How to Effectively Deal with a Bully in a Community Association

Most Members in an Association understand that rules and social decorum dictate how they are to interact with Board members, Association employees, and other members. However, there are a small percentage of people that do not abide by rules and social decorum and they are always looking for a fight. These people need to be dealt with differently than usual bullies because they are simply looking to create an altercation and they will not respond to a positive approach to their “problem.”

  • The bullies discussed in this handout are more difficult than bullies who are periodic “gadflies.” These bullies are people who always respond negatively, even when a board member or manager interacts with them positively and politely.
  • Board members and managers need to respond to these bullies with strength. These kinds of bullies will not respond to common reasoning.
  • When a bully creates an issue, the situation needs to be addressed as soon as possible. The bully needs to be informed, expressly or impliedly, that their behavior will not be tolerated and they will not be rewarded for making the Board’s/manager’s life difficult.
  • Try to be clear and concise when defusing a situation with a bully. Clarity will give you more confidence in your/the Board’s position and it will make it harder for the bully to prolong the confrontation.
  • One way to deal with a bully is to call them out on their behavior. Tell them that you know they are purposefully trying to escalate a situation. They may be shocked that you have actually called their bluff.
  • Make sure that you and the Board enforce reasonable boundaries. Bullies love to push and invade boundaries so make sure that you clearly inform the bully of the boundaries established and make sure that they are strictly enforced. Example: Announce rules for meeting etiquette at the beginning of an annual or board meeting so the bully can’t claim ignorance of the rules.
  • Be as calm as possible while still being forceful. A bully is looking to get a dramatic reaction when they create confrontation. Take a breath and try to remain level-headed; this will give you the upper hand in the exchange.
  • Try to make sure that you always interact with the bully around other people. Being around others may force the bully to tone down their behavior.
  • Remember that if you feel that the bully may get physical or is placing you in a dangerous situation you need to remove yourself and others from the situation and call the police if necessary.
  • If you feel that the bully is going to continue to present a physical threat avoid any conversations in person and have a security guard or police officer present at future meetings.
  • Remember that it is okay to adjourn a meeting if the bully is taking over the meeting and won’t let the Board proceed with other business.
  • Stay positive! Usually an Association only has one bully. Don’t let that bully dampen your outlook on serving the Association. The homeowners appreciate what the Board and managers do for them!

If your association has questions, please contact Mulcahy Law Firm, P.C. at 602.241.1093 to have an attorney assist you.

 

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Preventing Theft of Association Funds

We aren’t the only ones that have seen this in the news week after week! Theft of association funds has unfortunately become common in community associations throughout the nation.

No board of directors ever wants to find out that money that is needed to run the association and maintain the common area is now gone due to embezzlement. As an association board, you can help prevent the possibility of theft of association funds by following some easy and common sense steps.

What can the association do? Understand and identify the risk the association faces and implement steps and actions that board members can do to help prevent the association from falling victim.

Warning signs of potential fraud include the following: missing bank statements and reconciliations, general ledgers that do not balance, missing and altered documents, photocopies rather than originals, unexplained cash shortages, unauthorized credits to receivable accounts, increased past due accounts, duplicate payments to vendors, unauthorized purchase transactions and payments for unspecified services.

Accounting checks and balances are vital steps toward protecting the association’s assets, but, vigilance and awareness are also needed. The board of directors should periodically set aside time for a full discussion of all financial matters, and, above all, they must maintain a level of skepticism.

A major board decision is the selection of a management company to perform financial services. Working together, the board and advisers can make a good selection by considering:

  1. The company’s reputation for integrity;
  2. Experience of the managers and the company; and
  3. The qualifications of, and processes followed by the financial department.

A thorough review of the management company’s and the association’s insurance policies should be undertaken and appropriate action taken. It is then important to remain vigilant, reviewing all processes dealing with your association’s money. Even though the association may have hired a management company; the association’s financial actions and records remain the responsibility of the board of directors.

