By Wayne S. Hyatt
Hyatt & Stubblefield, P.C.
Atlanta, Georgia
Presented at CNU 2000
Congress for New Urbanism
Copyright 2000
Exercpts from:
The Role and Structure of Association Governing Boards
The following suggestions are offered in no particular order of priority. Some are not revolutionary, others are, or one may so consider them. Many of the ideas are already under discussion or being carried out. They cover a broad spectrum, but the list is not exhaustive. In every case the list awaits expansion through project-specific additions and modifications.
Governing boards need to have a more flexible approach to governance, and the initial governing documents need to create and to institutionalize rule-making as a dynamic rather than a static process. A legal framework is needed that permits the board and the association to implement the development’s covenants in a manner that allows the governance process to evolve with the needs, desires, and changes within the community. At the same time, there should be procedures for owner involvement and owner protections.
An alternative governance approach involves the creation of a more legitimate governance structure than the current corporate model and recognizes the difference between regulation and prohibition. Such a new structure contemplates that the initial governing documents will contain only a limited number, perhaps a severely limited number, of prohibitions and restrictions, including only those restrictions that the developer believes to be vital to the overall community development plan. Coupled with these initial provisions would be a method for permitting changes and for the adoption, modification, or abrogation of regulations through the community’s "legislative process’ as time passes and circumstances change. Members’ rights to initiate and to participate in this process are vital.
In addition, to the initial restrictions or prohibitions, there would be several general but clearly stated standards of conduct, maintenance, and design. These standards would operate to establish ranges of expectation and permitted activity without being overly restrictive or disruptive of individual choice within articulated, accepted norms.
In a system that provides simplicity, flexibility, and balance, it would be necessary to promulgate initial restrictions and prohibitions that might, in the final analysis, be inconsistent with the development plan and the reality of the community as it takes for, grows, and changes. Rather, the governing body, first the board of directors, and, secondarily, the membership, would have the power to make or to change these provisions, according to a defined procedure. In other words, the goal would be to create a truly responsive governance system, one that is realistically empowered to govern. For this to work, the practitioner and the developer, indeed the development team, must not be change-averse and precedent-bound.
At the same time, the governance system must provide checks and balances, disclosures of potential consequences from operation of the system to purchasers, and specific protections for owners and for the individual owner. If one argues, as I do, that there is a great need for recognition of the importance of the group and a moderation of the emphasis upon the individualism and "rights," it is important not to forget that the individual’s interests do exist and need both recognition and protection. Too frequently, boards of directors become autocratic and ignore these interests, deny members information and fair hearings. Civility applies at all levels and the rights of the minority and of the majority need respect.
For this reason, the community association governing documents should contain not only empowering sections but also language establishing a "bill of rights" for owners, establishing boundaries to the board’s powers. Those boundaries provide some degree of certainty to the purchaser and aid in enforceability by showing a court that there are limits both to the acceptable degree of control and to the powers that support that control. It is also appropriate for there to be an obvious cost to directors who act in flagrant violation of these standards. Periodic reevaluation of restrictions also will ensure that those in force have application in the community. Finally, this format would address concerns regarding the applicability of the corporate model to the political and social needs of the community. Finally, this format would address concerns regarding the applicability of the corporate model to the political and social needs of the community as well as establish an appellate mechanism.
The board’s business role will increase as new and greater powers are required to meet new needs, especially as some forms of privatization take place. Examples include the provision of services of a municipal nature, social and educational activities, technological services, and a wide variety of other activities as discussed in the section on changes in market demands. Issues of capacity, delegation, provision of individualized services, and use of technology will all be important. The nature and purpose of the association will become more significant, and courts should look to those considerations in determining the appropriate degree of autonomy to afford to the board.
The powers and methods of operation of the board should be clarified, providing guidance as to what activities fit into each role, how the board should operate, and standards or training requirements for qualifying for office. Training will be formal and informal, and the community association will pay for it as a common expense of all owners.
Quality training promotes better job performance and job satisfaction by providing needed skills and maturity of judgment. It also increases respect for the position and the person holding it. Better-trained boards result in fewer problems and better association governance.
Board composition is problematic in this day and age. As owners’ time and demands conflict, member involvement in community policy decisions, as such decisions involve an ever increasing range of issues, will take on even more importance that we see today. Associations may also need procedures to create boards that are balances in terms of the members’ understanding of and experience in corporate governance.
End of author’s comments.
Moderator’s comments:
Under no circumstances should the training involve the Community Associations Institute (CAI). They do not in any way represent the interests of the association members; their only interest is restricting the rights of the members in favor of the corporate interests.
