The Board of Managers - Part 1

One of my interests in learning more about the duties of our Board of Managers, and of its operation, is to gain sufficient understanding to responsibly observe and support the board. In pursuing this I am also gaining some understanding of how unit owners both support and undermine the operation of the board. This can be sometimes be observed during the association meetings.

I am also interested in exploring the synergies which are possible within our association.

This blog is a consequence of my ongoing education as a unit owner. I am acquiring a much deeper appreciation of the difficulty facing current and previous boards. I have discussed certain aspects with various experts, and that includes an attorney who specializes in condominium law.

In putting this and other information out here, I may be putting tools in the hands of individuals who will misuse them. However, I think being informed is preferable to putting one's head in the sand and hoping for the best. I also think that the politicians amongst us are already familiar of the information presented here. As unit owners, we are all equals and we should be equally aware of the duties and responsibilities facing our Board of Managers. We then may have a better appreciation of the service they provide to all of us, and also aware of when individuals may stray from their duties or of Unit Owner attempts to manipulate the Members of the Board to individual advantage.

Our Board of Managers is a team and is, in fact, one of three teams which are involved in the operation of our Association and determine the quality of life here. Each of these has specific duties and obligations. The Unit Owners really do not function as a "team" and probably should simply be called a group. The three are:

1. Our Board of Managers.
2. Our Unit Owners.
3. Our professional Managers and Contractors.

This post is the first of a several pertaining to the duties, responsibilities and operation of our Board. It is also one of a series which will delve into the roles that each of the three groups play in the operation of BLMH and how they influence or determine the quality of life here. I place our Board of Managers as first, Unit Owners second and our professional Managers and Contractors third. It could be argued that our Unit Owners play a role equal to that of the Board of Managers, based on sheer strength of numbers. However, our Board of Managers are unit owners who have volunteered to operate to a higher standard than the unit owners at large. To that end they have taken a 14-point oath and are willing to provide time and talent for the good of the Association. The oath will be covered in the second part of this series. It is significant that in taking the oath, the members of the Board agree to follow the Association rules even if they do not agree with them, will not intervene directly in any homeowner disputes and also agree to put the Association's interests above their personal agenda.

I place unit owners second because they may simply come and go on a daily basis, and beyond paying association fees may have no further commitment to the association. However, I assert that they collectively determine to a degree greater than the "bricks and mortar" upon which our association is built, the quality of life here at BLMH. Unlike our Board of Managers, the unit owners do not take an oath, nor do they agree to a code of conduct. They do agree follow the "rules and regulations". They are subject to the Bylaws. They do elect the Board of Managers. However, they can and do attempt to further their own agendas, change the rules, undermine the board and have no fiduciary responsibility to the Association, beyond paying their monthly fees and any fines or special assessments. Unit owners do sometimes attempt to avoid their financial responsibilities, to the detriment of the Association. They may also act in ways that are in their personal interest but are not for the good of the association and can at times act out of malice or spite. The role of unit owners and our hired professionals and contractors will be the subject of future posts in this series.

It is not possible to discuss the Board of Managers without delving into some of the aspects of the Condominium Association. In our association, the Board of Managers are often called our Board of Directors. I'll use both terms interchangeably.
Oversight of the association, a not-for-profit corporation, is in accordance with the Illinois Condominium Property Act. That act is a statute concerning the ownership in and rights and responsibilities of parties under the condominium form of ownership of property. It is modified from time to time by the state legislature. That act, which I will call the “Property Act” determines many of the aspects of how our association is to be run and in the overseeing of the association, the rights and obligations of the association and of the unit owners. It provides minimum standards and defines the sharing of expenses, insurance, the contents of bylaws, frequency of association meetings, procedures for the election of our Board of Managers, the budgeting of reserves, etc.

Simply stated, the Property Act specifies that “The unit owners’ association is responsible for the overall administration of the property through its duly elected board of managers. Each unit owner shall be a member of the association.” Rules of governance of the internal affairs of the association are covered under our association’s Bylaws. Our association also has Rules and Regulations which provide the details of restrictions and conduct of unit owners.

The Property Act provides standards for professional Condominium Association Managers, who are compensated individuals. We have such a firm performing professional management duties for us.