Our law firm suggests that boards have the following accounting and financial controls in place to prevent embezzlement and fraud in their association:

  1. Keep association records up to date;
  2. Assign control of all reserve funds to the entire board;
  3. Monthly financial reports should be prepared and made available for board review (include in the monthly report: a balance sheet, a statement of revenues and expenses and a comparison of actual revenues and expenditures to budgeted amounts);
  4. Require two signatures (including at least one board member) on all checks or transfers greater than a pre-designated amount;
  5. Prior to signing checks, authorized check signers must review invoices and supporting documentation;
  6. Review bank statements and reconciliations on a monthly basis;
  7. Keep only a small amount of petty cash on hand and in a secure place;
  8. Regularly review delinquent receivable balances;
  9. Purchase adequate fidelity insurance to cover the volunteers and employees who handle funds. In addition, arrange for directors and officers coverage (D&O insurance) in the event the board is accused of financial mismanagement;
  10. Hire a CPA to conduct an independent annual review or audit; and
  11. If your board discovers that funds are missing from your association, remove the suspected fraud perpetrator from a position of control, put a stop on all bank account activity and check with your association attorney for advice on how to proceed.

For more information on this very topic, please review our Mulcahy Community Association Cheat Sheet titled Tips for Preventing Theft and Fraud of Association Funds.

 

If you have any questions, please contact Beth Mulcahy at 602.241.1093 or bmulcahy@mulcahylaw.net.

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Now is the time to Start Planning your 2019 Association Budget!

Most community association documents require an associations’ board of directors to adopt a budget for each fiscal year and early to late fall is typically the time of year devoted to that process. Because the management company is familiar with all aspects of the association, they usually prepare the budget for the board’s approval. However, an association’s finance committee should be encouraged to help with the process. Whether the manager, a committee or a combination thereof develops the budget, it requires time and research to complete the process.

The association budget is broken down into two documents: (1) operations and (2) reserves. The operations budget consists of daily and monthly expenditures such as landscape maintenance, insurance, legal fees, water, social programs, etc. The reserve budget is money reserved for large capital expenditures such as painting, roofs, common area improvements, etc. Both operations and reserves should be addressed annually and budgeted appropriately. In my opinion, the board of directors has a fiduciary duty to review the operating budget of the association and provide annual reports if requested.

As the general counsel attorney for over 1,000 community associations in Arizona, I am often asked for tips on budget preparation. Set forth below are 9 steps to help simplify the budget process and preparation:
1. Review last year’s budget and records and compare the differences between what was budgeted and what was actually spent. Review each line item in the budget. Is there a difference between what was budgeted and what was expended? Why is there a difference?
2. Evaluate the needs of the community for the upcoming year. Does the annual assessment need to be raised because of an increase in delinquencies and cost of living? Are there new expenditures for any of the line items in the operational budget that will benefit the community?
3. Assess the needs of the community for the future. What long term or capital projects need to be addressed in the reserve budget? When was the last reserve study conducted? Considering the cost of living increases, should a new reserve study be conducted? Does a larger percentage of the annual assessment need to be directed to the reserve budget?
4. Ask questions of the association’s vendors. Are there potential cost increases or added services a vendor might deem necessary for the association? Are proposed cost increases necessary?
5. Review and analyze the association’s contracts. Are changes in services needed that may require an increase or decrease in the contract amount? Does the association need to get three bids to determine value received?
6. Receive and analyze information from the vendors with regard to the budget.
7. Plan for the miscellaneous. Surprises are not fun in the operational budget. Consider including a line item for a reasonable amount of money to handle the unexpected.
8. Budget the line item amount taking all research and information gathered into account.
9. Prepare for the budget presentation to the board and homeowners. Have backup information available and reasons as to how and why each line item was established.
In a planned community the budget must be approved by the board, but there is no requirement that the budget be approved by the membership prior to the start of the fiscal year (unless the governing documents require this, which in my experience would be unusual). The Arizona Condominium Act (A.R.S. Section 33-1243) requires that the board of directors provide (typically by mail) a summary of the proposed condominium budget to all unit owners within thirty days after adoption. The unit owners in accordance with the procedures set forth in A.R.S. 33-1243 (D) shall ratify any budget or amendment, unless the board of directors is expressly authorized in the declaration to adopt and amend budgets from time to time. If ratification is required, the board of directors is required to set a date for a meeting of the unit owners (not fewer than fourteen nor more than thirty days after mailing the summary) to consider ratification of the budget. The budget is ratified whether or not a quorum is present, unless a majority or any larger vote of the unit owners as specified in the declaration rejects it at that meeting. If the proposed budget is rejected, the periodic budget last ratified by the unit owners will be continued until such time as the unit owners ratify a subsequent budget proposed by the board of directors.

