The Gull's Call - Apr/May/Jun 2025

President'sColumn What Happens When HOAs Cannot Fill Their Board of Directors? by Bill Pai, Community Board President B Y LAW, EVERY HOMEOWNERS ASSOCIATION (HOA) with common area or common components needs a board of directors to conduct official HOA business. From hiring and managing vendors to maintaining financial records, HOA boards fulfill key responsibilities, which collectively keep their communities on solid financial footing. Laws governing HOAs assume a board of directors is in place. HOA boards are composed of elected members, drawn from the association’s membership. Ideally, there are more than a sufficient number of people who are willing to serve in an elected capacity, attending board meetings and working closely with the CHBIOA staff. WHAT HAPPENS WHEN THERE AREN’T ENOUGH PEOPLE WILLING TO SERVE ON AN HOA BOARD? Quite simply, without a functioning board of directors, then the HOA itself can no longer operate as it was designed by law. With nobody willing to serve on the board (or an insufficient number to maintain a quorum), there will be no one left to transact business, negotiate and sign contracts, manage reserve assessments or make general decisions about the direction of the HOA. Additionally, the absence of a qualified board can mean there is nobody who has the legal authority to pay vendors or collect assessments, however those assessments are still owed to the association. WHAT OCCURS IN HOAS THAT CANNOT FILL SUFFICIENT BOARD SEATS TO ENSURE A QUORUM? If there is no board in place, any HOA member, vendor or HOA creditor may file a lawsuit against the HOA. Once it is determined that there is nobody authorized to serve as the HOA’s representative, the court will likely appoint a receiver, whose job is to conduct business on behalf of the association. This outcome is less than ideal. Receivers can be costly, charging per hour to handle the tasks that a HOA elected board would have done for free. The receiver’s cost will likely be passed on to homeowners, which typically leads to an increase in dues or another round of special assessments. Receiverships also tend to scare off potential homebuyers and lenders. This can then cause property values within the community to decline. In addition, the HOA may lose its insurance coverage. Maintenance of common areas is

often suspended, and all HOA members will be exposed to civil action. The consequences are potentially dire. Receivers will usually be left in place until a qualified board can be again elected. However, in some cases the court may mandate that the receiver remain in place even when homeowners express a willingness to serve on the board. Again, this is a less-than-ideal situation for those who live in that HOA. Once a HOA has lost its board, there is little CHBIOA can do to assist given the legal constraints. CHBIOA can advise HOA boards to put into place some actions to prevent this scenario from happening in the first place, including encouraging all its members to consider serving at some point and making clear the potential consequences of not having a board in place. There are multiple HOA boards within CHBIOA which in 2025 are at risk of being unable to fill a quorum of their board seats. Another risk of having insufficient candidates willing to stand for election to an HOA board is that members may be appointed without any review or approval by the overall membership. There may be times when those appointees are not qualified or have ulterior motives in serving that may not be in the best interests of the HOA membership overall. In short, HOA boards are critical to maintaining our community’s quality of life. They matter for running HOA meetings, for electing replacement board members, for handling delinquent assessments, for ensuring the health and safety of the common areas, and for upholding property values for the entire community. And that’s just the beginning. As such, no HOA wants to end up in a situation where it lacks a functioning board of directors. We encourage all HOAs within our community to work with CHBIOA staff to avoid this worst-case scenario, and to put measures in place to ensure the fair and regular election of a sufficient number of board members each election cycle. Serving on a board is about doing your best. You don’t have to know everything about it, you will be trained. You don’t have to be a genius; professional advice will be provided. You only need to be committed to spending time, effort, and integrity to do the best you can for your association and neighbors. It is time to volunteer, step up, fill the empty seats and make a difference in the world. Choose your corner, pick away at it carefully, intensely and to the best of your ability and that way you might change the world. – Charles Eames

6 April | May | June 2025

The Gull’s Cal