Hiring Professionals - A Winning Approach

One of the key questions facing volunteer community association boards is, “When should we hire a professional to assist us?” This question oftentimes will apply to professional management companies, construction professionals, vendors and service providers, accountants, attorneys and reserve consultants.

Volunteer Enthusiasm

One of the features of community association boards is that they are governed by a volunteer group of committed homeowners who may not be versed in the intricacies of operating a business. As a result, there is often a diverse and wide variety of individual experience in association governance – a combination that can lead to enthusiastic, albeit sometimes ill-fated, approaches to cost containment.

Generally speaking, a common reason volunteer boards do not hire professionals to assist them in their governance responsibilities is that the board is “trying save money.” However, in the end, efforts to replace or refuse to utilize professional assistance can end up costing more and may also expose volunteer boards to unnecessary and personal liability.

How many times have we heard suggestions like, “I have a friend who can . . . for free”? This approach can lead to poor advice, shoddy workmanship (with no performance bond or insurance to correct problems) and missed opportunities to preserve the rights of the homeowners that the board is chartered to protect. In reality, such approaches could expose board members to personal liability for their actions, or for their failure to act, even though the motive (saving money) appears noble.

Avoiding Liability

No one wants to place his or her personal assets at risk while serving as a volunteer for the governance of their community association. A common question is, therefore, “Am I at risk legally if we as board members make a decision someone doesn’t like?”

Many states have very specific statutes addressing personal liability of volunteers serving a nonprofit corporation. Even a “layman’s” reading of these laws by a non-attorney provides clarity. Typical wording act would be something like the following:

Director(s) shall perform their duties as a director and as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

In performing the duties of a director, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by:

1. One or more officers or employees of the corporation whom the director believes to be reliable and competent in the matter presented;
   
   
2. Counsel, public accountants, or other persons as to matters which the director believes to be within such person's professional or expert competence; or
   
   
3. A committee of the board upon which the director does not serve, duly designated in accordance with a provision in the articles of incorporation or bylaws, as to matters within its designated authority, which committee the director believes to merit confidence; so long as, in any such case, the director acts in good faith, after reasonable inquiry when the need therefore is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.

The short answer to preventing personal liability is simple: Hire professionals. Rely on their advice. Protect the interests of the association and protect yourself. Avoid unnecessary liability.

Action Steps

When do we hire professionals? Start today. Whether it is professional management, qualified contractors, accounting professionals or legal experts, the association’s board of directors should begin its search by interviewing those professionals who are active in the community association industry. Meet with several and hire the ones that most closely match the needs that have been identified by the board. In doing so, the board will fulfill its responsibility to protect the interests of its members and the association. Additionally, individual board members will also protect themselves from unnecessary exposure. Hire professionals and rely on their input and advice. It’s a winning approach.

Corey Recla
CMCA®, PCAM®, AMS®,
Chief Executive Officer
EMB Management
Bellevue, WA