Veteran members of an HOA board typically know what to do and what mistakes to avoid. If you are a new HOA leader, knowing the common failures of HOA board members allows you to steer clear from them.
In this article:
Avoid the Usual Failures of HOA Board Members
Everyone makes mistakes — it’s human nature. But, the gravity of those mistakes differs from person to person and situation to situation. For instance, some of the biggest mistakes of HOA board members can lead to detrimental effects. Luckily, if you are a new HOA board member, you can take steps to prevent these mistakes. The first thing you must do is familiarize yourself with the most common failures of HOA board members, listed below:
1. Failing to Collect Overdue Fees in a Timely Manner
Collecting fees can be a daunting task, especially if some homeowners are reluctant to pay them. It remains one of the most important tasks HOA boards must fulfill, though. After all, HOA fees are the lifeblood of any community association. As a board member, it is your duty to collect fees in a timely, professional manner. Failure to do this can impact your entire association’s cash flow and hinder your HOA.
A good way to prevent this is to impose consequences when homeowners default on their payments. You can levy late fees or revoke resident privileges such as access to amenities. You can also partner with a collections agency to do the work for you, though they will take a cut of the fee. Some associations even go so far as to place a lien on homeowner property and then foreclose on it.
2. Failing to Review Financials
It is very important to closely watch your association spending. Far too often, associations experience fraud in some way or another. In order to prevent this, accounting for every dollar spent will help ensure homeowners that their money is going towards their best interest and prevent fraud amongst your association. It is also a good idea to have a third party to perform a full audit of your association’s financial documents.
3. Failing to File Tax Returns
It is very common for board members in self-managed associations to forget to file important legal documents each year. Every homeowner’s association is required to file a federal tax return (IRS Form 1120 or 1120-H). Many board members think that the association is not required to file anything because it does not pay taxes. This is not true. You are still required to file this form on behalf of your association. Failure to do so can put your association at risk of losing its non-profit status and will result in penalties and interest that will need to be paid to the IRS.
4. Failing to File Secretary of State Documents
Another common mistake is board members forgetting to file their annual reports with the Secretary of State. Failure to file the required documents can result in a dissolution of the association which can cause potential legal and financial issues. If this does happen, it can easily be remedied by contacting the Secretary of State office to file the necessary forms and pay any applicable penalties.
To prevent such a blunder, though, it is a good idea to create a calendar-wide checklist. Schedule important events and deadlines ahead of time. If you can, have an alert system set up as well with the help of apps or software.
5. Failing to Maintain Insurance Coverage
Boards must review the association’s insurance policies every year. To do this, you must have a clear understanding of renewal and lapse dates. You must also check coverage amounts. If a claim occurs during a time when insurance has lapsed, it can cause major problems. For one thing, your board may need to collect special assessments, which no one in the community wants.
As with taxes and filing Secretary of State documents, you should include insurance reviews in your checklist for the year. It is also recommended to check whether you have all the essential insurance policies to keep your HOA safe and secure.
5. Failing to Get Community Feedback
One of the most common failures of HOA board members is keeping board meetings closed. While the executive session should definitely be off-limits to the public, your HOA board should include an open session, too. In fact, the Open Meeting Act requires HOAs to conduct open board meetings. This way, homeowners can listen in onboard discussions about topics that affect the community. Homeowners can also weigh in on certain matters.
Apart from open board meetings, your HOA board should actively seek community feedback. This could be in the form of a suggestion box or through the use of online tools. Remember that serving on your HOA’s board of directors comes with a wealth of responsibilities. That includes keeping an open mind and listening to input from residents.
6. Failing to Ask for Professional Help
Many homeowners associations feel that they can get by with complete self-management. While that may be true for some, even smaller communities need assistance every once in a while. There is absolutely nothing wrong with seeking help for your association, especially when it comes to accounting and money management and legal matters. An HOA management company can significantly reduce the amount of work you need to do.
Similarly, an HOA attorney can help you with plenty of issues. In fact, failing to consult your attorney on some matters opens you up to legal liability. Let the professionals come in and help you with these matters to ensure your association functions at its greatest potential.
The First Step to Success
The key to preventing the common failures of HOA board members is knowing what they are in the first place. Staying aware of the problems you may encounter can help you minimize them in the process. But, sometimes, knowledge is not enough. You must also proactively take preventive measures to ensure these blunders don’t happen to your community. You can accomplish most of these by maintaining a carefully curated calendar. As for the rest, it takes a familiarity with the law and your governing documents.
An HOA management company like Clark Simson Miller can help you avoid all of these errors. CSM provides community associations across the country with expert remote management services, including financial management and back-office admin work. Get in touch with Clark Simson Miller today at email@example.com or online.
- 9 Crucial Items That Should Be Part Of Your HOA Yearly Checklist
- Open Meeting Act vs Open Forum In HOA Board Meetings
- How To Pick HOA Management Company That’s Right For Your Community