If condo boards are compensated, what should condo owners know?
By: Shamontiel L. Vaughn
Tags: Property Management, Volunteering, Volunteer Management, Condo Board Association, Condominiums

If condo boards are compensated, what should condo owners know?

Why waiving condo assessments is shaky territory

Photo credit: Colin Watts/Unsplash

If you’ve ever been on a condo association board, then you already know that it is often a time-consuming job. You can end up dedicating more time to contractors, building maintenance and day-to-day owner concerns than you would dedicate time to a paying job. So it makes perfect sense to me for condo association board members to be paid for their services — or just pay a property management company and skip the blurred line between volunteering and a paid job. But before a condo board makes the decision to start paying board members, there are some blurry details that should be worked out ahead of time.

Do not let condo board members waive assessment fees.

There is a story in HOA Leader about a condo board president who (allegedly) didn’t pay assessments for one full year and only three months the prior year. On the surface, this makes sense. Instead of just paying the board member — especially for a similar rate of pay — just waive the assessments to make the same amount. But for record-keeping purposes, especially for a treasurer, it may be too difficult to figure out which is which. Did the president take on the role to get out of paying assessments? Did the president choose this method of payment to dodge paying late fees if he couldn’t pay on time? Why can’t the president just deduct assessments from whatever monthly payment is made, as in a check for a check?

Allow the owners to have a say to avoid complaints later.

While condo bylaws may spell out whether board members are volunteers or can receive payment, there are usually lines in the wording about whether a board can choose to pay a board member with or without the owners voting on it. Personally, I think that all the owners should vote on this decision. Why? If all of the owners are aware that the condo board is hiring a property manager, why make any other assessment-related payment a secret? Is it sneaky for a board to vote on this independently? Not really, considering the owners voted on these board members in the first place.

It is, however, unnecessary to hide considering the budget should state where all profits and losses are. So even if the owners don’t know now, they’ll eventually find out later. May as well be upfront from the beginning. If there is a two-thirds vote for that board member to be paid however the owners see fit, there will probably still be some annoyed owners who were outvoted. They want it to be voluntary no matter what (and usually contribute bare minimum other than complaints). But the paid board member decision won’t be the kind of “ah ha!” moment that was described within this HOA Leader post.

Make board payments match productivity.

There will always be volunteers (in any industry) who are relentless workers and thoroughly enjoy (or at least try) doing volunteer work. Then there will be those who lag behind, the ones who’d rather do anything but attend meetings, don’t care about building repairs, have zero interest in taking minutes, have no clue who is on the board or the building, and barely pay attention to lobby or email announcements. It happens. Some owners just want to mind their business, pay their assessments and go about their day. But attaching a monetary payment to the board could pique their interests. Now that there is money involved, these same uninterested owners want in.

But how do owners decide who is worthy of payment and who isn’t? Before voting to pay board members, all owners should also know how to effectively and legally remove paid board members who are just collecting money but not doing much the same way they would do with a slacker property management company. Prior board members and active owners will already know the amount of work involved in being a productive board member. This should not be too hard to figure out. If it comes down to the occasional financial report (on an agreed-upon schedule, not just requested because the wind blew), that may be helpful.

One major thing that should happen immediately is the paid board member loses the right to vote on potential contractors, repair work, etc. without board member approval. The paid board member becomes a neutral party that follows whatever the other board members decide. Why? Because if the board pays one member to do a job and (s)he is also (potentially) making a profit on the back end by recommending and hiring contractors to make an additional percentage, this can be a conflict of interest. Just as property managers are hired to work under the direction of the board, so should a paid condo board member. Suggestions may be welcome but not required. Even terminating an agreement with current workers (i.e. plumber, maintenance staff, painters, etc.) should require unpaid board members’ approval and votes.

Photo credit: Karolina Grabowska/Unsplash

Board members should be an example to the owners when it comes to assessment payments.

Life happens. As with any other owner, board members can fall on tough times. But by not paying assessments in exchange for compensation, this is a foggy area when it comes to scrutinizing other owners for not paying their assessments on time. There’s a reason Corporate America jobs usually have lunch outings and birthday gift requests around payday. They know when you should have money in your pocket. The same goes for assessments. If a president (or any board member) is already being paid for their services, why not just deduct some of those funds to “pay” assessments as opposed to skipping it? If the payment is $500 per month and assessments are $200, pay $200 to the condo board account and keep $300. It’s fairly simple.

Could the treasurer choose to just pay the board member $300 and deposit the other $200 each month into the board checking/savings account? Yes, sure, but it sounds like an unnecessary pain come record-keeping time — for tax purposes and for other owners who are entitled to see the annual profits and losses. One way to potentially get around this is for the treasurer to document that the $200 assessment from the board payment is clearly connected to this person, but transparency would save the board from unnecessary confusion. Not doing so would also give serial late payers the opportunity to assume the board members are never late because they don’t pay dues in the first place. If everybody’s assessment dues are due on the same day, then they’re all on a level playing field.

Would it be easier to hire property managers instead of paid condo board members?

Yes, and for a number of reasons. The first one is if your condo association is a nonprofit LLC, the whole goal is for everyone to put their money in the pot and equally pay out repairs, upgrades, monthly bills, etc. But if one person is making a profit while the others are paying for the “pot” money, this can become complicated for tax reasons. Review your bylaws to see if it is required that all board members must be unpaid volunteers, whether the board or owners can decide to pay a particular board member, whether a property management company is required or do they confirm the board can be self-managed, and any other wording regarding compensation. While a condo association can pay their property manager and still be a nonprofit, the property manager (an independent contractor or a corporation all its own) would still be held responsible for his or her own taxes.

Clearly condo owners would want to pick a board member (or property manager) who they believe will do a good job of managing funds and the building. Maybe start off by allowing someone who has potential to be a property manager become a volunteer board member first to see if this person does well. This way, you at least know what you’re getting if owners don’t opt for the traditional property management route.

There are zillions of stories online about property managers who collected funds and did nothing else, so assuming a multi-building property management company (or even a small company) must be the way to go isn’t always accurate. Some are fabulous. Others are terrible. You won’t know who is who until you work with them directly. But a property manager who actually lives on the property — just like a landlord who lives in the building — is more than likely going to be more invested than someone who collects a check from afar.