President Has Duty to Set Meeting Pace

QUESTION: Our board of directors has a very nice president who is intimidated by the rest of the board members. He does not control lengthy discussions and consequently our board meetings often last over three hours.

I do not serve on the board but I like to go to the meetings just to find out what is happening in our association.

After seeing how the board meetings drag on and on, I don’t think I would be interested in serving on the board because they never seem to accomplish anything.

What can be done to silence some of the board members or homeowners who appear to engage in long monologues just to hear themselves talk?

ANSWER: Your president may be a nice guy, but that does not mean he is an effective president. Obviously, the president is the one who must control aimless discussions and eliminate gossip or unnecessary conversations. An ineffective president and an inefficient board will turn off people like you who might be a good prospect to serve the association.

Information packets containing bids for contracts, committee reports, correspondence and all pertinent information should be distributed a few days before the meeting.

If all participants are prepared to make decisions, then the meetings shouldn’t last longer than an hour to an hour and a half. I find that a timed agenda helps to move the meeting along in a constructive way. By having a written agenda with approximate times for each item shown in the margin of the page, everyone can keep the president on track by gently reminding him that time is slipping away.

Volunteers will be more likely to participate and be less resentful of their obligations if meetings start on time, accomplish goals and end on time.

Board Must Control Reserve Account

Q: Our homeowner association was managed by the board of directors until we recently signed a contract with a management company. They separated our funds into an operating account and a reserve account. The management company writes the checks from the operating account to pay all of the regular bills.

The reserve account is for roof repair and other major expenses. The manager set the account up for us but she refuses to sign checks on the account. We had $6,000 worth of painting work. The manager said that we should have the approval for the painting work written in the board meeting minutes. When the work was completed, she brought the check to the board president for two board members’ signatures instead of following up herself.

We hired a manager to do the work for us. We were tired of doing it ourselves. The manager’s refusal to take care of the reserve funds is very disappointing. Though most of her work is satisfactory, I feel that we aren’t getting our money’s worth if we still have responsibility and liability for the reserve funds.

Who is right?

A: I have good news for you. Your manager is doing it right, even though it probably means extra work for her. California law requires that a community association’s board members must control the reserve funds and the reserve account must have two board members’ or officers’ signatures for withdrawals.

By having the reserve expenditure approved in the board meeting minutes, the manager is protecting the two check signers form liability if any questions arise in the future. The written documentation in the minutes will show that the withdrawal was authorized by the full board.

Signing a reserve check is not something that is a frequent occurrence, so I don’t think you should be concerned about having to do it this way. You should be glad that the manager is following the letter of the law.

Every board of directors for every association should make sure that there is a special insurance policy called a fidelity bond to cover the association’s reserve funds and operating account. It is preferable to have the management company named in the fidelity bond coverage so that your operating account is fully protected.

Owners Associations Need to Have Budget

Q: I live in a 16-unit homeowner association that is unincorporated. One of the owners has designated himself as president and whenever an unusual expense comes along, he just sends an extra bill along with the monthly assessment bill.

I have learned from reading your column that the association is supposed to have a budget. The president says, “It’s too much fuss and bother.” Since ours is a small unincorporated association, he believes that a budget is not required.

Is he right?

A: Every community association in California, whether it is incorporated or unincorporated, large or small, must prepare an annual budget and distribute it to the owners between 45 and 60 days prior to the beginning of the fiscal year. Community association is the term for any of the following forms of common-interest residential developments: condominium, planned unit development, residential cooperative, homeowner association, community apartment or “own-your-own” apartment project.

According to a newly adopted portion of California Civil Code Section 1366 that took effect July 1, the association cannot increase the assessment unless the pro forma budget has been properly prepared and distributed.

Your letter indicates that the board president is, in effect, levying a special assessment every time he feels the need to do so. The owners are entitled to better financial planning and controls from a board of directors.

If the board members don’t have the time to run the association in a businesslike manner, then the association members should be wiling to hire a management company or consultant to do the budget preparation and other financial work so that the association is operating in compliance with the law.

Hickenbottom is past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually. Readers with questions or comments can write to her in care of “Condo Q&A;,” Box 5068, Thousand Oaks, Calif. 91360.