Understanding Self-Managed HOAs

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In Colorado, professionally managed HOAs make up about 80% of registered HOAs in Colorado, but many communities prefer to self-manage the affairs of their association. The HOA Center strives to provide quality information and resources that may be helpful to self-managed associations. For board members of self-managed HOAs, there are some things to keep in mind and regularly consider. The HOA Center has prepared numerous resources for Self Managed associations.

Information and Resources for Members of Self-Managed HOAs

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For members of self-managed HOAs, the biggest difference may be that their board isn't able to respond to inquiries as quickly as a professionally managed association, or they may lack certain knowledge or experience in governing an HOA. That isn't to say that many self-managed associations don't have competent and well-qualified board members - many do. However, for members of self-managed HOAs, there are some things to keep in mind and regularly consider.

Remember There is No Regulatory Oversight of HOAs or Community Association Managers in Colorado

If you are dedicated to fighting your HOA at all costs, keep in mind that those costs may inevitably include hiring an attorney.

Legal Resources

Volunteers vs. Professionals

Your board members are composed of volunteers. Do your best to extend patience and understanding when requesting information or action, as they may have additional constraints than a professional manager might have.

Board Member Authority

In a nonprofit corporation, a board of directors (board members) make the majority of the decisions for the association. Below is a list of provisions from the Colorado Common Interest Ownership Act and the Colorado Revised Nonprofit Corporation Act which provide the authority for many of the powers of the Board of Directors (board members).

Board Members are Elected

The composition of the board in your community is determined by elections. If you are unsatisfied with your board, you should consider your own candidacy or supporting the candidacy of another member who you trust.

Keep Your Contact Information Up to Date

Stay as connected as possible. Remember to keep your contact information up to date with the association, especially if your mailing address is not located within the association.

Dealing with Receiving a Violation Notice

Receiving a violation notice from your association can be a shocking and often anger provoking circumstance. Avoid the urge to react emotionally. Read through the entire violation notice and take notes on anything you have questions about or would like to present rebutting evidence of.

Unfortunately, tenants in HOAs have less rights to petition any violation received on their own. If you are a tenant in an HOA and receive a violation notice, you should immediately contact your landlord and involve them. They will need to correspond with the association on your behalf and may need to act as an advocate if you want to contest the violation.

You have a right to a hearing (see 38-33.3-209.5(2)(b)) and that is the most appropriate place to air your grievances. Trying to handle the matter outside of a hearing is not advised, and many times, only frustrates the situation. If you believe that you have genuinely not violated any of the association rules, then you should request a hearing on the matter. While you are entitled to the opportunity for a hearing regardless of your culpability, keep in mind that simply disagreeing with the rule is not a good faith reason to request a hearing. The best place to discuss the efficacy of community rules is during association meetings and work groups. If you request a hearing - make sure you attend it! The HOA Center frequently hears complaints from homeowners that they requested a hearing, but were unable to attend, so the hearing was held without them and a fine was imposed. While this may seem unacceptable to many, it is considered acceptable.

Do Not Compare Yourself to Your Neighbors

Just because your neighbor has a certain fence or they painted it a certain color does not automatically mean that you are allowed to as well. Many HOAs have procedures in place to request a variance to certain rules. Many times, homeowners are unaware of a variance received by a neighbor and assume that their similar conduct would be acceptable. This is not the case. Any deviation from your community standards should be based on written approval from your board.

Time Commitments

There will be a considerable time commitment required in order to efficiently and effectively manage an HOA, regardless of the size. This should be a primary consideration when thinking about offering your candidacy for board membership.

General Board Member Responsibility & Liability

The Colorado Common Interest Ownership Act and the Colorado Revised Nonprofit Corporation Act both contain standards for both responsibility and liability with regard to board membership.

Liability of Board Members

Section 38-33.3-303(2)(b) of the Colorado Common Interest Ownership Act states that, if not appointed by the declarant, no board member may be liable for actions taken or omissions made in the performance of such board member's duties, except for wanton and willful acts or omissions.

