seem to easily shrink back and do nothing rather than face a group of disgruntled owners at the next board meeting and this lack of action can constitute a breach of their fiduciary duty to the owners. Performing one's fiduciary duty often means making unpopular decisions.
While most owners don't like paying higher assessments or a special assessment, they are normally not in a position to make business judgments because they are not sufficiently informed about the condition of the property, the details of the budget and increases in costs which occur in various categories at least annually. That being said, unless the condominium documents provide otherwise, if a special assessment is levied and a sufficient majority of the owners are opposed to it, there is a mechanism in the Virginia Condominium Act by which the owners can call for an owners meeting to have a vote on the issue.
Also, bear in mind that all owners may attend board meetings and observe the discussions of the board members about money and other issues. These are not decisions made "in the back room", in that all board meetings must be open to the members, except for certain specific topics, which are outlined in the Condominium Act. At each board meeting there must be a short period known as the owners forum where you can speak your mind on any topic related to the operation of the association.
In conclusion, the foregoing paragraphs outline the normal method of financial management of associations and we think it generally works well. It is the right and duty of all owners to observe and responsibly critique how their boards are operating and there is a method for doing so built into Virginia law. Ultimately, board members whose actions are not in harmony with the majority of the owners will find themselves replaced at the next election. To answer your ultimate question, if you nevertheless wish to put some limits on your board, you must amend your condominium documents which requires the signatures of sufficient owners - those who have 66 2/3s of the votes in the association.