Category: podcast

What makes for an effective nonprofit  HOA board of directors?

(For the record, I am not a lawyer nor work for a lawyer and I am not providing legal advice or opinion.)

First and foremost, an HOA is  a chartered nonprofit corporation given authority to function as such under the AZ Constitution.   The association’s Governing Documents, an agreement between the HOA and the members, gives the HOA the authority and powers to function as the governing body of the subdivision.

As you are well aware, both nonprofit corporation law and the Governing Documents place the ultimate authority and responsibility for managing the HOA – in the true meaning of “managing” and not CAM — in the board of directors (BOD).  CAM keeps the HOA functioning smoothly delivering the services and providing for “groundskeeping.”  In order for the HOA to accomplish its mission and goals, which provide the necessary guidance and direction for performance, it is the BOD that must decide 2 important questions: What is our purpose?  What should it be?

What then makes for an effective BOD? To start at the beginning and get right to the point, my emphasis at this important juncture (Managing the Nonprofit Organization, Peter F. Drucker, p. 171-172, 1990),

“The board needs to know that it owns the organization. But it owns an organization not for its own sake — as a board — but for the sake of the mission which that  organization is to perform.”

“If you find that the board has become inflexible, you have to look for ways of renewing the board with fresh appointments. The more power is concentrated in a few people on a board, the more likely the situation will turn unhealthy.”

And this is where the BOD has failed the members!

As pointed out in earlier posts, “mgmt case study #1”, SCG’s continues to widely publish its nonsensical vision and mission statements providing no guidelines to act or of any value to measure effective performance. What we have witnessed is a BOD deciding on its own where to go and what to do, cleverly masked as fulfilling the wishes and desires of the members.  In actuality, all those meet the board, chats, Q &As, etc. allow for a presentation of grievances without binding the BOD to action.

There is no provision to require the BOD to hold a vote on a member’s proposed amendment to the governing documents as permitted by state law with respect to removing a director or all directors.  Or to nullify an act of the BOD.

Drucker continues with, “Ducking controversy or minimizing difficulty, snowing people with reports that are not realistic either about the quality of the programs . . . or whatever . . . that’s terrible leadership”

It’s well beyond time for a necessary change in attitude and culture before SCG descends into chaos. Adoption of a new approach, as recommended in A Plan toward Restructuring the HOA Model of Governance is needed, today!

HOA management (BOD) is more than property management (CAM)

I continue to be baffled as to how real estate attorneys and property managers, unlicensed in most states, have been allowed by state legislatures to advise and dictate to HOA boards (BOD) on how to govern a community by an Association that  is very similar to a local government body.  Governing a community is more than managing a property in a subdivision.   

 Many other experts and authorities have attempted to explain this complex concept of “what is management”  — including the renowned Peter F. Drucker. (The Practice of Management and Management). My take is a simple, down-to-earth explanation as part of “Reorienting the BOD and its followers,” the first step in A Plan Toward the Restructuring the HOA Model of Governance. 

Management (noun) – Management is an entity — an organization whether a business, a nonprofit, an HOA, a charity, a club, a group, or a person. It applies to any person, or organization, or entity at all levels with respect to its level of authority and responsibilities — CEO, president, division director, department manager, supervisor, or committee chair. The difference in organizational type is related to their purpose and mission. Businesses  are to make a profit for their stockholders. Nonprofit membership organizations, like HOAs,  have a mission or goal as  laid out by the founders and initial directors that is designed to attract and maintain members — for $$$$$  — who identify with the mission.

Management (function) —  Management is a practice (as first described by Drucker in 1973). It’s an actual application by practitioners/managers — whatever the designation: manager, governor, administrator, board of directors, trustee, etc. — of the set of beliefs, principles, and values held by the organization. The quality and success of the management function is measured by its performance in attaining its mission, objectives, and goals. They may set by its constitution, charter, bylaws, Declaration of CC&Rs, or by department/section/committee descriptions.

Executive level management — at the state legislature through its lawmaking authority or at HOA board of directors level — has final and total responsibility for the successful performance of the organization and sets the mission, goals, conduct and operation of the entity. It has the duty to 1) set policy, plans, rules, regulations, controls, procedures, etc., and 2) organize and structure the entity. All in keeping with its powers under the legal documents and laws granting it the authority to so act.

The very first task for the BOD is to determine just what is the purpose of the entity, and what should it be. Once this reason for being has been determined and stated in terms that permit the evaluation of performance, a valid mission statement can be issued.  From the mission statement a single goal  or set of goals can be issued that permit a measurement of the entity’s performance.  Value statements can be adopted to guide the BOD and members with respect to acceptable means and methods for achieving the goals.

