RealManage Insight

HOA Services - Know When to Consult the Experts

by Staff Writer on Nov 2, 2017 8:00:00 AM

Although your HOA board of directors certainly embodies a broad spectrum of knowledge and expertise, it's unlikely that it will cover every critical aspect of HOA decision-making. Many boards are aware of this but can be tempted to save the money otherwise spent on hiring outside expertise. Be wary of making this mistake. The modest cost of hiring a few hours of outside expertise that fills a blind spot in your board's knowledge base could save you tens of thousands of dollars in corresponding issues down the road. To expand on this point, let's explore a few HOA services domains where outside expertise often proves essential in HOA decision-making: legal decisions, financial decisions, and decisions surrounding construction and landscaping projects.

Legal decisions

HOA boards can potentially face so many decisions that may have legal ramifications that some would-be board members shy away for fear of a painfully litigious environment. However, hiring trusted outside legal expertise upon facing each potentially litigious situation can defuse such worries and put you on a relatively worry-free path. Two areas that serve as strong examples include lawsuits targeting individual HOA board members, and conflicts between HOA governing documents.

Litigation against individual HOA board directors

Unfortunately, individual boar members do occasionally find themselves the targets of litigation, often from unhappy HOA association members who blame the targeted director, rightfully or not, for their grievances. Although these lawsuits are generally unsuccessfully, they are a valid cause for concern for anyone on an HOA board or anyone considering joining one. The best defense against such lawsuits is to always adhere to the highest standard of care and integrity as a board director. All the same, it's also wise to seek outside legal expertise before making any decisions on how to respond upon first learning of any looming litigation. An attorney specializing in HOA related cases can help the board navigate the legal intricacies surrounding board members' expected standard of care, as well as any applicable HOA volunteer immunity rights or protections granted board members at the federal, state or HOA governing-document level.

Conflicts between HOA governing documents

Almost as common as conflicts between HOA members are conflicts between HOA documents. The discovery of apparent, sometimes blatant, contradictions between two different HOA governing documents can lead to a paralysis in decision-making. For example, one governing document may state that the HOA board of directors has a particular right concerning holding HOA elections, while another may specifically state that they do not have such a right. Even more worrisome is when the governing documents as a whole display an apparent conflict with state law. However, an attorney well-versed in the HOAdocument hierarchy, as well as HOA-related state law, can often quickly resolve legal concerns by identifying the language, and the document, that has priority and holds sway. Qualified attorneys can also help you follow the proper process for rewriting any conflicting language in your governing documents if necessary.

Financial decisions

Your HOA probably already has an accountant lined up for tax time. But there are many other financial areas where CPAs or professional financial advisors can prove immensely helpful. One of the most overlooked is the process of drafting an HOA budget for the coming year. Especially when there's a considerable amount of money at stake, it's a smart move to call in a financial expert before making a critical budgeting decision. CPAs and professional financial advisors specializing in HOAs can help you answer complex budget-related questions such as the following:

  • What are the tax implications of each of next year's most expensive HOA planned projects?
  • Which HOA projects can we count as capital improvements?
  • How can we best estimate, structure and allocate our future financial resources to realistically cover our must-have HOA projects for the coming year?

Construction and landscaping decisions

Hiring a professional guide with a background in HOA-related construction or landscaping projects can help you navigate through an immensely complicated decision-making process: how to go about preserving and improving your HOA community's buildings and grounds. Once you ensure that the construction and landscaping experts you hire as advisors have no financial relationship with those you would hire to perform the actual construction or landscaping work, you can get a relatively unbiased opinion on the cost of various projects; the time they will realistically take; how to approach the bidding process; and what pitfalls and red flags to look out for along the way.

Bringing outside expertise to bear

It's simply impractical to assume that an HOA board of directors will have the professional expertise in-house to guide them through every critical decision they face. Nonetheless, the temptation to save money in the short-term leads some HOAs to shrug off hiring outside expertise even when facing obstacles that the board is clearly unprepared to tackle alone. To avoid this mistake, it's important to make an ongoing investment in the specialized expertise that fills each blind spot in your board's knowledge base. As explored above, attorneys specializing in HOA-related law can help you avoid litigation directed at board members, conflicts between governing documents, and other legal issues HOAs often face. Likewise, CPAs and financial advisors well-versed in HOA tax burdens and financial obstacles can help you tackle next year's budget and other financial concerns with confidence and peace of mind. Finally, a professional guide in the construction or landscaping space can prove enormously helpful as you gauge the cost, timeframe, bidding process and pitfalls to look out for as you decide on each key HOA project.

To learn more about hiring outside expertise to help guide your board's decision-making, contact us.

How to Choose an HOA Management Provider - Free Download

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