If you have questions and need answers on budgeting questions or you’d like to request a copy of a sample budget, please contact Beth Mulcahy, Esq. at 602.241.1093 or bmulcahy@mulcahylawfirm.com.

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Who is responsible for damages throughout the community after a storm?

We’ve had a number of large monsoons tear through the Valley this summer. While we love some rain, unfortunately, many of the monsoons cause extensive damages with their rain, wind and lightening. In the days following a monsoon, I usually receive many calls and questions about who is responsible for the damages caused by the monsoon to different areas throughout a community.

One of the most common scenarios that I receive questions about is when a tree that is located on common area property falls onto a neighboring Lot or home owned by an individual homeowner. The Association typically wants to know who should be responsible for the damages the tree causes.

In general terms, an association’s governing documents (typically the CC&Rs) will address the maintenance responsibilities of the association and the homeowners, respectively. All else being equal, the association is responsible for maintenance as set forth in the CC&Rs; and, likewise, the Owners are responsible for maintenance as set forth in the CC&Rs.  Typically the CC&Rs will include a provision about maintenance responsibilities being shifted (from the Association to the Owner, or vice versa) in certain circumstances, for instance, if an owner’s willful or negligent acts are the cause of the need for maintenance.

In regards to the situation of a tree falling and causing damage to a Lot or home, in general if the damages were a result of the Association’s failure to maintain the tree, then the Association would be responsible for the damages. However, if the damages were unrelated to the Association’s failure to maintain the tree, then maintenance responsibilities are not shifted. As such, if a tree falls as a result of a monsoon, it is my opinion that the responsibility for the damages would fall on whoever is responsible for that area under the CC&Rs. In this case, the owner of the Lot or home would be responsible for the damages to the Lot or home.

It is always a good idea for both associations and homeowners to check in on their insurance policies to be sure the community will be ready when the next storm hits. The Association should check in with its insurance company to see if there is coverage for extensive storm damage.

Please contact our firm for advice if your Association has storm damage and/or flooding after the next monsoon. Our firm will help the Board by talking through the Association’s maintenance responsibilities and insurance coverage, in order to help the Board make the best decisions.

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DOG BREED RESTRICTIONS

Pet restrictions in community associations can be a very controversial topic. Animal lovers consider dogs (and pets in general) to be members of the family, so any type of restriction that places limitations on an owner’s right to keep his/her pets within the home can be met with serious resistance.

Breed specific restrictions, which are a subset of pet restrictions, are also very controversial. In the context of a Condominium, certain breeds may be restricted based on size/weight and such restrictions may be considered reasonable based on the limited size and close quarters of most Condominiums. However, this article is more focused on breed restrictions that are tied to so-called “dangerous” breeds (e.g. pit bulls).

Pursuant to Arizona law, the Board has an obligation to maintain the common areas safe from known or foreseeable dangers. Proponents of breed restrictions may argue that restricting so-called “dangerous” breeds is consistent with the Board’s obligations to maintain the common areas safe from foreseeable dangers. Opponents of breed restrictions may argue that a rule restricting a dog based solely on breed is arbitrary, discriminatory and/or unreasonable if the specific dog in question has not shown any dangerous or aggressive tendencies.

Arizona law is not entirely settled on this particular issue. However, it is relevant to note that in 2016, the Arizona Legislature weighed in on this issue with regard to a city or county’s ability to restrict/regulate breeds.  Pursuant to ARS 9-499.04(C), “A city or town may regulate the control of dogs if the regulation is not specific to any breed.”  Although that legislation is not specific to Planned Communities or Condominiums, it should be taken into consideration.

Other possible factors to consider with regard to breed restrictions would be (1) whether to include a grandfather clause, which would permit existing dogs to remain in the community; (2) how to address mixed breeds; and (3) how to determine the exact breed of a particular dog, if the breed is in question.

Regardless of breed, if the Board becomes aware of any aggressive or dangerous dog (or other pet/animal) within the community, I would strongly urge the Board to take action to further investigate and make every effort to maintain the common areas in a reasonably safe manner.

If you have any specific questions regarding breed restrictions, or pet restrictions in general, please do not hesitate to contact our office.

