Directors and Officers – Powers, Duties and Qualifications

“Community Association” is the generic term for communities that are created pursuant to recorded covenants or other documents that create an association of the unit or homeowners. The term community association includes condominiums, homeowner associations, and housing cooperatives. These are typically organized as non-profit corporations, which are operated by a board of directors elected by the members of the association.

The governing documents of most community associations provide the following authority, duties, and responsibilities for the board:

• The board is elected by the owners/members of the community.

• The board elects and directs the officers: The board makes broad policy decisions, and the officers are given authority to carry out these decisions. In many cases, the officers will be the same person as the directors.

• Like a major corporation, the board of directors will determine how monies are spent, hire and fire employees and contractors, and take care of a broad range of responsibilities for the community. This is done without a vote of the members.

• The board of directors is charged with management of the association, which includes:

1. Running the business affairs of the association,
2. Establishing a budget,
3. Establishing good governance policies as required by the Colorado Common Interest Ownership Act,
4. Establishing and enforcing rules and regulations for the community and how these are enforced,
5. Employing an accountant,
6. Employing an attorney,
7. Employing a manager/management company,
8. Employing necessary personnel for maintenance and repair,
9. Coordinating physical maintenance of the common areas, including the timing, scope, and type of maintenance; and
10. Other responsibilities and policies.

In exercising the authority granted to them, board members owe certain duties of care to their communities (i.e., nonprofit corporations):

Duty of Care – Directors of community associations are recognized to have the same duties as directors of a business operation. That is, they must give the business of the association the same degree of care and diligence that prudent persons would exercise in their own affairs in similar circumstances.  The Duty of Care requires a director (1) to act prudently with the care of an ordinarily prudent person; (2) to act in the best interests of the association; and (3) to do so in good faith.

To discharge the Duty of Care, the director must monitor the association’s activities.  This includes such things as:

1. 1. 1. Attending Meetings.  Regular attendance at meetings of the board of directors is a basic element of prudent performance as a director.
      2. Independent Judgment.  Each director, no matter how selected, shares in all responsibilities and powers of the board.  Each director should exercise her or his independent judgment on all association decisions.
      3. Information.  To function effectively, a director needs to be informed.  This information is often supplied by the manager or executive director. To the extent such information is not adequate, a board or an individual director will have to determine what additional information is needed. Needless to say, the director should read the information with which he or she is supplied, even when a director has total and justified confidence in the individual supplying the information. In general, the board may rely on information supplied by the manager, the association’s attorney, accountant, or others, but if for any reason any member of the board thinks it is inadequate in any respect, he or she should not hesitate to request further information.

Colorado law does not specify qualifications for board members.  Rather, the governing documents of an association will typically specify the qualifications for board members.  Generally, most documents require board members to be owners within the community.  Additionally, some documents will require board members to be in good standing, meaning they are current in their payment of assessments and otherwise in compliance with the association’s governing documents.

The terms of board members are also usually set forth in the governing documents.  If not, the default provision under the Colorado Revised Nonprofit Corporation Act sets a one-year term.  The best scenario is for the terms of directors to be staggered so that not all board members are up for election in the same year.  Note that the Colorado Condominium Ownership Act requires the board members’ terms to be staggered.

Each board of directors then elects the officers of the association, who usually serve for one year.  The typical positions and duties are as follows:

President

The president of an association is vested with all powers generally given to the chief executive officer of a corporation. While specific bylaw provisions may vary the president’s duties, it is generally presumed that he or she will preside at all meetings of the board and the membership. The president will execute contracts, orders, and other documents in the name of the association as its agent.

The president also assumes general charge of the day-to-day administration of the association and has the authority to order specific actions in furtherance of the board’s policies. The president serves as spokesman for the board of directors in most matters relating to general association business. Like all officers of the association, the president has an affirmative duty to carry out the responsibilities of the office in the best interests of the association.

However, it is also important to note that the president does not have any greater voting power or control in association matters with respect to the rest of the board members.  Decisions of the board are made on a majority basis, of which the president only holds one vote.

Vice President

The vice president of an association is the person who steps into the shoes of the President in the absence of the President.

Under what circumstances could the vice president be called to step into the shoes of the president?  The following are some representative scenarios:

1. When the President resigns and before a new President has been appointed by the Board
2. When the President is out-of-town and cannot attend a meeting
3. When the President is ill and cannot participate or fulfill his or her duties

 In addition, the Vice President may be given other duties as determined by the Board, such as chairing certain committees or otherwise.

Secretary

The secretary is responsible for:

1. Keeping and maintaining a record of all meetings of the Association
2. Acting as custodian of all records of the Association
3. Ensuring access to the records by members of the Association

In many associations, the secretary may not be the person who actually takes minutes, stores records, sends notices, and meets with owners who want to inspect records of the Association.  Rather, these specific duties will be delegated to the association’s management company.  However, the secretary is still the one ultimately responsible for overseeing these functions and ensuring that the records are properly kept.

Treasurer

The treasurer is responsible for:

1. Acting as the custodian of the association’s funds
2. Coordinating the annual budget
3. Preparing and giving the annual financial report of the association
4. Coordinating the association’s review or audit as necessary

As with the office of the secretary, in many associations, the treasurer may not be the person who actually writes the checks, makes the deposits, sends the collection letters, or drafts the budget.  Rather, these specific duties are often delegated to the association’s management company.  However, the treasurer is still the one responsible for overseeing these functions and ensuring that the funds are properly accounted for.

Unless otherwise specified in governing documents, the officers serve at the will of the board of directors and can be removed with or without cause at any time by a majority of the full board. However, even if an individual is removed as an officer, such individual remains a director on the board and serves as a member-at-large.

If you have any questions concerning the directors’ and officers’ duties or powers, please do not hesitate to contact an Altitude Community Law attorney at 303.432.9999.