“A mission  statement has to be operational; otherwise it’s just good intentions. A mission statement has to focus on what the institution really tries to do.” (Managing the Nonprofit Organization, Peter Drucker, 1990).

The mission statement by the HOA Management Case Study #1 subject, SCG for example, speaks  in the present tense using the word “IS,” making it more of a propaganda statement — it already exists or has already been accomplished — rather than a condition, an ideal,  to be achieved.  Consequently, SCG’s mission serves no value for the establishment of goals that can measure performance, leaving the HOA essentially without any direction.

* * * *

Cautionary note:

Management when it fails to abide by the authorizing documents and marketing materials that appeal to the wants, desires, and wishes of the members will result in members exiting  the organization, taking their future member donations, dues, fees, etc. with them. With businesses, except small, closely held businesses, exiting is a simple task of selling one’s stock and buying another.

HOAs are more like a small, closely held businesses where exiting is not a simple task primarily due to the need to find some other private buyer (investor) willing to ignore why you are leaving. The status and situation of members can be viewed as a form of indentured servitude: you can’t leave unless you have  money to leave (like having paid off your servitude obligation), or you die.

Consequently, management in membership nonprofit organizations, like local governments, must keep the members happy.  Any changes or  modifications to the purpose, or mission, or goals of the organization must consider  the effect on the members.  And must follow the law and the controlling documents – the CC&Rs in HOAs.  The BOD is not a free agent to do as  it pleases as if the HOA were its own private club.

HOA case study approach vs focus groups

The more familiar focus group methodology stands in sharp contrast to the Case Study approach, which is a top-down, managerial process, while focus groups are a bottoms-up approach to provide guidance to decision-makers. The key aspect here is how does the researcher use the data gathered, which is dependent on the depth and quality of its subsequent analysis.

An important caveat:  focus groups can be used to advance personal agendas by shaping the content of the issue or conditions to be studied and/or the phrasing and wording of the questions asked.  There is generally no debate between the respondents questions or criticizing their views.

HOA Case Study Overview

Simply put, the case method is a discussion of real-life situations that business facing executives.  IT IS AN EDUCATIONAL PROCESS FOR ALL HOA MEMBERS and will help in becoming a more meaningful, relevant, and productive participant in the governance of your HOA.   It is members only and independent of any HOA approval or regulations.

If properly conducted, the outcome  should provide your BOD with solutions that have much more merit than listening to the views gathered at focus groups or Q & A sessions (workshops, fireside chats, meet the board, etc.).

The method consists of being presented with a real event or issue or a case facing an executive – president, BOD, committee chair — and asking a question or two regarding what you would decide. As you review each case, you’ll put yourself in the shoes of the key decision maker, analyze the situation, and decide what you would do to address the challenges.   

Importantly, there is the requirement to present your views or opinions before the study group (online participants), and  after a discussion with other group participants you will be asked to volunteer your decision and reasons why.  If you feel that your decision[s] have merit you can present them to the president or BOD as you feel comfortable.  It would be appropriate to indicate the basis for your recommendations, the HOA Case Study Group that you participated in.

How to participate in a meaningful and instructive manner.  YOU are the decision maker! What to do?  (Harvard Business School, Executive Education). 

Here’s your chance to deal effectively with HOA issues and resolve the problems in a practical  manner. No unsupported opinions, feelings, likes/hates, etc.

  • What are the most important issues being raised?
  • Each case begins with a text description followed by exhibits. Ask yourself: What is the case generally about, and what information do I need to analyze?
  • Put yourself in the shoes of the case protagonist, and own that person’s problems. Ask yourself: What basic problem is this executive trying to resolve?
  • What recommendations should I make based on my case data analysis?

. . . .

Why are focus groups used?

(Copley Focus Centers)

“Focus Groups are generally used to gather people’s opinions, ideas, and beliefs on a certain topic or product.  While surveys or questionnaires can be useful, they can not capture what a person is thinking or feeling.  This is where a focus group will come into play. . . .  The main purpose of focus group research is to draw upon respondents’ attitudes, feelings, beliefs, experiences and reactions in a way where other methods are not applicable.