 

 

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Desert Mountain Club Inc. v. Eric Graham, et al., No. 1 CA-CV 17-0100 (April 12, 2018)

The Arizona Court of Appeals issued an opinion earlier this year regarding a dispute between a nonprofit golf and recreation club (“Club”) and two equity membership members in the club (“Members”).  Although this case isn’t specifically about a homeowners association or a condominium, it does provide valuable insight as to how the Arizona Court of Appeals views an association’s governing documents vs. state law.

Under the facts of this case,  the Club and the two Members disagreed on whether specific provisions of the Desert Mountain Club Inc.’s Bylaws or state law applied to a dispute about termination of a club membership.  The Club’s Bylaws outlined four specific ways that a member could terminate their membership to the Club. When a member terminates their membership, the Bylaws provided that he/she must continue to pay dues and fees until their membership is sold to a new member. Upon the resale of that membership, the old member must pay the Club a transfer fee of $65,000 or 20% of the sale, whichever is greater. The Bylaws also had provisions that “gave the Club’s Board discretion on how to enforce delinquent or non-payments, including by expulsion or ‘any and all other remedies allowed by law.”

In 2014, the two Members wrote to the Club that they were resigning their membership and would not pay any dues or assessments. The Club sued both couples for resigning their membership and then failing to pay the assessments that they owed. The trial court granted summary judgment in favor of the Club and the members appealed.

On Appeal, the members argued that ARS §10-3620 allowed them to resign at any time without payment obligations and that the bylaws did not specifically address “resignation.”   ARS 10-3620 states in relevant part,

  1. A member may resign at any time, except as set forth in or authorized by the articles of incorporation or bylaws.
  2. The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made prior to resignation.

The Arizona Court of Appeals held that ARS §33-3620 “does not guarantee a member of a non-profit the right to resign without obligation. By its terms, the statute allows articles or bylaws to restrict the default right of resignation.” Therefore, the Court looked at the four ways to terminate membership outlined in the Bylaws and stated that even though the process is “burdensome and expensive” it is a contractual agreement between the members and the Club.

Next, on appeal the Members also argued that the Club violated ARS §10-3610, which provides, “all members have the same rights and obligations with respect to any other matters, except as set forth in or authorized by the articles of incorporation or bylaws.” The members argued that the Club’s Board was treating members differently who didn’t pay dues.  In some cases, the Board extended a settlement offer, while in others the Board expelled the members, and in this case the Board filed a lawsuit.   The Court further held that ARS §10-3610, “like §10-3620(A), makes the non-profit’s bylaws the higher authority.” “The Club therefore had discretion to redress some members’ delinquent payments with expulsion, and others’—like the Members’—with a lawsuit to collect its dues and transfer fee.” Therefore, while the Board’s discretion must be used reasonably and not arbitrarily or capriciously, the Board’s discretion was protected in the bylaws and there was no showing of an abuse of the discretion.

What are the key takeaways from this case for HOA and condo boards?  Associations need to look at the plain language of the association’s documents vs. state law regarding rights and responsibilities of owners and associations.  If the language of the state law defers authority on a subject to the association’s documents, the association’s documents should be followed (and vice versa).  For example, the language under state law for the removal of a board member from office indicates that state law trumps an association’s documents if the association’s documents conflict with state law regarding the procedure to remove a board member from office.  The bottom line is that when there are conflicts between an association’s documents and state law, it is always a good idea for an association to consult with legal counsel to determine what provision should be followed.  And, the way to make that determination is to look at the plain language of both to see which one trumps the other.

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BOARD MEMBER REMOVAL

Does your Association board and/or owners know the process under Arizona law for removal of a board member/director at large from office?  In Arizona, the Arizona Condominium Act, ARS Section 33-1243(H), and the Arizona Planned Communities Act, ARS Section 33-1813(A), provide for very specific protocols for the removal of Board Members in Condominiums and Planned Communities, respectively. Please also note that both statutes provide for removal, with or without cause, so long as the required protocol is met. The general protocol requires the following steps:

  • The Board must receive a petition that calls for removal of a member of the board of directors and that is signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to (1) in an association of less than 1,000 members, at least twenty-five percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one hundred votes in the association, whichever is less; (2) in an association of more than 1,000 members, at least ten percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one thousand votes in the association, whichever is less;
  • Upon receipt of the petition, the Board must notice and hold a special meeting to vote on removal within 30 days; and
  • So long as a quorum is present at the special meeting, the members of the association who are eligible to vote at the time of the meeting may remove any member of the board of directors, by a majority vote of those voting on the matter at the meeting.

