Can an HOA Board Member Owe the HOA Money? The short answer is yes, an HOA board member can owe the HOA money. This is a body made up of residents who manage the affairs of the common property as well as share the costs of maintaining services in a residents’ residential neighborhood. The HOA board is formed by the elected volunteer members taking necessary decisions and making actions for the betterment of the quality of life in the community. But what if the board member in the HOA is a debtor to the HOA? What is permitted and what consequences arise therefrom?
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Can an HOA Board Member Owe the HOA Money?
HOA board member can owe the HOA money. But it is important to know the circumstances and the possible outcomes. Like with any other group of people, HOA board members can also face financial problems and fail to pay assessments or owe the HOA money in any other way.
Kinds of Obligations that an HOA Board Member Can Have
An HOA board member may owe the HOA money for various reasons, including:
Unpaid assessments: Board members are also like any regular homeowner in that they are obligated to make monthly or quarterly association assessments. If they do not do the above, they stand the risk of sinking in to debt.
Fines and penalties: The fines and penalties imposed cannot be ignored as they tend to accumulate in rather short order, in this case because a board member is once in a while involved in violation of the rules and regulations of the community.
Reimbursement for expenses: A board of directors might have some expenses that are related to their work for instance, transport expenses or training expenses. Depending on whether they secure the payment or if they go over the agreed amount of expenses, they might be due to the HOA.
Damage to common areas: Board members are responsible for repairs of any vandalism or destruction of common areas or community property as well as replacement costs.
The Consequences of an HOA Board Member Being in Debt
If the board member owes the HOA some amount of money, then it means that conflict of interests arises, the board loses its credibility and can harm the entire community. Some implications to consider:
Conflict of interest: If the member of the board wants to repay the money to the HOA, he/she will try to make financial decisions that will be in his/her favor not in the favor of the homeowner association.
Lack of credibility: Any board member that is in arrears with their assessment or owes the HOA money can tarnish their image in the society.
Difficulty in enforcing rules: If any board member is not respecting the rules and regulation of the community then the board fails practice these rules to other homeowners.
Financial burden on the community: This means that if the debt of a board member is large, it will become a burden to the community; one way or the other; the assessment fees are likely to be raised or else some services will have to be cut down.
How to Address the Issue
There’s always a possibility that an HOA board member is indebted to the HOA, which must be dealt with fairly and effectively. Here are some steps to consider:
Review the governing documents: Review the CC&Rs (Covenants, Conditions & Restrictions), or, if the community is a condominium association, review the bylaws to know the procedures for collecting any outstanding dues.
Communicate with the board member: The board should then contact the delinquent board member to seek to know the reasons for the defaulting and then agree with the member on a repayment plan schedule.
Seek professional advice: Talk to the HOA’s attorney or accountant to find out whether the board is doing the right things in accordance with the law and the regulations.
Consider a payment plan: The board may set a suggestion in regard to the payment plan that can be used to recover the amount of money owed by the delinquent board member.
Remove the board member (if necessary): Under very rare circumstances where a board member owes a large amount of money and does not seem to be interested in repaying the money, then the board should consider dismiss him/her from the board. You can contact us here.
Best Practices for HOA Boards
To avoid conflicts of interest and ensure that board members are held to the same standards as other homeowners, HOA boards should consider the following best practices:
Establish clear policies: The following are governance recommendations that, when implemented in writing, will further define policies and procedures for collecting debts: Procedures pertaining to board members are to have clear debts collection policies to ensure that accounts receivable is collected on time.
Conduct regular financial reviews: It is recommended to study all financial statements of the HOA to reveal such problems or failures to pay on time.
Require board members to disclose conflicts: Expect board members to report any possible conflict of interest including having unpaid bills.
Hold board members accountable: Ensure board of directors is responsible for whatever they do and whatever they decide to do comes with a cost to the HOA.
Conclusion
When an HOA board member owes the HOA money, there will always be conflict of interest, board credibility will be a problem and there is high likelihood to damage the community. It becomes important for HOA boards to act adequately and in a appropriate manner to disentangle the situation. In doing so boards retain confidence from the community and all property owners including board members are kept to the same CODE of ETHICS.