“Focus Groups are generally used when there is little or no knowledge about the target market.  Most commonly Focus Groups are used when a new . . .  service is being developed and the company is not sure how the public will react.  In this instance, a Focus Group is conducted to get opinions, ideas, suggestions, and reactions before the product or service is available to the public.  Once the information is gathered, changes may be applied to the service or product to make sure that it will be received well by the target audience.”

proposed HOA constitutionality bill

“Now is the time for all good homeowner advocate leaders to come to the aid of member-owners”

 living in HOAs and suffering abuse, financial and emotional distress as a result of BODs being  protected by Arizona laws. These abuses are easy to understand and support! (See HOA Common Sense: rejecting private government and The HOA-Land Nation Within America).

A quick and simple — but highly effective — bill that was proposed in March 2011 and will bring relief to homeowners being treated a second-class citizens by state laws in support of the HOA legal scheme. It was ignored by Arizona advocates and dismissed by the Legislature.

“No provision of any contract or any declaration of covenants, conditions, and restrictions . . . is enforceable in this state unless the party seeking to enforce the provision proves by clear and convincing evidence that 1) the provision being enforced was knowingly and voluntarily agreed to by all parties . . . . Any representation or statement offered as clear and convincing evidence . . . shall include a signed statement containing the following, beginning with “I understand that I can ask that the following be read and explained to my satisfaction.”

“So reads an excerpt from my proposed “Truth in HOAs” statute that should be made law in each and every state. That is, if indeed the legislature stands by the Declaration of Independence and the US Constitution, which we are hearing so much about in the media nowadays.”

The “The Truth in HOAs Act,” as I called  it,  allows each state to modify the proposal in accordance with its state HOA/condo acts — shown in square brackets [].  Also, subsection (3) contains a list of acknowledgements  that can be tailored to each state’s advocate lobbying efforts.  See Arizona Truth in HOAs statute (pvtgov.org).  The essential bill section is contained in subparagraph (4).

“Therefore, in reference to subsection 3(d) above, the CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state that, “The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

 The real estate subdivision or condominium will not be affected by requiring HOAs to join with other forms of local government and be subject to the Constitution as a home rule entity.  See HOAs violate local home rule doctrine and are outlaw governments.

This 2022 legislative session offers a unique, one-time opportunity to get the message across and to educate the legislators. Remaining silent on the issues only plays into the pro-HOA hands of CAI and offers excuses by the media not to cover HOA abuse.  Not only will you find “ammunition” in support of your arguments as contained in the 2 above publications, but also in my Arizona Supreme Court  amicus brief filed and accepted in Tarter v. Bendt (see note (vi) in Can HOA members expect justice in Arizona courts?).

My arguments are summarized in the Commentary.  As is my approach, my arguments are supported by legal authority and hard evidence documents, which CAI ignores and YOU lose!  They must be exposed if the legislators are to be fully informed on the reality of HOA-Land.  As leaders who are internet publishers,  actions speak louder than words!

 

Can HOA members expect justice in Arizona courts?

“HOA members in Arizona should not expect justice from the courts”

If you are a member of an Arizona HOA/condo, or soon plan to be one, you should pay heed to the above quote made in response to the Arizona Supreme Court’s denial to hear the Bendt appeal petition for review.[i]  In my Commentary, trying to understand the rationale for the denial,

“The homeowner, Bendt, is punished for speaking out, in admittedly harsh terms, [relating to issues of HOA governance]. Yet the judicial system stands by looking at a distance and allowing Trump and his followers to function as vexatious litigants; allowing them to  raise allegations, which are not only laughable but blatantly false under Rule 11, is shameful conduct.”[ii]

What message is being sent by this disturbing decision? To the public? To the homeowners in HOAs seeking the equal protection of the laws under the Constitution? To the national lobbying trade group, CAI, who can breathe easy with respect to any challenges to the constitutionality of the HOA legal scheme that  contains denials of fundamental rights and privileges?

Professor Randy Barnett wrote, speaking of justice and judicial legitimacy,

“A constitution that lacks adequate procedures to ensure the justice of valid laws is illegitimate even if it was consented to by a majority …. A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the HOA amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just.”[iii]  

And we must not ignore the effect of precedent on court opinions. Hansford and Spriggs found [that] the doctrine of stare decisis, itself, falls victim to the preferences of the judges. The closer the precedent was to the judges views, the more the precedent would be followed, and vice versa. Additionally, the research found that “the justices are more likely to negatively treat [modify or reject] a precedent they dislike on ideological grounds if that precedent is quite vital [how often cited in support]” by the judges (p. 75).[iv]  Bad HOA laws abound leading to favorable anti-homeowner decisions.