Currently, there is no Arizona case law that specifically addresses removal of a board member from office.  A recent case in Pennsylvania (A Pocono Country Place Property Owners Association, Inc. v. Kowalski, No. 904 C.D. 2017 (Pa. Commw. Ct. May 7, 2018)) sheds some light on whether a court can unilaterally remove a director from office for bad behavior despite the fact that state law addressed a procedure for removal of the director and that procedure was not followed.  In this case, 8 board members filed suit against 1 board member, seeking his removal from the board and banning him from serving in the future, based on his behavior towards the other board members, which allegedly included a number of insulting, hostile and potentially discriminatory emails.  While the Court found the Defendant’s conduct to be “deplorable”, it ruled that such conduct did not constitute grounds for court intervention pursuant to the Pennsylvania Nonprofit Corporation law.

From the facts presented in the case, the behavior of the 1 board member fell below the expectations of a board member.  However, a court couldn’t intervene in this matter and remove the director from office because the state’s statutory removal provisions had not been adhered to.  As such, an important takeaway from this case for Arizona associations is that the procedures for removal of a board member outlined in ARS Section 33-1243(H) and ARS Section 33-1813(A) must be strictly adhered to.

If your community is dealing with an existing or potential removal issue, please feel free to contact my office for assistance.

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Be a Better Leader for your Association!

What makes one community association successful while another struggles?

After 20 years of experience working with community associations, I have come to the conclusion that one of the reasons is leadership. This article will define leadership, talk about the importance of leadership, characteristics of a good community association leader and how boards can lead at a higher level.

What is the importance of leadership?

Strong leadership gives and organization guidance, stability, continuity from year to year and a unity of purpose.

There are many definitions for leadership:

Drea Zigarmi, in his book The Leader Within, defines leadership as “the act of arousing, engaging, and satisfying the motives of followers – in an environment of conflict, competition or change – that results in the followers taking a course of action toward a mutually shared vision.”

What are some of the characteristics of a great community association leader?

1. A leader must be moral and ethical

2. A leader engages in proper behavior

3. A leader has read, understands and follows the governing documents and the laws regarding community associations

4. A leader is educated on community association topics and procedures

5. A leader follows the advice of professionals who are hired to help

6. A leader is respectful of other board members and community members

7. A leader places the good of the association as a priority and encourages others to do the same

8. A leader encourages mentoring and support of board members

9. A leader can conduct an efficient and effective board meeting

10. A leader sets a good example

11. A leader arouses others in the community to step up and help the community and to follow the association’s documents

If leaders are not respected by their members, they can never effectively lead an organization.

Leadership is often divided into 4 styles. What type of leader are you?

Directing leaders give specific instruction and closely supervise group tasks; they show exactly what they want others to do and how to do it.

Coaching leaders direct and supervise tasks but they also explain decisions, ask for suggestions and encourage those they work with. They will encourage all to contribute when deciding what to do and how to do it.

Supporting leaders share in the decision-making. They facilitate and support the group members’ efforts. They might say to the group, “I will be here to help if you need me.”

Delegating leaders give all decision and problem solving responsibility to the group members. The president of a board of directors may be one style, or a combination of the leadership styles. Additionally, he or she may use a different style depending on the desired outcome or the makeup of the committee or board he or she is working with.

Community Association Boards Leading at a Higher Level

Leading at a higher level is defined by Ken Blanchard, the business leadership guru, as is “the process of achieving worthwhile results while acting with respect, care, and fairness for the wellbeing of all involved.” According to Ken Blanchard, in order to lead at a higher level, boards need to do the following:

1. Set sights on the right target and vision. (Develop goals at the beginning of each year to make your community association better and work toward accomplishing those goals);

2. Treat homeowners’ right – (treating all fairly, with respect and in accordance with governing documents and community association law);

3. Treat fellow board members right (working together to accomplish the goals of the association and acknowledging their support of the association).

4. Be the right kind of leader (adhering to the characteristics of a good leader).

I believe leadership and education are intertwined so I hope that you will continue to learn as you lead your communities toward excellence.

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Hiring Unlicensed Contractors Costs More Money in the End. Period!