Our board, which is the Board of Directors for the corporation, which we also call our association, is sometimes called the Board of Managers. I personally prefer the title "Board of Managers." which embodies the task facing our Board. They are to "manage" the operation of the association. Sometimes, the term "Director" brings to mind someone behind the scenes telling people how to act. Our board is required, with few exceptions to operate with meetings open to all Unit Owners. It is the mandate of our Board to manage, and each of our Board of Managers take an oath upon assuming their duties.

The standards for the operation of the association are stated in the Property Act and the duties and responsibilities of our elected Board of Managers are also specified. There are specific rules of conduct. However, the Property Act does not define capabilities or training for our elected Board of Managers. If our BLMH was an airplane, it is analogous to a situation where I could be elected to fly it, then having won my pilot’s seat, which is a seat on the Board, I am given a pilot’s license, and a copy of the Property Act, the Bylaws and the Rules and Regulations and told “follow the documents and do a good job”. It is the responsibility of the members of the Board of Managers to achieve the necessary education and training necessary to "fly the plane". The association does provide workshops to assist the members of the board, and they also have access to professionals including lawyers, accountants, our professional management company and so on. However, I can understand why condominium associations do run into trouble from time to time. Those “troubles” range from unhappy unit owners, serious mistakes, the hiring of relatives or friends to outright chicanery or larceny and misuse of association funds.

Having said that, the Board of Managers is given legal “fiduciary duties” to fulfill. That’s a fairly broad term, which applies to the duties performed for the association and its membership. In carrying out those fiduciary duties, there are standards of conduct. They include the Duty of Care and the Duty of Loyalty. A third aspect, called the Duty of Good Faith, may be required and is important because the duties of care and loyalty do not cover all types of improper conduct by corprate directors.

The Duty of Care prohibits faithlessness and self-dealing. It requires that members of our Board of Managers fully inform themselves of all material information reasonably available, that they act with due care in carrying out their duties, and that they monitor and oversee the professional (compensated) managers. Members of the Board of Managers should acquire and maintain sufficient knowledge and understanding to enable themselves to properly discharge their duties. It requires the exercise of care that an ordinary, prudent person would follow under similar circumstances.

The Duty of Loyalty prohibits faithlessness and self-dealing. It requires that members of our Board of Managers must act in the best interest of the association. It refrains them from conduct such as self-dealing, fraud and actions that serve to entrench themselves in their position. They must act without personal or private motive and their decisions must be based on the merits of the matter, without outside influence. It requires that the members of our Board of Managers put the association's interests ahead of their own.

The Duty of Good Faith prohibits negligence. It requires that the members of our Board of Managers must act in the honest belief that the action taken is in the best interest of the Association and its members. Members of the Board do not act in good faith when they know they are making material decisions without adequate information or adequate deliberation.

If the duties specified above are carried out by the members of the Board of Managers, then they have met their legal responsibilities to the association. In meeting those duties, there are several aspects of their position that they will have satisfied. These include:

First, making business decisions in managing the affairs of the association. Inaction or neglect is not acceptable. Second, making decisions out of good faith. The members of the Board of Managers cannot act out of personal interest, self-dealing or have ulterior motives. They cannot use the power of their office to further their own interests at the expense of others, seek special privileges or special treatment. All unit owners must be treated in a uniform manner and fairly. Third, members of the Board of Managers must make informed decisions. Their actions must demonstrate an informed exercise of business judgment. They are responsible for oversight of the professional mangers and contractors; however, they cannot ignore the sound advice of the professional managers. The members of the Board of Managers are obligated to seek out fact before taking action. The Board of Managers must also determine when to obtain professional advice from accountants, attorneys, architects and engineers or other knowledgeable professionals. Fourth, the members of our Board of Managers must act rationally, within their authority and in accordance with the Bylaws and Rules and Regulations of the association, for the purpose of furthering the interests of the association.

In part 2 I will take a look at the agreements made by candidates, including their signed statements. I will also look at the “Board Member Oath” which each of our board members are required to sign. These documents, combined, spell out in plain English rules of conduct and expectations thereof.

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Disclaimer: It is in the domain of experts to contest what I have put here. This is in my words and I am not a lawyer, so use this at your own risk and use it to further your own education and research!