And still we see “Equal justice under the law” emblazoned on the façade of the US Supreme Court building. It contains a major defect, a misleading fallacy,  and a presumption of supreme court infallibility [without error].  Bad laws — unjust laws — will not produce justice for all!  And that is just what we face in the HOA-Land Nation.

I have argued (2009) for a judicial system that adhere to the following:

“Before we can decide, we must examine some of the myths and realities of the American judicial system.  First, we have the concept of justice, the very foundation of any judicial system, although some have argued it is to uphold the law.  Philosophically, a judicial system cannot exist in a democracy if it does not uphold justice and correct the wrongs of the past.  In fact the people are told “Equal Justice Under Law”, the motto on the Supreme Court building; “to secure justice”, the commonplace stated purpose of court rules of procedure;   “to establish justice”, the opening purpose in the Preamble to the US Constitution; and we designate the members of the Supreme Court as “justices”. Notice that “to uphold the law” is not included in the above.  This is the argument, along with the insistence on precedent, used by those special interests who favor unjust laws.”[v]

. . . .

So, in particular, what is wrong with the AZ  supreme court denial in Bendt?  A lot!

An amicus brief is submitted, and subject to approval by the Court and the parties, to advise the Justices in better understanding the conditions and factors relevant its opinion that it may not be aware of. The following is a summary of arguments presented in my amicus brief[vi] seeking the Court to review the petition in the name of justice for the homeowner, Bendt, and for all other citizens living n Arizona HOAs.

“The Hannaman 2002 study (NJ) was quite frank and revealing describing problems and complaint still in existence some 19 years later in spite of efforts by the self-proclaimed HOA experts and educators, national CAI. “

“[Referring to Nevada Supreme Court in Kosor v. Olympia Companies, 478 P.3d 390 (2020)]. Because we conclude that each of Kosor’s statements was “made in direct connection with an issue of public interest in a place open to the public or in a public forum,” we reverse the district court’s decision to the contrary and remand for further proceedings consistent with this opinion.

“As our [California] Supreme Court has recognized, owners of planned development units ” ‘comprise a little democratic subsociety . . . .’ ” (citations omitted).” (Damon v. Ocean Hills Journalism Club, 102 Cal. Rptr. 2d 205 (Ct. App. 2000) at “A. Public Forum”).

“Among its findings [South Carolina HOA study committee] were . . . While the Community Association Institute (CAI) and other private entities offer educational resources to homeowners and managers, state government cannot place the sole responsibility of educating homeowners and board members on a private entity.

“Although not presented by the Appellant where three plaintiffs who] are lawyers, and based on claims of false and inexcusable character assassination against Tarter . . . this Court has reasonable suspicion to remand the case for a determination the validity of an anti-slapp motion.

“This Court, or any court, cannot allow a group of individuals or organizations to create a devise in order to escape constitutional protections and enter into a contract, constitutionally valid in all other aspects, to form private local governments whose members remain citizens of this country as well as of their respective states. It, as it stands in regard to HOAs, makes a mockery of the Constitution and our principles of a democratic society.

“The free speech issues of limited-purpose public figure and of HOAs and social media as public forums with respect to political HOA governance issues have been raised and need to be addressed.

“As with Brown [v. Bd of Educ.], America’s culture and environment has changed dramatically from 1964’s Homes Association Handbook and the formation in 1973 of Community Associations Institute (CAI) to deal with rising HOA problems and constitutional concerns after only 9 years. In 1992 CAI dropped its 501(c)3 educational status for 501(c)6 trade organization so it could lobby state legislators.”

I cannot understand the Supreme Court’s denial of Bendt’s petition and the opportunity to rule or to further investigate these issues, by orders or by request to the Legislature — as it has so ordered in the past —  and thereby fulfilling its obligation to defend the Arizona and US Constitutions.  Instead, it seems that the Justices have allowed their opinions to be guided by the prevailing public policy favoring private government HOAs that are independent of the two Constitutions.[vii]

References

[i] See AZ supreme court denies hearing HOA case raising limited-purpose public figure doctrine.

[ii] Id.

[iii] Randy Barnett, Restoring the Lost Constitution, Princeton Univ. Press, (2004).

[iv] Hansford and Spriggs, The Politics of Precedent on the U.S. Supreme Court, Princeton Univ. Press (2006).

[v] See in general,  HOAs, justice, and judicial myth and precedent.

[vi] Staropoli Amicus brief Tarter  v. Bendt

[vii] See in general, The HOA-Land Nation Within America and Establishing the New America of Independent HOA Principalities.