 

Have you ever heard the phrase “penny wise but pound foolish”? Over the years, I have seen some expensive mistakes made by association boards. One common mistake is trying to save a little money by hiring an unlicensed contractor. I’ve often found that, in the end, the unlicensed contractor ends up costing a lot more money for the association.

My advice… Hire licensed and bonded contractors for projects that under Arizona law require you to hire licensed and bonded contractors.

Here’s a good example of a construction project costing an association a lot more money in the long run than it should have. The property manager of an association hired an unlicensed contractor to install new rain gutters on the condominium building. The unlicensed contractor, who did not have workers’ compensation insurance, hired a person to perform some of the work at a contracted daily amount. When a rain gutter came in contact with a high-voltage electrical wire, the worker was severely shocked and fell, sustaining serious injuries. This case eventually came before an appellate court to determine which entity was considered the “employer” for purposes of workers’ compensation liability. The court determined that both the management company and the unlicensed contractor were employers of the injured man. Furthermore, the court found that the homeowners’ association was also liable as an employer based on the management company’s authorized actions in the association’s behalf. In this case, the association was required to compensate the worker for the worker’s medical bills, injuries and loss of income.

This case does have a moral – associations and property management companies should never hire unlicensed contractors (unless it is minor handyman work – see below for definition – or contact the Arizona Registrar of Contractor’s Office for clarification). Both associations and property management companies may be deemed “employers” and subject to liability for workers’ compensation benefits when an employee of an unlicensed and uninsured contractor is hired to work at an association. It should be standard procedure for contractors who work for an association to provide proof of a contractor’s license as well as proof of insurance prior to the start of work.

The Arizona Registrar of Contractor’s Office (www.azroc.gov or 602-542-1525) has a user friendly website with great information. Check this site for license and bond information and for complaints or disciplinary action against a prospective contractor. Where there is smoke, there is usually fire. So, if the contractor already has open (or closed) complaints, we suggest re-considering the use of that contractor. A contractor must have a current and active license, showing he or she is qualified to perform the type of work required, before he or she can even bid on a project. Violation of this statute is a class 1 misdemeanor.

The most frequently claimed exemption to the licensing requirements is that of the “handyman”. Arizona statute allows individuals who perform minor repairs or installations to do so without being licensed. To qualify for this exemption two conditions must be met: 1) The work does not require a local building permit; AND 2) The total cost of the project, including labor, materials and all other items does not exceed $1,000.00.

Finally, don’t forget to have our law firm review the contract between the association and contractor BEFORE the contract is executed. We can help protect the association by inserting association-friendly language in the contract to protect the association in the event of problems with the contractor down the road.

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What is “reasonable”?

The terms “reasonable” and “unreasonable” are frequently used in the Community Association legal industry. Both the Arizona Planned Communities Act and Arizona Condominium Act use the terms “reasonable” and “unreasonable” throughout various sections of the legislation. For instance, ARS 33-1242 grants the association the authority “after notice and an opportunity to be heard,” to “impose reasonable monetary penalties on unit owners for violations of the declaration, bylaws and rules of the association.”  ARS 33-1817(B) (3) provides that “approval of a construction project’s architectural designs, plans and amendments shall not unreasonably be withheld” by the association or design review committee.

In advising Board Members in Arizona, I typically receive questions about whether or not a particular decision is legal. In rendering my legal opinion to my client, not only do I try to provide advice and options for the client to stay within the confines of the law, but I also try to provide my clients with the best practice and/or advice on how to find a reasonable solution that will help keep them out of legal trouble and be a win-win situation. In my experience, the Boards that I work with that communicate well and that make reasonable decisions, have fewer problems, than those who make unreasonable decisions. While these words may sound obvious, being a Board Member for a Community Association can be extremely emotional, demanding and stressful, and sometimes the reasonable solution may not seem all that clear or judgment may be clouded by the emotional aspect of the position. I am hopeful that this post will provide Board Members with some tips and tools to make more reasonable decisions on behalf of the association.

First, it is important to keep in mind that if a Board decision is challenged in Court, ultimately the determination of reasonableness will be a question of fact for the jury to decide. There will be a number of factors that will likely go into each analysis, but I’m always trying to think ahead to how a court/jury would look at the Board’s decision if it proceeded to a lawsuit. Therefore, Board Members should also treat the determination of what is reasonable in a particular situation, on a case by case basis.  What is reasonable in one set of circumstances may not be reasonable for the next case. Factors may include, but are not limited to: the costs associated with the decision; how the Board has treated a similar situation in the past; if the Board is allowed to grant a variance; the ultimate goal or outcome desired.

