When an HOA breaches its own rules, the board can risk losing the trust of the entire community. It is a slippery slope, and one mistake can lead to an all-out recall from homeowners. For this reason, board members should understand how to proceed when there are violations.
HOA Breaches Own Rules: What Counts as a Breach
Board members are tasked with the management and operation of the community association. They essentially serve as the association’s representatives. So, if an HOA breaches its own rules, homeowners usually question the board’s ability to govern in an effective and fair manner.
Typically, breaches happen when the association violates its own CC&Rs, bylaws, and rules and regulations. It can also happen when the association breaks federal, state, or local laws. Let’s discuss these below.
- Violating CC&Rs. This is when the board ignores the obligations of the association, such as maintenance and architectural standards. It can also happen when the board amends the rules improperly or enforces them inconsistently.
- Violating Bylaws. The bylaws dictate the operations of the community. When the board violates election rules, meeting procedures, and notice requirements, that usually counts as a breach.
- Violating Rules and Regulations. An HOA violates its own rules when it enforces them selectively.
- Failing to Follow, State, or Local Laws. Associations must adhere to the statutory requirements and procedures of the law. These provisions typically cover everything from notices and open meetings to budgets and disclosures.
Common Reasons Why an HOA Breaches Own Rules
Breaches don’t always happen intentionally. While select cases may be malicious, most of the time, board members suffer from inexperience or poor management. Here are the reasons why an HOA would breach its own rules.
1. Lack of Knowledge or Training
Board members might just be unaware of the requirements and procedures under state laws and their governing documents. Due to a lack of experience or expertise, they tend to make mistakes more frequently. While attending workshops and undergoing training can help with this, most associations turn to professional assistance.
2. Poor Recordkeeping
Misplacing documents or storing them haphazardly can result in unintentional breaches. They might go against the rules or past decisions because they don’t have minutes on hand or have outdated copies of the governing documents. Incomplete financial records can also lead to costly yet completely avoidable mistakes.
3. Frequent Board Turnover
When board members change too often, it can lead to a loss of institutional knowledge. Outgoing directors might fail to pass on important information about past decisions, ongoing issues, or best practices. New directors then commit mistakes more frequently due to the lack of guidance or insight.
4. Selective Rule Enforcement
An HOA that does not enforce rules fairly can result in a breach. When the board enforces the rules selectively, it can call its authority and integrity into question. Homeowners will then begin to lose trust and challenge the board.
5. Misinterpretation of Governing Documents
Most governing documents are dense and contain legal jargon. Since boards don’t always have legal experience, they might misinterpret the real meaning of some clauses or ignore the context of others altogether. Even the smallest misunderstandings can lead to operational breaches. For this reason, many boards hire a lawyer or an HOA manager.
Steps the Board Should Take After Identifying a Breach
If a breach does occur, the board must act accordingly to maintain integrity and trust. Here are the steps to take.
1. Confirm the Breach
First, the board must confirm that a breach has actually taken place. This step usually involves reviewing the governing documents, checking meeting minutes, verifying timelines, and gathering evidence to support the claim.
2. Consult Legal Counsel
Boards should talk to an HOA attorney or lawyer at the earliest possible time. This will prevent the situation from escalating or worsening, which will be harder to address later.
3. Stop the Unlawful Action Immediately
The board should halt all actions that violate the CC&Rs, bylaws, rules, or the law. It is important to cease such actions immediately to avoid making matters worse.
4. Document What Happened
While the board may feel hesitant to immortalize a mistake, especially an embarrassing one, it is still important to document the events. Creating a clear record will help ensure transparency and protect the association in the future.
5. Correct the Issue
Any time an HOA breaches its own rules, the board should take corrective action quickly. If the board made an unlawful decision, reverse it immediately. The board should do whatever is necessary and legal to remedy the situation, whether that means redoing a vote, refunding charges, or amending the rules.
Sometimes, it can even go so far as to remove board members. If the problem board member refuses to correct their mistake or continues to commit it, then other directors may need to vote them out. This can also happen at the hands of homeowners in what’s called a recall election.
6. Notify Homeowners
Transparency is essential, and that means letting homeowners know that a breach has happened and that the board has taken corrective measures. Homeowners have a right to know what’s going on in the community. Keeping them in the loop, even if it involves a mistake, will only strengthen their trust in the board.
7. Take Preventive Measures
Corrective action is excellent, but the board should ultimately focus on establishing preventive measures. Make sure errors like this don’t happen again, both for current and future board members. This usually means updating policies, scheduling training, performing audits, and revising processes as necessary.
Legal Risks When an HOA Breaches Own Rules
Board members must understand that breaches can expose the association to liability. Even if homeowners don’t hold them accountable, legal issues will eventually arise.
If homeowners do challenge the board, it can lead to lawsuits and court judgments. This will not only cost the association time and money but also its respect among owners and its reputation in the industry. A court may award the homeowner monetary damages and order the association to pay penalties, thereby exhausting the HOA’s funding.
Additionally, breaches can cause the loss of legal protection under the Business Judgment Rule. This rule protects board members from liability for decisions made while serving in their positions. But the rule doesn’t apply if boards act in bad faith or violate their fiduciary duties.
Word of Advice
Associations, through their board members, must follow their rules to maintain trust and ensure legal protection. When an HOA breaches its own rules, the board must act quickly to document the error and correct the issue. More importantly, it should focus on preventing such mistakes from happening again.
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