Are you having trouble getting volunteers to serve on the association’s board? Are current directors submitting their resignations with nobody seemingly there to take their places? Although there are a number of reasons why individuals do not volunteer to serve on boards, failing to secure a board of directors can negatively impact your association.
Because Colorado homeowner associations are nonprofit corporations, they must comply with the corporate requirements of the Colorado Revised Nonprofit Corporations Act, which requires boards of directors to conduct business of the nonprofit corporations. Therefore, it is critical that your association maintain a functioning board.
Without a board, an association cannot make decisions or take any action because it does not have a mechanism for doing so. For example, an association would be unable to pay its bills (e.g., management fees, insurance, landscaping, etc.) if it had no board because there would be no decision-maker instructing management to issue payment or to sign the checks. Furthermore, an association that did not have a board of directors would be unable to enter into contracts for maintenance and repairs allowing the community to fall in a state of disrepair with property values plummeting.
Additionally, it is possible that a court will appoint a third-party receiver to operate the association’s affairs in lieu of a board. In other words, an individual who does not live or have ownership interest in the community, will be in charge of the management and operation of the community. The receiver would step into the board’s shoes to collect assessments, retain contractors, maintain the community, and make all other decisions on behalf of the community, while having no financial, or other, interest in the community itself.
Additionally, once the receiver collects assessments, the first invoice to be paid will be that of the receiver. Pursuant to Colorado law, a receiver is entitled to pay his/her salary first, along with any incurred costs. As a result, there may very well be a substantial increase in assessments and operating costs.
It is important for owners’ voices to remain the driving force behind your association’s operations, as a receivership will essentially terminate any owner involvement or impact in the community. Owner involvement is key to maintaining a happy and healthy community, so please encourage owners in your association to volunteer for the board!
For more information regarding the impact on a community when volunteers refuse to serve, please contact an Altitude attorney at 303.432.9999 or at [email protected].