The Lauren, A Condominium
Did You Pass the Test?
An educated board member should know the answers to all of the questions in the Quiz. There are several reasons why this is important.
This is why they elected you! The purpose of a board is to establish association policies and procedures and to oversee the management of the community. These are jobs that simply can't be done by the association acting as a "committee of the whole." These jobs only can be accomplished by a small group, operating with good professional support, and with an adequate knowledge base. Without a firm -rasp of the financial, operational and legal matters outlined in the Quiz, a board member does not have the knowledge required to do an effective (or competent) job. You cannot make the good decisions the community expects if you do not know the context in which you are operating.
You owe it to the community. If you devote the time and energy required to serve on the board, you might as well do it right. A board member wants to make a contribution to the improvement of the community. You can do this only by learning how things work (or don't work,) and by learning the legal, practical and financial limits that apply. Only with this knowledge can a board chart a course for improvement. Otherwise, nothing will ever get better.
An ill-informed board WILL get into trouble. It's inevitable. Decisions based on insufficient facts (or the wrong facts,) sooner or later will get the association into: a) legal trouble with owners, b) legal trouble with contractors, c) legal trouble with the county/ city, d) dire financial straits, e) criminal court, f) factional warfare in the community, and on and on. One consequence is that the board will lose the faith, trust and respect of the owners, and will no longer have a mandate to lead the community. Another consequence is that the community will get a "reputation" and will become less desirable in the marketplace, causing property values to decline.
If for no other reason, you need to be well informed for your own protection. Each director has a duty to exercise reasonable care in the performance of his/her responsibilities on the board. This duty is sometimes referred to as an aspect of the board member's fiduciary duty, but it really is something separate.
A board member who participates in board votes and discussions without being properly informed is not acting with reasonable care. When a board member fails to act with reasonable care, that board member is being negligent. In addition, if a board member is not well informed about the scope of board authority, he/she may do something that is clearly outside of a board member's authority. There have been cases where board members have been held personally liable for their acts and omissions. You should have directors & officers liability insurance (D&0), and the association may have some obligation to indemnify directors, but these protections have their limits. There are situations where board members are not protected by the association and its insurance policies. If you do not have the requisite knowledge to do your job as a director, you are much more likely to face personal liability for something you did, (or failed to do).
If your score on the Quiz was not great, do not despair. By taking the time to test yourself, you have taken that important first step. You have found out what you don't know. Once you accomplish that, the rest of the learning process should be easy. If you scored well on the Quiz -congratulations! Just remember, however, that the process of educating a board member (or anyone else) never stops. There is always more to learn for the benefit of the individual, and of the community, too.
Joe Douglass is a partner in the Washington office of the law firm of Whiteford, Taylor& Preston, L.L. P. and is a past president of our Chapter
The Quiz is courtesy of Jim Ahlbert (Ahlberg & Associates), Judy Currier (President, Leewood Homeowners Association), Joe Douglass (Whiteford, Taylor & Preston, L.L.P), Anne Inman (President, Concord Mews), and Barbara A. Mosgrave (Woodburn Village). If you have any questions that have not been answered, or would like to offer feedback on the Association Quiz, call the Chapter office tit 703-1750-3644, or email us (info@caidc.org) Your comments are welcome!
