Many associations have at least one or two homeowners that think that they can do whatever they want and/or act as if the rules do not apply to them. It can be difficult enough to deal with someone who refuses to follow the rules, but what if that person is on the board? Despite what some may believe, officers and directors are not exempt from having to follow the association’s rules and regulations. On the contrary, as the persons charged with enforcing the rules, the board members should be setting an example of compliance for the other members to follow. However, it sometimes happens that a board member is the one exhibiting the troublesome behavior. It may be out of a sense of entitlement or a personal agenda that the director is seeking to forward to further his or her own personal interests, or it may just be that this director does not understand his/her fiduciary duties to the association or what is required of him/her. Whatever the reason for the noncompliance, it can make things quite difficult for the rest of the board to have to deal with enforcement issues with one of their own. Below are some tips on dealing with this situation should it arise in your association.
First and foremost, as indicated above, directors and officers are NOT exempt from having to follow the rules. If a violation has been committed, the board must follow its set procedures for sending out violation notices and levying fines if appropriate[1]. The other directors must not let their personal feelings get in the way of doing their job and must evenly enforce the governing documents. Violations should not be ignored and fines should not be waived for a director unless the board is prepared to do the same for any other homeowner. Further, directors should not have access to make changes to their own homeowner account. If a property manager or bookkeeper receives a request or directive from a director to remove fines from the account of any director, the manager should question this and make sure that the waiver was approved by the board as a whole before complying with such request. Self managed associations not using an outside bookkeeper should have a system of checks and balances in place to ensure that any changes to anyone’s account other than the regular assessments and payments require approval and oversight by more than one board member. If an owner is being assessed fines and is not paying those fines, it becomes a collection matter and should be handled like any other collection matter. Putting the account into collections may or may not have an impact on the violation issue, however, unless you end up foreclosing on the property and thereby removing the problem owner from the association.
Second, it goes without saying that if a director is involved in a rule violation or alleged violation, that director must recuse him or herself from any board discussion or vote on the matter. The director is still entitled to a hearing before the board if requested, but he or she will be acting as an individual homeowner and not as a director at that hearing and cannot take part in the board discussion about it afterwards. It is also important to note that an association’s obligation to indemnify and defend its officers and directors only extends to their authorized actions that are within the scope of their official duties as an officer or director. When a person is acting in his or her individual capacity and not in the capacity of an officer or director, there is no duty to indemnify them. Similarly, when a director acts under the auspices of his or her office but such actions exceed the director’s authority or are outside the scope of his or her official duties, the Association is not required to indemnify that director and should instead treat him or her the same as any other homeowner who is not on the board.
If the director’s noncompliance with the rules is an ongoing issue that cannot be resolved through the normal violation and fine process, it may be necessary to take further action to address the problem. A director who is not following the rules and is in an ongoing conflict with the association will likely not be a very effective director. It may be appropriate to simply ask this person to resign his or her position due to the conflict. If that doesn’t work, another option might be to remove the director from the board. The association’s bylaws will spell out the procedures required to remove a director.[2] Directors of a cooperative may only be removed for cause associated with their duties as a director, but for townhome and condominium associations governed under Chapter 317A, a director can be removed with or without cause. Typically, removal of a director requires approval from a certain percentage of the membership. However, some association documents may also provide for removal of a director by the rest of the board for cause if the director has too many unexcused absences from meetings, is delinquent in the payment of his/her assessments and/or is otherwise in violation of the association’s rules. The bylaws may also have provisions requiring a member to be in good standing at the time of the annual meeting (i.e. not delinquent and not in violation of the governing documents) in order to be eligible to run for or be elected to the board. These latter provisions can be extremely helpful in these situations, but if your documents do not contain this language, you will have to go through the more cumbersome procedures of having a membership vote to remove the director.
If removal of the offending director is not a viable option or seems too extreme, perhaps some board training, coaching or some sort of mediation or conflict resolution process may be appropriate to help educate all of the directors on their obligations and duties and/or to allow the board to more effectively work together under the circumstances. If you find yourself in this situation, you should also consider adding additional amounts to your annual budget for legal fees, as you are likely going to need it.
[1] Effective January 1, 2024, new statutory requirements went into effect regarding what must be contained in a violation notice if a fine is being levied, so make sure you are in compliance with these requirements if your association is governed under the Minnesota Common Interest Ownership Act.
[2] Note, this may be different than what is required to remove an officer. Officers that are also directors would remain on the board after being removed from their office. Directors that are removed are no longer directors.