C.R.S. § 13–21–116(2)(b)(I) also states that no member of the board of directors of a nonprofit corporation may be held liable for actions taken or omissions made in the performance of his duties as a board member except for wanton and willful acts or omissions.

Governing Law

There are several different sources of authority which govern HOAs. These federal and state laws include, but are not limited to the Fair Housing Act, the American’s with Disabilities Act, the Colorado Common Interest Ownership Act, the Colorado Revised Nonprofit Corporation Act, as well as local ordinances and zoning codes. Board members should be familiar with these laws and should seek legal counsel with any questions they have regarding them.

Governing Documents

In addition to a variety of federal, state and local laws, as a corporate entity (or LLC), HOAs must also follow their association’s governing documents. These include a declaration of covenants, articles of incorporation, bylaws, rules and regulations and policies & procedures. Board members should be familiar with these documents and should seek legal counsel with any questions they have regarding them.

Specific Board Member Duties

While each association and board may determine the roles and responsibilities of each individual board member, generally, each position traditionally handles certain duties and responsibilities.

President

Heads up the board and presides as the Chair of the board.
Supervises all of the business and affairs of the board.
Acts as the spokesperson for the board of directors.
Has authoritative direction to order actions in furtherance of the policies established by the board of directors.

Vice President

Has authority to act on behalf of the board when the President is not able to.

Secretary

Maintains the minutes of the meetings of the association.
Maintains all of the association’s records.
Ensures actions of the association are in accordance with its bylaws.
Keeps the board informed about meetings and updates on the association.
Provides access to association records to homeowners.

Treasurer

Custodian of the association’s monies.
Keeps account of the receipts and disbursements in the association’s books.
Keeps track of the organization’s financial condition.
Coordinates the HOA’s budgetary process.
Provides annual financial reports.

General Board Member Duties

A board member has a number of duties and obligations that they must adhere to including

Duty of Care

The legal obligation imposed on an individual requiring that they exercise a reasonable standard of care while performing any acts that could foreseeably harm others.

Duty of Loyalty

Term used to refer to a fiduciary's loyalty to a corporation. A board member must place the association’s interest before their own.

Duty of Due Diligence

The standard is the effort made by an ordinarily prudent or reasonable party to avoid harm to another party or themselves.

Duty of Reasonable Care

Duty to exercise reasonable care when making decisions on behalf of the association.

Duty of Confidentiality

Board members are required to restrict the access to certain documentation and information.

Section 7-128-401 of the Nonprofit Act requires each board member to discharge their duties in good faith, with the care an ordinary prudent person in a like position would exercise under similar circumstances and in a manner the board member reasonably believes to be in the best interests of the association.
Section 38-33.3-113 of the Colorado Common Interest Ownership Act states that every duty governed by article 33.3 imposes an obligation of good faith in its performance or enforcement.
Section 38-33.3-317 of the Colorado Common Interest Ownership Act defines what records must be kept by the association for the purposes of retention and production to unit owners. You may want to review a summary of House Bill 12-1237, which has subsequently been incorporated into CCIOA Section 317. It may help understand which association records "must be produced", which "may be produced" (at the discretion of the Board), and those which "must be withheld".

Duty to be Free From Conflicts of Interest

In addition to section 38-33.3-310.5 of the Colorado Common Interest Ownership Act (which substantially adopts section 7-128-501 of the Colorado Revised Nonprofit Corporation Act) section 38-33.3-209.5 (responsible governance policies) states that the required policy regarding how to handle conflicts of interest involving board members must, at a minimum, define or describe the circumstances under which a conflict of interest exists; set forth procedures to follow when a conflict of interest exists, including how, and to whom, the conflict of interest must be disclosed and whether a board member must recuse himself or herself from discussing or voting on the issue; and, provide for the periodic review of the association's conflict of interest policies, procedures, and rules and regulations.

Section 7-128-501 of the Colorado Revised Nonprofit Corporation Act defines a conflicting interest transaction to mean "A contract, transaction, or other financial relationship between a nonprofit corporation and a director of the nonprofit corporation, or between the nonprofit corporation and a party related to a director, or between the nonprofit corporation and an entity in which a director of the nonprofit corporation is a director or officer or has a financial interest."

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