Part of the duties of a community association’s board of directors includes fiscal responsibility. Among other things, the board of directors is tasked with prioritizing and making decisions regarding the best use of the association’s limited financial resources. Expenses such as common area maintenance, insurance, water, and professional services including management, accounting, and legal are common and routine community expenses.
However, boards are increasingly facing requests for associations to provide services, such as community trash or cable, for residential maintenance and repairs, and requests for involvement in neighboring proposed developments. Although such requests and expenditures may initially sounds like a prudent use of community funds, directors should familiarize themselves with the association’s governing documents to ensure that such expenses are authorized. The association’s articles of incorporation, bylaws, and covenants include guidance, restrictions, conditions, and authorizations regarding permissible and proper uses of the association funds. Some of these provisions may be somewhat broad while others may contain very specific limitations and homeowner approval requirements.
Community trash service is a common request. The idea being that a single trash provider will reduce the amount of traffic and large trucks in the community while allowing for economic savings for such community-wide services. Again look to the documents first. The declaration may have an express provision authorizing the board to contract for such services or it may require a homeowner vote before such services can be provided.
Homeowner maintenance and repair requests, especially for condominium and townhome communities, should also be scrutinized before a board agrees to undertake such projects. The covenants typically outline the maintenance, repair, and insurance obligations of both the association and its homeowners. The board should gain a clear understanding of these responsibilities to ensure the association is properly maintaining and repairing those components that are the responsibility of the association while not undertaking projects that are the responsibility of the individual homeowners. Gratuitously assuming responsibility for homeowner repairs could subject the board to legal claims for breach of its fiduciary duties to the association. Additionally, some covenants include restrictions that require a homeowner vote before significant expenditures can be made for certain types of repair or maintenance projects.
With continued strong real estate development and the growth of infill projects, communities may become aware of proposed neighboring developments. Residents may be concerned that the proposed neighboring projects will negatively impact their community with greater residence density along with concerns regarding traffic, noise, and/or products type and styles that differ from the existing community. Boards may be faced with homeowner requests to get involved in these proposed neighboring developments and/or to try to legally prevent them.
This can be somewhat of a tricky situation as it is clearly prudent for the board to be informed of proposed adjoining developments that may affect the community. It may also be appropriate for the board to interact with governmental planning officials to make sure community concerns are considered, and for the board to disseminate relevant planning information to their homeowners. Distributing this information will serve to facilitate an opportunity for concerned residents to get involved, to attend public hearing, and to voice their individual concerns directly to the planning officials. However, the board should be cautious before spending significant financial resources on such issues. Some homeowners in the community may support the proposed development and view such expenditures as inappropriate involvement in the city planning and political process. Legitimate arguments can be advanced that the community was not created or intended to serve in a role of development oversight for projects outside the bounds of the community and association funds should be limited to items more directly affecting the community such as common area maintenance and covenants enforcement.
As you can see, expenditures that at first seem proper may require further consideration and in some instances may require a legal opinion or community vote. However, the starting point for a board in evaluating proposed expenses should first be a review of the association’s governing documents.
If you have questions or would like to further discuss your association’s use of funds please contact an Altitude Community Law attorney at 303.432.9999.