Second, the Board should understand the scope of its authority in making decisions by reviewing the Association’s governing documents. Some Articles of Incorporation, CC&Rs and Bylaws give the Board broad authority to make decisions. Others limit the Board’s authority in certain ways. For example, if an Association’s CC&Rs give the Board enforcement power and require each homeowner to maintain the landscaping on his/her Lot, but does not provide details of what the landscaping should entail, would it be reasonable for the Board to require that each homeowner hire a professional landscaping company to maintain the landscaping on his/her own Lot? In my opinion, this would be an unreasonable requirement outside of the scope of the Board’s power and authority.

Third, the Board should learn how to communicate better with the homeowners/members in the community. A Board or Board Member may be automatically perceived as unreasonable if he/she is not willing to listen to homeowners and not willing to open the lines of communication. Advances in technology give Boards additional ways to communicate with homeowners through email, electronic newsletters, websites, and social media. With that being said, the use of email in people’s everyday lives can create a greater sense of urgency or an expectation of a quicker response time. I advise my clients to try to acknowledge receipt of emails within 24 hours and to let the person know when they can expect a Board answer or decision. Individual Board members should not be making decisions on behalf of the whole Board. Therefore a reasonable response may be, “[t]hank you for your email. The Board will add this topic/question to the agenda for the next Board meeting. Please feel free to attend to hear the Board’s discussion.”

Fourth, there is a balancing act between being flexible and also being consistent. One of the most prevalent complaints I see homeowners make is that the Board is selectively enforcing the governing documents. While some governing documents authorize the Board to grant variances in certain situations, in most cases the Board should aim to enforce each provision equally and consistently among homeowners. With that being said, the Board is governing a group of neighbors and sometimes it can be more effective and reasonable to do the “neighborly thing.” For example, if there is a person in the association who lives alone who recently broke his/her leg and cannot adequately maintain his/her landscaping, rather than levying a fine each day and/or week after hearing the reasons for the violations, the Board could consider discussing alternative options to keep the yard maintained. Maybe a Board member or other neighbor would be willing to volunteer and do a cleanup, or maybe the Board can help the neighbor find a landscaping company. This solution is more reasonable in my opinion because the end goal for the Board should be compliance and trying to improve and keep up the property values.

Fifth, the Board should learn how to complete a cost/benefit analysis. The costs associated with some decisions do not always outweigh the benefits. There are many times when the Board should consider whether a specific decision could end in litigation or an increase its insurance premiums. The Board should look at its options and conduct a cost/benefit analysis of a situation if there is a risk of litigation. While the prevailing party in a breach of contract lawsuit is entitled to its reasonable attorneys’ fees, there are certain causes of action where the prevailing party may not be awarded its attorneys’ fees. Therefore, the Board should discuss the risks of litigation with its legal counsel. In my opinion, part of being reasonable is using “preventative   legal.” Further, the Board has a fiduciary duty to do what it believes to be in the best interest of the Association. As such, if the Board does not have expertise or knowledge in a certain area, it should consult with legal, a CPA, reserve specialist or other expert in the field to help make the reasonable and best decision.

Finally, the Board is going to have to work to get along in order to make a reasonable decision as a whole. Board members bring different experiences and expertise to the Board, and there will likely be many different personalities on the Board at any one time. In my experience, Board conflict can be reduced if each Board Member understands the type of persons he/she is working with. I recommend that Board Members working together each take a DiSC profile personality test. The DiSC profile test provides a report about your personality and in my  experience helps improve communication among team members. My employees take the personality test prior to starting at Mulcahy Law Firm so that I can better communicate and work with each individual employee on my team. I would encourage you to consider taking the free test. Here is a link to the free Disc personality test: https://discpersonalitytesting.com/free-disc-test/.  In my experience, sometimes knowing that a person may react a certain way or speak a certain way helps relieve some of the emotional responses you may have if you didn’t know that is just the way the person is. Emotional decision making can lead to unreasonable decision making.

It is important to remember that sometimes there is no right or wrong answer. Sometimes the Board can only do its best, given the circumstances. In these cases, my advice is to have justifications for the ultimate decision and consult with experts if you are feeling uneasy or unsure.

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